Back to GetFilings.com
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Fiscal Year Ended December 29, 2002
-----------------
( ) TRANSITIONAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number: 1-8116
------
WENDY'S INTERNATIONAL, INC.
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Ohio 31-0785108
- ----------------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
P.O. Box 256, 4288 West Dublin-Granville Road, Dublin, Ohio 43017-0256
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 614-764-3100
---------------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
- ------------------------------------ -----------------------------------------
Common Shares, $.10 stated value New York Stock Exchange
(114,358,000 shares outstanding
at February 28, 2003)
Preferred Stock Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
- -----------------------------------------------------------
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. YES X NO .
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
---
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). YES X NO .
--- ---
The aggregate market value of the voting stock held by non-affiliates of the
Registrant computed by reference to the price at which such voting stock was
last sold, as of June 30, 2002 was $4,587,345,000.
Documents incorporated by reference:
Portions of the Financial Statements and Other Information furnished with
the Definitive 2003 Proxy Statement dated March 4, 2003 are incorporated
by reference into Parts I and II.
Portions of the Definitive 2003 Proxy Statement dated March 4, 2003 are
incorporated by reference into Part III.
Exhibit index on pages 19-21.
1
PART I
ITEM 1. BUSINESS
THE COMPANY
Wendy's International, Inc. was incorporated in 1969 under the
laws of the State of Ohio. Wendy's International, Inc. and its
subsidiaries are collectively referred to herein as the
"Company."
The Company is primarily engaged in the business of operating,
developing and franchising a system of distinctive quick-service
and fast-casual restaurants serving high quality food. At
December 29, 2002, there were 6,253 Wendy's restaurants
("Wendy's") in operation in the United States and in 21 other
countries and territories. Of these restaurants, 1,320 were
operated by the Company and 4,933 by the Company's franchisees.
At December 29, 2002, the Company and its franchisees operated
2,348 Tim Hortons ("Hortons") restaurants with 2,188 restaurants
in Canada and 160 restaurants in the United States. Of these
restaurants open at December 29, 2002, only 71 were company
operated.
Additionally, at December 29, 2002, the Company and its
franchisees operated 210 Baja Fresh restaurants in 19 states and
the District of Columbia. This included 98 company operated
restaurants and 112 franchise restaurants.
OPERATIONS
Each Wendy's restaurant offers a relatively standard menu
featuring hamburgers and filet of chicken breast sandwiches,
which are prepared to order with the customer's choice of
condiments. Wendy's menu also includes chicken nuggets, chili,
baked and French fried potatoes, prepared salads, desserts, soft
drinks and other non-alcoholic beverages and children's meals. In
addition, the restaurants sell a variety of promotional products
on a limited basis.
Each Hortons unit offers coffee, cappuccino, fresh baked goods
such as donuts, muffins, pies, croissants, tarts, cookies, cakes,
bagels and in some units sandwiches, soups and fresh-baked
breads.
Baja Fresh offers a range of fast-casual, fresh Mexican food. The
menu includes a variety of fresh, flavorful food including the
following: burritos, tacos, quesadillas, nachos, tostadas, beans
and rice.
The Company strives to maintain quality and uniformity throughout
all restaurants by publishing detailed specifications for food
products, preparation and service, by continual in-service
training of employees and by field visits from Company
supervisors. In the case of franchisees, field visits are made by
Company personnel who review operations and make recommendations
to assist in compliance with Company specifications.
Generally, the Company does not sell food or supplies to its
Wendy's franchisees. However, the Company has arranged for volume
purchases of many of these products. Under the purchasing
arrangements, independent distributors purchase certain products
directly from approved suppliers and then store and sell them to
local company and franchised restaurants. These programs help
assure availability of products and provide quantity discounts,
quality control and efficient distribution. These advantages are
available both to the Company and to any franchisee who chooses
to participate in the distribution program.
Under the Hortons Canada franchise arrangements, the franchisee
is required to purchase certain products such as coffee, sugar,
flour and shortening from a Hortons' subsidiary. These products
are distributed from five warehouses located across Canada.
Products are delivered to Hortons Canada restaurants primarily by
Hortons' fleet of trucks and trailers. Both company and franchise
stores of Hortons U.S. purchase products from a supplier that has
been approved by the Company.
The New Bakery Co. of Ohio, Inc. ("Bakery"), a wholly-owned
subsidiary of the Company, is a producer of buns for Wendy's
restaurants. At December 29, 2002, the Bakery supplied 706
restaurants operated by the Company and 2,160 restaurants
operated by franchisees. At the present time, the Bakery does not
manufacture or sell any other products.
See Notes 7 and 14 on pages AA-27, AA-28, AA-33, AA-34 and AA-35
of the Financial Statements and Other Information furnished with
the Company's 2003 Proxy Statement, which Notes are incorporated
herein by reference, for further information regarding revenues,
income before income taxes and total assets attributable to the
Company's segments.
RAW MATERIALS
The Company and its franchisees have not experienced any material
shortages of food, equipment, fixtures or other products which
are necessary to restaurant operations. The Company anticipates
no such shortages of products and, in any event, alternate
suppliers are available.
2
TRADEMARKS AND SERVICE MARKS OF THE COMPANY
The Company has registered certain trademarks and service marks
in the United States Patent and Trademark office and in
international jurisdictions, some of which include "Wendy's",
"Wendy", "Old Fashioned Hamburgers", "Quality Is Our Recipe",
"Tim Hortons", "TimBits", "Your Friend Along the Way" and "Baja
Fresh". The Company believes that these and other related marks
are of material importance to the Company's business. Domestic
trademarks and service marks expire at various times from 2003 to
2015, while international trademarks and service marks have
various durations of five to 20 years. The Company generally
intends to renew trademarks and service marks which expire.
The Company entered into an Assignment of Rights Agreement with
the Company's Founder, R. David Thomas, and his wife dated as of
November 5, 2000 (the "Assignment"). The Company has used Mr.
Thomas, who was Senior Chairman of the Board until his death on
January 8, 2002, as a spokesperson and focal point for its
products and services for many years, and with the efforts and
attributes of Mr. Thomas has, through its extensive investment in
the advertising and promotional use of Mr. Thomas' name,
likeness, image, voice, caricature, endorsement rights and
photographs (the "Thomas Persona"), made the Thomas Persona well
known in the U.S. and throughout North America and a valuable
asset for both the Company and Mr. Thomas. Under the terms of the
Assignment the Company acquired the entire right, title, interest
and ownership in and to the Thomas Persona, including the sole
and exclusive right to commercially use the Thomas Persona.
