Tim Hortons Inc. has announced strong underlying operating results for the third quarter ended October 3, 2010. Earnings growth in the third quarter was negatively impacted by an asset impairment charge the Company took pertaining to three markets in the New England region.
Following a comprehensive review, the company has decided to close 36 restaurants, 34 of which are located in the Providence and Hartford markets, in the fourth quarter in order to focus on and reinvest in core growth markets in the Northeast and Midwest U.S. where the brand continues to demonstrate strengthening average unit volumes, cash flows and brand progression.
The Company has decided to deploy approximately $400 million of the $430 million in after-tax cash proceeds from the sale of its joint venture interest in Maidstone Bakeries to repurchase shares through an amended 2010 program, and through a 2011 share repurchase program, subject to receipt of regulatory approval. The Company has also committed the remaining $30 million from the sale with the intent of supporting our key relationship with restaurant owners to help to partially mitigate anticipated rising operating costs.
"We continued to create sales momentum in the third quarter with strong operating performances in both our Canadian and U.S. segments," said Don Schroeder, president and CEO. "However, at the same time, we incurred an asset impairment charge and subsequently made the decision to close all of our underperforming restaurants in two markets in the New England region. We expect this decision to have a positive impact on our U.S. business in terms of our continued business progression and management focus," added Schroeder. "We plan to reinvest a portion of the expected earnings improvement from these closures to increase our brand profile in our U.S. core growth markets where we are building critical mass.”