Industry News | October 24, 2002

Wendy's International, Inc. Reports 3rd Quarter Results, Announces Investment in Italian Chain

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Wendy's International, Inc. (NYSE: WEN) announced today strong growth in systemwide sales, revenues, same-store sales and earnings for the third quarter of 2002, which ended on September 29.

The Company produced strong results for the third quarter, which met or exceeded management's expectations for the period.

  • Systemwide sales grew 14.3% to a record $2.5 billion.
  • Total revenues increased 18.3% to a record $722 million.
  • Same-store sales grew 5.0% at Wendy's U.S. company restaurants, and sales growth was even stronger at franchised restaurants.
  • Same-store sales at Tim Hortons® restaurants in Canada grew 5.8%, while U.S. restaurants grew 8.8%.
  • The Company and its franchisees opened 143 new restaurants in the quarter, including 71 Wendy's, 55 Tim Hortons and 17 Baja Fresh®.
  • Wendy's domestic operating margin improved 60 basis points to 15.7% compared to the same quarter a year ago due to strong sales, supply chain management initiatives, and lower management and crew turnover.
  • Net income for the quarter increased 16.3% to $60.9 million and diluted EPS were $0.52, up 18.2% over $0.44 reported a year ago.

    Chairman and Chief Executive Officer Jack Schuessler said: "We delivered strong results at Wendy's and Tim Hortons in the quarter and we are very pleased with our financial performance during the first nine months of the year. We have produced very robust top-line growth and earnings growth.

    "We have focused on restaurant operations again this year while our competition has moved to more discounting. By focusing on quality food and service, our company restaurants and franchisees are producing superior results in a challenging economic environment for consumer product and retail companies," Schuessler said.

    The Company also announced today that it plans to invest $12 million in the Pasta Pomodoro restaurant business for approximately a 25 percent stake in the company. The transaction is expected to close in the next few days.

    Founded in 1994, Pasta Pomodoro is a fast casual restaurant featuring freshly prepared Italian food. Pasta Pomodoro has 24 restaurants, mainly in San Francisco and the Bay area. There are four units in Arizona and one in southern California. Two restaurants are currently under construction.

    "Pasta Pomodoro fits very well into our strategic framework for mergers, acquisitions and investments," said Schuessler.

    "First of all, the food at Pasta Pomodoro is great. It's very high quality and made fresh with delicious flavors. The food is right on trend with consumers. Second, the chain does not compete with our Wendy's, Tim Hortons or Baja Fresh franchisees. Third, founder Adriano Paganini, the management team and the staff are well positioned to grow the business to a range of 75 to 100 units by the end of 2005," Schuessler said. "In addition to our growth capital, we will provide restaurant industry expertise as they need it in the future."

    Paganini, who is chief executive officer and executive chef of Pasta Pomodoro, said: "We are very pleased to form a relationship with Wendy's. They understand the restaurant business and we look forward to their support as we grow over the next several years."

    The Company also:

  • Reiterated its 2002 EPS growth goal of $1.90 to $1.95, a 15% to 18% increase.
  • Announced that its board of directors has approved an additional $200 million for repurchase of Wendy's® common shares.
  • Announced that it will pay its 99th consecutive quarterly dividend to shareholders.