In 2001, the Company acquired rights for the continued use of the
name and likeness of Mr. Ronald V. Joyce, a former director of
the Company, following his retirement from the Company in 2001.
SEASONALITY
The Company's business is moderately seasonal. Average restaurant
sales are normally higher during the summer months than during
the winter months.
WORKING CAPITAL PRACTICES
Cash from operations, cash and investments on hand, and possible
asset sales, should enable the Company to meet its financing
requirements. In addition, the Company has available unused lines
of credit.
COMPETITION
Each company and franchised restaurant is in competition with
other food service operations within the same geographical area.
The quick-service restaurant industry is highly competitive. The
Company competes with other organizations primarily through the
quality, variety and value perception of food products offered.
The number and location of units, quality and speed of service,
attractiveness of facilities, effectiveness of marketing and new
product development by the Company and its competitors are also
important factors. The price charged for each menu item may vary
from market to market depending on competitive pricing and the
local cost structure.
The Company's competitive position at its Wendy's restaurants is
enhanced by its use of fresh ground beef, its unique and diverse
menu, promotional products, its wide choice of condiments and the
atmosphere and decor of its restaurants. Hortons is known for the
freshness of its wide variety of baked goods and for its
excellent coffee. Baja Fresh is known for fresh, flavorful
Mexican food.
RESEARCH AND DEVELOPMENT
The Company engages in research and development on an ongoing
basis, testing new products and procedures for possible
introduction into the Company's systems. While research and
development operations are considered to be of prime importance
to the Company, amounts expended for these activities are not
deemed material.
GOVERNMENT REGULATIONS
A number of states have enacted legislation which, together with
rules promulgated by the Federal Trade Commission, affect
companies involved in franchising. Much of the legislation and
rules adopted have been aimed at requiring detailed disclosure to
a prospective franchisee and periodic registration by the
franchisor with state administrative agencies. Additionally, some
states have enacted, and others have considered, legislation
which governs the termination or non-renewal of a franchise
agreement and other aspects of the franchise relationship. The
United States Congress has also considered legislation of this
nature. The Company has complied with requirements of this type
in all applicable jurisdictions. The Company cannot predict the
effect on its operations, particularly on its relationship with
franchisees, of future enactment of additional legislation.
Various other government initiatives such as minimum wage rates
and taxes can all have a significant impact on the Company's
performance.
3
ENVIRONMENT AND ENERGY
Various federal, state and local regulations have been adopted
which affect the discharge of materials into the environment or
which otherwise relate to the protection of the environment. The
Company does not believe that such regulations will have a
material effect on its capital expenditures, earnings or
competitive position. The Company cannot predict the effect of
future environmental legislation or regulations.
The Company's principal sources of energy for its operations are
electricity and natural gas. To date, the supply of energy
available to the Company has been sufficient to maintain normal
operations.
ACQUISITIONS AND DISPOSITIONS
The Company has from time to time acquired the interests of and
sold Wendy's, Hortons and Baja Fresh restaurants to franchisees,
and it is anticipated that the Company may have opportunities for
such transactions in the future. The Company generally retains a
right of first refusal in connection with any proposed sale of a
franchisee's interest. The Company will continue to sell and
acquire Wendy's, Hortons and Baja Fresh restaurants in the future
where prudent.
See Notes 9 and 10 on pages AA-29, AA-30 and AA-31 of the
Financial Statements and Other Information furnished with the
Company's 2003 Proxy Statement, which Notes are incorporated
herein by reference, for further information regarding
acquisitions and dispositions.
INTERNATIONAL OPERATIONS
Markets in Canada are currently being developed for both company
owned and franchised restaurants. The Company has granted
development rights for the countries and territories listed under
Item 2 on page 9 of this Form 10-K.
FRANCHISED WENDY'S RESTAURANTS
As of December 29, 2002, the Company's franchisees operated 4,933
Wendy's restaurants in 50 states, the District of Columbia and 21
other countries and territories.
The rights and franchises under which most franchised restaurants
in the United States are operated are set forth in one basic
document, the Unit Franchise Agreement. This document gives the
franchisee the right to construct, own and operate a Wendy's
restaurant upon a site accepted by Wendy's and to use the Wendy's
system in connection with the operation of the restaurant at that
site. The Unit Franchise Agreement provides for a 20 year term
and a 10 year renewal subject to certain conditions.
Wendy's has in the past franchised under different agreements on
a multi-unit basis; however, now it is generally the intent of
the Company to grant new Wendy's franchises on a unit-by-unit
basis.
The Wendy's Unit Franchise Agreement requires that the franchisee
pay a royalty of 4% of gross sales, as defined in the agreement,
from the operation of the restaurant. The agreement typically
requires that the franchisee pay the Company a technical
assistance fee. In the United States, the technical assistance
fee required under newly executed Unit Franchise Agreement is
currently $25,000 for each restaurant.
The technical assistance fee is used to defray some of the cost
to the Company in providing technical assistance in the
development of the Wendy's restaurant, initial training of
franchisees or their operator and in providing other assistance
associated with the opening of the Wendy's restaurant. In certain
limited instances (like the regranting of franchise rights or the
relocation of an existing restaurant), Wendy's may charge a
reduced technical assistance fee or may waive the technical
assistance fee. The Company does not select or employ personnel
on behalf of the franchisees.
Wendy's currently offers to qualified franchisees, pursuant to
its Franchise Real Estate Development program, the option of
having Wendy's locate and secure real estate for new store
development. Wendy's obtains all licenses and permits necessary
to construct and operate the restaurant, with the franchisee
having the option of building the restaurant or having Wendy's
construct it. The franchisee pays Wendy's a fee for this service
and reimburses Wendy's for all out-of-pocket costs and expenses
Wendy's incurs in locating, securing, and/or constructing the new
store.
The rights and franchises currently offered for international
development are contained in the Franchise Agreement and Services
Agreement (the Agreements) which are issued upon approval of a
restaurant site. The Agreements are for an initial term of 10
years or the term of the lease for the restaurant site, whichever
is shorter. The Agreements license the franchisee to use the
Company's trademarks and know-how in the operation of the
restaurant. Upon execution of the Agreements, the franchisee is
required to pay a technical assistance fee. Generally, the
technical assistance fee is $30,000 for each restaurant.
Currently, the franchisee is required to pay monthly fees,
usually 4%, based on the monthly gross sales of the restaurant,
as defined in the Agreements.
4
See Schedule II on page 18 of this Form 10-K, and Management's
Review and Outlook on pages AA-1 through AA-15 and Note 11 on
pages AA-31 and AA-32 of the Financial Statements and Other
Information furnished with the Company's 2003 Proxy Statement
(Management's Review and Outlook and Note 11 are incorporated
herein by reference) for further information regarding reserves,
commitments and contingencies involving franchisees.
