Tim Hortons Inc. Announces 2009 Fourth Quarter and Year-End Results;
Continued sales momentum in the fourth quarter contributes to achievement of
annual operating income target
(Unaudited. All amounts in Canadian dollars)
Financial & Sales Highlights
----------------------------
-------------------------------------------------------------------------
2009 2008
% Full Full %
Q4 2009 Q4 2008 Change Year Year Change
-------------------------------------------------------------------------
Revenues $ 615.3 $ 563.7 9.2% $2,242.1 $2,043.7 9.7%
Operating
income(1)(3) $ 139.4 $ 108.8 28.1% $ 495.4 $ 446.3 11.0%
Adjusted
Operating
Income(2)(3) $ 139.4 $ 130.1 7.2% $ 502.7 $ 467.6 7.5%
Effective Tax
Rate(3) 32.2% 32.6% 37.4% 32.8%
Net Income $ 91.0 $ 69.1 31.6% $ 296.4 $ 284.7 4.1%
Diluted Earnings
Per Share (EPS) $ 0.51 $ 0.38 32.9% $ 1.64 $ 1.55 5.8%
Fully Diluted
Shares 179.7 181.4 (1.0)% 180.6 183.5 (1.6)%
-------------------------------------------------------------------------
($ in millions, except EPS. Fully diluted shares in millions. All numbers
rounded.)
(1) 2008 operating income includes a negative $21.3 million impact from
an asset impairment and related restaurant closure costs. Full year
2009 operating income includes a negative $7.3 million impact for
professional advisory fees and shareholder related costs incurred in
connection with the public company reorganization.
(2) 2009 adjusted operating income for the full year excludes the impact
of costs related to our public company reorganization and 2008
adjusted operating income excludes the asset impairment and
restaurant closure costs that did not recur. Adjusted operating
income is a non-GAAP measure. For information regarding this measure,
and a reconciliation to U.S. GAAP, please refer to "Disclosure of
Non-GAAP Financial Measure" and Table 1 in this release.
(3) Operating Income, Adjusted Operating Income and Effective Tax Rate
incorporate the adoption of changes to accounting standards relating
to Noncontrolling interests.
(4) Includes sales at Franchised and Company-operated locations. As of
January 3rd, 2010, 99.6% of our restaurants in Canada and 99.1% of
our U.S. restaurants were franchised.
-------------------------------------------------------------------------
Same-Store Sales(4) Q4 2009 2009 Full Year
-------------------------------------------------------------------------
Canada 3.4% 2.9%
U.S. 2.1% 3.2%
-------------------------------------------------------------------------
Highlights
----------
- Strong fourth quarter sales performance in both Canada and the United
States, with a 3.4% same-store sales increase in Canada and 2.1%
growth in the U.S.
- U.S. segment achieves $4.8 million operating income for full-year
compared to breakeven target
- The Company's Board has approved an increase in the target dividend
payout range to 30% to 35% of prior year, normalized annual net
earnings, and approved a 30% increase in the quarterly dividend to
$0.13 per share
- New $200 million share repurchase program announced
OAKVILLE, ON, Feb. 25 /CNW/ - Tim Hortons Inc. (TSX: THI, NYSE: THI) today announced its results for the fourth quarter and full year ended January 3rd, 2010.
"Our focus on being relevant to our customers and responding to their needs continues to position Tim Hortons among the leaders in the North American restaurant sector. Our record revenue and earnings performance in 2009 once again demonstrated the resiliency of our brand in difficult economic circumstances and we were pleased with the ability of our system to continue to successfully grow in challenging times," said Don Schroeder, president and CEO.
Consolidated Results
All percentage increases and decreases represent year-over-year changes for the fourth quarter of 2009 compared to the fourth quarter of 2008, unless otherwise noted. Fourth quarter and full- year results in 2009 include an extra week of operations which had an approximate impact of 6% to 8% on revenues, costs and earnings in the quarter and approximately 1% to 2% for the full year.
Fourth quarter systemwide sales(5) grew 13.4% on a constant currency basis, benefiting from the extra week of sales over the comparable period, and from same-store sales growth and restaurant development. Total revenues were $615.3 million, an increase of 9.2% compared to $563.7 million last year. Revenues benefited from higher sales, consisting primarily of distribution sales, and from higher rents and royalties. These factors were partially offset by lower franchise fee revenues, due primarily to timing of franchise sales, and from lower sales from fewer company-operated restaurants.
