2012 Second Quarter Conference Call
Tim Hortons
August 9th, 2012
Scott Bonikowsky Vice President, Corporate, Publ ic & Government Affairs
Paul House Executive Chairman, and President & Chief Executive Off icer
Cynthia Devine Chief Financial Off icer
S p e a k e r s ( i n s e q u e n c e )
2
Certain information in this presentation, particularly information regarding future economic performance, finances, and plans, expectations and objectives of management, and other information, constitutes forward-looking information within the meaning of Canadian securities laws and forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We refer to all of these as forward-looking statements. Various factors including competition in the quick service segment of the food service industry, general economic conditions and others described as "risk factors" in the Company's 2011 Annual Report on Form 10-K filed February 28th, 2012, as updated in our Quarterly Report on Form 10-Q expected to be filed today with the U.S. Securities and Exchange Commission and Canadian Securities Administrators, could affect the Company's actual results and cause such results to differ materially from those expressed in forward-looking statements. As such, readers are cautioned not to place undue reliance on forward-looking statements contained in this presentation, which speak only as to management's expectations as of the date hereof.
Forward-looking statements are based on a number of assumptions which may prove to be incorrect, including, but not limited to, assumptions about: the absence of an adverse event or condition that damages our strong brand position and reputation; the absence of a material increase in competition within the quick service restaurant segment of the food service industry; cost and availability of commodities; continuing positive working relationships with the majority of the Company’s restaurant owners; the absence of any material adverse effects arising as a result of litigation; there being no significant change in the Company’s ability to comply with current or future regulatory requirements; and general worldwide economic conditions. We are presenting this information for the purpose of informing you of management’s current expectations regarding these matters, and this information may not be appropriate for any other purpose.
We assume no obligation to update or alter any forward-looking statements after they are made, whether as a result of new information, future events, or otherwise, except as required by applicable law. Please review the Company's Safe Harbor Statement at www.timhortons.com/en/about/safeharbor.html.
Results only include up to July 1st, 2012 unless otherwise noted and have not been updated. Historical results are no guarantee of future performance.
SAFE HARBOR STATEMENT
3
Paul House
Executive Chairman, President & CEO
4
KEY HIGHLIGHTS
Strong EPS growth benefited from net income attributable to THI and share repurchase
Many operational initiatives focused on growth
Launch of Single-serve Coffee and Panini Sandwich* platforms announced
5 *In Canada
TOP-LINE SALES GROWTH
*Constant currency basis.
(1) Systemwide sales growth includes restaurant sales at both Franchised and Company-operated restaurants. Same-stores sales growth includes sales at Franchised and Company-operated locations open for 13 months or
more. See information on slide 19 regarding these measures. 6
*
Percentages represent year-over-year comparisons, unless otherwise noted.
2012 2011
Q2 Q2
Systemwide Sales Growth(1)* 6.0% 7.2%
Same-Store Sales
Growth(1) 1.8% 3.8%
4.9% 6.6%
MORE THAN A GREAT BRAND
Free Wi-Fi and Interior Digital Menu Boards continue to roll-out across Canada
Panini platform to be in place in Canada later in the second half of 2012
Canadian drive-thru double order station implementation 7
Q2 2012 Menu & Promotional Innovation
Frozen Lemonade Launch in Canada
$1 promotional price (Small)
Promotion of the Peach Mango Smoothie for $1.99
Promotion of the Tuscan Chicken Panini in the U.S.
Iced Capp promotion in both the U.S. and Canada
Continued Promotional Activity
YTD 2012
41
Restaurants
Q2 RESTAURANT DEVELOPMENT ACTIVITY
9
Note: Locations opened include mix of full-serve standard and non-standard restaurants and self-serve kiosk locations. Internationally, 5 restaurant were opened in the G.C.C. this quarter and 6 YTD.