FRANCHISED HORTONS RESTAURANTS
Hortons franchisees operate under several types of license
agreements. The typical term of a license agreement for a
standard type of unit is 10 years plus aggregate renewal
period(s) of approximately 10 years.
In Canada, for franchisees who lease land and/or buildings from
Hortons, the license agreement generally requires between 3% and
4.5% of weekly gross sales of the restaurant, as defined in the
license agreement, for royalties plus a monthly rental which is
the greater of a base monthly rental payment or a percentage
(usually 10%) rental payment based on monthly gross sales, as
defined in the license agreement. Where the franchisee either
owns the premises or leases it from a third party, the royalty
required is increased by 1.5%. In the United States, for
franchisees who lease land and/or buildings from Hortons, the
license agreement generally requires 4.5% of weekly gross sales
of the restaurant, as defined in the license agreement, for
royalties plus a monthly rental which is the greater of a base
monthly rental payment or a percentage (usually 8.5%) rental
payment based on monthly gross sales, as defined in the license
agreement.
Hortons generally retains the right to reacquire a franchisee's
interest in a restaurant in the event the franchisee wants to
sell its interest during the first five years of the term of the
license agreement. After such period, Hortons generally retains a
right of first refusal with regard to any proposed transfer of
the franchisee's interest in the restaurant, together with the
right to consent to any transfer to a new franchisee.
FRANCHISED BAJA FRESH RESTAURANTS
Each Baja Fresh area developer is required to enter into two
types of agreements: an Area Development Agreement ("ADA") and a
franchise agreement for each restaurant opened under the ADA. The
ADA establishes the timing and number of stores to be developed
in an area. Pursuant to the current ADA, a franchisee is required
to pay a non-refundable $50,000 initial franchise fee for the
first restaurant, and an initial development fee equal to $17,500
multiplied by the total number of restaurants required under the
ADA (excluding the first restaurant). As each new site is
accepted, the franchisee signs a franchise agreement and lease on
the premises and pays an initial franchise fee of $35,000,
$17,500 of which is paid in cash and $17,500 of which is paid by
crediting a portion of the initial development fee paid by the
franchisee. Other than this credit, the development fee is
non-refundable.
The current ADA fixes royalties payable to the Company under
each single restaurant franchise agreement to 5% of the
franchisee's gross sales. For restaurants currently opened
pursuant to older ADAs, lower initial franchise fees and royalty
rates may apply (as low as a $20,000 initial franchise fee and
4% royalty rate for certain franchisees, including those who had
entered into ADAs with the Company prior to fiscal year ended
1999).
The ADAs have an initial term equal to the number of years over
which the franchisee is required to open restaurants, typically
5 years, but provides the franchisee with an opportunity to
enter into a successor ADA subject to certain conditions. The
single restaurant franchise agreements typically have a 10-year
initial term, but provide the franchisee with an opportunity to
enter into a two successive 5-year renewal franchise agreements
subject to certain conditions.
ADVERTISING AND PROMOTIONS
Products sold by Wendy's restaurants are advertised through
television, radio, newspapers, the internet and a variety of
promotional campaigns. The Company attempts to keep franchisees
informed of current advertising techniques and effective
promotions. The Company's advertising materials are also made
available to the franchisees. Both the Restaurant Franchise
Agreement (Wendy's previous form of franchise agreement) and the
Wendy's Unit Franchise Agreement provide that franchisees will
spend 4% of their gross sales, as defined in the applicable
agreement, for advertising and promotions. The Restaurant
Franchise Agreement and the Unit Franchise Agreement specify that
2% is to be spent on local and regional advertising (including in
many cases cooperative advertising) and 2% is the required
contribution to The Wendy's National Advertising Program, Inc.
("WNAP"). Under the Restaurant Franchise Agreement and the Unit
Franchise Agreement, the Company has the ability to increase the
required total advertising expenditure to 5% in certain
instances. Also, under the Unit Franchise Agreement the Company
may in certain circumstances change the allocation between
local/regional and national advertising.
For the years 1993 through 2001, the domestic system approved the
reallocation of the 4% advertising and promotions percentage,
such that the 4% was reallocated as 2.5% toward national
advertising and 1.5% toward local and regional advertising. For
the years 2002 through 2006, the domestic system has approved the
reallocation of the 4% advertising and promotions percentage,
such that the 4% would be reallocated as 3% toward national
advertising and 1% toward local and regional advertising.
In 2002, 2001 and 2000, approximately $207 million, $162 million
and $152 million, respectively, was spent on advertising,
promotions and related expenses by WNAP. WNAP is an Ohio
not-for-profit corporation which was established to collect and
administer the funds contributed by the Company and all domestic
franchisees. WNAP's Trustees are comprised of representatives of
both the Company and its franchisees.
5
Products sold by Wendy's Canada restaurants are advertised
through television, radio and a variety of promotional campaigns.
Wendy's Canadian Advertising Program Inc. ("WCAP") provides
Wendy's Canada corporate and franchise restaurants (excluding
Quebec, where all advertising in done locally) with in-store
advertising and promotional materials. WCAP currently collects
approximately 2.75% of monthly gross sales, as defined in the
franchise agreement, from Wendy's Canada franchise and corporate
restaurants (excluding Quebec) as contributions to this fund.
During 2002, 2001 and 2000, approximately $11.0 million, $9.7
million and $9.0 million, respectively, was spent by WCAP.
Products sold by Hortons restaurants are advertised through
television, radio, newspapers and a variety of promotional
campaigns. Hortons provides franchisees with in store advertising
and promotional materials. Tim Hortons Canada is generally
entitled to collect 4% of monthly gross sales, as defined in the
franchise agreement, from franchisees as a contribution to the
Tim Hortons Advertising and Promotion Fund (Canada) Inc. ("Ad
Fund"). For the 2002 calendar year, the contribution percentage
was voluntarily and temporarily reduced to 3.75% from January 1
through September 30, and further reduced to 3.5% from October 1
through the end of 2002. Tim Hortons U.S. collects 4% of monthly
gross sales, as defined in the franchise agreement, from
franchisees as a contribution to The Tim's National Advertising
Program ("TNAP"). During 2002, 2001 and 2000, approximately $57
million, $51 million and $48 million, respectively, was spent by
the Ad Fund and approximately $6.8 million, $5.8 million and $4.5
million, respectively, was spent by TNAP.