Operating income in the fourth quarter rose 28.1% to $139.4 million compared to $108.8 million in the prior year comparable period. Operating income in 2008 included a negative $21.3 million impact from an asset impairment charge and related restaurant closure costs. Operating income growth benefited from higher systemwide sales, a gain on the sale of a property and increased earnings contributions from our U.S. segment. Absent the 2008 impairment and closure costs and the approximate 6% growth impact of the extra week of operations, operating income was up slightly in the fourth quarter. Operating income growth was negatively impacted in the fourth quarter by the timing of franchise sales, resulting in lower franchise fees, and by lower distribution income due to certain gains in the comparable quarter of 2008 that did not recur.
Net income in the fourth quarter increased to $91.0 million, up 31.6% compared to $69.1 million last year. Diluted earnings per share (EPS) was $0.51, an increase of 32.9% compared to $0.38 last year. Fourth quarter EPS benefited from 1.0% fewer shares outstanding in the quarter compared to the same period last year due to the Company's share repurchase activities. In 2008 net income and EPS were negatively impacted by $15.4 million in after-tax costs associated with the asset impairment charge and related restaurant closure costs.
On a full-year basis, systemwide sales(5) increased 7.9%. Total revenues increased by 9.7% to $2.24 billion compared to $2.04 billion in 2008. Operating income grew 11.0% to $495.4 million compared to $446.3 million last year, including approximately 1.5% benefit from the extra week of operations. Adjusted operating income(2), excluding the impact of costs related to our public company reorganization and 2008 asset impairment charge and related restaurant closure costs, grew 7.5% to $502.7 million in 2009. Net income in 2009 was $296.4 million, an increase of 4.1% compared to $284.7 million last year. Earnings per share for the full year in 2009 was $1.64 compared to $1.55 last year. The effective tax rate for the full year was 37.4% versus 32.8% last year, reflecting previously disclosed impacts from the public company reorganization.
Segmented Performance Commentary
Both operating segments enjoyed strong financial and sales performance in the quarter, benefiting from the strength of our brand position, marketing, promotion and menu activities.
Canada
------
Same-store sales grew 3.4% in Canada in the fourth quarter. Canadian same-store sales accelerated in each consecutive month of the quarter, and experienced continued momentum heading into the first quarter. Promotional programs aimed to reinforce our value to customers largely offset the benefit of pricing in place in the system during the fourth quarter, but drove transaction growth, contributing to the positive sales performance. A total of 60 restaurants were opened in the fourth quarter, including 15 non-standard locations.
Canadian segment operating income was $147.0 million in the fourth quarter, a 7.2% increase from $137.1 million last year. Operating income benefited from systemwide sales growth including the extra week of operations. Operating income was impacted by lower franchise fee revenues due primarily to timing of resales and renovations, by lower equity income, and by lower distribution income due to certain gains in the comparable period of 2008.
On a full-year basis, same-store sales in Canada increased 2.9%, slightly below our targeted range of 3% to 5%. A total of 131 restaurants were opened in 2009, within our targeted range of 120 to 140 locations. Operating income on a full-year basis was $534.1 million, an increase of 5.4% compared to 2008.
United States
-------------
The U.S. segment increased same-store sales by 2.1% in the fourth quarter, outpacing the majority of restaurant companies that have reported U.S. same-store sales for this time period. Cold Stone Creamery(C) co-branded locations continued to contribute significantly to same-store sales growth this quarter. Promotional, marketing and menu initiatives also helped our sales performance, which has carried into the first quarter. A total of 7 locations were opened in the fourth quarter, including 2 non-standard locations.
U.S. segment operating income increased to $1.2 million, representing the third consecutive quarter of positive earnings contributions. Operating income growth benefited from the previous closure in 2008 of underperforming restaurants, higher systemwide sales, and lower general and administrative costs. These factors were partially offset by lower franchise fees during the quarter.
On a full-year basis, same-store sales growth in the U.S increased 3.2%, surpassing our targeted range of 0% to 2% growth. A total of 45 sites were opened in the U.S. during 2009, compared to our target of 30 to 40 restaurant locations. Full-year operating income increased to $4.8 million in 2009, significantly exceeding our target of break-even segment operating income.
