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.
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
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.
Logos, product and company names mentioned are the property of their respective owners.
