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DUBLIN, Ohio – December 1, 2005 – Wendy’s International, Inc. (NYSE: WEN) today updated certain elements of its comprehensive plan to improve the performance of the overall Company and its Wendy’s® business, as well as enhance value for its shareholders. The Company initially announced these strategic initiatives in July 2005.
Company files registration statement for IPO of Tim Hortons shares
A Form S-1 registration statement was filed today with the United States Securities and Exchange Commission for a 15 to 18 percent initial public offering (IPO) of Tim Hortons Inc. The Company continues to target March 2006 for the Tim Hortons IPO, and plans to list shares on both the New York Stock Exchange and Toronto Stock Exchange. The stock symbol will be THI. Tim Hortons Inc.’s reporting currency will be Canadian dollars.
Management expects to complete in the fourth quarter the sale of certain Wendy’s real estate assets and the closing of 40 to 45 underperforming Wendy’s restaurants
The Company expects to record in the fourth quarter of 2005 approximately $60-70 million in pretax asset gains and approximately $200 million in cash proceeds from selling certain Wendy’s real estate properties to franchisees and third parties. The number of Wendy’s properties sold is expected to be approximately 200.
The Company also expects to record during the fourth quarter approximately $ 23- 28 million in pretax charges for the closing of 40-45 underperforming Wendy’s restaurants that were negatively impacting profits and returns , and to reflect the net realizable value of a market held for disposition.
Company expects fourth-quarter non-cash goodwill writedown and asset impairment for Tim Hortons U.S.
The Company expects to record during the fourth quarter a non-cash pretax charge of approximately $25 million for the writedown of goodwill for Tim Hortons U.S., which resulted from the 2004 acquisition of restaurants in New England. The Company disclosed in July and again in October it would review its business units during the fourth quarter for any potential impairment of goodwill.
The Company also expects to record during the fourth quarter a non-cash pretax charge of $15-20 million for the impairment of fixed assets associated with certain Tim Hortons® restaurants in New England that were acquired in 2004.
The Company plans to close five Tim Hortons restaurants in the U.S. by year-end 2005, in its normal course of business, which is expected to result in a pretax charge of $1-2 million. The closings will include two kiosks in New England and three restaurants in other markets. Tim Hortons remains committed to the New England market and the brand’s future success there. Tim Hortons has restaurant openings planned in the U.S. and New England in the fourth quarter. Management has adjusted the time frame for reaching its store development goal of 500 Tim Hortons restaurants in the U.S. from the end of 2007 to the end of 2008. As of Oct. 2, 2005, there were 272 Tim Hortons restaurants in the U.S.
Chairman and Chief Executive Officer Jack Schuessler said: “We took decisive actions to position our Wendy’s and Tim Hortons U.S. businesses for improved results and we are on track executing the strategic initiatives we announced earlier this year. We are also on schedule with our S-1 filing today and the IPO in March.”
The Company also announced today that it expects:
- To record during the fourth quarter a non-cash pretax charge of approximately $ 10 million for the writedown of goodwill for its Cafe Express business, and pretax charges of $3-6 million for the impairment of assets and potential closing of one restaurant in a market.
- To record during the fourth quarter a pretax charge of $2-4 million for closing four underperforming Baja Fresh® Mexican Grill restaurants.
Overall, the Company expects the combined goodwill, asset impairment and store closing pretax charges to total $79-95 million in the fourth quarter. These charges will be partially offset by expected asset gains of $60-70 million from selling approximately 200 Wendy’s real estate properties by year end. The Company continues to anticipate the refranchising of certain Wendy’s stores, resulting in gains in future periods.
The Company’s fourth-quarter tax rate is expected to be affected by changes in the value of the Company’s currency hedge on inter-company notes. The hedge was $500 million (Canadian) and was valued at Canadian $1.16 for tax purposes at the end of the third quarter 2005. For the fourth quarter:
- An increase in the value of the hedge from a $0.01 (Canadian) weakening in the Canadian dollar will increase the Company’s tax expense in U.S. currency by approximately $1.3 million, or $0.01 per share; a decrease in the value of the hedge from a $0.01 (Canadian) strengthening of the Canadian dollar will decrease the Company’s tax expense in U.S. currency by approximately $1.3 million, or $0.01 per share.
The tax expense will be determined by the Canadian exchange rate on the last business day of the Company’s fourth quarter (December 30, 2005). The Company disclosed the currency hedge on October 27, 2005, and said it may impact its tax expense until the hedge is settled. The hedge is expected to be settled in March 2006.
Due to the potential variability associated with the previously mentioned currency hedge, asset gains, and charges for store closings, goodwill impairments and market impairments, the Company cannot reaffirm its 2005 EPS guidance provided on October 27, 2005.
As previously announced, the Company intends to pay off $100 million in 6.35% notes due December 15, 2005 and plans to continue executing its previously announced share repurchase program. The Company may be precluded from repurchasing shares at certain times due to its strategic initiatives and the anticipated IPO.
Tim Hortons IPO statement
A registration statement relating to these securities has been filed with the Securities and Exchange Commission, but has not yet become effective. These securities may not be sold, nor may offers to buy be accepted prior to the time the registration statement becomes effective.
Goodwill and asset impairment calculation
To determine the range of the estimated goodwill charges, management estimated the fair market value of the business based on historical performance, discounted cash flow projections and comparative market data . The Company’s expected impairment of certain markets is in accordance with Statement of Financial Accounting Standards (SFAS) No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets.”
Safe Harbor statement
Certain information in this news release, particularly information regarding future economic performance and finances, and plans, expectations and objectives of management, is forward looking. Factors set forth in our Safe Harbor under the Private Securities Litigation Reform Act of 1995, in addition to other possible factors not listed, could affect the Company's actual results and cause such results to differ materially from those expressed in forward-looking statements. Please review the Company’s Safe Harbor statement at http://www.wendys-invest.com/safeharbor.
Wendy’s International, Inc. overview
Wendy's International, Inc. is one of the world's largest restaurant operating and franchising companies with more than 9,800 total restaurants and quality brands – Wendy's Old Fashioned Hamburgers®, Tim Hortons and Baja Fresh Mexican Grill. The Company also has investments in two additional quality brands – Cafe Express and Pasta Pomodoro®. More information about the Company is available at www.wendys-invest.com.
Cafe Express is a trademark of Cafe Express, LLC
Pasta Pomodoro is a registered trademark of Pasta Pomodoro, Inc.
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CONTACTS:
John Barker: (614) 764-3044 or john_barker@wendys.com
David Poplar (614) 764-3547 or david_poplar@wendys.com
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