Tim Hortons Inc. Announces 2010 Second Quarter Results:
Higher same-store sales growth fueled strong consolidated earnings
(Unaudited. All amounts in Canadian dollars and presented in accordance
with U.S. GAAP)
Financial & Sales Highlights
----------------------------
-------------------------------------------------------------------------
Q2 2010 Q2 2009 % Change
-------------------------------------------------------------------------
Total Revenues $ 639.9 $ 605.5 5.7%
Operating income $ 149.9 $ 129.0 16.1%
Effective Tax Rate 29.5% 32.8%
Net Income attributable to THI $ 94.1 $ 77.8 21.0%
Diluted Earnings Per Share (EPS) $ 0.54 $ 0.43 25.2%
Fully Diluted Shares 174.9 180.9 (3.3)%
-------------------------------------------------------------------------
($ in millions, except EPS. Fully diluted shares in millions. All numbers
rounded.)
Results for 2010, and retroactively for 2009, incorporate adoption of new
accounting standard SFAS No. 167 - Amendments to FASB No. 46(R), now
codified within ASC 810 - Consolidations. This standard relates to
consolidation of certain variable interest entities. Please refer to the
Company's Form 10-Q for additional information.
-------------------------------------------------------------------------
Same-Store Sales(1) Q2 2010 Q2 YTD Q2 2009
-------------------------------------------------------------------------
Canada 6.4% 5.8% 1.7%
U.S. 3.1% 3.1% 3.3%
-------------------------------------------------------------------------
(1) Includes sales at Franchised and Company-operated locations. As of
July 4th, 2010, 99.5% of our restaurants in both Canada and in the
U.S. were franchised.
Quarterly Highlights
--------------------
- Significant sales growth in Canada and strong performance in the U.S.
- Systemwide sales(2) grew 9.2% on a constant currency basis
- 6.4% increase in same-store sales in Canada
- 3.1% increase in same-store sales in the U.S.
- Strong consolidated operating income gain of 16.1% with solid
contributions from both Canadian and U.S. segments
- EPS growth of 25.2% in second quarter
OAKVILLE, ON, Aug. 12 /CNW/ - Tim Hortons Inc. (TSX: THI, NYSE: THI) today announced its results for the second quarter ended July 4th, 2010.
"Our quarterly same-store sales performance in Canada was the best in several quarters, and the strength of our same-store sales growth in the U.S. was gratifying given continued economic challenges in that market," said Don Schroeder, president and CEO. "We continue to make excellent progress on our growth initiatives and we believe our business is well positioned to continue to drive shareholder value," added Schroeder.
Consolidated Results
All percentage increases and decreases represent year-over-year changes for the second quarter of 2010 compared to the second quarter of 2009, unless otherwise noted.
Systemwide sales(2) increased 9.2% on a constant currency basis. During the quarter total revenues were $639.9 million, an increase of 5.7% compared to $605.5 million last year.
Strong systemwide sales growth was the primary driver of total revenue improvement. This growth was partially offset by lower revenues from consolidated variable interest entities and fewer Company-operated restaurants.
During the second quarter operating income was $149.9 million, a 16.1% increase compared to $129.0 million last year. Strong systemwide sales growth drove higher rents, royalties and distribution income. Costs continued to be well managed during the quarter, resulting in improved operating margin. Both equity income and franchise fees were not a significant factor affecting operating income growth in the quarter. The comparable period of 2009 included $2.7 million in costs relating to the public company reorganization.
Net income attributable to Tim Hortons, which excludes the impact of noncontrolling interests, was $94.1 million, an increase of 21.0% compared to $77.8 million in the second quarter of last year. Higher operating income, and a lower year-over-year tax rate primarily due to lower Canadian statutory rates resulting from our public company reorganization, contributed to our strong net income performance. Discrete items further reduced the effective tax rate during the second quarter by approximately 1.1%. The effective tax rate in the quarter was 29.5% compared to 32.8% in the same period last year. Net income in the second quarter was impacted by higher interest expense of $1.8 million primarily related to a partial settlement of an interest rate swap related to the portion of our term debt that was prepaid and the write-off of associated deferred financing costs.
Second quarter diluted earnings per share (EPS) was $0.54, climbing 25.2% compared to $0.43 per share last year. Our EPS growth rate benefited by 4.2% from fewer outstanding shares due to our share repurchase programs.