Corporate Developments
Board increases dividend payout range and declares dividend payment of
----------------------------------------------------------------------
$0.13 per share
---------------
The Board of Directors has approved a change to the Company's long-term targeted dividend payout range, reflecting confidence in our future growth and our strong cash flow position. Effective immediately, our targeted dividend payout range is 30% to 35% of prior year, normalized annual net earnings each year, and we plan to focus initially at the lower end of the range. The previous targeted range was 20% to 25% of prior year, normalized annual net earnings.
Coinciding with this change in 2010, the Board has declared a quarterly dividend of $0.13 per share payable on March 23rd, 2010 to shareholders of record as of March 8th, 2010, representing an increase of 30% from previous dividend. Dividends are declared and paid in Canadian dollars to all shareholders with Canadian resident addresses. For U.S. shareholders, dividends paid will be converted to U.S. dollars based on prevailing exchange rates at the time of conversion by Tim Hortons for registered shareholders and by Clearing and Depository Services Inc. for beneficial shareholders.
New $200 million share repurchase program announced
---------------------------------------------------
The Board approved the commencement of a new $200 million share repurchase program. The Company expects to complete its current program by March 1, 2010, after which the new plan will begin. Under terms of the new $200 million program, the Company is authorized to purchase up to $200 million in common shares, not to exceed the regulatory maximum of 5% of the outstanding common shares at the time of regulatory approval.
"Our confidence in future growth and proven capacity to generate strong free cash flow positions us well to continue our number one priority of funding our business growth investment needs while still returning value to shareholders in the form of increased dividends and a new share repurchase program," said Cynthia Devine, chief financial officer.
Consistent with the previous program, shares will be repurchased through a combination of a 10b5-1, or automatic trading plan, and in accordance with management's discretion considering regulatory requirements, and market, cost and other considerations. Repurchases will be made by Tim Hortons on either the Toronto Stock Exchange or the New York Stock Exchange. There can be no assurance as to the precise number of shares that will be repurchased under the share repurchase program, or the aggregate dollar amount of the shares purchased. Tim Hortons may discontinue purchases at any time, subject to compliance with applicable regulatory requirements. Shares purchased pursuant to the share repurchase program will be cancelled.
Investor Conference and 2010 Outlook
------------------------------------
Tim Hortons will broadcast our investor conference on March 5th, 2010 over the internet starting at 8:30 a.m. (Eastern Time). The live webcast will be available at www.timhortons-invest.com under the Events and Presentations tab. We plan to announce our 2010 outlook at the investor conference in parallel with our overall strategic plan and growth initiatives.
Annual Meeting of Shareholders
------------------------------
The Board of Directors has set a record date of March 23rd, 2010 for the annual meeting of shareholders. The meeting will be held on Friday, May 14th at 10:30a.m. Eastern Time at the School of Hospitality Management, Ryerson University, 55 Dundas Street West, 7th Floor Auditorium in Toronto, Ontario.
Disclosure on Non-GAAP Financial Measure
Adjusted operating income is a non-GAAP measure, which does not have a standardized meaning prescribed by U.S. GAAP, and may not be comparable to similar measures presented by other publicly-traded companies. Therefore, adjusted operating income should not be construed as an alternative to other financial measures determined in accordance with U.S. GAAP. Presentation of this non-GAAP measure is made with operating income, the most directly comparable U.S. GAAP measure. Management believes this pro forma adjusted information is important for comparison purposes to prior periods and for purposes of evaluating the Company's operating earnings performance compared to our target for 2009, which did not include the impact of the excluded items. The Company evaluates its business performance and trends excluding amounts related to such items. Therefore, this measure provides a more consistent view of management's perspectives on underlying performance and is more relevant for comparison purposes between periods than the closest equivalent U.S. GAAP measure.
Table 1 Pro forma: Reconciliation of adjusted operating income to U.S.
GAAP
-------------------------------------------------------------------------
Full Full
% Year Year %
Q4 2009 Q4 2008 Change 2009 2008 Change
-------------------------------------------------------------------------
Reported
Operating
Income* $ 139.4 $ 108.8 28.1% $ 495.4 $ 446.3 11.0%
Add: Public
company
reorganization
costs - 7.3 N/M
Add: Asset
impairment
and related
closure costs - (21.3) N/M - 21.3 N/M
------------------------------------------------------
Adjusted
Operating
Income* $ 139.4 $ 130.1 7.2% $ 502.7 $ 467.6 7.5%
-------------------------------------------------------------------------
($ in millions, all numbers rounded.) N/M - Not Meaningful
* Operating Income and Adjusted Operating Income incorporate adoption
of SFAS 160 - Noncontrolling Interests in Consolidated Financial
Statements.