9
Q2 2012
19
Restaurants
YTD 2012
22
Restaurants
Q2 2012
15
Restaurants
LAUNCHING SINGLE-SERVE
Tassimo® Single-Serve
North American-wide agreement with Kraft Foods to enter single-serve
Single-serve formats
Premium-blend coffee, decaf coffee and lattes
Planned launch in time for the 2012 holiday season
10
CYNTHIA DEVINE
Chief Financial Officer
11
Q2 2012 – KEY FINANCIAL METRICS
($ in millions CDN, except per share data)
All numbers rounded 12
2012 2011 % 2012
Q2 Q2 Change YTD
Revenues $ 785.6 $ 702.8 11.8% $ 1,506.9
Operating income $ 158.8 $ 143.2 10.9% $ 290.5
Net income attributable
to THI $ 108.1 $ 95.5 13.1% $ 196.8
Diluted EPS attributable
to THI $ 0.69 $ 0.58 18.9% $ 1.26
Q2 2012 – REVENUES
All numbers rounded 13
2012 2011 % 2012
Q2 Q2 Change YTD
Sales $ 563.8 $ 498.1 13.2% $ 1,087.1
Franchise revenues
Rents & royalties 199.0 185.4 7.3% 379.2
Franchise fees 22.8 19.3 18.2% 40.6
221.8 204.7 8.4% 419.8
Total revenues $ 785.6 $ 702.8 11.8% $ 1,506.9
($ in millions CDN, except per share data)
Q2 2012 – COSTS & EXPENSES
All numbers rounded. N/M - not meaningful. 14
2012 2011 % 2012
Q2 Q2 Change YTD
Cost of sales $ 493.3 $ 434.1 13.7% $ 958.7
Operating expenses 73.1 65.1 12.2% 139.8
Franchise fee costs 24.8 20.4 21.4% 45.1
General & administrative
expenses 40.4 44.0 (8.1%) 80.5
Equity (income) (3.9) (3.8) 1.0% (7.1)
Other (income), net (1.0) (0.2) N/M (0.6)
Total costs & expenses, net $ 626.7 $ 559.5 12.0% $ 1,216.4
($ in millions CDN, except per share data)
Q2 2012 – EARNINGS HIGHLIGHTS
All numbers rounded 15
2012 2011 % 2012
Q2 Q2 Change YTD
Operating income $ 158.8 $ 143.2 10.9% $ 290.5
Interest (expense), net (7.9) (6.6) 20.5% (15.1)
Income taxes (41.7) (40.2) 3.7% (76.1)
Net income attributable to
noncontrolling interests (1.2) (0.9) 31.3% (2.4)
Net income attributable to THI $ 108.1 $ 95.5 13.1% $ 196.8
Diluted EPS attributable to THI $ 0.69 $ 0.58 18.9% $ 1.26
Diluted weighted average
shares outstanding (millions) 156.0 164.0 (4.9%) 156.2
($ in millions CDN, except per share data)
2012 2011 % 2012
Q2 Q2 Change YTD
$ 5.6 $ 4.0 40.1% $ 8.8
U.S.
CANADA
SEGMENT REPORTING OPERATING INCOME
($ in millions CDN)
All numbers rounded
2012 2011 % 2012
Q2 Q2 Change YTD
$ 164.6 $ 156.4 5.2% $ 305.1
16
Q2 2012 – FINANCIAL REVIEW
($ in millions CDN, unless otherwise indicated)
All numbers rounded *Includes $16.8 M of Ad Fund spending
17
Cash Flow
Q2 Cash Capex* $49.2
Q2 Depreciation and
Amortization $30.9
Balance Sheet
Cash and cash
equivalents $57.7
Restricted cash and
cash equivalents $87.3
Total current assets $521.7
Total assets $2.1 billion
Long-term debt $354.6
Capital leases – long-
term $97.5
Appendix
Total systemwide sales growth includes restaurant level sales at both Franchised and Company-operated restaurants. Approximately 99.5% of our consolidated system is franchised as at July 1st, 2012. Systemwide sales growth is determined using a constant exchange rate where noted, 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 second quarter of 2012, systemwide sales on a constant currency basis increased 6.0% compared to the second quarter of 2011. Systemwide sales are important to understanding our business performance as they impact our royalties and rental revenues, as well as our distribution revenues. Changes in systemwide sales are driven by changes in average same-store sales and changes in the number of systemwide restaurants, and are ultimately driven by consumer demand.
Same-store sales growth represents growth on average, in retail sales at restaurants operating systemwide that have been open for thirteen or more months.
We believe systemwide sales and same-store sales growth provide meaningful information to investors regarding the size of our system, the overall health and financial performance of the system, and the strength of our brand and restaurant owner base, which ultimately impacts our consolidated and segmented financial performance. Franchised restaurant sales are not generally included in our Condensed Consolidated Financial Statements (except for certain non-owned restaurants consolidated in accordance with applicable accounting rules). The amount of systemwide sales impacts our rental and royalties revenues, as well as distribution revenues.
SYSTEMWIDE SALES GROWTH & SAME-STORE SALES
19