Note: The Company has retroactively adopted new accounting standard SFAS
No. 167 which has impacted prior year reported results, and 2010 actual
results, for most revenue and cost line items. The new standard pertains
to the consolidation of variable interest entities ("VIEs"). Under the
accounting standard, if the Company is determined to be the primary
beneficiary of a VIE, we are required to consolidate the VIE assets,
liabilities, results of operations and cash flows.
Segmented Performance Commentary
Both operating segments increased their year-over-year earnings performance, contributing to strong consolidated performance.
Canada
------
Same-store sales in the Canadian segment increased 6.4% compared to the second quarter of 2009, the strongest quarterly year-over-year growth performance since the third quarter of 2007. Successful menu initiatives and promotions, and operational initiatives such as our hospitality strategy, helped contribute to transaction growth during the quarter. Average cheque was positively impacted this quarter by previous pricing in the system, which we expect to have a more moderate impact in the second half of the year as pricing is lapped.
A total of 15 new restaurants were opened in Canada in the second quarter. Also, at the end of the quarter, we had 63 restaurants in Canada co-branded as Cold Stone Creamery(C) locations which contributed slightly to same-store sales growth in the segment. We have decided to broaden our initial 2010 plan for up to 60 co-branded locations in Canada by an additional 20 to 25 restaurants.
Canadian segment operating income was $149.7 million, increasing 13.1% compared to $132.3 million last year. The significant increase in same-store sales and ongoing restaurant development drove most of the year-over-year increase, benefiting rents, royalties and distribution income. Income also benefited from manufacturing income related to our new coffee roasting facility which began operations in the fourth quarter of 2009. These factors were partially offset by moderately higher general and administrative expenses.
United States
-------------
Same-store sales in the U.S. segment grew by 3.1% in the second quarter. Transaction growth was driven by continued menu innovation, value promotions and to a lesser extent Cold Stone Creamery(C) co-branded locations. Average cheque benefited from additional pricing in the system, offset significantly by promotional activity and value pricing. These initiatives were designed to drive transactions in order to help address continuing economic weakness and ongoing competitive activity in our core U.S. markets. Late in the quarter we also lapped several of the high volume Cold Stone Creamery openings from 2009, which will likely impact year-over-year growth rates to some extent for second half of the year.
A total of 21 Tim Hortons locations opened in the second quarter, including 15 self-serve kiosks. In addition, at the end of the second quarter there were 70 co-branded Tim Hortons and Cold Stone Creamery locations, with 67 of those sites being Tim Hortons restaurants.
The U.S. segment continued its quarterly profitability improvement trend, with a 14% year-over-year increase to $3.6 million compared to $3.1 million last year. The U.S. segment benefited from continued systemwide sales growth which drove higher distribution contributions, and from higher rents and royalties. Fewer Company-operated restaurants than the comparable period was also a significant factor in the U.S. segment operating income performance. Currency translation negatively impacted U.S. segment revenues by 11.9% and operating income by approximately 10.5%.
Corporate Developments
Sale of 50% interest in Maidstone Bakeries
------------------------------------------
In a separate announcement issued this morning we have disclosed that, further to a previously announced receipt of a buy/sell notice from our joint venture partner Aryzta AG, we have decided to sell our 50% interest in Maidstone Bakeries to Aryzta for gross proceeds of CAD$475 million. The all-cash transaction is subject to receipt of regulatory approvals, and is expected to close before year-end 2010. Our arrangement with Aryzta includes supply chain sourcing and pricing commitments for Timbits(TM) and donuts that extend until early 2016, and it has supply rights for these products until late 2017 at our option.
The Company maintains flexibility to secure alternative means of supply after the agreement expires, if necessary, and plans to evaluate possible options for the use of net proceeds from a transaction including potential avenues to return value to shareholders. Final decisions regarding the use of proceeds will be announced at the appropriate time. Additional information on this transaction can be found in the separate announcement issued today.
Private placement of $200 million Senior Notes completed
--------------------------------------------------------
During the second quarter of 2010 we successfully completed a private placement transaction in Canada of $200 million principal amount of senior unsecured 4.20% notes. The debt offering was significantly oversubscribed, indicating strong market support for the Company. The net proceeds of this offering were used primarily to refinance a portion of our outstanding term loan and for general corporate purposes.
Board declares dividend payment of $0.13 per common share
---------------------------------------------------------
The Board of Directors has declared a quarterly dividend of $0.13 per common share, consistent with our previously announced change in dividend rate and targeted payout range of 30% to 35% of normalized prior-year earnings. The dividend is payable on September 8th, 2010 to shareholders of record as of August 23rd, 2010. 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.
