Tim Hortons Q3 Results Top Estimates

(RTTNews) - Canadian quick service restaurants operator Tim Hortons, Inc. (THI, THI.TO), which is being acquired by Burger King Worldwide, Inc. (BKW), reported Wednesday a profit for the third quarter that declined 14 percent from last year, reflecting higher interest expense. Both adjusted earnings per share and quarterly revenues topped analysts' expectations.

"We have strong momentum in our business, supported by early stage execution of our strategic plan. We are pleased with our ongoing growth and evolution which we believe is positioning our brand for long-term success," President and CEO Marc Caira said in a statement.

Oakville, Canada-based Tim Hortons reported net income of C$98.13 million or C$0.74 per share for the third quarter, lower than C$113.86 million or C$0.75 per share in the year-ago quarter.

Results for the latest quarter include C$0.21 per share of costs related to the transaction with Burger King, an affiliate of 3G Capital.

Excluding items, adjusted net income for the quarter was C$0.95 per share, compared to last year's C$0.76 per share.

On average, 14 analysts polled by Thomson Reuters expected the company to report earnings of C$0.89 per share for the quarter. Analysts' estimates typically exclude special items.

Revenues for the quarter increased 10.2 percent to C$909.16 million from C$825.35 million in the same quarter last year, and topped eight Wall Street analysts' consensus estimate of C$883.85 million.

Sales for the quarter also grew 10.2 percent to C$634.79 million from last year, and franchise revenues rose 9.9 percent to C$274.37 million from the year-ago quarter.

Systemwide sales growth was primary due to a 12.8 percent increase in distribution sales and growth of 8.6 percent in rents and royalties revenue.

Franchise fee revenues grew by 17.4% due to higher levels of restaurant development and increased renovations in Canada, which also resulted in higher associated franchise fee costs.

Revenues in Canada grew to C$747.69 million from C$676.01 million, and U.S. revenues increased to C$60.10 million from C$47.02 million last year.

The company said both of its Canadian and U.S. segments had strong same-store sales growth during the quarter, driven by gains in average cheque. Canadian same-store sales grew 3.5 percent, and U.S. same-store sales increased 6.8 percent.

Total costs and expenses grew 12.8 percent to C$740.35 million from C$656.53 million a year ago. Interest expense fro the quarter was C$18.52 million, higher than C$9.41 million last year. The company also declared a near 31 percent increase in quarterly dividend to C$0.32 per share, payable on December 5 to shareholders of record as of the close of business on November 20, 2014.

"With our strategic transaction announced in August, we can build on our momentum and have the opportunity to participate in the creation of a global powerhouse in the quick service restaurant sector. We expect Tim Hortons to significantly expand its reach as a strong, independent brand within the new company," Schroeder added.

Burger King in late August agreed to acquire Tim Hortons in a cash and stock deal reportedly valued at about $11.4 billion to create a combined entity that will be publicly-listed and headquartered in Canada. The closing of the deal is currently anticipated to occur in late 2014 or early 2015.

In Wednesday's regular trading session, THI is currently trading at $81.08, up $0.51 or 0.63% on a volume of 64,063 shares. THI.TO is currently trading on the TSX at C$92.55, up C$0.71 or 0.77% on a volume of 26,096 shares.