Tim Hortons Inc. is Canada's largest quick service restaurant chain and features coffee fresh-baked goods soups and sandwiches. Tim Hortons Inc. has a market cap of $5.1 billion; its shares were traded at around $28.18 with a P/E ratio of 19.1 and P/S ratio of 2.5. The dividend yield of Tim Hortons Inc. stocks is 1.3%.
Highlight of Business Operations:Operating income increased $6.6 million, or 5.4%, in the third quarter of 2009 compared to the third quarter of 2008 primarily as a result of higher revenues, as discussed above, and higher contribution from our U.S. operations. Partially offsetting operating income growth were higher general and administrative expenses and lower other income. We incurred $3.2 million of professional advisory fees and shareholder-related transaction costs related to our public company reorganization in the third quarter of 2009 ($7.3 million year-to-date). These costs were not included in our 2009 annual operating income target and impacted our operating income growth rate by 2.6% in the third quarter of 2009 and by 2.1% on a year-to-date basis.
Our revenues increased $146.8 million, or 9.9%, in the year-to-date period ended September 27, 2009 to $1,626.8 million from $1,480.0 million in the year-to-date period ended September 28, 2008, primarily as a result of higher distribution sales and an increase in rents and royalties due to higher systemwide sales. Operating income grew $18.5 million, or 5.5%, in the 2009 year-to-date period, primarily as a result of the higher revenues and higher contributions from our U.S. operations. Partially offsetting operating income growth was lower other income, lower equity income, and higher general and administrative costs. The higher general and administrative expense included $7.3 million of professional advisory fees and shareholder-related transaction costs incurred year-to-date related to our public company reorganization, partially offset by the 2008 management restructuring charge of $3.1 million that did not recur in 2009 year-to-date.
Net income attributable to Tim Hortons Inc. decreased $17.6 million, or 22.3%, during the third quarter of 2009 as compared to the third quarter of 2008 and $10.2 million, or 4.7%, in the year-to-date period. In the third quarter of 2009, we recorded certain tax-related expenses, including a non-cash U.S. deferred tax valuation allowance, totaling $19.9 million in connection with our public company reorganization. These tax charges, coupled with the professional advisory fees and shareholder-related transaction costs incurred in the quarter of $3.1 million after tax, lowered our net income by $23.1 million and the growth rate by 29.3%. On a year-to-date basis, the higher tax expense and professional advisory fees and shareholder-related transaction costs incurred relating to our public company reorganization decreased net income by $27.1 million. Higher operating income in both the quarter and on a year-to-date basis, as well as lower net interest expense in the third quarter, partially offset the higher tax expense and advisory fees noted above. Diluted earnings per share attributable to Tim Hortons Inc. (EPS) decreased to $0.34 in the third quarter of 2009 from $0.43 in the third quarter of 2008 and $1.13 in the 2009 year-to-date period compared to $1.17 in the 2008 comparable period. EPS was impacted by $0.13 in the third quarter and $0.15 in the 2009 year-to-date period as a result of the impact of the public company
In the first quarter of 2009, we spent $16.7 million to purchase approximately 0.6 million shares of Company common stock as part of our 2009 share repurchase program at an average cost of $29.85 per share. As a result of our Boards decision in May 2009 to approve a transaction to reorganize as a public Canadian company (see below), we decided to defer purchases in the 2009 share repurchase program in the second and third quarters. Now that the public company reorganization is complete, our Board has approved the resumption of our share repurchase program, beginning in the fourth quarter of 2009. We currently expect to spend up to $150 million during the remainder of the program until it terminates on March 1, 2010. Shares will be repurchased through a combination of a 10b5-1, or automatic trading program, and/or through managements discretion, subject to regulatory requirements, and market, cost, and other considerations.
In February 2009, our Board of Directors approved an 11.1% increase in the quarterly dividend to $0.10 per share. The Company declared and paid its March 2009, June 2009 and September 2009 dividends at this new rate. Our Board of Directors declared a quarterly dividend payable on December 15, 2009 to shareholders of record as of December 1, 2009 at the $0.10 rate per share as well. The Companys current dividend policy is to pay a total of 20% to 25% of prior year, normalized annual net income attributable to Tim Hortons Inc. in dividends each year, returning value to shareholders based on the Companys earnings growth. The payment of future dividends, however, remains subject to the discretion of our Board of Directors. As of September 28, 2009, dividends are declared and paid in Canadian dollars to all shareholders with Canadian resident addresses. For U.S. resident stockholders, dividends paid will be converted to U.S. dollars based on prevailing exchange rates at time of conversion by the Clearing and Depository Services Inc. for beneficial shareholders and by the Companys transfer agent for registered shareholders. As a Canadian public company, dividends paid by the Company to Canadian resident shareholders are designated as eligible dividends for Canadian tax purposes. For resident U.S. shareholders, dividends paid by the Company effective after September 28, 2009 are generally subject to Canadian withholding taxes at a rate of 15% of the gross amount of the dividends paid, which may be eligible as a foreign tax credit for U.S. tax purposes, depending on the individual resident shareholders tax situation.
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