Tim Hortons increases stock buyback maximum, funded with borrowed money

OAKVILLE, Ont. – Tim Hortons Inc. (TSX:THI) says it’s going to borrow up to an additional $900 million to fund the repurchase of its shares.

The Canadian restaurant company says it has received regulatory approval to buy back up to 10 per cent of its publicly traded shares, raising a previous spending limit set at $250 million.

Tim Hortons says it’s not certain how much it will actually spend on the revised stock buyback program but says the additional borrowing will preserve its flexibility to invest the business while creating value for its shareholders.

The company also announced that it had a 14.5 per cent increase in second-quarter net income attributable to Tim Hortons and an 11.2 per cent increase in operating income, compared with the same time last year.

Net income attributable to Tim Hortons Inc. was $123.7 million, up from $108.1 million in the second quarter of 2012 — due to an increase in its Canadian operations, which offset a decline in its much smaller U.S. division.

Total revenue for the company was $800.1 million, up 1.9 per cent from $785.6 million. Same-store sales, including corporate and franchised locations, grew 1.5 per cent in Canada and 1.4 per cent in the United States.

Tim’s operating income rose to $176.6 million overall, up $17.7 million from a year before. Its Canadian segment accounted for most of that while it’s U.S. segment accounted for $2.6 million — down $1.5 million from a year earlier.