Products sold by Wendy's international restaurants outside of
Canada are advertised through various media including television,
radio, newspaper and a variety of promotional campaigns. Most
international franchisees are required by their franchise
agreement to spend at least 4% of the gross sales of their
restaurants, as defined in the franchise agreement, on
advertising and marketing. The Company assists its international
franchisees in preparing and executing marketing plans and
endeavors to keep its international franchisees informed of
current advertising techniques and effective promotions.
Baja Fresh has the right to assess franchisees an advertising fee
in the amount of 1% of gross sales, and to establish regions for
cooperative advertising and require an additional advertising fee
not to exceed 1.5% of gross sales. The Company has not made an
assessment of either of these advertising fees to date.
See Note 13 on page AA-33 of the Financial Statements and Other
Information furnished with the Company's 2003 Proxy Statement,
which Note is incorporated herein by reference, for further
information regarding advertising.
PERSONNEL
As of December 29, 2002, the Company employed approximately
48,000 people, of whom approximately 45,000 were employed in
company operated restaurants. The total number of full-time
employees at that date was approximately 9,200. The Company
believes that its employee relations are satisfactory.
AVAILABILITY OF INFORMATION
The Company makes available through its internet website
www.wendys-invest.com its annual report on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K and amendments
to those reports filed or furnished pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934, as amended, as soon
as reasonably practicable after electronically filing such
material with the Securities and Exchange Commission. The
reference to the Company's website address does not constitute
incorporation by reference of the information contained on the
website and should not be considered part of this document.
ITEM 2. PROPERTIES
Wendy's uses outside contractors in the construction of its
restaurants. The restaurants are built to Company specifications
as to exterior style and interior decor. The majority are
free-standing, one-story brick buildings, substantially uniform
in design and appearance, constructed on sites of approximately
40,000 square feet, with parking for approximately 45 cars. Some
restaurants, located in downtown areas or shopping malls, are of
a store-front type and vary according to available locations but
generally retain the standard sign and interior decor. The
typical new free-standing restaurant contains about 2,910 square
feet and has a food preparation area, a dining room capacity for
94 persons and a double pick-up window for drive-through service.
The restaurants are generally located in urban or heavily
populated suburban areas, and their success depends upon serving
a large number of customers. Wendy's provides a facility for
rural and less populated areas that has a building size of 2,123
square feet and approximately 60 seats. This unit provides full
double drive-through capacity. Wendy's also operates restaurants
in special site locations such as travel centers, gas
station/convenience stores, military bases, arenas, malls,
hospitals, airports and college campuses.
Hortons uses outside contractors in the construction of its
restaurants. The restaurants are built to Company specifications
as to exterior style and interior decor. The standard Hortons
restaurant currently being built consists of a free-standing
producing unit ranging from 1,150 to 3,030 square feet. Each of
these includes a bakery capable of supplying fresh baked goods
throughout the day to several satellite Hortons within a defined
area. In addition, Hortons has restaurants that are 550 to 800
square foot drive-through-only units, kiosks, full-service carts
and mobile carts which are typically located in high traffic
areas. Some of these drive-thru only units, kiosks and carts have
production facilities on site.
There are also Wendy's and Hortons concepts combined in one
free-standing unit which averages about 5,780 square feet. These
units share a common dining room seating from 104 to 127 persons.
Each unit has separate food preparation and storage areas and
most have separate pick-up windows for each concept.
6
The Company remodels its restaurants on a periodic basis to
maintain a fresh image, providing convenience for its customers
and increasing the overall efficiency of restaurant operations.
At December 29, 2002, the Company and its franchisees operated
6,253 Wendy's restaurants. Of the 1,320 company operated Wendy's
restaurants, the Company owned the land and building for 610
restaurants, owned the building and held long-term land leases
for 465 restaurants and held leases covering land and building
for 245 restaurants. The Company's land and building leases are
written for terms of 10 to 25 years with one or more five-year
renewal options. In certain lease agreements the Company has the
option to purchase the real estate. Certain leases require the
payment of additional rent equal to a percentage (ranging from 1%
to 10%) of annual sales in excess of specified amounts. Some of
the real estate owned by the Company is subject to mortgages
which mature over various terms. The Company also owned land and
buildings for, or leased, 502 Wendy's restaurant locations which
were leased or subleased to franchisees. Surplus land and
buildings are generally held for sale.
At December 29, 2002, there were 2,348 Hortons units, of which
all but 71 were franchise operated. Of the 2,277 franchised
units, 457 were owned by Hortons and leased to franchisees, 1,343
were leased by Hortons and in turn subleased to franchisees, with
the remainder either owned or leased directly by the franchisee.
The Company's land and building leases are generally for terms of
10 to 20 years, and often have one or more five-year renewal
options. In certain lease agreements the Company has the option
to purchase the real estate.
At December 29, 2002, there were 210 Baja Fresh restaurants, of
which 98 were company operated restaurants and 112 were franchise
restaurants. The Company held leases for all 98 company operated
restaurants. The Company's leases are written for terms of 5 to
10 years with one or more five-year renewal options. Certain
leases require the payment of additional rent equal to a
percentage (ranging from 3% to 6%) of annual sales in excess of
specified amounts. Additionally, the Company held leases for six
Baja Fresh restaurant locations which were leased or subleased to
franchisees. The remainder of the franchise operated restaurants
were either owned or leased directly by the franchisee.
See the location of company and franchise restaurants listed
under Item 2 on pages 8 and 9 of this Form 10-K.
