Tim Hortons Q3 Profit Falls 22%; Resumes Stock Buyback Program

10/30/2009 1:14 PM ET

(RTTNews) - Quick-service restaurant operator Tim Hortons Inc. (THI.TO: News ,THI: News ) said Friday that its third quarter profit fell 22% from last year, mainly hurt by the impact of its reorganization as a Canadian public company.

The Oakville, Canada-based company reported net income for the third quarter of C$61.2 million or C$0.34 per share, compared to C$78.8 million or C$0.43 per share for the year-ago quarter.

The latest quarter result includes a C$23.1 million impact in connection with the reorganization as a Canadian public company. The reorganization, which became effective on September 28, drove substantially all of the increase in effective tax rate for the third quarter, which rose to 50.5% compared to 32.5% last year.

Operating income for the quarter rose 5.4% to C$129.2 million, while adjusted operating income increased 8% to C$132.4 million.

Total revenues for the third quarter increased 10.7% to C$563.55 million from C$509.00 million in the same quarter last year, benefiting from higher sales as well as increased rents and royalties.

For the third quarter, same-store sales grew 3.1% in Canada and 4.3% in the U.S., with contributions from transaction growth and slight improvement in average check.

Canadian segment operating income rose 5.9% to C$140.8 million in the third quarter from C$132.9 million last year. U.S. Segment had an operating income of C$1.1 million in the third quarter, compared to an operating loss of C$2.1 million in the prior year quarter.

For the first nine months, the company reported net income of C$205.4 million or C$1.13 per share, compared to C$215.6 million or C$1.17 per share for the same period last year.

Total revenue for the nine-month period increased 9.9% to C$1.63 billion from C$1.48 billion in the prior year period.

Based on year-to-date performance, the company said it now expects 2009 Canadian same-store sales to come in at the low end or slightly below its growth target of 3% to 5%.

As a result of the completion of the reorganization as a Canadian public company, the Tim Hortons board has approved resumption of the previously announced stock buyback program, beginning in the fourth quarter. In May, the company had decided to defer further purchases in its share repurchase program, pending a change in corporate structure.

The company said it currently expects to spend up to C$150 million during the remainder of the program, which ends on March 1, 2010. Prior to the decision to defer the program, the company has already spent C$16.7 million to repurchase about 0.6 million shares.