Wendy's International, Inc. (NYSE: WEN) today announced very strong sales and earnings results for the first quarter, which ended on April 4, 1999. The results were announced during the Company's annual meeting of shareholders. Highlights from the quarter included: * Systemwide sales increased 12% to a record $1.63 billion and revenues increased from $456 million a year ago to $477 million. * At Wendy's(R) Company operated restaurants in the United States, average unit volumes (AUVs) increased 13% and same-store sales were up 10%. AUVs at Wendy's franchised units in the U.S. increased 9.5%. * Tim Hortons' same-store sales in Canada increased 10% and same-store sales in the U.S. were also positive. * Net income was $32 million, up 34% from $24 million a year ago. * Total diluted earnings per share were $0.25, up 39% compared to $0.18 a year ago. Total EPS for the quarter included $0.01 in asset gains from the sale of real estate, franchising and fees from refinancing notes. In the first quarter a year ago, total EPS included an insignificant amount of gains. * Base EPS (total diluted EPS less gains) was $0.24 for the quarter, up 33% compared to last year. * Wendy's first quarter domestic operating margin increased from 13.4% to 15.8% due primarily to the strong sales growth at Company stores, and franchising underperforming Company units during the first quarter of 1998. 1ST QUARTER DILUTED EARNINGS PER SHARE
1Q-99 1Q-98 Base EPS $0.24 $0.18 Gains $0.01 $0.00 Total EPS $0.25 $0.18 "We delivered an outstanding quarter with sales at Wendy's North America and Tim Hortons(R) Canada well above expectations," said Chairman, CEO and President Gordon F. Teter. "In particular, sales in March and early April were outstanding, even with Good Friday and Easter falling into our fiscal first quarter. Those holidays typically have a negative impact on sales. "The strong sales performance at Wendy's U.S. stretches over nearly three years as March was the 35th consecutive month of positive AUVs." Several factors contributed to the outstanding first quarter performance: * Improved restaurant operations at Wendy's and Tim Hortons. * Balanced and effective product-focused marketing. * Successful promotional products (Monterey Ranch Chicken(TM) sandwich at Wendy's and Cafe Mocha at Tim Hortons). * Effective corporate and store-level cost controls. * A strong economy in North America. "The Monterey Ranch Chicken sandwich was a huge success with our customers, who have become accustomed to great tasting, high quality products from Wendy's," said Teter. "Customers reacted favorably to the new Cafe Mocha drink at Tim Hortons, which followed last year's successful introduction of flavored cappuccino. "Most importantly, our success with new products affirms Wendy's and Tim Hortons' quality brand positions. Our long-term commitment to product research and development and superior store-level operations continues to pay off," said Teter. The Company has two new products in stores. At Wendy's, a new Cheddar Lovers' Bacon Cheeseburger(TM) is available as a promotional item. At Tim Hortons, a new iced cappuccino drink has been added to the menu at all stores. "Our strong momentum has continued into the second quarter," said Teter. "Same-store sales at Wendy's in the U.S. during April increased in the high single digits and same-store sales at Tim Hortons in Canada are up more than 10% in April." Management Raising 1999 Base EPS Goal Due to the strong first quarter, management is raising its goal for 1999 Base EPS growth to a range of 16% to 18%. The new goal is higher than the Base EPS growth goal of 15% to 17.5% announced in March and up from the original goal of 12% to 15%. Base EPS was $1.03 in 1998, excluding non- recurring charges. Total EPS for 1999 is expected to include $.06 to $.07 in asset gains. "Our first quarter performance was very encouraging," said Frederick R. Reed, Chief Financial Officer. "Not only did the Company achieve excellent sales results, but we controlled costs effectively and delivered strong flow through to the bottom line. We also made progress on several strategic initiatives." Strategic Initiatives and Return on Capital The Company is making progress on its strategy to improve return on invested capital (ROIC). The initial steps included the 1998 closing and refranchising of underperforming Wendy's and initiating several store-level productivity programs to help improve domestic margins. Progress during the first quarter included: * Utilizing cash from the balance sheet to repurchase 597,000 common shares for $15.3 million. Since announcing its plan to repurchase a total of $350 million in common shares, the Company has repurchased $226 million through the end of the quarter. * Completing about $38 million of a program to refinance with third-party lenders up to $150 million in notes receivable held by the Company. A total of $86 million in notes has been refinanced since early 1998. Cash generated from the refinancing is intended for share repurchase. * Completing the sale of 26 Wendy's properties to franchisees. The Company has sold a total of about 170 lease properties since early 1998 