Tim Hortons Inc. Announces 2009 Fourth Quarter and Year-End Results;
Continued sales momentum in the fourth quarter contributes to achievement of
annual operating income target

    
    (Unaudited. All amounts in Canadian dollars)

                         Financial & Sales Highlights
                         ----------------------------

    -------------------------------------------------------------------------
                                                      2009      2008
                                            %         Full      Full    %
                       Q4 2009   Q4 2008  Change      Year      Year  Change
    -------------------------------------------------------------------------
    Revenues          $  615.3  $  563.7    9.2%  $2,242.1  $2,043.7    9.7%
    Operating
     income(1)(3)     $  139.4  $  108.8   28.1%  $  495.4  $  446.3   11.0%
    Adjusted
     Operating
     Income(2)(3)     $  139.4  $  130.1    7.2%  $  502.7  $  467.6    7.5%
    Effective Tax
     Rate(3)             32.2%     32.6%             37.4%     32.8%
    Net Income        $   91.0  $   69.1   31.6%  $  296.4  $  284.7    4.1%
    Diluted Earnings
     Per Share (EPS)  $   0.51  $   0.38   32.9%  $   1.64  $   1.55    5.8%
    Fully Diluted
     Shares              179.7     181.4  (1.0)%     180.6     183.5  (1.6)%
    -------------------------------------------------------------------------
    ($ in millions, except EPS. Fully diluted shares in millions. All numbers
     rounded.)

    (1) 2008 operating income includes a negative $21.3 million impact from
        an asset impairment and related restaurant closure costs. Full year
        2009 operating income includes a negative $7.3 million impact for
        professional advisory fees and shareholder related costs incurred in
        connection with the public company reorganization.

    (2) 2009 adjusted operating income for the full year excludes the impact
        of costs related to our public company reorganization and 2008
        adjusted operating income excludes the asset impairment and
        restaurant closure costs that did not recur. Adjusted operating
        income is a non-GAAP measure. For information regarding this measure,
        and a reconciliation to U.S. GAAP, please refer to "Disclosure of
        Non-GAAP Financial Measure" and Table 1 in this release.

    (3) Operating Income, Adjusted Operating Income and Effective Tax Rate
        incorporate the adoption of changes to accounting standards relating
        to Noncontrolling interests.

    (4) Includes sales at Franchised and Company-operated locations.  As of
        January 3rd, 2010, 99.6% of our restaurants in Canada and 99.1% of
        our U.S. restaurants were franchised.


    -------------------------------------------------------------------------
    Same-Store Sales(4)               Q4 2009                 2009 Full Year
    -------------------------------------------------------------------------
    Canada                               3.4%                           2.9%
    U.S.                                 2.1%                           3.2%
    -------------------------------------------------------------------------


    Highlights
    ----------

    -   Strong fourth quarter sales performance in both Canada and the United
        States, with a 3.4% same-store sales increase in Canada and 2.1%
        growth in the U.S.
    -   U.S. segment achieves $4.8 million operating income for full-year
        compared to breakeven target
    -   The Company's Board has approved an increase in the target dividend
        payout range to 30% to 35% of prior year, normalized annual net
        earnings, and approved a 30% increase in the quarterly dividend to
        $0.13 per share
    -   New $200 million share repurchase program announced
    

OAKVILLE, ON, Feb. 25 /CNW/ - Tim Hortons Inc. (TSX: THI, NYSE: THI) today announced its results for the fourth quarter and full year ended January 3rd, 2010.

"Our focus on being relevant to our customers and responding to their needs continues to position Tim Hortons among the leaders in the North American restaurant sector. Our record revenue and earnings performance in 2009 once again demonstrated the resiliency of our brand in difficult economic circumstances and we were pleased with the ability of our system to continue to successfully grow in challenging times," said Don Schroeder, president and CEO.

Consolidated Results

All percentage increases and decreases represent year-over-year changes for the fourth quarter of 2009 compared to the fourth quarter of 2008, unless otherwise noted. Fourth quarter and full- year results in 2009 include an extra week of operations which had an approximate impact of 6% to 8% on revenues, costs and earnings in the quarter and approximately 1% to 2% for the full year.

