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Wendy's International, Inc. Announces Comprehensive Strategic Initiatives to Enhance Shareholder Value

  • Plans to sell 15%-18% of Tim Hortons in Initial Public Offering
  • Launches initiatives to improve operating and financial performance of its Wendy's business
  • Board authorizes an additional $1 billion for share repurchase and a 25% increase in the Company's annual dividend rate to $0.68 per share
  • Plans to repay $100 million in debt due December 2005

DUBLIN, Ohio (July 29, 2005) - Wendy's International, Inc. (NYSE: WEN) today announced a comprehensive plan intended to improve the performance of its Wendy's business and enhance value for its shareholders.

The Board of Directors and management began in 2004 a thorough review of the Company's operations and strategic plan with its long-term, independent financial advisor, Goldman Sachs. The resulting initiatives announced today are a comprehensive approach to manage the Company for the future.

Chairman and CEO Jack Schuessler said: "We are taking strategic actions to improve Wendy's performance and highlight the value of Tim Hortons.  The strategic initiatives reflect the evolution of our business and represent the most effective way to enhance value for our shareholders and other stakeholders."

Company plans to sell 15%-18% of Tim Hortons in Initial Public Offering

The Board of Directors unanimously approved a plan to sell 15%-18% of Tim Hortons in an initial public offering (IPO).  The Company hopes to complete the IPO by the end of the first quarter 2006 and would retain ownership of the remaining 82%-85% of the Tim Hortons business. 

An IPO of 15%-18% would preserve the ability to complete a tax-free spin-off to Wendy's shareholders if the Board decides to pursue such an initiative in the future.

The Board and management had previously considered various alternatives for Tim Hortons. The strategic and financial rationale for pursuing the IPO now includes:

  • Tim Hortons is able to internally fund its growth, in contrast to its reliance on the Company for capital to expand since its merger with Wendy's in 1995 through the early 2000s.
  • Tim Hortons is generating significant growth with annual same-store sales increases of more than 7% in Canada since 2000. Tim Hortons has expanded from 1,980 restaurants in 2000 to 2,721 at year-end 2004, and produced $996 million in revenue and $247 million in segment income in 2004.
  • Tim Hortons "Always Fresh" par-baking initiative (Maidstone Bakery) is a proven success, but was still being developed in the early 2000s. In addition, the business has expanded its vertical integration initiatives with its Maidstone Coffee roaster and a distribution business in Canada (dry and frozen goods).
  • Tim Hortons' performance in the U.S. has improved.

Company repositioning Tim Hortons U.S. business

Tim Hortons U.S. business has been breakeven financially over the past three years with same-store sales growing at an annual growth rate of 9% since 2000.  At year-end 2004 there were 184 franchised stores and 67 company operated units.

The Company plans to reposition its Tim Hortons U.S. business by accelerating re-franchising of company stores and continuing to open new restaurants with franchisees.

The chain will review its portfolio of U.S. stores, including the New England locations acquired in 2004 and converted to Tim Hortons.  These units have produced lower than expected sales, which has negatively affected profitability in the U.S.  As part of its annual review of goodwill at all of its brands, during the fourth quarter the Company will review for impairment the goodwill related to the New England acquisition.

Company to focus on improving financial performance of its Wendy's business

The Company completed a thorough review of its Wendy's business and plans to maximize profits and returns in the U.S., Canada and International markets.  Strategic initiatives include:

  • Rebalancing U.S. Store Mix: Following a review of its portfolio of 5,935 U.S. stores at year-end 2004, which consisted of 22% company operated and 78% franchise operated units, the Company will pursue the sale of certain stores to franchisees that are in areas where it is not efficient for the Company to operate. Through these sales, Wendy's plans to lower the mix of company operated stores over the next two to three years from 22% to a range of 15%-18%. Wendy's will continue to provide leadership to the system with innovation in operations, new products, buildings and equipment. The Company may also buy certain stores from franchisees for strategic reasons. Management believes this initiative will increase operating margins and improve overall performance.
  • Closing Underperforming U.S. Company Stores: The Company has analyzed its U.S. company store base and intends to close 40 to 60 underperforming restaurants that are negatively impacting profits and returns.
  • Selling Franchised Real Estate: At year-end 2004, Wendy's owned 217 U.S. sites where it leases real estate to franchisees. The Company intends to pursue the sale of this real estate to franchisees or third party investors, where feasible.
  • Slowing New Store Development: Wendy's will slow U.S. company new store development, which has averaged 71 units over the past four years, to a range of 30 to 40 beginning in 2006. The Company is adjusting its development plan due to rising real estate and building costs, as well as margin pressure, and to focus on improving unit level economics.
  • Rebalancing Wendy's Store Mix in Canada: The Company assessed its portfolio of 154 company operated and 230 franchise operated units in Canada. Management intends to close certain underperforming units, re-franchise units in certain provinces and limit development to the most profitable areas.