Tim Hortons conference call today at 2:30 p.m. (EDT) Thursday, August 12th, 2010
Tim Hortons will host a conference call today to discuss the second quarter results, scheduled to begin at 2:30 p.m. (EDT). The dial-in number is (416) 641-6712 or (800) 354-6885. No access code is required. A simultaneous web cast of the call, including presentation material, will be available at www.timhortons-invest.com. A replay of the call will be available until August 19th, 2010 and can be accessed at (416) 626-4100 or (800) 558-5253. The call replay reservation number is 21476996. The call and presentation material will also be archived for a period of one-year in the Events and Presentations section.
Safe Harbor Statement
Certain information in this news release, particularly information regarding future economic performance, finances, and plans, expectations and objectives of management, including as they relate to the Company's progress on growth initiatives and ability to drive shareholder value, the intention to close a transaction for the sale of the Company's 50% interest in a joint venture bakery, the evaluation of possible options for the use of the net proceeds from that sale transaction and related supply chain matters, constitutes 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 2009 Annual Report on Form 10-K filed March 4th, 2010 and the Quarterly Report on Form 10-Q filed August 12th, 2010 with the U.S. Securities and Exchange Commission and Canadian Securities Administrators, 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.
(2) 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 July 4th, 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 second quarter of 2010, systemwide sales growth on a constant
currency basis was up 9.2% compared to the second quarter of 2009.
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.
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 July 4th, 2010, Tim Hortons had 3,627 systemwide restaurants, including 3,040 in Canada and 587 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)
Second quarter ended
July 4, June 28,
2010 2009 $ Change % Change
----------- ----------- ----------- -----------
(Note 1)
REVENUES
Sales $444,344 $425,348 $18,996 4.5%
Franchise revenues:
Rents and royalties 175,879 160,824 15,055 9.4%
Franchise fees 19,639 19,287 352 1.8%
----------- ----------- ----------- -----------
195,518 180,111 15,407 8.6%
----------- ----------- ----------- -----------
TOTAL REVENUES 639,862 605,459 34,403 5.7%
----------- ----------- ----------- -----------
COSTS AND EXPENSES
Cost of sales 375,347 365,711 9,636 2.6%
Operating expenses 61,560 58,909 2,651 4.5%
Franchise fee costs 20,379 19,615 764 3.9%
General and
administrative expenses 36,745 35,694 1,051 2.9%
Equity (income) (3,760) (3,367) (393) 11.7%
Other (income), net (260) (152) (108) N/M
----------- ----------- ----------- -----------
TOTAL COSTS AND EXPENSES,
NET 490,011 476,410 13,601 2.9%
----------- ----------- ----------- -----------
OPERATING INCOME 149,851 129,049 20,802 16.1%
Interest (expense) (6,878) (5,058) (1,820) 36.0%
Interest income 113 120 (7) (5.8%)
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAXES 143,086 124,111 18,975 15.3%
INCOME TAXES 42,161 40,648 1,513 3.7%
----------- ----------- ----------- -----------
Net Income 100,925 83,463 17,462 20.9%
Net income attributable to
noncontrolling interests 6,804 5,703 1,101 19.3%
----------- ----------- ----------- -----------
NET INCOME ATTRIBUTABLE TO
TIM HORTONS INC. $94,121 $77,760 $16,361 21.0%
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Basic earnings per common
share attributable to
Tim Hortons Inc. $0.54 $0.43 $0.11 25.3%
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Diluted earnings per
common share attributable
to Tim Hortons Inc. $0.54 $0.43 $0.11 25.2%
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Weighted average number of
common shares outstanding -
Basic (in thousands) 174,586 180,731 (6,145) (3.4%)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Weighted average number of
common shares outstanding -
Diluted (in thousands) 174,873 180,923 (6,050) (3.3%)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Dividend per common share $0.13 $0.10 $0.03
----------- ----------- -----------
----------- ----------- -----------
N/M - not meaningful
(all numbers rounded)
Note 1 - For comparative purposes, prior year figures have been presented
on a consistent basis to reflect the Company's adoption of
SFAS No. 167
TIM HORTONS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands of Canadian dollars, except share and per share data)
