020230 Tricon Earnings Rise 28 Percent

Chicago - Tricon Global Restaurants Inc. said fourth-quarter net income rose 28%, helped by higher sales at its KFC and Taco Bell chains and record international growth.

Tricon, the world's second-largest restaurant company behind McDonald's Corp. , said earnings in the period ended Dec. 29 rose to $164 million, or $1.08 a share, compared with $128 million, or 86 cents, a year earlier. The 2001 fourth quarter had one less week than that in 2000.

Results beat analysts' mean estimate of $1.04 a share, as tracked by Thomson Financial/First Call. Tricon also raised 2002 earnings forecasts by 3 cents a share on the low end of its range, boosting its target to $3.56 to $3.63 a share.

"We're getting off to a great start. We felt that, given the momentum we have, we did need to raise our guidance some," Tricon Chief Financial Officer David Deno said.

"Where that's coming from is...great performance in our base business, KFC, Taco Bell and Pizza Hut; multi-branding, which is proving to be a good thing; and thirdly, international, especially new unit growth," he said.

Tricon, based in Louisville, Kentucky, said it expects first-quarter earnings per share from ongoing operations in the range of 74 cents to 78 cents.

"The news regarding the outlook for 2002 will likely be greeted warmly by the Street," wrote Salomon Smith Barney analyst Mark Kalinowski in a note late Monday. He is maintaining his "outperform" rating on Tricon shares.

Fourth quarter revenues, including company sales and franchise and license fees, rose to $2.20 billion from $2.18 billion a year earlier. Systemwide sales, which include company-operated and franchised restaurants, were $6.97 billion.

U.S. PERFORMANCE IMPROVES

U.S. same-store sales, for restaurants open at least one year, rose 3% in the fourth quarter on a combined basis, Tricon said. U.S. same-store sales at Taco Bell rose 8%, while those at KFC rose 7%.

Same-store sales at Pizza Hut fell 5%, hurt by a difficult comparison in last year's quarter when the company introduced its Insider pizza.

The company has also been expanding its use of multi-branded stores, where it mixes several concepts under one roof. In the fourth-quarter, Tricon added 137 multi-branded units for a total of 1,520.

The company, which already does some multi-branding between its KFC and A&W stores, said it has also formed agreements to multi-brand with seafood chain Long John Silver's and hamburger chain Back Yard Burgers in some markets. It plans to add about 325 multi-branded units in 2002.

INTERNATIONAL GROWTH TARGETED

Tricon opened 437 new international restaurants in the quarter, resulting in a record 1,041 for the year, including more than 600 KFCs and more than 400 Pizza Huts.

The company said it expects international expansion to drive more than half its earnings growth in the longer term. In 2002, Tricon said it expects international revenues to grow at a low double-digit rate.

Tricon plans to add about 1,000 international stores in 2002, or about two and one-half times the number it's adding in the U.S., with additions coming in key growth markets such as China, Korea, Mexico and the UK, Deno said.

Tricon recently opened its first substantial overseas Taco Bell franchise in China, he added.

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