Fourth quarter systemwide sales(5) grew 13.4% on a constant currency basis, benefiting from the extra week of sales over the comparable period, and from same-store sales growth and restaurant development. Total revenues were $615.3 million, an increase of 9.2% compared to $563.7 million last year. Revenues benefited from higher sales, consisting primarily of distribution sales, and from higher rents and royalties. These factors were partially offset by lower franchise fee revenues, due primarily to timing of franchise sales, and from lower sales from fewer company-operated restaurants.

Operating income in the fourth quarter rose 28.1% to $139.4 million compared to $108.8 million in the prior year comparable period. Operating income in 2008 included a negative $21.3 million impact from an asset impairment charge and related restaurant closure costs. Operating income growth benefited from higher systemwide sales, a gain on the sale of a property and increased earnings contributions from our U.S. segment. Absent the 2008 impairment and closure costs and the approximate 6% growth impact of the extra week of operations, operating income was up slightly in the fourth quarter. Operating income growth was negatively impacted in the fourth quarter by the timing of franchise sales, resulting in lower franchise fees, and by lower distribution income due to certain gains in the comparable quarter of 2008 that did not recur.

Net income in the fourth quarter increased to $91.0 million, up 31.6% compared to $69.1 million last year. Diluted earnings per share (EPS) was $0.51, an increase of 32.9% compared to $0.38 last year. Fourth quarter EPS benefited from 1.0% fewer shares outstanding in the quarter compared to the same period last year due to the Company's share repurchase activities. In 2008 net income and EPS were negatively impacted by $15.4 million in after-tax costs associated with the asset impairment charge and related restaurant closure costs.

On a full-year basis, systemwide sales(5) increased 7.9%. Total revenues increased by 9.7% to $2.24 billion compared to $2.04 billion in 2008. Operating income grew 11.0% to $495.4 million compared to $446.3 million last year, including approximately 1.5% benefit from the extra week of operations. Adjusted operating income(2), excluding the impact of costs related to our public company reorganization and 2008 asset impairment charge and related restaurant closure costs, grew 7.5% to $502.7 million in 2009. Net income in 2009 was $296.4 million, an increase of 4.1% compared to $284.7 million last year. Earnings per share for the full year in 2009 was $1.64 compared to $1.55 last year. The effective tax rate for the full year was 37.4% versus 32.8% last year, reflecting previously disclosed impacts from the public company reorganization.

Segmented Performance Commentary

Both operating segments enjoyed strong financial and sales performance in the quarter, benefiting from the strength of our brand position, marketing, promotion and menu activities.

    
    Canada
    ------
    

Same-store sales grew 3.4% in Canada in the fourth quarter. Canadian same-store sales accelerated in each consecutive month of the quarter, and experienced continued momentum heading into the first quarter. Promotional programs aimed to reinforce our value to customers largely offset the benefit of pricing in place in the system during the fourth quarter, but drove transaction growth, contributing to the positive sales performance. A total of 60 restaurants were opened in the fourth quarter, including 15 non-standard locations.

Canadian segment operating income was $147.0 million in the fourth quarter, a 7.2% increase from $137.1 million last year. Operating income benefited from systemwide sales growth including the extra week of operations. Operating income was impacted by lower franchise fee revenues due primarily to timing of resales and renovations, by lower equity income, and by lower distribution income due to certain gains in the comparable period of 2008.

On a full-year basis, same-store sales in Canada increased 2.9%, slightly below our targeted range of 3% to 5%. A total of 131 restaurants were opened in 2009, within our targeted range of 120 to 140 locations. Operating income on a full-year basis was $534.1 million, an increase of 5.4% compared to 2008.

    
    United States
    -------------
    

The U.S. segment increased same-store sales by 2.1% in the fourth quarter, outpacing the majority of restaurant companies that have reported U.S. same-store sales for this time period. Cold Stone Creamery(C) co-branded locations continued to contribute significantly to same-store sales growth this quarter. Promotional, marketing and menu initiatives also helped our sales performance, which has carried into the first quarter. A total of 7 locations were opened in the fourth quarter, including 2 non-standard locations.