(Unaudited)
Year-to-date
period ended
July 4, June 28,
2010 2009 $ Change % Change
----------- ----------- ----------- -----------
(Note 1)
REVENUES
Sales $850,292 $816,464 $33,828 4.1%
Franchise revenues:
Rents and royalties 335,839 304,988 30,851 10.1%
Franchise fees 36,343 39,714 (3,371) (8.5%)
----------- ----------- ----------- -----------
372,182 344,702 27,480 8.0%
----------- ----------- ----------- -----------
TOTAL REVENUES 1,222,474 1,161,166 61,308 5.3%
----------- ----------- ----------- -----------
COSTS AND EXPENSES
Cost of sales 722,394 703,584 18,810 2.7%
Operating expenses 120,285 115,502 4,783 4.1%
Franchise fee costs 38,205 39,393 (1,188) (3.0%)
General and
administrative expenses 71,417 69,170 2,247 3.2%
Equity (income) (7,017) (6,432) (585) 9.1%
Other (income), net (397) (316) (81) 25.6%
----------- ----------- ----------- -----------
TOTAL COSTS AND EXPENSES,
NET 944,887 920,901 23,986 2.6%
----------- ----------- ----------- -----------
OPERATING INCOME 277,587 240,265 37,322 15.5%
Interest (expense) (12,325) (10,515) (1,810) 17.2%
Interest income 460 784 (324) (41.3%)
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAXES 265,722 230,534 35,188 15.3%
INCOME TAXES 80,224 75,689 4,535 6.0%
----------- ----------- ----------- -----------
Net Income 185,498 154,845 30,653 19.8%
Net income attributable to
noncontrolling interests 12,488 10,646 1,842 17.3%
----------- ----------- ----------- -----------
NET INCOME ATTRIBUTABLE TO
TIM HORTONS INC. $173,010 $144,199 $28,811 20.0%
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Basic earnings per common
share attributable to
Tim Hortons Inc. $0.99 $0.80 $0.19 23.9%
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Diluted earnings per
common share attributable
to Tim Hortons Inc. $0.99 $0.80 $0.19 23.8%
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Weighted average number of
common shares outstanding -
Basic (in thousands) 175,318 180,975 (5,657) (3.1%)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Weighted average number of
common shares outstanding -
Diluted (in thousands) 175,571 181,140 (5,570) (3.1%)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Dividend per common share $0.26 $0.20 $0.06
----------- ----------- -----------
----------- ----------- -----------
N/M - not meaningful
(all numbers rounded)
Note 1 - For comparative purposes, prior year figures have been presented
on a consistent basis to reflect the Company's adoption of
SFAS No. 167
TIM HORTONS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands of Canadian dollars)
As at
-----------------------------
July 4, January 3,
2010 2010
-------------- --------------
(Note 1)
(Unaudited)
ASSETS
Current assets
Cash and cash equivalents $157,495 $121,653
Restricted cash and cash equivalents 49,958 60,629
Restricted investments 4,997 20,186
Accounts receivable, net 160,105 179,942
Notes receivable, net 19,204 20,823
Deferred income taxes 2,064 3,475
Inventories and other, net 109,592 80,490
Advertising fund restricted assets 25,661 26,681
-------------- --------------
Total current assets 529,076 513,879
Property and equipment, net 1,489,517 1,494,032
Notes receivable, net 2,641 3,475
Deferred income taxes 10,771 8,919
Intangible assets, net 7,444 8,405
Equity investments 46,594 45,875
Other assets 25,876 19,706
-------------- --------------
Total assets $2,111,919 $2,094,291
-------------- --------------
-------------- --------------
Note 1 - For comparative purposes, prior year figures have been presented
on a consistent basis to reflect the Company's adoption of
SFAS No. 167
TIM HORTONS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands of Canadian dollars)
As at
-----------------------------
July 4, January 3,
2010 2010
-------------- --------------
(Note 1)
(Unaudited)
LIABILITIES AND EQUITY
Current liabilities
Accounts payable $128,214 $135,248
Accrued liabilities:
Salaries and wages 15,092 23,268
Taxes 25,239 27,586
Other 109,862 111,401
Deferred income taxes 117 376
Advertising fund restricted liabilities 40,850 43,944
Current portion of long-term obligations 109,128 7,821
-------------- --------------
Total current liabilities 428,502 349,644
-------------- --------------
Long-term obligations
Long-term debt 237,100 336,302
Advertising fund restricted debt 344 415
Capital leases 68,314 67,156
Deferred income taxes 12,545 10,159
Other long-term liabilities 73,114 74,929
-------------- --------------
Total long-term obligations 391,417 488,961
-------------- --------------
Equity
Equity of Tim Hortons Inc.
