Tim Hortons signed a definitive agreement to sell its cup business to Dopaco Canada, Inc. The sale resulted from a strategic business review by Tim Hortons' management team and is expected to close by the end of July.
The sale should generate approximately $20 million in cash, and a one-time pretax gain of approximately $3.9 million, or approximately $0.02 per share in the third quarter for Wendy's International. The cup manufacturing business generated income of about $0.01 per share for Wendy's International in 2001.
"Our sale of the cup and lid business is consistent with our strategic plan to divest businesses that are not critical to our long-term objectives," said Chief Financial Officer Kerrii Anderson. "This sale will produce a one- time gain that is separate from our Wendy's restaurant refranchising initiatives.
Tim Hortons will continue to buy cups and lids from the business being sold to Dopaco Canada, Inc.
"Our sales momentum continued in June, as we focused on quality products at both Wendy's and Tim Hortons," said Chairman and Chief Executive Officer Jack Schuessler. "Wendy's continued to attract customers with our new Garden Sensations™ salads and our everyday Super Value Menu. In addition, our marketing has been very effective and our customer service initiatives continue to pay off at the pick-up window and inside our restaurants. Tim Hortons featured a popular strawberry-themed baked goods product promotion, and the chain continues to expand its share of the quick-service coffee business." At the same time, we are adding growth drivers to our Company through investments and acquisitions, such as Baja Fresh®, which we completed about two weeks ago."
Including the approximately $0.02 per share gain from the sale of the cup manufacturing business, 2002 earnings per share at Wendy's are now expected to grow in the 13.5% to 16.5% range, which would produce EPS in a range of $1.87 to $1.92, up from $1.65 in 2001.The outlook is higher than the company's previous EPS goal of $1.85 to $1.90.
The 13.5% to 16.5% EPS growth goal for 2002 includes $0.01 per share in asset gains from refranchising Wendy's restaurants, which management previously disclosed, compared to $0.03 per share in 2001. The 2002 outlook also includes $0.02 to $0.04 per share in dilution from the Baja Fresh acquisition, which was previously disclosed on May 31st. The company's long-term goal for annual EPS growth continues to be in the 12% to 15% range.