Tim Hortons conference call today at 10:30 a.m. (ET) Thursday, February 25th, 2010
Tim Hortons will host a conference call today to discuss the fourth quarter and year end results, scheduled to begin at 10:30 a.m. (ET). The dial-in number is (416) 641-6712 or 1(800) 354-6885. No access code is required. A simultaneous web cast will be available at www.timhortons-invest.com. A presentation supporting the call will be available at this web site under the Events and Presentations section. The call will be archived at this site for a period of one year and will also be available under the Events and Presentations section. A replay of the call will be available for a period of one week and can be accessed at (416) 626-4100 or 1 (800) 558-5253. The call replay reservation number is 21458576.
Safe Harbor Statement
Certain information in this news release, particularly information regarding future economic performance, finances, and plans, expectations and objectives of management, constitute forward-looking information within the meaning of Canadian securities laws and forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We refer to all of these as forward-looking statements. Various factors including competition in the quick service segment of the food service industry, general economic conditions and others described as "risk factors" in the Company's 2008 Annual Report on Form 10-K, filed February 26, 2009, and our Form 10-Q filed on November 5th, 2009, could affect the Company's actual results and cause such results to differ materially from those expressed in forward-looking statements. As such, readers are cautioned not to place undue reliance on forward-looking statements contained in this news release, which speak only as of the date hereof. Forward-looking statements are based on a number of assumptions which may prove to be incorrect, including, but not limited to, assumptions about: the absence of a material increase in competition within the quick service restaurant segment of the food service industry; the absence of an adverse event or condition that damages our strong brand position and reputation; continuing positive working relationships with the majority of the Company's franchisees; there being no significant change in the Company's ability to comply with current or future regulatory requirements; the absence of any material adverse effects arising as a result of litigation; and general worldwide economic conditions. We are presenting this information for the purpose of informing you of management's current expectations regarding these matters, and this information may not be appropriate for any other purpose.
We assume no obligation to update or alter any forward-looking statements after they are made, whether as a result of new information, future events, or otherwise, except as required by applicable law. Please review the Company's Safe Harbor Statement at www.timhortons.com/en/about/safeharbor.html.
(5) Total systemwide sales growth includes restaurant level sales at both
Company and Franchise restaurants. Approximately 99.5% of our
consolidated system is franchised as at January 3rd, 2010. Systemwide
sales growth is determined using a constant exchange rate, where
noted, to exclude the effects of foreign currency translation. U.S.
dollar sales are converted to Canadian dollar amounts using the
average exchange rate of the base year for the period covered. For
the fourth quarter of 2009, systemwide sales growth on a constant
currency basis was up 13.4% compared to the fourth quarter of 2008.
Systemwide sales are important to understanding our business
performance as they impact our franchise royalties and rental income,
as well as our distribution income. Changes in systemwide sales are
driven by changes in average same-store sales and changes in the
number of systemwide restaurants, and in the fourth quarter of 2009,
by the extra week of operations.
Tim Hortons Inc. Overview
Tim Hortons is the fourth largest publicly-traded restaurant chain in North America based on market capitalization, and the largest in Canada. Operating in the quick service segment of the restaurant industry, Tim Hortons appeals to a broad range of consumer tastes, with a menu that includes premium coffee, flavored cappuccinos, specialty teas, home-style soups, fresh sandwiches, wraps, hot breakfast sandwiches and fresh baked goods, including our trademark donuts. As of January 3rd, 2010, Tim Hortons had 3,578 systemwide restaurants, including 3,015 in Canada and 563 in the United States. More information about the Company is available at www.timhortons.com.