Common shares
Authorized: unlimited shares
Issued: 174,348,514 and 177,318,614
shares, respectively 494,512 502,872
Common stock held in trust, at cost:
330,405 and 278,500 shares,
respectively (11,337) (9,437)
Contributed surplus 1,937 -
Retained earnings 834,184 796,235
Accumulated other comprehensive loss (115,405) (120,061)
-------------- --------------
Total equity of Tim Hortons Inc. 1,203,891 1,169,609
Noncontrolling interests 88,109 86,077
-------------- --------------
Total equity 1,292,000 1,255,686
-------------- --------------
Total liabilities and equity $2,111,919 $2,094,291
-------------- --------------
-------------- --------------
Note 1 - For comparative purposes, prior year figures have been presented
on a consistent basis to reflect the Company's adoption of
SFAS No. 167
TIM HORTONS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of Canadian dollars)
Year-to-date period ended
July 4, 2010 June 28, 2009
-------------- --------------
(Note 1)
(Unaudited)
CASH FLOWS PROVIDED FROM (USED IN)
OPERATING ACTIVITIES
Net income $185,498 $154,845
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation and amortization 57,874 54,972
Stock-based compensation expense 5,447 4,073
Equity income, net of cash dividends (696) 2,513
Deferred income taxes 1,493 3,714
Changes in operating assets and
liabilities
Restricted cash and cash equivalents 10,697 25,316
Accounts and notes receivable 19,835 19,659
Inventories and other (27,206) 3,978
Accounts payable and accrued liabilities (15,899) (74,610)
Settlement of cash flow hedges (4,791) -
Other, net 2,817 315
-------------- --------------
Net cash provided from operating activities 235,069 194,775
-------------- --------------
CASH FLOWS (USED IN) PROVIDED FROM
INVESTING ACTIVITIES
Capital expenditures (48,494) (69,324)
Proceeds from sale of restricted investments 15,240 -
Principal payments received on notes
receivable 1,644 733
Other investing activities (7,418) (11,841)
-------------- --------------
Net cash used in investing activities (39,028) (80,432)
-------------- --------------
CASH FLOWS (USED IN) PROVIDED FROM
FINANCING ACTIVITIES
Purchase of common shares/treasury stock (98,018) (16,701)
Purchase of common shares held in trust (3,252) (713)
Purchase of common shares for settlement
of restricted stock units (377) (232)
Dividend payments to common shareholders (45,413) (36,253)
Distributions and other to noncontrolling
interests (10,456) (14,147)
Proceeds from issuance of debt, net of
issuance costs 200,359 1,150
Principal payments on other long-term
debt obligations (203,218) (2,551)
-------------- --------------
Net cash used in financing activities (160,375) (69,447)
-------------- --------------
Effect of exchange rate changes on cash 176 (1,552)
-------------- --------------
Increase in cash and cash equivalents 35,842 43,344
Cash and cash equivalents at beginning of
period 121,653 124,717
-------------- --------------
Cash and cash equivalents at end of period $157,495 $168,061
-------------- --------------
-------------- --------------
Note 1 - For comparative purposes, prior year figures have been presented
on a consistent basis to reflect the Company's adoption of
SFAS No. 167
TIM HORTONS INC. AND SUBSIDIARIES
SEGMENT REPORTING
(In thousands of Canadian dollars)
(Note 1 and 2)
(Unaudited)
Second Quarter ended
-----------------------------------------------
July 4, June 28,
2010 % of Total 2009 % of Total
----------- ----------- ----------- -----------
REVENUES
Canada $538,228 84.1% $468,822 77.4%
U.S. 30,135 4.7% 38,717 6.4%
----------- ----------- ----------- -----------
Total reportable segments 568,363 88.8% 507,539 83.8%
Variable interest entities 71,499 11.2% 97,920 16.2%
----------- ----------- ----------- -----------
Total $639,862 100.0% $605,459 100.0%
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
SEGMENT OPERATING INCOME
(LOSS)
Canada $149,730 97.7% $132,347 97.7%
U.S. 3,580 2.3% 3,141 2.3%
----------- ----------- ----------- -----------
Reportable Segment
Operating Income 153,310 100.0% 135,488 100.0%
----------- -----------
----------- -----------
Variable interest entities 7,743 6,279
Corporate Charges (11,202) (12,718)
----------- -----------
Consolidated Operating
Income 149,851 129,049
Interest expense, net (6,765) (4,938)
Income taxes (42,161) (40,648)
----------- -----------
Net Income 100,925 83,463
Net Income attributable
to noncontrolling
interests 6,804 5,703
----------- -----------
Net Income attributable
to Tim Hortons Inc. $94,121 $77,760
----------- -----------
----------- -----------
Year-to-date period ended
-----------------------------------------------
July 4, June 28,
2010 % of Total 2009 % of Total
