Tim Hortons Inc Fourth Quarter Results. Conference Call and Web cast February 20, 2009

Transcription

1 Tim Hortons Inc Fourth Quarter Results Conference Call and Web cast February 20, 2009

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 Fourth Quarter Conference Call and Webcast and our 2009 Outlook and Targets 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 Solid performance in core Canadian business, operating income lower due to previously announced store closures and related asset impairment charge Operating income was down 7.2% to $107.9 million Adjusted operating income * was up 11.1% to $129.1 million Sales performance relatively strong in an economic environment that significantly deteriorated Marketing and promotional programs, customer loyalty, innovation and our store owners will be the driving forces that will help overcome the economic conditions * Adjusted Operating Income see slide 22 for reconciliation to GAAP measure

6 Top-Line Sales Growth Q Q Systemwide Sales 8.2% 7.9% Same-Store Sales 4.4% 3.8% (0.1)% 4.2% 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 21 regarding this measure. 6

7 Q Menu and Promotional Program Introduced combo and bundle programs to Canada and the U.S. This includes muffins or cookies with tea Chili and Garlic Toast and Chicken Fajita wraps returned to Quebec Promotion of holiday merchandise that included branded mugs, coffee scoops and TimCards 7

8 Restaurant Development Activities 161 restaurant units opened in Q store projects targeted in 2008, 266 locations opened 55 restaurants opened in Q4 106 restaurants opened in Q4 8

9 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 293 licensed locations in Ireland and the U.K., Primarily self-serve platform 9

10 Cynthia Devine, Chief Financial Officer 10 10

11 Q Key Financial Metrics Systemwide Sales Same-Store Sales 1 Q % Revenues Operating Income Adjusted Operating Income* Net Income Diluted EPS (1) Systemwide sales growth includes restaurant sales at both Company and Franchise restaurants (see slide 24 for additional information on this measure). * Adjusted Operating Income see slide 22 for reconciliation to GAAP measure 4.4% (0.1)% 9.4% (7.2%) 11.1% (8.6)% $

12 12 Q Results - Revenues (C$ Millions) Q Q % Change Sales $372.1 $ % Franchise revenues Rents and Royalties % Franchise fees (8.5)% % Total Revenues $563.7 $ %

13 Q Results Expenses (C$ Millions) COSTS AND EXPENSES, NET Q Q % Change Cost of Sales $ $ % Operating expenses 11.7% Franchise fee costs (11.2)% General & administrative expenses % Equity (income) (10.5) (9.6) 9.4% Asset impairment and related closure costs N/M Other expense (income), net N/M Total Costs & Expenses, net $ $ % N/M Not Meaningful 13

14 Q Results Income (C$ Millions) Q Q % Change Operating Income $ $ (7.2%) Interest (expense) (6.0) (6.2) (4.6%) Interest income (60.1%) Income taxes (expense) (33.7) (36.6) (7.9%) Net income (8.6%) Diluted EPS ($ per share) $ 0.38 $ 0.40 (5.9%) Diluted Shares outstanding (millions) (2.9%) Adjusted Operating Income (millions)* $ $ % *See slide 22 for reconciliation to GAAP measure 14

15 Q Results Segments Q Q % Change Segment Operating Income (Loss) $ $ % $ (21.3) $ (0.5) N/M Does not include corporate charges. N/M Not Meaningful 15

16 Balance Sheet Highlights Cash and cash equivalents $ million Term debt and capital leases $ million (As at end of December 28, 2008) 16

17 Cash Flow Highlights 2008 CAPEX $ million Q4 CAPEX $ 62.2 million 2008 Depreciation & Amortization $ 91.3 million Q4 Depreciation & Amortization $ 24.5 million 17

18 Corporate Structure U.S. domiciled company Many complexities to the current structure Ratifications of the Canada-United States tax treaty add further complexities Feasibility review undertaken and underway to assess alternatives, including potentially converting parent company from a U.S. to a Canadian public company with the potential for future benefits No assurance that the transaction will take place 18

19 2009 Targets* Operating income growth of 11-13% (targeted rate of growth is 6% to 8% excluding the impact of asset impairment and related closure costs) Includes approximately 1% positive impact from 53 rd week US break-even operating income performance on a full year basis Same-store sales growth of 3-5% in Canada and 0-2% in the U.S restaurants openings in Canada full-serve restaurants which will be complemented by nonstandard locations in the U.S. Capital expenditure of $180 million to $200 million Tax Rate of 32-34% * Excludes the impact of any potential corporate reorganization. Targets are for 2009 only and only effective as of the date targets originally issued. The company does not intend to update our annual targets which are subject to risks and uncertainties. Please read in conjunction with the Company s 2008 Fourth Quarter and Year End results disclosed February 20, 2009 for important information on Targets and the potential impact of feasibility review underway regarding Company structure. 19

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21 21 Definition: Systemwide Sales Growth (1) Total systemwide sales growth includes restaurant level sales at both Company and Franchise restaurants. Approximately 99.0% of our system is franchised as at December 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 fourth quarter of 2008, systemwide sales growth was up 8.2% compared to the fourth 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.

22 Adjusted Operating Income Reconciliation (*) (C$ Millions; N/M Not Meaningful) Q Q % Change Reported Operating Income $ $ (7.2)% Add: Asset Impairment and Related Closure costs N/M Adjusted Operating Income 11.1% $ $ FY 2008 FY 2007 % Change Reported Operating Income $ $ % Add: Asset impairment and related closure costs Add: Management restructuring costs, net 1 of savings* N/M N/M Adjusted Operating Income $ $ % * Originally disclosed as $3.1 million, which did not include savings of $0.6 million realized in fiscal

23 FOR MORE INFORMATION Scott Bonikowsky, Vice-President, Investor Relations 23