U.S. segment operating income increased to $1.2 million, representing the third consecutive quarter of positive earnings contributions. Operating income growth benefited from the previous closure in 2008 of underperforming restaurants, higher systemwide sales, and lower general and administrative costs. These factors were partially offset by lower franchise fees during the quarter.

On a full-year basis, same-store sales growth in the U.S increased 3.2%, surpassing our targeted range of 0% to 2% growth. A total of 45 sites were opened in the U.S. during 2009, compared to our target of 30 to 40 restaurant locations. Full-year operating income increased to $4.8 million in 2009, significantly exceeding our target of break-even segment operating income.

Corporate Developments

    
    Board increases dividend payout range and declares dividend payment of
    ----------------------------------------------------------------------
    $0.13 per share
    ---------------
    

The Board of Directors has approved a change to the Company's long-term targeted dividend payout range, reflecting confidence in our future growth and our strong cash flow position. Effective immediately, our targeted dividend payout range is 30% to 35% of prior year, normalized annual net earnings each year, and we plan to focus initially at the lower end of the range. The previous targeted range was 20% to 25% of prior year, normalized annual net earnings.

Coinciding with this change in 2010, the Board has declared a quarterly dividend of $0.13 per share payable on March 23rd, 2010 to shareholders of record as of March 8th, 2010, representing an increase of 30% from previous dividend. Dividends are declared and paid in Canadian dollars to all shareholders with Canadian resident addresses. For U.S. shareholders, dividends paid will be converted to U.S. dollars based on prevailing exchange rates at the time of conversion by Tim Hortons for registered shareholders and by Clearing and Depository Services Inc. for beneficial shareholders.

    
    New $200 million share repurchase program announced
    ---------------------------------------------------
    

The Board approved the commencement of a new $200 million share repurchase program. The Company expects to complete its current program by March 1, 2010, after which the new plan will begin. Under terms of the new $200 million program, the Company is authorized to purchase up to $200 million in common shares, not to exceed the regulatory maximum of 5% of the outstanding common shares at the time of regulatory approval.

"Our confidence in future growth and proven capacity to generate strong free cash flow positions us well to continue our number one priority of funding our business growth investment needs while still returning value to shareholders in the form of increased dividends and a new share repurchase program," said Cynthia Devine, chief financial officer.

Consistent with the previous program, shares will be repurchased through a combination of a 10b5-1, or automatic trading plan, and in accordance with management's discretion considering regulatory requirements, and market, cost and other considerations. Repurchases will be made by Tim Hortons on either the Toronto Stock Exchange or the New York Stock Exchange. There can be no assurance as to the precise number of shares that will be repurchased under the share repurchase program, or the aggregate dollar amount of the shares purchased. Tim Hortons may discontinue purchases at any time, subject to compliance with applicable regulatory requirements. Shares purchased pursuant to the share repurchase program will be cancelled.

    
    Investor Conference and 2010 Outlook
    ------------------------------------
    

Tim Hortons will broadcast our investor conference on March 5th, 2010 over the internet starting at 8:30 a.m. (Eastern Time). The live webcast will be available at www.timhortons-invest.com under the Events and Presentations tab. We plan to announce our 2010 outlook at the investor conference in parallel with our overall strategic plan and growth initiatives.

    
    Annual Meeting of Shareholders
    ------------------------------
    

The Board of Directors has set a record date of March 23rd, 2010 for the annual meeting of shareholders. The meeting will be held on Friday, May 14th at 10:30a.m. Eastern Time at the School of Hospitality Management, Ryerson University, 55 Dundas Street West, 7th Floor Auditorium in Toronto, Ontario.