----------- ----------- ----------- -----------
REVENUES
Canada $1,006,893 82.4% $897,427 77.3%
U.S. 57,848 4.7% 73,044 6.3%
----------- ----------- ----------- -----------
Total reportable segments 1,064,741 87.1% 970,471 83.6%
Variable interest
entities 157,733 12.9% 190,695 16.4%
----------- ----------- ----------- -----------
Total $1,222,474 100.0% $1,161,166 100.0%
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
SEGMENT OPERATING
INCOME (LOSS)
Canada $282,116 98.8% $248,169 99.0%
U.S. 3,334 1.2% 2,577 1.0%
----------- ----------- ----------- -----------
Reportable Segment
Operating Income 285,450 100.0% 250,746 100.0%
----------- -----------
----------- -----------
Variable interest entities 14,223 12,553
Corporate Charges (22,086) (23,034)
----------- -----------
Consolidated Operating
Income 277,587 240,265
Interest expense, net (11,865) (9,731)
Income taxes (80,224) (75,689)
----------- -----------
Net Income 185,498 154,845
Net Income attributable
to noncontrolling
interests 12,488 10,646
----------- -----------
Net Income attributable
to Tim Hortons Inc. $173,010 $144,199
----------- -----------
----------- -----------
Second Quarter ended
-----------------------
July 4, June 28,
2010 2009 $ Change % Change
----------- ----------- ----------- -----------
Sales is comprised of:
Distribution sales $367,390 $320,823 $46,567 14.5%
Company-operated
restaurant sales 5,455 6,605 (1,150) (17.4)%
Sales from variable
interest entities 71,499 97,920 (26,421) (27.0)%
----------- ----------- ----------- -----------
$444,344 $425,348 $18,996 4.5%
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Year-to-date
period ended
-----------------------
July 4, June 28,
2010 2009 $ Change % Change
----------- ----------- ----------- -----------
Sales is comprised of:
Distribution sales $682,114 $613,028 $69,086 11.3%
Company-operated
restaurant sales 10,445 12,741 (2,296) (18.0)%
Sales from variable
interest entities 157,733 190,695 (32,962) (17.3)%
----------- ----------- ----------- -----------
$850,292 $816,464 $33,828 4.1%
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Note 1 - For comparative purposes, prior year figures have been presented
on a consistent basis to reflect the Company's adoption of
SFAS No. 167
Note 2 - While the adoption of SFAS No. 167 resulted in the consolidation
of its 50-50 bakery joint venture, the Company's chief decision
maker continues to view and evaluate the performance of the
Canadian segment with this 50-50 bakery joint venture accounted
for on an equity accounting basis, which reflects 50% of its
operating income (consistent with views and evaluations prior to
the adoption of the Standard). As a result, the net revenues,
and the remaining 50% of operating income of this joint venture
have been included in Variable interest entities along with
revenues and operating income from our non-owned consolidated
restaurants.
TIM HORTONS INC. AND SUBSIDIARIES
SYSTEMWIDE RESTAURANT COUNT
Increase/ Increase/
As of As of (Decrease) As of (Decrease)
July 4, January 3, From June 28, From
2010 2010 Year End 2009 Prior Year
----------------------------------------------------
Tim Hortons
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Canada
Company-operated 14 13 1 15 (1)
Franchised 3,026 3,002 24 2,924 102
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Total 3,040 3,015 25 2,939 101
% Franchised 99.5% 99.6% 99.5%
U.S.
Company-operated 3 5 (2) 5 (2)
Franchised 584 558 26 531 53
----------------------------------------------------
Total 587 563 24 536 51
% Franchised 99.5% 99.1% 99.1%
Total Tim Hortons
Company-operated 17 18 (1) 20 (3)
Franchised 3,610 3,560 50 3,455 155
----------------------------------------------------
Total 3,627 3,578 49 3,475 152
----------------------------------------------------
----------------------------------------------------
% Franchised 99.5% 99.5% 99.4%
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) as well
as sales from our bakery joint venture which we are
required to consolidate.
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) as well as cost of sales from
our bakery joint venture.
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, excluding joint
ventures that we are required to consolidate.
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.
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 Relates to the consolidation of our bakery joint
interests venture and certain non-owned restaurants that the
Company is required to consolidate under ASC 810
(formerly SFAS No. 167 and 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: Alexandra Cygal, (905) 339-5960 or [email protected]
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