TIM HORTONS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands of Canadian dollars, except share and per share data)
(Unaudited)
Fourth quarter ended
January December
3, 2010 28, 2008 $ Change % Change
---------- ---------- ---------- ----------
REVENUES
Sales $409,423 $372,055 $37,368 10.0%
Franchise revenues:
Rents and royalties 179,177 157,230 21,947 14.0%
Franchise fees 26,714 34,404 -7,690 (22.4%)
---------- ---------- ---------- ----------
205,891 191,634 14,257 7.4%
---------- ---------- ---------- ----------
TOTAL REVENUES 615,314 563,689 51,625 9.2%
---------- ---------- ---------- ----------
COSTS AND EXPENSES
Cost of sales 362,357 322,558 39,799 12.3%
Operating expenses 63,205 58,378 4,827 8.3%
Franchise fee costs 25,756 29,458 -3,702 (12.6%)
General and administrative
expenses 37,206 33,850 3,356 9.9%
Equity (income) -9,999 -10,490 491 (4.7%)
Asset impairment and
related closure costs - 21,266 -21,266 N/M
Other (income), net -2,644 -174 -2,470 N/M
---------- ---------- ---------- ----------
TOTAL COSTS AND EXPENSES,
NET 475,881 454,846 21,035 4.6%
---------- ---------- ---------- ----------
OPERATING INCOME 139,433 108,843 30,590 28.1%
Interest (expense) -5,603 -5,950 347 (5.8%)
Interest income 894 906 -12 (1.3%)
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES 134,724 103,799 30,925 29.8%
INCOME TAXES 43,345 33,890 9,455 27.9%
---------- ---------- ---------- ----------
Net Income 91,379 69,909 21,470 30.7%
Net income attributable to
noncontrolling interests 390 782 -392 (50.1%)
---------- ---------- ---------- ----------
NET INCOME ATTRIBUTABLE TO
TIM HORTONS INC. $90,989 $69,127 $21,862 31.6%
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Basic earnings per common
share attributable to Tim
Hortons Inc. $0.51 $0.38 $0.13 32.9%
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Diluted earnings per common
share attributable to Tim
Hortons Inc. $0.51 $0.38 $0.13 32.9%
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Weighted average number of
common shares outstanding -
Basic (in thousands) 179,570 181,261 -1,692 (0.9%)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Weighted average number of
common shares outstanding
- Diluted (in thousands) 179,713 181,443 -1,730 (1.0%)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Dividend per common share $0.10 $0.09 $0.01
---------- ---------- ----------
---------- ---------- ----------
N/M - not meaningful
(all numbers rounded)
TIM HORTONS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands of Canadian dollars, except share and per share data)
(Unaudited)
Year ended
January December
3, 2010 28, 2008 $ Change % Change
----------- ----------- ----------- -----------
REVENUES
Sales $1,494,196 $1,348,015 $146,181 10.8%
Franchise revenues:
Rents and royalties 657,909 601,870 56,039 9.3%
Franchise fees 90,033 93,808 -3,775 (4.0%)
----------- ----------- ----------- -----------
747,942 695,678 52,264 7.5%
----------- ----------- ----------- -----------
TOTAL REVENUES 2,242,138 2,043,693 198,445 9.7%
----------- ----------- ----------- -----------
COSTS AND EXPENSES
Cost of sales 1,318,576 1,180,998 137,578 11.6%
Operating expenses 238,791 216,605 22,186 10.2%
Franchise fee costs 86,903 87,486 -583 (0.7%)
General and
administrative expenses 141,739 130,846 10,893 8.3%
Equity (income) -35,963 -37,282 1,319 (3.5%)
Asset impairment and
related closure costs - 21,266 -21,266 N/M
Other (income), net -3,319 -2,564 -755 N/M
----------- ----------- ----------- -----------
TOTAL COSTS AND
EXPENSES, NET 1,746,727 1,597,355 149,372 9.4%
----------- ----------- ----------- -----------
OPERATING INCOME 495,411 446,338 49,073 11.0%
Interest (expense) -21,220 -24,558 3,338 (13.6%)
Interest income 1,950 4,926 -2,976 N/M
----------- ----------- ----------- -----------
INCOME BEFORE INCOME
TAXES 476,141 426,706 49,435 11.6%
INCOME TAXES 178,263 139,812 38,451 27.5%
----------- ----------- ----------- -----------
Net Income 297,878 286,894 10,984 3.8%
Net income attributable
to noncontrolling
interests 1,511 2,216 -705 (31.8%)
----------- ----------- ----------- -----------
NET INCOME ATTRIBUTABLE
TO TIM HORTONS INC. $296,367 $284,678 $11,689 4.1%
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Basic earnings per common
share attributable to
Tim Hortons Inc. $1.64 $1.55 $0.09 5.7%
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Diluted earnings per
common share attributable
to Tim Hortons Inc. $1.64 $1.55 $0.09 5.8%
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Weighted average number of
common shares outstanding
- Basic (in thousands) 180,477 183,298 -2,821 (1.5%)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Weighted average number of