7
WENDY'S TIM HORTONS BAJA FRESH
------- ----------- ----------
State Company Franchise Company Franchise Company Franchise
Alabama - 102 - - - -
Alaska - 10 - - - -
Arizona 41 45 - - 15 -
Arkansas - 57 - - - -
California 29 203 - - 52 64
Colorado 42 81 - - - 3
Connecticut 4 36 - - - -
Delaware - 18 - - - -
Florida 126 323 - - - 4
Georgia 43 223 - - 2 -
Idaho - 24 - - - 1
Illinois 98 111 - - 5 -
Indiana 5 167 - - - -
Iowa - 43 - - - -
Kansas 17 53 - - - 2
Kentucky 3 126 - 1 - -
Louisiana 58 61 - - - -
Maine 4 19 2 4 - -
Maryland - 112 - - 7 4
Massachusetts 54 30 - - - -
Michigan 38 222 11 48 - 3
Minnesota 30 25 - - - -
Mississippi 6 80 - - - -
Missouri 25 66 - - - -
Montana - 15 - - - -
Nebraska - 32 - - - -
Nevada - 48 - - 6 6
New Hampshire 3 21 - - - -
New Jersey 16 114 - - - -
New Mexico - 36 - - - -
New York 66 147 - 41 - -
North Carolina 33 192 - - - 4
North Dakota - 7 - - - -
Ohio 111 329 26 25 - 4
Oklahoma - 41 - - - -
Oregon 17 40 - - - 10
Pennsylvania 84 174 - - - -
Rhode Island 8 12 - - - -
South Carolina - 116 - - - -
South Dakota - 10 - - - -
Tennessee - 176 - - 2 -
Texas 76 285 - - 4 -
Utah 52 19 - - 1 -
Vermont - 2 - - - -
Virginia 45 148 - - 3 5
Washington 27 39 - - - 2
West Virginia 22 47 1 1 - -
Wisconsin - 60 - - - -
Wyoming - 14 - - - -
District of Columbia - 5 - - 1 -
----- ----- --- --- --- ---
Domestic Subtotal 1,183 4,366 40 120 98 112
----- ----- --- --- --- ---
8
WENDY'S TIM HORTONS BAJA FRESH
------- ----------- ----------
Country/Territory Company Franchise Company Franchise Company Franchise
Aruba - 3 - - - -
Bahamas - 6 - - - -
Canada 133 221 31 2,157 - -
Cayman Islands - 2 - - - -
Dominican Republic - 5 - - - -
El Salvador - 9 - - - -
Guam 2 - - - - -
Guatemala - 7 - - - -
Hawaii 2 4 - - - -
Honduras - 16 - - - -
Iceland - 1 - - - -
Indonesia - 27 - - - -
Jamaica - 2 - - - -
Japan - 83 - - - -
Mexico - 16 - - - -
New Zealand - 14 - - - -
Panama - 6 - - - -
Philippines - 40 - - - -
Puerto Rico - 46 - - - -
United Kingdom - 1 - - - -
Venezuela - 56 - - - -
Virgin Islands - 2 - - - -
---- ----- ---- ----- -- ---
International Subtotal 137 567 31 2,157 - -
---- ----- ---- ----- -- ---
Grand Total 1,320 4,933 71 2,277 98 112
===== ===== ==== ===== -- ---
ITEM 3. LEGAL PROCEEDINGS
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
9
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
This information is incorporated herein by reference from page
AA-40 of the Financial Statements and Other Information furnished
with the Company's 2003 Proxy Statement.
ITEM 6. SELECTED FINANCIAL DATA
This information is incorporated herein by reference from page
AA-40 of the Financial Statements and Other Information furnished
with the Company's 2003 Proxy Statement.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's Review and Outlook on pages AA-1 through AA-15 of
the Financial Statements and Other Information furnished with the
Company's 2003 Proxy Statement is incorporated herein by
reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
This information is incorporated herein by reference from page
AA-9 of the Management's Review and Outlook in the Financial
Statements and Other Information furnished with the Company's
2003 Proxy Statement.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Balance Sheets of the Company at December 29,
2002 and December 30, 2001, and the Consolidated Statements of
Income, Statements of Cash Flows and Statements of Shareholder's
Equity for each of the three fiscal years in the periods ended
December 29, 2002, December 30, 2001 and December 31, 2000, the
Report of Independent Accountants on these Consolidated Financial
Statements, and the Company's unaudited quarterly financial data,
are incorporated herein by reference from pages AA-16 through
AA-38 of the Financial Statements and Other Information furnished
with the Company's 2003 Proxy Statement.
The Report of Independent Accountants on the Company's
Consolidated Financial Statement Schedule is included on page 17
of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
10
PART III
ITEMS 10, 11, 12, AND 13. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT;
EXECUTIVE COMPENSATION; SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDERS MATTERS; AND CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS
EXECUTIVE OFFICERS OF THE REGISTRANT
Name Age Position With Company Officer Since
John T. Schuessler 52 Chairman of the Board, Chief Executive Officer and 1983
President, Director
Kerrii B. Anderson 45 Executive Vice President and Chief Financial Officer,
Director 2000
Thomas J. Mueller 51 President and Chief Operating Officer -
Wendy's North America 1998
Donald F. Calhoon 51 Executive Vice President 1984
Kathie T. Chesnut 51 Executive Vice President 1990
George Condos 49 Executive Vice President 1982
Leon M. McCorkle, Jr. 62 Executive Vice President, General Counsel and Secretary 1998
Ronald E. Musick 62 Executive Vice President 1986
John F. Brownley 60 Senior Vice President and Treasurer 1981
Jonathan F. Catherwood 41 Executive Vice President 2001
John M. Deane 48 Executive Vice President 2001
Brion G. Grube 51 Senior Vice President 1990
Lawrence A. Laudick 55 Senior Vice President, General Controller and 1976
Assistant Secretary
No arrangements or understandings exist pursuant to which any
person has been, or is to be, selected as an officer, except in
the event of a change in control of the Company, as provided in
the Company's Key Executive Agreements. The executive officers of
the Company are appointed by the Board of Directors.
Except as set forth below, each of the above individuals has held
the same principal occupation with the Company for at least the
last five years.
Mr. Schuessler joined the Company in 1976. He served in Company
Operations as Regional Vice President from 1983 to 1984, Zone
Vice President from 1984 to 1986, and Division Vice President
from 1986 until 1987, when he was promoted to Senior Vice
President of the Northeast Region. In 1995, Mr. Schuessler was
promoted to Executive Vice President of U.S. Operations. He was
named President and Chief Operating Officer, U.S. Operations in
1997, and Chief Executive Officer and President on March 16,
2000. Mr. Schuessler was also named Chairman of the Board on May
1, 2001.
Mrs. Anderson joined the Company in 2000 as Executive Vice
President and Chief Financial Officer. Prior to joining the
Company, Mrs. Anderson had held the titles of Senior Vice
President and Chief Financial Officer of M/I Schottenstein Homes,
Inc. since 1987. She was also Secretary of M/I Schottenstein
Homes, Inc. from 1987 to 1994 and Assistant Secretary from 1994
until she joined the Company.
Mr. Mueller joined the Company in 1998 as Senior Vice President,
Special Projects, and in 1999 he was named Senior Vice President
for the Northeast Region. In 2000, Mr. Mueller was named
President and Chief Operating Officer - Wendy's North America.
Prior to joining the Company, Mr. Mueller was with Burger King
from 1973 to 1997, where his most recent position was Senior Vice
President, North American Operations.
Mr. Calhoon joined the Company in 1978 and held various positions
with the Company until being named Vice President, Field
Marketing in 1984. In 1989 he was promoted to Vice President,
Corporate Marketing and in 1995 was named Senior Vice President,
Corporate Marketing. In 2000, Mr. Calhoon was named Executive
Vice President, Corporate Marketing.