Disclosure on Non-GAAP Financial Measure

Adjusted operating income is a non-GAAP measure, which does not have a standardized meaning prescribed by U.S. GAAP, and may not be comparable to similar measures presented by other publicly-traded companies. Therefore, adjusted operating income should not be construed as an alternative to other financial measures determined in accordance with U.S. GAAP. Presentation of this non-GAAP measure is made with operating income, the most directly comparable U.S. GAAP measure. Management believes this pro forma adjusted information is important for comparison purposes to prior periods and for purposes of evaluating the Company's operating earnings performance compared to our target for 2009, which did not include the impact of the excluded items. The Company evaluates its business performance and trends excluding amounts related to such items. Therefore, this measure provides a more consistent view of management's perspectives on underlying performance and is more relevant for comparison purposes between periods than the closest equivalent U.S. GAAP measure.

    
    Table 1 Pro forma: Reconciliation of adjusted operating income to U.S.
    GAAP

    -------------------------------------------------------------------------
                                                      Full      Full
                                            %         Year      Year    %
                       Q4 2009   Q4 2008  Change      2009      2008  Change
    -------------------------------------------------------------------------
    Reported
     Operating
     Income*         $ 139.4   $ 108.8   28.1%   $ 495.4   $ 446.3   11.0%
    Add: Public
     company
     reorganization
     costs                   -                         7.3               N/M
    Add: Asset
     impairment
     and related
     closure costs           -     (21.3)    N/M         -      21.3     N/M
                       ------------------------------------------------------
    Adjusted
     Operating
     Income*         $ 139.4   $ 130.1    7.2%   $ 502.7   $ 467.6    7.5%
    -------------------------------------------------------------------------
    ($ in millions, all numbers rounded.) N/M - Not Meaningful

    * Operating Income and Adjusted Operating Income incorporate adoption
        of SFAS 160 - Noncontrolling Interests in Consolidated Financial
        Statements.
    

Tim Hortons conference call today at 10:30 a.m. (ET) Thursday, February 25th, 2010

Tim Hortons will host a conference call today to discuss the fourth quarter and year end results, scheduled to begin at 10:30 a.m. (ET). The dial-in number is (416) 641-6712 or 1(800) 354-6885. No access code is required. A simultaneous web cast will be available at www.timhortons-invest.com. A presentation supporting the call will be available at this web site under the Events and Presentations section. The call will be archived at this site for a period of one year and will also be available under the Events and Presentations section. A replay of the call will be available for a period of one week and can be accessed at (416) 626-4100 or 1 (800) 558-5253. The call replay reservation number is 21458576.

Safe Harbor Statement

Certain information in this news release, particularly information regarding future economic performance, finances, and plans, expectations and objectives of management, constitute 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 2008 Annual Report on Form 10-K, filed February 26, 2009, and our Form 10-Q filed on November 5th, 2009, 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 news release, which speak only 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 a material increase in competition within the quick service restaurant segment of the food service industry; the absence of an adverse event or condition that damages our strong brand position and reputation; continuing positive working relationships with the majority of the Company's franchisees; there being no significant change in the Company's ability to comply with current or future regulatory requirements; the absence of any material adverse effects arising as a result of litigation; 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.

(5) Total systemwide sales growth includes restaurant level sales at both

Company and Franchise restaurants. Approximately 99.5% of our

consolidated system is franchised as at January 3rd, 2010. 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 fourth quarter of 2009, systemwide sales growth on a constant

currency basis was up 13.4% compared to the fourth quarter of 2008.

Systemwide sales are important to understanding our business

performance as they impact our franchise royalties and rental income,

as well as our distribution income. Changes in systemwide sales are

driven by changes in average same-store sales and changes in the

number of systemwide restaurants, and in the fourth quarter of 2009,

by the extra week of operations.

Tim Hortons Inc. Overview

Tim Hortons is the fourth largest publicly-traded restaurant chain in North America based on market capitalization, and the largest in Canada. Operating in the quick service segment of the restaurant industry, Tim Hortons appeals to a broad range of consumer tastes, with a menu that includes premium coffee, flavored cappuccinos, specialty teas, home-style soups, fresh sandwiches, wraps, hot breakfast sandwiches and fresh baked goods, including our trademark donuts. As of January 3rd, 2010, Tim Hortons had 3,578 systemwide restaurants, including 3,015 in Canada and 563 in the United States. More information about the Company is available at www.timhortons.com.