and continues to evaluate the sale of a portion of nearly 600 remaining properties. Dividend Approved, Directors Re-elected At the annual meeting of shareholders, the Board of Directors approved a quarterly dividend of 6 cents per share, payable on May 28 to shareholders of record as of May 14. It will be the Company's 85th consecutive dividend payment to shareholders. Also at the annual meeting, W. Clay Hamner, Ronald E Musick, Frederick R. Reed, Thekla R. Shackelford and Gordon F. Teter were re-elected to three-year terms as directors of the Company. Additionally, shareholders ratified the selection of PricewaterhouseCoopers LLP as independent public accountants and approved the performance goals of the executive bonus plan. Wendy's International, Inc. is one of the world's largest restaurant operating and franchising companies with $6.5 billion in systemwide sales during 1998. Wendy's Old Fashioned Hamburgers was founded in 1969 by Dave Thomas and is the third-largest quick-service hamburger restaurant chain with more than 5,300 units in the United States, Canada and other international markets. Tim Hortons was founded in 1964 by Tim Horton and Ron Joyce and is the largest coffee and baked goods restaurant chain in Canada. There are nearly 1,700 Tim Hortons restaurants in North America.
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SECURITIES LITIGATION REFORM ACT OF 1995 Certain information in this news release, particularly information regarding future economic performance and finances, and plans, expectations and objectives of management, is forward looking. The following factors, in addition to other possible factors not listed, could affect the Company's actual results and cause such results to differ materially from those expressed in forward-looking statements: Competition: The quick-service restaurant industry is intensely competitive with respect to price, service, location, personnel, and type and quality of food. The Company and its franchisees compete with international, regional, and local organizations primarily through the quality, variety, and value perception of food products offered. The number and location of units, quality and speed of service, attractiveness of facilities, effectiveness of advertising and marketing programs, and new product development by the Company and its competitors are also important factors. The Company anticipates that intense competition will continue to focus on pricing. Certain of the Company's competitors have substantially larger marketing budgets. Economic, Market and Other Conditions: The quick-service restaurant industry is affected by changes in national, regional, and local economic conditions, consumer preferences and spending patterns, demographic trends, consumer perceptions of food safety, weather, traffic patterns, and the type, number and location of competing restaurants. Factors such as inflation, food costs, labor and benefit costs, legal claims, and the availability of management and hourly employees also affect restaurant operations and administrative expenses. The ability of the Company and its franchisees to finance new restaurant development, improvements and additions to existing restaurants, and the acquisition of restaurants from, and sale of restaurants to franchisees is affected by economic conditions, including interest rates and other government policies impacting land and construction costs and the cost and availability of borrowed funds. Importance of Locations: The success of Company and franchised restaurants is dependent in substantial part on location. There can be no assurance that current locations will continue to be attractive, as demographic patterns change. It is possible the neighborhood or economic conditions where restaurants are located could decline in the future, thus resulting in potentially reduced sales in those locations. Government Regulation: The Company and its franchisees are subject to various federal, state, and local laws affecting their business. The development and operation of restaurants depend to a significant extent on the selection and acquisition of suitable sites, which are subject to zoning, land use, environmental, traffic, and other regulations. Restaurant operations are also subject to licensing and regulation by state and local departments relating to health, sanitation and safety standards, federal and state labor laws (including applicable minimum wage requirements, overtime, working and safety conditions, and citizenship requirements), federal and state laws which prohibit discrimination, and other laws regulating the design and operation of facilities, such as the Americans with Disabilities Act of 1990. Changes in these laws and regulations, particularly increases in applicable minimum wages, may adversely affect financial results. The operation of the Company's franchisee system is also subject to regulation enacted by a number of states and rules promulgated by the Federal Trade Commission. The Company cannot predict the effect on its operations, particularly on its relationship with franchisees, of the future enactment of additional legislation regulating