Mrs. Chesnut joined the Company in 1990 as Vice President,
Special Projects. In 1991, Mrs. Chesnut was named Vice President,
Research and Development and in 1994, she was promoted to Senior
Vice President, Research and Development, Quality Assurance and
Purchasing. In 2000, Mrs. Chesnut was promoted to Executive Vice
President, Research and Development, Quality Assurance and Supply
Chain Management. In 2001, Mrs. Chesnut assumed the
responsibilities for corporate business development. Prior to
joining the Company, she was with Showbiz Pizza Time, Inc. as
Director of Research and Development.
11
Mr. McCorkle joined the Company in 1998 as Senior Vice President
and General Counsel. He was also named Secretary of the Company
in 2000. In 2001, Mr. McCorkle was named Executive Vice
President. Prior to joining the Company, he was a senior partner
of Vorys, Sater, Seymour and Pease LLP.
Mr. Catherwood joined the Company in 2001 as Senior Vice
President of Mergers and Acquisitions. In 2002, Mr. Catherwood
was named Executive Vice President, Mergers, Acquisitions and
Business Integration. Prior to joining the Company, he was a
general partner at the Windsor Group, LLC.
Mr. Deane joined the Company in 2001 as Senior Vice President and
Chief Information Officer. In 2002, Mr. Deane was named Executive
Vice President. Prior to joining the Company, he was President of
Clipper Management Inc. from 1999 to 2001. Prior to that time,
Mr. Deane was Chief Information Officer of MedPartners Inc., now
Caremark Rx, Inc.
Mr. Grube joined the Company in 1990 as Division Vice President
and was promoted to Senior Vice President - Canada in 1993. In
January 2001, Mr. Grube was promoted to Senior Vice President -
International Wendy's. Before joining the Company, Mr. Grube was
with Imperial Savings Association from 1988 to 1990. Prior to
that time, Mr. Grube spent 12 years with Pizza Hut, Inc.
The information required by these Items, other than the
information set forth above, is omitted and incorporated herein
by reference from the Company's 2003 Proxy Statement dated March
4, 2003. However, no information set forth in the 2003 Proxy
Statement regarding the Audit Committee Report (pages 7-8), the
Report of the Compensation Committee on Executive Compensation
(pages 11-13) or the performance graph (page 14) shall be deemed
incorporated by reference into this Form 10-K.
ITEM 14. CONTROLS AND PROCEDURES
(a) Within the 90-day period prior to the filing date of this
Annual Report on Form 10-K, the Company, under the supervision,
and with the participation, of its management, including its
Chief Executive Officer and Chief Financial Officer, performed an
evaluation of the Company's disclosure controls and procedures,
as contemplated by Securities Exchange Act Rule 13a-15. Based on
that evaluation, the Company's Chief Executive Officer and Chief
Financial Officer concluded that such disclosure controls and
procedures were effective.
(b) No significant changes were made in the Company's internal
controls or in other factors that could significantly affect
these controls subsequent to the date of the evaluation performed
pursuant to Securities Exchange Act Rule 13a-15 referred to
above.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) and (2) - The following Consolidated Financial
Statements of Wendy's International, Inc. and Subsidiaries,
included in the Financial Statements and Other Information
furnished with the Company's 2003 Proxy Statement on pages
AA-16 to AA-38 and incorporated by reference in Item 8, are
filed as part of this Annual Report on Form 10-K.
Consolidated Statements of Income - Years ended
December 29, 2002, December 30, 2001 and December 31,
2000.
Consolidated Balance Sheets - December 29, 2002 and
December 30, 2001.
Consolidated Statements of Cash Flows - Years ended
December 29, 2002, December 30, 2001 and December 31,
2000.
Consolidated Statements of Shareholders' Equity - Years
ended December 29, 2002, December 30, 2001 and December
31, 2000.
Consolidated Statements of Comprehensive Income - Years
ended December 29, 2002, December 30, 2001 and December
31, 2000.
Notes to the Consolidated Financial Statements.
Report of Independent Accountants.
(3) Listing of Exhibits - See Index to Exhibits. The
following management contracts or compensatory plans or
arrangements are required to be filed as exhibits to this
report:
Sample Restated Key Executive Agreement between the
Company and Messrs. Brownley, Calhoon, Catherwood,
Condos, Deane, Grube, Laudick, McCorkle, Mueller,
Musick, Schuessler, and Mmes. Anderson and Chesnut.
Sample Key Executive Agreement between the Company, The
TDL Group Ltd. and Mr. House.
Assignment of Rights Agreement between the Company and
Mr. Thomas.
Senior Executive Annual Performance Plan.
Executive Annual Performance Plan.
Supplemental Executive Retirement Plan.
12
1978 Non-Qualified Stock Option Plan, as amended.
1982 Stock Option Plan, as amended.
1984 Stock Option Plan, as amended.
1987 Stock Option Plan, as amended.
1990 Stock Option Plan, as amended.
WeShare Stock Option Plan, as amended.
(b) No report on Form 8-K was filed during the quarter ended
December 29, 2002.
(c) Exhibits filed with this report are listed in the Index to
Exhibits.
(d) The following Consolidated Financial Statement Schedule of
Wendy's International, Inc. and Subsidiaries is included in
Item 15(d): II - Valuation and Qualifying Accounts.
All other schedules for which provision is made in the
applicable accounting regulations of the Securities and
Exchange Commission are not required under the related
instructions, are inapplicable, or the information has been
disclosed elsewhere.
13
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Wendy's International, Inc.
By /s/ KERRII B. ANDERSON 3/28/03
-------------------------------------------
Kerrii B. Anderson
Executive Vice President
and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the
dates indicated.