    
                      TIM HORTONS INC. AND SUBSIDIARIES
               CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
    (In thousands of Canadian dollars, except share and per share data)

                                 (Unaudited)

                                Fourth quarter ended
                                 January    December
                                 3, 2010    28, 2008    $ Change    % Change
                               ----------  ----------  ----------  ----------

    REVENUES
    Sales                       $409,423    $372,055     $37,368       10.0%
    Franchise revenues:
      Rents and royalties        179,177     157,230      21,947       14.0%
      Franchise fees              26,714      34,404      -7,690      (22.4%)
                               ----------  ----------  ----------  ----------
                                 205,891     191,634      14,257        7.4%
                               ----------  ----------  ----------  ----------
    TOTAL REVENUES               615,314     563,689      51,625        9.2%
                               ----------  ----------  ----------  ----------

    COSTS AND EXPENSES
    Cost of sales                362,357     322,558      39,799       12.3%
    Operating expenses            63,205      58,378       4,827        8.3%
    Franchise fee costs           25,756      29,458      -3,702      (12.6%)
    General and administrative
     expenses                     37,206      33,850       3,356        9.9%
    Equity (income)               -9,999     -10,490         491       (4.7%)
    Asset impairment and
     related closure costs             -      21,266     -21,266         N/M
    Other (income), net           -2,644        -174      -2,470         N/M
                               ----------  ----------  ----------  ----------
    TOTAL COSTS AND EXPENSES,
     NET                         475,881     454,846      21,035        4.6%
                               ----------  ----------  ----------  ----------

    OPERATING INCOME             139,433     108,843      30,590       28.1%

    Interest (expense)            -5,603      -5,950         347       (5.8%)
    Interest income                  894         906         -12       (1.3%)
                               ----------  ----------  ----------  ----------

    INCOME BEFORE INCOME TAXES   134,724     103,799      30,925       29.8%

    INCOME TAXES                  43,345      33,890       9,455       27.9%
                               ----------  ----------  ----------  ----------

    Net Income                    91,379      69,909      21,470       30.7%
    Net income attributable to
     noncontrolling interests        390         782        -392      (50.1%)
                               ----------  ----------  ----------  ----------

    NET INCOME ATTRIBUTABLE TO
     TIM HORTONS INC.            $90,989     $69,127     $21,862       31.6%
                               ----------  ----------  ----------  ----------
                               ----------  ----------  ----------  ----------

    Basic earnings per common
     share attributable to Tim
     Hortons Inc.                  $0.51       $0.38       $0.13       32.9%
                               ----------  ----------  ----------  ----------
                               ----------  ----------  ----------  ----------

    Diluted earnings per common
     share attributable to Tim
     Hortons Inc.                  $0.51       $0.38       $0.13       32.9%
                               ----------  ----------  ----------  ----------
                               ----------  ----------  ----------  ----------

    Weighted average number of
     common shares outstanding -
     Basic (in thousands)        179,570     181,261      -1,692       (0.9%)
                               ----------  ----------  ----------  ----------
                               ----------  ----------  ----------  ----------

    Weighted average number of
     common shares outstanding
     - Diluted (in thousands)    179,713     181,443      -1,730       (1.0%)
                               ----------  ----------  ----------  ----------
                               ----------  ----------  ----------  ----------

    Dividend per common share      $0.10       $0.09       $0.01
                               ----------  ----------  ----------
                               ----------  ----------  ----------

    N/M - not meaningful
    (all numbers rounded)



                      TIM HORTONS INC. AND SUBSIDIARIES
               CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
    (In thousands of Canadian dollars, except share and per share data)

                                 (Unaudited)

                                     Year ended
                                 January    December
                                 3, 2010    28, 2008    $ Change    % Change
                              ----------- ----------- ----------- -----------
    REVENUES
    Sales                     $1,494,196  $1,348,015    $146,181       10.8%
    Franchise revenues:
      Rents and royalties        657,909     601,870      56,039        9.3%
      Franchise fees              90,033      93,808      -3,775       (4.0%)
                              ----------- ----------- ----------- -----------
                                 747,942     695,678      52,264        7.5%
                              ----------- ----------- ----------- -----------
    TOTAL REVENUES             2,242,138   2,043,693     198,445        9.7%
                              ----------- ----------- ----------- -----------