common shares outstanding
- Diluted (in thousands) 180,609 183,492 -2,884 (1.6%)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Dividend per common share $0.40 $0.36 $0.04
----------- ----------- -----------
----------- ----------- -----------
N/M - not meaningful
(all numbers rounded)
TIM HORTONS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands of Canadian dollars)
As at
--------------------------
January 3, December 28,
2010 2008
------------ ------------
(Unaudited)
ASSETS
Current assets
Cash and cash equivalents $103,267 $101,636
Restricted cash and cash equivalents 60,629 62,329
Restricted investments 20,186 -
Accounts receivable, net 170,757 159,505
Notes receivable, net 38,609 22,615
Deferred income taxes 3,388 19,760
Inventories and other, net 68,289 71,505
Advertising fund restricted assets 26,681 27,684
------------ ------------
Total current assets 491,806 465,034
Property and equipment, net 1,340,757 1,332,852
Notes receivable, net 9,782 17,645
Deferred income taxes 8,919 29,285
Intangible assets, net 6,034 2,606
Equity investments 120,939 132,364
Other assets 18,416 12,841
------------ ------------
Total assets $1,996,653 $1,992,627
------------ ------------
------------ ------------
TIM HORTONS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands of Canadian dollars)
As at
--------------------------
January 3, December 28,
2010 2008
------------ ------------
(Unaudited)
LIABILITIES AND EQUITY
Current liabilities
Accounts payable $129,563 $157,210
Accrued liabilities:
Salaries and wages 20,324 18,492
Taxes 25,220 25,605
Other 112,173 110,518
Deferred taxes 376 -
Advertising fund restricted liabilities 43,944 47,544
Current portion of long-term obligations 7,642 6,691
------------ ------------
Total current liabilities 339,242 366,060
------------ ------------
Long-term obligations
Term debt 335,995 332,506
Advertising fund restricted debt 415 6,929
Capital leases 67,156 59,052
Deferred income taxes 4,603 13,604
Other long-term liabilities 78,304 72,467
------------ ------------
Total long-term obligations 486,473 484,558
------------ ------------
Equity
Equity of Tim Hortons Inc.
Common shares
Authorized: unlimited shares
Issued: 177,318,614 shares 502,872 -
Common stock, (US$0.001 par value per
share)
Authorized: nil and 1,000,000,000
shares, respectively
Issued: nil and 193,302,977 shares,
respectively - 289
Capital in excess of par value - 929,102
Treasury stock, at cost: nil and
11,754,201 shares, respectively - (399,314)
Common stock held in trust, at cost:
278,500 and 358,186 shares,
respectively (9,437) (12,287)
Retained earnings 796,235 677,550
Accumulated other comprehensive loss (120,626) (54,936)
------------ ------------
Total equity of Tim Hortons Inc. 1,169,044 1,140,404
Noncontrolling interests 1,894 1,605
------------ ------------
Total equity 1,170,938 1,142,009
------------ ------------
Total liabilities and equity $1,996,653 $1,992,627
------------ ------------
------------ ------------
TIM HORTONS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of Canadian dollars)
Year ended
January 3, December 28,
2010 2008
------------ ------------
(Unaudited)
CASH FLOWS PROVIDED FROM (USED IN) OPERATING
ACTIVITIES
Net income $297,878 $286,894
Net income attributable to noncontrolling
interests (1,511) (2,216)
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization 101,447 91,278
Asset impairment and related closure costs - 21,266
Stock-based compensation expense 8,869 9,630
Equity income, net of cash dividends 11,397 4,519
Deferred income taxes 25,342 (13,714)
Changes in operating assets and liabilities
Restricted cash and cash equivalents 789 (23,820)
Accounts and notes receivable (13,692) (51,235)
Inventories and other 1,012 (3,708)
Accounts payable and accrued liabilities (19,726) 22,723
Other, net 3,846 14,398
------------ ------------
Net cash provided from operating activities 415,651 356,015
------------ ------------
CASH FLOWS (USED IN) PROVIDED FROM INVESTING
ACTIVITIES
Capital expenditures (157,971) (174,247)
Purchase of restricted investments (20,136) (11,881)
Proceeds from sale of restricted investments - 12,000
Principal payments on notes receivable 2,821 3,939
Other investing activities (22,540) (13,418)
------------ ------------
Net cash used in investing activities (197,826) (183,607)
------------ ------------
CASH FLOWS (USED IN) PROVIDED FROM FINANCING
ACTIVITIES
Purchase of common shares (113,401) -
Purchase of treasury stock (16,701) (165,258)
Dividend payments (72,506) (66,086)
Purchase of common shares/stock held in trust (713) (3,842)