/s/ JOHN T. SCHUESSLER* 3/28/03 /s/ KERRII B. ANDERSON 3/28/03
------------------------------------------------ --------------------------------------------
John T. Schuessler, Chairman of the Board, Kerrii B. Anderson, Executive Vice President
Chief Executive Officer and President, Director and Chief Financial Officer, Director
/s/ PAUL D. HOUSE* 3/28/03 /s/ LAWRENCE A. LAUDICK* 3/28/03
------------------------------------------------ --------------------------------------------
Paul D. House, Director Lawrence A. Laudick, Senior Vice
President, General Controller
and Assistant Secretary
/s/ ERNEST S. HAYECK* 3/28/03 /s/ JANET HILL* 3/28/03
------------------------------------------------ --------------------------------------------
Ernest S. Hayeck, Director Janet Hill, Director
/s/ THOMAS F. KELLER* 3/28/03 /s/ WILLIAM E. KIRWAN* 3/28/03
------------------------------------------------ --------------------------------------------
Thomas F. Keller, Director William E. Kirwan, Director
/s/ TRUE H. KNOWLES* 3/28/03 /s/ DAVID P. LAUER* 3/28/03
------------------------------------------------ --------------------------------------------
True H. Knowles, Director David P. Lauer, Director
/s/ ANDREW G. McCAUGHEY* 3/28/03 /s/ JAMES F. MILLAR* 3/28/03
------------------------------------------------ --------------------------------------------
Andrew G. McCaughey, Director James F. Millar, Director
/s/ JAMES V. PICKETT* 3/28/03 /s/ THEKLA R. SHACKELFORD* 3/28/03
------------------------------------------------ --------------------------------------------
James V. Pickett, Director Thekla R. Shackelford, Director
*By /s/ KERRII B. ANDERSON 3/28/03
--------------------------------------------
Kerrii B. Anderson,
Attorney-in-Fact
14
CERTIFICATIONS
I, John T. Schuessler, certify that:
1. I have reviewed this annual report on Form 10-K of Wendy's
International, Inc.;
2. Based on my knowledge, this annual report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in
light of the circumstances under which such statements were
made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly
present in all material respects the financial condition,
results of operations and cash flows of the registrant as
of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules
13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to
ensure that material information relating to the
registrant, including its consolidated subsidiaries, is
made known to us by others within those entities,
particularly during the period in which this annual
report is being prepared;
b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date within
90 days prior to the filing date of this annual report
(the "Evaluation Date"); and
c) presented in this annual report our conclusions about
the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation
Date;
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation
of internal controls which could adversely affect the
registrant's ability to record, process, summarize and
report financial data and have identified for the
registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant
role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have
indicated in this annual report whether or not there were
significant changes in internal controls or in other factors
that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies
and material weaknesses.
Date: March 28, 2003
/s/ John T. Schuessler
--------------------------------------
Name: John T. Schuessler
Title: Chief Executive Officer
15
CERTIFICATIONS
I, Kerrii B. Anderson, certify that:
1. I have reviewed this annual report on Form 10-K of Wendy's
International, Inc.;
2. Based on my knowledge, this annual report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in
light of the circumstances under which such statements were
made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly
present in all material respects the financial condition,
results of operations and cash flows of the registrant as
of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules
13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to
ensure that material information relating to the
registrant, including its consolidated subsidiaries, is
made known to us by others within those entities,
particularly during the period in which this annual
report is being prepared;
b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date within
90 days prior to the filing date of this annual report
(the "Evaluation Date"); and
c) presented in this annual report our conclusions about
the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation
Date;
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation
of internal controls which could adversely affect the
registrant's ability to record, process, summarize and
report financial data and have identified for the
registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant
role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have
indicated in this annual report whether or not there were
significant changes in internal controls or in other factors
that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies
and material weaknesses.
Date: March 28, 2003
/s/ Kerrii B. Anderson
--------------------------------------
Name: Kerrii B. Anderson
Title: Chief Financial Officer
16
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE
TO THE BOARD OF DIRECTORS AND
SHAREHOLDERS OF WENDY'S INTERNATIONAL, INC.
AND SUBSIDIARIES
Our audits of the consolidated financial statements referred to
in our report dated January 31, 2003, appearing on page AA-38 of
the Financial Statements and Other Information furnished with the
2003 Proxy Statement of Wendy's International, Inc. (which report
and consolidated financial statements are incorporated by
reference in this Annual Report on Form 10-K) also included
audits of the Financial Statement Schedule listed in Item 15(d)
of this Form 10-K. In our opinion, this Financial Statement
Schedule presents fairly, in all material respects, the
information set forth therein when read in conjunction with the
related consolidated financial statements.
Columbus, Ohio /s/ PricewaterhouseCoopers LLP
January 31, 2003
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the
Registration Statements on Form S-3 (File Nos. 333-100463 and
333-102824) and in the Registration Statements on Form S-8 (File
Nos. 2-67253, 2-98696, 33-18177, 2-82823, 33-36602, 33-36603,
333-9261, 333-32675, 33-57913, 333-60031, 333-60033, 333-83973,
333-42478, 333-65990 and 333-97277) of Wendy's International,
Inc. of our report dated January 31, 2003, relating to the
financial statements, which appears in the Annual Report to
Shareholders, which is incorporated in this Annual Report on Form
10-K. We also consent to the incorporation by reference of our
report dated January 31, 2003 relating to the Financial Statement
Schedule, which appears in this Form 10-K.
Columbus, Ohio /s/ PricewaterhouseCoopers LLP
March 27, 2003
17
WENDY'S INTERNATIONAL, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (in thousands)
BALANCE AT CHARGED (CREDITED) BALANCE AT
BEGINNING TO COSTS & ADDITIONS END OF
CLASSIFICATION OF YEAR EXPENSES (DEDUCTIONS) (a) YEAR
Fiscal year ended December 29, 2002:
Reserve for royalty receivables $ 1,937 $ 516 $ (257) $ 2,196
Deferred tax asset valuation allowance 12,280 8,581 - 20,861
Reserve for possible franchise-
related losses & contingencies 7,115 (1,044) (562) 5,509
------- ------- -------- -------
$21,332 $ 8,053 $ (819) $28,566
------- ------- -------- -------
Fiscal year ended December 30, 2001:
Reserve for royalty receivables $ 1,617 $ 133 $ 187 $ 1,937
Deferred tax asset valuation allowance - 12,280 - 12,280
Reserve for possible franchise-
related losses & contingencies 6,680 1,965 (1,530) 7,115
------- ------- -------- -------
$ 8,297 $14,378 $ (1,343) $21,332
------- ------- -------- -------
Fiscal year ended December 31, 2000:
Reserve for royalty receivables $ 1,663 $ 380 $ (426) $ 1,617
Reserve for possible franchise-
related losses & contingencies 6,012 1,106 (438) 6,680
------- ------- -------- -------
$ 7,675 $ 1,486 $(864) $ 8,297
------- ------- -------- -------
(a) Primarily represents reserves written off or reversed due to the resolution
of certain franchise situations.
Year-end balances are reflected in the Consolidated Balance Sheet as follows:
DECEMBER 29, DECEMBER 30, DECEMBER 31,
2002 2001 2000
---- ---- ----
Deducted from accounts receivable $ 6,558 $ 8,057 $5,544
Deducted from notes receivable - current 301 276 114
Deducted from notes receivable - long-term 846 719 2,639
Deducted from deferred tax asset - long-term 20,861 12,280 -
------- ------- ------
$28,566 $21,332 $8,297
------- ------- ------
18
WENDY'S INTERNATIONAL, INC. AND SUBSIDIARIES
INDEX TO EXHIBITS
EXHIBIT DESCRIPTION WHERE FOUND
2(a) Share Purchase Agreement, dated as of Incorporated herein by reference from
October 31, 1995, by and among Wendy's Exhibit 2 of Form 10-Q for the quarter
International, Inc., 1149658 Ontario Inc., ended October 1, 1995.
