Tim Hortons Inc Third Quarter Results. Conference Call and Web cast November 7, 2008

Transcription

1 Tim Hortons Inc Third Quarter Results Conference Call and Web cast November 7, 2008

2 Q Speakers (in sequence) Scott Bonikowsky Vice-President, Investor Relations Don Schroeder President & Chief Executive Officer Cynthia Devine Chief Financial Officer 2

3 Safe Harbor Statement Certain statements in this presentation and our response to various questions in our 2008 Third Quarter Conference Call and Webcast may constitute forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and applicable Canadian securities law. Such forward- looking statements, which speak only as of the time made, are based on current expectations and involve certain risks and uncertainties. Actual results might differ materially from those projected in the forward- looking statements. In some cases, information regarding certain important factors that could cause actual results to differ from any such forward-looking statement appears or is discussed together with such statements. Additional information concerning these factors is contained in the most recent Form 10-K filed February 26, 2008, press releases and other filings with the Securities and Exchange Commission and Canadian securities regulators. Information in these materials is subject to, and qualified in its entirety by, information contained in the Company s public securities filings. Many of the factors that will determine our future performance are beyond our ability to control or predict. Therefore, we may not have identified them all in our various statements or risk factors. You are cautioned not to place undue reliance on any forward-looking statements. Except as required by applicable securities laws, we do not have any intention or obligation to update forward-looking statements after this presentation, even if new information, future events or other circumstances have made them incorrect or misleading. You can review the full text of the Company s Safe Harbor Statement on our website at 3

4 Don Schroeder, President and CEO 4

5 Q Key Themes Strong operating income growth fueled primarily by Canadian systemwide sales growth, increasing rents and royalties and year-over-year cost factors Challenging economic environment, more deeply embedded in the U.S. market than in Canada Continued innovation and growth catalysts planned to help mitigate impacts of the current environment

6 Top-Line Sales Growth Q Q Systemwide Sales 7.8% 11.7% Lapping Same-Store Sales 3.8% 7.7% (0.6)% 4.5% Percentages represent year-over-year comparisons, unless otherwise noted. (1) Systemwide sales growth includes restaurant sales at both Company and Franchise restaurants. See information on slide 19 regarding this measure. 6

7 Q Menu and Promotional Program Chocolate Brownie and Hazelnut Iced Capp Supremes European-style Danishes and croissants & Gourmet Cookies Bagel B.E.L.T. Various soups, including Italian Wedding and Hearty Potato Bacon Fresh Choice Sides includes donuts, apples hashbrowns and muffins, as sides to hot breakfast sandwich combos (U.S. only) 7

8 Responding to economic challenges in the US market Reinforce Value: Drive Transactions + Brand Building Combo programs Fresh Choice Sides Product bundles at various value price points Strategic alliances requiring less capital intensity to seed the brand TOPS Friendly Markets, approximately 80 sites Planned rationalization of some underperforming corporate store sites 8

9 Restaurant Development Activities 2008 restaurant development is back-half loaded consistent with most years store projects targeted in 2008 Several new restaurants opened as part of the Syracuse, N.Y. expansion. As well, about 80 Tim Hortons sites to open in Tops Friendly Markets in western and central N.Y. and Pennsylvania 49 restaurants opened in Q3 2008: 30 restaurants opened, 75 YTD 19 restaurants opened, 30 YTD 9

10 International presence expands in Ireland and U.K. High quality Bean to Cup offering with minimal capital Coffee and focused assortment of baked goods Seeds brand presence 261 licensed locations in Ireland and the U.K., Primarily self-serve platform 10

11 New Initiatives ecommerce Specialty Coffee BC Rollout 11

12 Cynthia Devine, Chief Financial Officer 12 12

13 Q Key Financial Metrics Q Systemwide Sales Same-Store Sales 1 7.8% 3.8% (0.6)% Revenues Operating Income Net Income Diluted EPS 3.8% 12.7% 16.9% $0.43 (1) Systemwide sales growth includes restaurant sales at both Company and Franchise restaurants (see slide 19 for additional information on this measure). 13

14 14 Q Results - Revenues (C$ Millions) Q Q % Change Sales $333.6 $ % Franchise revenues Rents and Royalties % Franchise fees % % Total Revenues $509.0 $ %

15 Q Results Expenses (C$ Millions) COSTS AND EXPENSES, NET Q Q % Change Franchise fee costs $ 19.8 $ 20.4 (2.9)% Cost of Sales % Operating expenses 3.8% General & administrative expenses (2.5)% Equity (income) (9.4) (9.9) (4.4)% Other (income) expense, net (0.1) 1.1 N/M Total Costs & Expenses, net $ $ % N/M not meaningful 15

16 Q Results Income (C$ Millions) Q Q % Change Operating Income $ $ % Interest (expense) (6.3) (6.1) 2.8% Interest income (47.5%) Income taxes (expense) (38.0) (36.7) 3.6% Net income % Diluted EPS ($ per share) $ 0.43 $ % Diluted Shares outstanding (millions) (2.8%) 16

17 Balance Sheet Highlights Cash and Cash Equivalents $ 67.6 million Share Repurchases $ 49.5 million Term debt and capital leases $ million CAPEX $ 46.0 million Q3 Depreciation & Amortization $ 22.7 million (As at end of September 28, 2008) 17

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19 19 Definition: Systemwide Sales Growth (1) Total systemwide sales growth includes restaurant level sales at both Company and Franchise restaurants. Approximately 98.7% of our system is franchised as at September 28, Systemwide sales growth is determined using a constant exchange rate 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 third quarter of 2008, systemwide sales growth was up 7.8% compared to the third quarter of Systemwide sales impact our franchise royalties and rental income, as well as our distribution sales. Changes in systemwide sales are driven by changes in average same-store sales and changes in the number of systemwide restaurants. Management believes systemwide sales data is useful and important in assessing the overall health and financial performance of the brand and the Company s Franchisee base, and ultimately, the financial performance of the Company on a consolidated and segmented basis.

20 FOR MORE INFORMATION Scott Bonikowsky, Vice-President, Investor Relations 20