DUBLIN Ohio Wendy’s International Inc. posted a nearly 90-percent plunge in fourth-quarter net income versus a year earlier, reflecting the loss of profits from Tim Hortons, one of the chains it divested under intense pressure from shareholders.
The burger giant also logged $5.7 million in research and development expenses during the quarter for its namesake chain’s planned rollout of breakfast, which is currently being tested in about 150 restaurants.
Revenues dipped 1 percent, to $596.4 million, and franchise revenue dropped 20 percent.
For the quarter ended Dec. 31, Wendy’s earned $3 million, or 3 cents per share, compared with $30 million, or 25 cents per share, a year ago.
The company’s fourth quarter of fiscal 2005 included results from Tim Hortons, Baja Fresh and other discontinued operations, which contributed about $3.9 million to net income, the company said. In the last three months of 2006, discontinued operations resulted in a $6.9 million loss, mostly from Baja Fresh.
Other items negatively affecting Wendy’s fourth-quarter bottom line included a drop in franchisee rental income and reduced gains on sales of properties, the company said. In addition, Wendy’s spent $7.9 million in restructuring and severance charges during the fourth quarter.
The company’s income from continuing operations totaled $9.9 million, or 9 cents per share, in the fourth quarter of 2006, versus $26.1 million, or 22 cents per share, in the fourth quarter of 2005. Those results were well below average Wall Street expectations of 21 cents per share, as reported by Thomson Financial.
Still, the company remained upbeat about its top line growth and future performance as it executes its planned turnaround.
"We ended 2006 with strong momentum, positive same-store sales and significantly reduced costs," Wendy’s recently named chief executive Kerrii B. Anderson said in a statement. "We intend to build on this momentum and drive even stronger results in 2007 and beyond, as we examine every facet of our business for improvement."
Wendy’s restaurant sales increased 2.2 percent to $526.7 million. Fourth-quarter same-store sales increased 3.1 percent at domestic corporate restaurants and rose 2.7 percent at U.S.-based franchised units.
For the year, Wendy’s earned $94.3 million, or 82 cents per share, compared with profit of $224.1 million, or $1.92 per share, a year earlier. Revenues dipped 0.7 percent to $2.44 billion. Same-store sales increased 0.8 percent at U.S. corporate units and 0.6 percent at U.S. franchised restaurants. The company finished the year with seven consecutive months of positive same-store sales.
Wendy’s operates and franchises a system of 6,674 namesake restaurants worldwide. It has agreed to sell its majority-owned Café Express concept and still holds a minority interest in the Pasta Pomodoro chain.