Feedstuffs, November 19, 2007


Wendy’s lays out strategic plan

Key Points
■ Plan includes emphasis on hamburgers, breakfast, snacks and beverages. ■ Committee studies possible recapitalization or sale of company.


ENDY’S International Inc. has laid out plans to improve results by emphasizing bigger and fancier hamburgers and expanding its breakfast and late-night day-parts, according to an announcement that coincided with the company’s release of third-quarter financial results. The announcements came as a committee of the company’s directors continues to explore strategic options that could include a recapitalization or sale of the company, a study that was begun earlier this year (Feedstuffs, April 30), but Wendy’s chief financial officer Jay Fitzsimmons said the study is taking longer than expected because of credit market volatility. Wendy’s laid out 10 initiatives to drive growth and improve returns, including an emphasis on bigger and fancier hamburgers such as its Baconater — a half-pound beef patty with six bacon strips, cheese, ketchup and

mayonnaise — and its new Jalapeno Cheddar Double Melt being introduced this month, as well as promoting restaurants’ use of fresh, not frozen, ground beef. Wendy’s said it will also expand its breakfast menu and the number of restaurants serving breakfast — currently just 850 of more than 6,000 stores — and will offer late-afternoon and late-night snacks, more beverages and updated value menus. “We are focused on exactly what we can control, which is improvement in our core business,” explained Wendy’s chief executive officer Kerrii Anderson. Triarc Companies Inc., which is led by investor Nel-

son Peltz and owns Arby’s Restaurant Group, has indicated an interest in acquiring Wendy’s for $37-41 per share, or $3.2 billion to $3.6 billion (Feedstuffs, Aug. 13). Peltz also is a member of Wendy’s board. At least two Wendy’s franchisees also have indicated interest in the company (Feedstuffs, Oct. 8). Wendy’s operates or franchises Wendy’s Old Fashioned Hamburgers restaurants in the U.S. and worldwide.

Financial results
For its third quarter ended Sept. 30, Wendy’s reported net earnings of $29.9 million, or 34 cents per share, on revenues of $631.1 million, compared with $69.2 million, or 58 cents per share, on revenues that totaled $630.1 million in its third quarter last year. The company said financial results for the quarter were strong, reflecting continuing business turnaround, cost

PLAN OUTLINED: Wendy’s International continues to explore its recapitalization or sale but has laid out a number of initiatives to grow sales and improve profits. controls and improvement in restaurant margins, but they were down from year ago due to expenses related to the board’s committee and restructuring. “We are continuing to execute our strategic plan and delivered at both the corporate and store levels despite commodity cost pressures and the very tough competitive environment,” the company said. Wendy’s opened 25 new restaurants in the quarter, bringing its number of stores at the end of the period to 6,633. For its three quarters, Wendy’s reported net earnings of $73.8 million, or 81 cents per share, on revenues of $1.9 billion, compared with $91.3 million, or 78 cents per share, on revenues of $1.8 billion in its first nine months last year.

Feed formulation for profitability: Maybe it’s least about least cost
N any larger feed mill, you I can find a feed formulation program. This is a piece of computer software that resembles a virtual matrix holding the nutrient composition of a desired feed recipe against the nutrient compositions and prices of various optional raw materials. In a multiple linear function, the computer calculates millions of combinations simultaneously and spits out the cheapest formula that meets the set criteria. This is something humans alone, even theoretically, even with endless time, could not do. When I studied animal nutrition, my class had to walk over to the information technology department at the university and run the calculations on a computer that was not a computer but a room full of buzzing machines with another room for the loud cooling system. Now, I have two competing versions for multiple clients and pricelists on a mediumrange laptop. What remains unchanged is the attitude. The name of the software program somehow reflects the unwritten subtitle of our feed business: “leastcost formulation.” There is nothing wrong about it.
*Mike Spandern is with FeedConcepts, an agribusiness development firm based in Bohnhusen, Germany. He can be reached at (49) 171-344-0581 or mike@feed

