Tim Hortons Q2 Profit Tops Estimates, To Enhance Share Repurchase

(RTTNews) - Canadian quick-service restaurant chain Tim Hortons, Inc. (THI, THI.TO) Thursday reported higher profit for the second quarter that topped estimates. However, revenues came short of expectations. The company maintained its targets for 2013, but expects full-year same-store sales growth in Canada and the U.S. to be below targeted ranges. Further, Tim Hortons decided to boost share repurchase.

Marc Caira, president and CEO, said, ''We delivered solid profitability in the quarter and progression in same-store sales. Although the operating environment remains challenging, we are focused on building our market leadership to drive top line growth."

Net income attributable to the company climbed to C$123.74 million from C$108.07 million in the previous year. Earnings per share rose to C$0.81 from C$0.69. On average, 15 analysts polled by Thomson Reuters expected earnings of C$0.75 per share for the quarter. Analysts' estimates typically exclude special items.

Total revenue grew 1.9 percent to C$800.14 million from C$785.58 million in the prior year. Analysts expected revenues of C$816.51 million.

Same-store sales improved 1.5 percent in Canada on top of a 1.8 percent increase last year. Same-store sales growth was 1.4 percent in the U.S., compared to 4.9 percent last year.

Systemwide sales increased 5 percent on a constant currency basis, as a result of new restaurant development in Canada and the U.S. and same-store sales growth. Distribution sales decreased due to lower prices for coffee and other commodities.

Costs and expenses slid 0.5 percent to C$623.56 million, driven by lower cost of sales as well as general and administrative expense.

Looking ahead, the company still expects earnings of $2.87 to $2.97 per share for 2013. Analysts expect earnings of C$2.90 per share for the year.

However, Tim Hortons sees full-year same-store sales growth below its previously established targeted range of 2 to 4 percent in Canada and 3 to 5 percent in the U.S., based on year-to-date performance.

Additionally, Tim Hortons said the Board of Directors declared a dividend of $0.26 per common share payable to shareholders of record as of August 19. The dividend is payable on September 4.

The company's board has approved $900 million in additional debt, expected to be in the form of bank debt and/or newly issued bonds. The proceeds are expected to be used to repurchase shares.

Consistent with these plans, the company has obtained regulatory approval from the Toronto Stock Exchange to amend its Normal Course Issuer Bid or NCIB to remove the former maximum dollar cap of $250 million.

As a result, under its amended NCIB, the firm can purchase up to 10 percent of its 'public float' as at February 14.

THI closed at $57.06 on the NYSE on Wednesday. THI.TO settled down 0.4 percent at $59.49.