Company expects neutral to positive impact from facilities actions and improvement in ROA and ROIC

Facilities actions at Wendy's are expected to generate net gains from re-franchising stores and selling real estate, which would offset potential charges from closing underperforming stores.  Management expects the accumulation of gains and write-offs/charges will be neutral or slightly positive to earnings, while improving return on assets and invested capital.

Slowing Wendy's new company store development is expected to save $50 million to $60 million in annual capital expenditures as management focuses on improving   return on assets and return on invested capital.

The amount of cash generated from the Tim Hortons IPO, facilities actions and slowing Wendy's company store development is dependent on market and business conditions.  The Company plans to use the cash primarily to repurchase common shares of its stock.   

Board authorizes additional $1 billion for share repurchase and a 25% increase in the Company's annual dividend rate to $0.68 per share

Based on the Company's strategic initiatives and cash flow projections, the Board authorized an additional $1 billion for share repurchases. The total authorization for share repurchase is now $1.22 billion.

The Company has repurchased 40.4 million common shares for approximately $1 billion since 1998.

The Board also authorized a 25% increase in the Company's annual dividend rate per share from $0.54 to $0.68, beginning with the dividend payment date scheduled for November 21, 2005.  Going forward, the Company intends to target a dividend payout ratio in the range of 23%-27%, up from the current range of 18%-22%.

Company to pay off $100 million of debt due in December 2005 at maturity

The Company intends to use existing cash and cash flow to pay off $100 million in debt due on December 15, 2005 (6.35% notes on the balance sheet).

"We have a strong balance sheet and will remain focused on a sound, long-term financial strategy as we improve earnings and position the Company for the future," said Chief Financial Officer Kerrii Anderson.

Company reiterates 11%-13% long-term EPS growth rate

As part of the strategic planning process, management also reviewed the Company's financial outlook and is reiterating its long-term annual growth rate guidance of 11%-13%.  The outlook includes the plan to sell a portion of Tim Hortons as an IPO, the Wendy's brand initiatives to lower new unit development and operate fewer company stores, as well as future share repurchases.

"While we believe there is significant growth remaining in the Wendy's business, our initiatives are focused on improving returns and cash flow," Schuessler said.

"The Board and management are confident that the initiatives announced today will result in greater value for our shareholders and other stakeholders. While the implementation of the plan will be dependent on market and business conditions, we currently anticipate completing the IPO of Tim Hortons in the next nine months.  The other strategic initiatives with Wendy's will begin immediately and continue over the next two to three years," Schuessler said. 

Conference call and Webcast scheduled to discuss 2nd Quarter results and Strategic Initiatives

Management will host a conference call on Friday, July 29, beginning at 8:00 am (Eastern) to discuss its second-quarter results and elements of its Enterprise Strategic Initiatives. Investors and the public may participate in the conference call in either one of the following ways:

  • Phone Call: The dial-in number is 877-572-6014 (domestic) or 706-679-4852 (international). No need to register in advance.
  • Simultaneous Web Cast: Available at The call will also be archived at that site.

Management intends to supplement its conference call remarks with a PowerPoint presentation, which will be available at beginning at 8:00 am.

Tim Hortons IPO

A registration statement relating to the common shares to be sold in the Tim Hortons IPO is expected to be filed with the Securities and Exchange Commission, but has not been filed or become effective.  The common shares may not be sold and offers may not be accepted prior to the time the registration statement becomes effective.

This release does not constitute an offer to sell or the solicitation of any offer to buy, and there shall not be any sale of the common shares in any state in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such state.

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 has investments in two other quality brands - Cafe ExpressT and Pasta Pomodoro. More information about the Company is available at

Safe Harbor statement

Certain information in this news release, particularly information regarding future economic performance and finances, and plans, expectations and objectives of management, and the planned Tim Hortons' IPO 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

Cafe Express is a trademark of Cafe Express, LLC
Pasta Pomodoro is a registered trademark of Pasta Pomodoro, Inc.


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