Purchase of common shares/stock for settlement
of restriced stock units (477) (226)
Proceeds from issuance of debt, net of
issuance costs 3,507 3,796
Principal payments on other long-term debt
obligations (6,582) (7,376)
------------ ------------
Net cash used in financing activities (206,873) (238,992)
------------ ------------
Effect of exchange rate changes on cash (9,321) 10,618
------------ ------------
Increase (decrease) in cash and cash
equivalents 1,631 (55,966)
Cash and cash equivalents at beginning of year 101,636 157,602
------------ ------------
Cash and cash equivalents at end of year $103,267 $101,636
------------ ------------
------------ ------------
TIM HORTONS INC. AND SUBSIDIARIES
SEGMENT REPORTING
(In thousands of Canadian dollars)
(Unaudited)
Fourth Quarter ended
----------------------------------------------
January % of December % of
3, 2010 Total 28, 2008 Total
---------- ---------- ---------- ----------
REVENUES
Canada $539,020 87.6% $483,887 85.8%
U.S. 42,699 6.9% 46,234 8.2%
---------- ---------- ---------- ----------
Total reportable segments 581,719 94.5% 530,121 94.0%
Noncontrolling interests -
Non-owned consolidated
restaurants 33,595 5.5% 33,568 6.0%
---------- ---------- ---------- ----------
Total $615,314 100.0% $563,689 100.0%
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
SEGMENT OPERATING INCOME
(LOSS)
Canada $147,005 99.2% $137,146 118.4%
U.S. 1,184 0.8% (21,300) (18.4)%
---------- ---------- ---------- ----------
Reportable Segment
Operating Income 148,189 100.0% 115,846 100.0%
---------- ----------
---------- ----------
Noncontrolling interests -
Non-owned consolidated
restaurants 449 978
Corporate Charges (9,205) (7,981)
---------- ----------
Consolidated Operating
Income 139,433 108,843
Interest, net (4,709) (5,044)
Income taxes (43,345) (33,890)
---------- ----------
Net Income 91,379 69,909
Net Income attributable
to noncontrolling
interests 390 782
---------- ----------
Net Income attributable
to Tim Hortons Inc. $90,989 $69,127
---------- ----------
---------- ----------
Year ended
----------------------------------------------
January % of December % of
3, 2010 Total 28, 2008 Total
---------- ---------- ---------- ----------
REVENUES
Canada $1,944,673 86.7% $1,764,869 86.4%
U.S. 168,216 7.5% 142,874 7.0%
---------- ---------- ---------- ----------
Total reportable
segments 2,112,889 94.2% 1,907,743 93.3%
Noncontrolling interests
- Non-owned consolidated
restaurants 129,249 5.8% 135,950 6.7%
---------- ---------- ---------- ----------
Total $2,242,138 100.0% $2,043,693 100.0%
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
SEGMENT OPERATING INCOME
(LOSS)
Canada $534,131 99.1% $507,006 105.5%
U.S. 4,840 0.9% (26,488) (5.5)%
---------- ---------- ---------- ----------
Reportable Segment
Operating Income 538,971 100.0% 480,518 100.0%
---------- ----------
---------- ----------
Noncontrolling interests
- Non-owned consolidated
restaurants 1,732 2,772
Corporate Charges (45,292) (36,952)
---------- ----------
Consolidated Operating
Income 495,411 446,338
Interest, net (19,270) (19,632)
Income taxes (178,263) (139,812)
---------- ----------
Net Income 297,878 286,894
Net Income attributable
to noncontrolling
interests 1,511 2,216
---------- ----------
Net Income attributable
to Tim Hortons Inc. $296,367 $284,678
---------- ----------
---------- ----------
Fourth Quarter ended
----------------------
January December
3, 2010 28, 2008 $ Change % Change
---------- ---------- ---------- ----------
Sales is comprised of:
Distribution sales $370,209 $331,770 $38,439 11.6%
Company-operated
restaurant sales 5,619 6,717 (1,098) (16.3)%
Sales from non-owned
consolidated restaurants 33,595 33,568 27 0.1%
---------- ---------- ---------- ----------
$409,423 $372,055 $37,368 10.0%
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Year ended
----------------------
January December
3, 2010 28, 2008 $ Change % Change
---------- ---------- ---------- ----------
Sales is comprised of:
Distribution sales $1,340,711 $1,173,738 $166,973 14.2%
Company-operated
restaurant sales 24,236 38,327 (14,091) (36.8)%
Sales from non-owned
consolidated restaurants 129,249 135,950 (6,701) (4.9)%
---------- ---------- ---------- ----------
$1,494,196 $1,348,015 $146,181 10.8%
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
TIM HORTONS INC. AND SUBSIDIARIES
SYSTEMWIDE RESTAURANT COUNT
Increase/
As of As of (Decrease)
January December From
3, 2010 28, 2008 Year End
-------------------------------------
Tim Hortons
-----------
Canada
Company-operated 13 15 (2)
Franchised 3,002 2,902 100
-------------------------------------
Total 3,015 2,917 98
% Franchised 99.6% 99.5%
U.S.