the franchise relationship. Growth Plans: The Company plans to increase the number of systemwide Wendy's and Tim Hortons restaurants open or under construction. There can be no assurance that the Company or its franchisees will be able to achieve growth objectives or that new restaurants opened or acquired will be profitable. The opening and success of restaurants depends on various factors, including the identification and availability of suitable and economically viable locations, sales levels at existing restaurants, the negotiation of acceptable lease or purchase terms for new locations, permitting and regulatory compliance, the ability to meet construction schedules, the financial and other development capabilities of franchisees, the ability of the Company to hire and train qualified management personnel, and general economic and business conditions. International Operations: The Company's business outside of the United States is subject to a number of additional factors, including international economic and political conditions, differing cultures and consumer preferences, currency regulations and fluctuations, diverse government regulations and tax systems, uncertain or differing interpretations of rights and obligations in connection with international franchise agreements and the collection of royalties from international franchisees, the availability and cost of land and construction costs, and the availability of experienced management, appropriate franchisees, and joint venture partners. Although the Company believes it has developed the support structure required for international growth, there is no assurance that such growth will occur or that international operations will be profitable. Disposition of Restaurants: The disposition of company- operated restaurants to new or existing franchisees is part of the Company's strategy to develop the overall health of the system by acquiring restaurants from, and disposing of restaurants to, franchisees where prudent. The expectation of gains from future dispositions of restaurants depends in part on the ability of the Company to complete disposition transactions on acceptable terms. Transactions to Improve Return on Investment: The Company owns several notes receivable issued by franchisees. The Company has entered into an agreement with a third party lender that permits the lender to contact franchisees, offer to refinance notes and enter into commitments to refinance such notes on or before March 31, 1999. The Company expects that a substantial portion of the notes will be refinanced. However, franchisees could decide to not refinance for various reasons, including changes in economic, credit market or other conditions, and the Company cannot require franchisees to refinance. In addition, the timing of refinancing transactions would be controlled by the lender and franchisees. As a result, there is no assurance as to when the Company could receive cash proceeds or realize income from refinancing transactions. The sale of real estate previously leased to franchisees is generally part of the program to improve the Company's return on invested capital. There are various reasons why the program might be unsuccessful, including changes in economic, credit market, real estate market or other conditions, and the ability of the Company to complete sale transactions on acceptable terms and at or near the prices estimated as attainable by the Company. Year 2000: The Company anticipates timely completion of its program to address year 2000 issues. However, if the new information systems are not implemented on a timely basis, modifications to existing systems cannot be accomplished on a timely basis, information technology resources do not remain available, or other unanticipated events occur, there would be adverse financial and operational effects on the Company. The amount of these effects cannot be ascertained at this time. Although the Company has not been informed of material year 2000 issues by third parties with which it has a material relationship or franchisees, there is no assurance that these entities will be year 2000 compliant on a timely basis. Unanticipated failures or significant delays in furnishing products or services by third parties or general public infrastructure service providers, or the inability of franchisees to perform sales reporting and financial management functions or to make timely payments to the Company or suppliers, could have a material adverse effect on results of operations, financial condition and/or liquidity. Readers are cautioned not to place undue reliance on forward- looking statements, which speak only as of the date thereof. The Company undertakes no obligation to publicly release any revisions to the forward-looking statements contained in this release, or to update them to reflect events or circumstances occurring after the date of this release, or to reflect the occurrence of unanticipated events. ots Original Text Service: Wendy's International, Inc. Internet: http://www.newsaktuell.de Contact: John D. Barker of Wendy's International,Inc. (USA) 614-764-3044 Web site: http://www.wendys.com