with MIKE SPANDERN* In a highly competitive business environment, controlling costs splits winners from losers. I will not join the panic about low prices seemingly compromising quality because in a highcompetition environment, quality also splits winners from losers. In the commercial feed business, where competing mills have to meet specifications set by their customers, least-cost formulation makes sense. However, in the holistic view of animal production, the least-cost feeding strategy sometimes misses the bigger picture. The cost of feed is just one of many factors that determine profitability. A x B x C / D x E x F = profit. Whether reducing A increases profit depends on the behavior of B, C, D, E and F. In a situation where single components show considerable changes in price — as we currently experience with grains — it can make sense to reduce the intensity of production a little bit by decreasing the nutrient density of the diet. The effect of opening up the restrictions of the formulation to more fiber, for example, of course leads to less feed efficiency, which again might lead to less animal performance (weight gain). Still, the monetary losses

in performance could be justified by lower feed costs. In return, when good carcass quality (as another example) achieves a premium and my fixed capital costs are high, I might be more immune to rising commodity prices and will allow the formulation program to pull in expensive components to gain feed efficiency. These are the very basic economics of investment and return. It appears easy, but it is based on very detailed information and the will to commonly share results. In the feed industry, that’s a problem. Even in fully integrated organizations that control the whole process from purchasing grains to packing meat, the costs of feed get too much attention. There is an obvious clash of interests. The feed division must not only provide cheap feeds to the animal production group but also prove that it can be a wealthy profit center. In commercial sales, it’s even worse. The information and response loop is distorted by the questionable truth of animal performance data delivered by customers. Competition does not make life easier, either. Can you really compare feeds from different companies? Can you compare results on different farms? A calculation is only as good as the data fed into it.

Stock Summary
Feedstuffs-Moskow Stock Indexes Agribusiness Baking Fertilizer Meat Poultry Packaged Foods Dow Jones Industrials NASDAQ S&P 500 Nov. 14 260.10 242.80 483.60 192.50 140.30 195.50 13,224.00 2,644.32 1,470.60 Nov. 7 262.50 230.50 514.90 190.00 137.90 195.60 13,300.00 2,748.76 1,475.60 Nov. 14 close 20.03 43.42 37.75 21.55 107.90 86.61 8.68 22.97 51.79 23.44 37.13 43.47 N/A 45.91 35.64 0.95 49.71 34.68 32.98 53.03 57.30 94.74 66.27 27.30 52.84 7.25 23.61 72.22 24.10 117.12 31.95 15.91 29.37 1,480.00 28.66 4.99 38.70 14.46 47.42 Year ago 266.60 247.70 174.10 182.00 132.80 198.50 12,252.00 2,442.75 1,396.60 Nov. 7 close 20.46 42.09 36.47 20.49 106.65 85.39 7.40 21.66 50.39 23.01 37.48 43.88 N/A 47.15 35.07 1.10 50.49 36.74 33.33 51.53 54.20 94.56 70.89 27.19 52.61 8.71 23.32 71.98 36.99 123.89 32.94 15.84 28.64 1,575.00 27.98 5.07 37.70 14.60 47.26

Alpharma Andersons Inc., The ADM Balchem Bunge Ltd. BNSF Cagle’s Cal-Maine Foods Church & Dwight ConAgra Corn Product CSX DPL Dupont Hormel IGI Internatl Flavors KC Southern Kraft Foods Lilly Merck Monsanto Co. Mosaic Neogen Novartis Omega Protein Pfizer Philip Morris Pilgrims Pride Potash Corp. Sanderson Farms Sara Lee Schering-Plough Seaboard Smithfield Foods Strategic Diag. Tejon Ranch Tyson Foods Wyeth

-------2006-07------Highs Lows* 28.30 19.90 50.82 37.72 39.52 30.70 22.34 14.09 116.75 65.86 94.76 72.36 11.85 7.20 28.50 7.70 52.69 41.61 27.52 22.81 49.12 30.79 51.26 33.89 41.85 40.39 53.35 45.91 39.49 31.76 1.25 0.62 54.20 46.00 42.50 26.49 36.74 30.20 60.56 51.35 58.26 42.79 98.29 46.27 71.09 19.76 27.30 13.31 59.70 51.60 10.41 6.12 27.86 22.83 89.40 65.17 40.59 23.74 124.34 44.67 47.86 26.62 18.12 15.43 33.34 21.25 2,675.00 1,480.00 34.95 24.61 6.40 3.11 56.63 37.70 24.08 14.28 58.42 44.53

The Feedstuffs Stock Summary indexes and stock quotes are provided by Credit Suisse First Boston (CSFB), New York, N.Y. Moskow Stock Indexes are developed exclusively for Feedstuffs by Rob Moskow at CSFB. E-mail robert. *Highs and lows are as of Nov. 14.