000505 Wendy's 1st-Quarter Operating Earnings Rise

Cleveland - Wendy's International Inc., the No. 3 U.S. hamburger chain, said first-quarter earnings per share rose 21% before asset gains and posted solid sales growth in stores opened for year or longer.

The Dublin, Ohio-based company said earnings rose to 29 cents a share before asset gains, a result that matched analysts estimates and compared with a profit of 24 cents a share a year earlier. It also said the second quarter looked good so far.

Net earnings rose to $35.9 million, or 30 cents per diluted share, from $32 million, or 25 cents, in the year-earlier quarter. Revenues rose 9.1% to $519.8 million from $476.5 million.

Sales at Wendy's U.S. restaurants open more than a year grew by 3.5% in the first quarter, including a 5.4% rise in March, and same-store sales at its Tim Hortons restaurants in Canada rose by 9.9%.

“Although revenues were a touch lighter than expectations, same-store sales gains at both Wendy's concept and the Tim Hortons concept remain strong. The continuing positive momentum bodes well for the second quarter and beyond.” Salomon SmithBarney analyst Mark Kalinowski said in a new report.

He said operating earnings came in a penny ahead of his forecast of 28 cents a share.

Analysts on average had expected Wendy's to post operating earnings of 29 cents, according to a survey by market research firm First Call/Thomson Financial.

After the news, Wendy's stock closed down 15/16 at 21 15/16 in New York Stock Exchange trading.

“The earnings results exceeded our stated goal of producing 12% to 15% annual EPS growth,” said Jack Schuessler, chief executive and president of Wendy's.

The company said it had made progress on its initiatives to improve shareholder value, which included the repurchase of 4.3 million shares in the quarter for $74 million.

Since the share repurchase program began in 1998 through the end of the first quarter, Wendy's bought back about 21 million shares for $470 million. It said the board had authorized the repurchase of up to a total of $600 million.

During a conference call with analysts, company executives said the repurchases would continue although perhaps not as aggressively now that the stock price is above the $14-$16 a share it traded at in the first quarter.

Schuessler took over the top spot in March, following the death in December of Gordon Teter. He was succeeded as president and chief operating officer of Wendy's North America by Thomas Mueller on April 20.

Looking ahead, Wendy's said preliminary results for the April reporting period, which ends May 7, include same-store sales growth of 2.5% to 3% at Wendy's U.S. company stores and 7% to 8% at Tim Hortons in Canada.

Schuessler told analysts the company was looking for same-store sales growth of 3.5 to 4% at Wendy's in the United States and 5 to 6% at Tim Hortons for 2000.

Overall, he expects about 520 restaurants to open in 2000 and believes there is good growth opportunities for Wendy's in Manhattan. The company also is targeting previously untapped Hispanic communities with advertising.

Wendy's said sales in the first quarter benefited from the success of its Super Value Menu, the Cheddar Lovers' Bacon Cheeseburger and Chicken Nuggets. It said it has started promoting its Monterey Ranch Chicken sandwich and will emphasize late-night business in the second quarter.

At Tim Hortons, it said its new coffee cakes had proved successful in the quarter and that it would emphasize its iced cappuccino in the second quarter.

Separately, it said that during the annual meeting five directors were elected to three-year terms. They are James Pickett, Thomas Keller, Ronald Joyce, Andrew McCaughey and David Lauer.

The company also declared a quarterly dividend of 6 cents a share payable May 26 to shareholders of record May 15.

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