632687 Alberta Ltd. and Ronald V. Joyce
(b) Amendment to the Share Purchase Incorporated herein by reference from Exhibit 2.2
Agreement, dated as of December 28, to Ronald V. Joyce's Schedule 13D, dated
1995, by and among Wendy's International, January 5, 1996.
Inc., 1149658 Ontario Inc., 1052106
Ontario Limited and Ronald V. Joyce
(c) Agreement between Ronald V. Joyce, Incorporated herein by reference from Exhibit 2
WENTIM, LTD., Wendy's International, Inc. of Form 10-Q for the quarter ended October 4,
and the Irrevocable Trust for the Benefit 1998.
of Ronald V. Joyce, dated as of September
16, 1998
(d) Amendment to Share Purchase Agreement, Incorporated herein by reference from Exhibit
dated as of February 25, 1999, by and among 2(d) of Form 10-K for the year ended January 3,
Wendy's International, Inc., WENTIM, LTD. 1999.
and Ronald V. Joyce
(e) Registration Rights Agreement, dated as of Incorporated herein by reference from Exhibit 2.10
December 29, 1995, by and between Wendy's to Ronald V. Joyce's Schedule 13D, dated
International, Inc. and Ronald V. Joyce January 5, 1996.
(f) Amending Agreement No. 1 to the Registration Incorporated herein by reference from Exhibit
Rights Agreement, dated as of February 25, 2(o) of Form 10-K for the year ended January 3,
1999, by and between Wendy's International, 1999.
Inc. and Ronald V. Joyce
19
(g) Agreement between Wendy's International, Inc. Incorporated herein by reference from Exhibit 2
and Ronald V. Joyce dated October 18, 2001. of Form 8-K filed on October 19, 2001.
(h) Agreement between Ronald V. Joyce, Incorporated herein by reference from Exhibit 2 of
WENTIM, LTD., Wendy's International, Inc., Form 8-K filed on September 13, 2002.
THD RE No. 1 Co. and the Irrevocable Trust
for the Benefit of Ronald V. Joyce, dated as
of September 13, 2002.
3(a) Articles of Incorporation, as amended to Incorporated herein by reference from Exhibit
date 3(a) of Form 10-K for the year ended January 3
1999.
(b) New Regulations, as amended Incorporated herein by reference from
Exhibit 3 of Form 10-Q for the quarter
ended March 31, 2002.
* 4(a) Indenture between the Company and Bank Incorporated herein by reference from
One, National Association, pertaining to Exhibit 4(i) of Form 10-K for the year ended
6.25% Senior Notes due November 15, 2011 December 30, 2001.
and 6.20% Senior Notes due June 15, 2014
(b) Amended and Restated Rights Agreement Incorporated herein by reference from Exhibit 1
between the Company and American Stock of Amendment No. 2 to Form 8-A/A
Transfer and Trust Company Registration Statement, File No. 1-8116, filed
on December 8, 1997.
(c) Amendment No. 1 to the Amended and Restated Incorporated herein by reference from Exhibit 2
Rights Agreement between the Company and of Amendment No. 3 to Form 8-A/A
American Stock Transfer and Trust Company Registration Statement, File No. 1-8116, filed
on January 26, 2001.
10(a) Sample Restated Key Executive Agreement Incorporated herein by reference from Exhibit
between the Company and Messrs. Brownley, 10(a) of Form 10-K for the year ended January 3,
Calhoon, Catherwood, Condos, Deane, Grube, 1999.
Laudick, McCorkle, Mueller, Musick,
Schuessler, and Mmes. Anderson and Chesnut
(b) Sample Key Executive Agreement between Incorporated herein by reference from Exhibit
the Company, The TDL Group Ltd. and 10 of Form 10-Q for the quarter ended July
Mr. House 4, 1999.
* Neither the Company nor its subsidiaries are party to any other
instrument with respect to long-term debt for which securities
authorized thereunder exceed 10 percent of the total assets of the
Company and its subsidiaries on a consolidated basis. Copies of
instruments with respect to long-term debt of lesser amounts will be
furnished to the Commission upon request.
20
(c) Assignment of Rights Agreement between Incorporated herein by reference from Exhibit
the Company and Mr. Thomas 10(c) of Form 10-K for the year ended
December 31, 2000.
(d) Senior Executive Annual Performance Plan Incorporated herein by reference from Annex B
to the Company's Definitive 2002 Proxy
Statement, dated March 5, 2002.
(e) Executive Annual Performance Plan Incorporated herein by reference from Exhibit
10(e) of Form 10-K for the year ended
December 30, 2001.
(f) Supplemental Executive Retirement Plan Attached hereto.
(g) 1978 Non-Qualified Stock Option Plan, Incorporated herein by reference from Exhibit
as amended 10(k) of Form 10-K for the year ended January
2, 2000.
(h) 1982 Stock Option Plan, as amended Incorporated herein by reference from Exhibit
10(l) of Form 10-K for the year ended January
2, 2000.
(i) 1984 Stock Option Plan, as amended Incorporated herein by reference from Exhibit
10(m) of Form 10-K for the year ended January
2, 2000.
(j) 1987 Stock Option Plan, as amended Incorporated herein by reference from Exhibit
10(n) of Form 10-K for the year ended January
2, 2000.
(k) 1990 Stock Option Plan, as amended Incorporated herein by reference from
the Company's Definitive Proxy
Statement, dated March 4, 2003.
(l) WeShare Stock Option Plan, as amended Attached hereto.
13 Portions of the Financial Statements and Incorporated herein by reference from the
Other Information furnished with the Financial Statements and Other information
Company's Definitive 2003 Proxy Statement, furnished with the Company's Definitive 2003
dated March 4, 2003, as described in Parts I Proxy Statement, dated March 4, 2003.
and II of this Annual Report on Form 10-K.
21 Subsidiaries of the Registrant Attached hereto.
23 Consent of PricewaterhouseCoopers LLP Incorporated by reference to page 17
of this Form 10-K.
24 Powers of Attorney Attached hereto.
99 (a) Safe harbor under the Private Securities Attached hereto.
Litigation Reform Act of 1995
(b) Certification of Chief Executive Officer Attached hereto.
(c) Certification of Chief Financial Officer Attached hereto.
21