Company-operated 5 19 (14)
Franchised 558 501 57
-------------------------------------
Total 563 520 43
% Franchised 99.1% 96.3%
Total Tim Hortons
Company-operated 18 34 (16)
Franchised 3,560 3,403 157
-------------------------------------
Total 3,578 3,437 141
-------------------------------------
-------------------------------------
% Franchised 99.5% 99.0%
TIM HORTONS INC. AND SUBSIDIARIES
Income Statement Definitions
Sales Primarily includes sales of products, supplies and
restaurant equipment (except for initial equipment
packages sold to franchisees as part of the
establishment of their restaurant's business - see
"Franchise Fees") that are shipped directly from
our warehouses or by third party distributors to
the restaurants, which we include in distribution
sales. Sales include canned coffee sales through
the grocery channel. Sales also include sales from
Company-operated restaurants and sales from certain
non-owned restaurants that are consolidated in
accordance with ASC 810 (formerly FIN 46R).
Rents and Royalties Includes franchisee royalties and rental revenues.
Franchise Fees Includes the sales revenue from initial equipment
packages, as well as fees for various costs and
expenses related to establishing a franchisee's
business.
Cost of Sales Includes costs associated with our distribution
business, including cost of goods, direct labour
and depreciation, as well as the cost of goods
delivered by third-party distributors to the
restaurants, and for canned coffee sold through
grocery stores. Cost of sales also includes food,
paper and labour costs for Company-operated
restaurants and certain non-owned restaurants that
are consolidated in accordance with ASC 810
(formerly FIN 46R).
Operating Expenses Includes rent expense related to properties leased
to franchisees and other property-related costs
(including depreciation).
Franchise fee costs Includes costs of equipment sold to franchisees as
part of the commencement of their restaurant
business, as well as training and other costs
necessary to ensure a successful restaurant
opening.
General and Includes costs that cannot be directly related to
Administrative generating revenue, including expenses associated
with our corporate and administrative functions,
and depreciation of office equipment, the majority
of our information technology systems, and head
office real estate.
Equity Income Includes income from equity investments in joint
ventures and other minority investments over which
we exercise significant influence. Equity income
from these investments is considered to be an
integrated part of our business operations and is,
therefore, included in operating income. Income
amounts are shown as reductions to total costs and
expenses.
Asset Impairment and Represents non-cash charges relating to the
related closure impairment of long-lived assets. It also includes
costs costs related to restaurant closures made outside
of the normal course of operations as part of the
southern New Engalnd restaurant closures in the
fourth quarter of 2008.
Other (Income), net Includes expenses (income) that are not directly
derived from the Company's primary businesses.
Items include foreign currency adjustments, gains
and losses on asset sales, and other asset write-
offs.
Noncontrolling Represents certain non-owned restaurants that the
interests Company is required to consolidate under ASC 810
(formerly FIN 46R).
Comprehensive Income Represents the change in our net assets during the
reporting period from transactions and other events
and circumstances from non-owner sources. It
includes net income and other comprehensive income
such as foreign currency translation adjustments
and the impact of cash flow hedges.
For further information: Investors: Scott Bonikowsky, (905) 339-6186 or [email protected]; Media: David Morelli, (905) 339-6277 or [email protected]
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