    COSTS AND EXPENSES
    Cost of sales              1,318,576   1,180,998     137,578       11.6%
    Operating expenses           238,791     216,605      22,186       10.2%
    Franchise fee costs           86,903      87,486        -583       (0.7%)
    General and
     administrative expenses     141,739     130,846      10,893        8.3%
    Equity (income)              -35,963     -37,282       1,319       (3.5%)
    Asset impairment and
     related closure costs             -      21,266     -21,266         N/M
    Other (income), net           -3,319      -2,564        -755         N/M
                              ----------- ----------- ----------- -----------
    TOTAL COSTS AND
     EXPENSES, NET             1,746,727   1,597,355     149,372        9.4%
                              ----------- ----------- ----------- -----------

    OPERATING INCOME             495,411     446,338      49,073       11.0%

    Interest (expense)           -21,220     -24,558       3,338      (13.6%)
    Interest income                1,950       4,926      -2,976         N/M
                              ----------- ----------- ----------- -----------

    INCOME BEFORE INCOME
     TAXES                       476,141     426,706      49,435       11.6%

    INCOME TAXES                 178,263     139,812      38,451       27.5%
                              ----------- ----------- ----------- -----------

    Net Income                   297,878     286,894      10,984        3.8%
    Net income attributable
     to noncontrolling
     interests                     1,511       2,216        -705      (31.8%)
                              ----------- ----------- ----------- -----------

    NET INCOME ATTRIBUTABLE
     TO TIM HORTONS INC.        $296,367    $284,678     $11,689        4.1%
                              ----------- ----------- ----------- -----------
                              ----------- ----------- ----------- -----------

    Basic earnings per common
     share attributable to
     Tim Hortons Inc.              $1.64       $1.55       $0.09        5.7%
                              ----------- ----------- ----------- -----------
                              ----------- ----------- ----------- -----------

    Diluted earnings per
     common share attributable
     to Tim Hortons Inc.           $1.64       $1.55       $0.09        5.8%
                              ----------- ----------- ----------- -----------
                              ----------- ----------- ----------- -----------

    Weighted average number of
     common shares outstanding
     - Basic (in thousands)      180,477     183,298      -2,821       (1.5%)
                              ----------- ----------- ----------- -----------
                              ----------- ----------- ----------- -----------

    Weighted average number of
     common shares outstanding
     - Diluted (in thousands)    180,609     183,492      -2,884       (1.6%)
                              ----------- ----------- ----------- -----------
                              ----------- ----------- ----------- -----------

    Dividend per common share      $0.40       $0.36       $0.04
                              ----------- ----------- -----------
                              ----------- ----------- -----------

    N/M - not meaningful
       (all numbers rounded)



                      TIM HORTONS INC. AND SUBSIDIARIES
                     CONDENSED CONSOLIDATED BALANCE SHEET
                     (In thousands of Canadian dollars)

                                                             As at
                                                   --------------------------
                                                    January 3,   December 28,
                                                       2010           2008
                                                   ------------  ------------
                                                          (Unaudited)

    ASSETS

    Current assets
      Cash and cash equivalents                      $103,267       $101,636
      Restricted cash and cash equivalents             60,629         62,329
      Restricted investments                           20,186              -
      Accounts receivable, net                        170,757        159,505
      Notes receivable, net                            38,609         22,615
      Deferred income taxes                             3,388         19,760
      Inventories and other, net                       68,289         71,505
      Advertising fund restricted assets               26,681         27,684
                                                   ------------  ------------
    Total current assets                              491,806        465,034

    Property and equipment, net                     1,340,757      1,332,852

    Notes receivable, net                               9,782         17,645

    Deferred income taxes                               8,919         29,285

    Intangible assets, net                              6,034          2,606

    Equity investments                                120,939        132,364

    Other assets                                       18,416         12,841
                                                   ------------  ------------
    Total assets                                   $1,996,653     $1,992,627
                                                   ------------  ------------
                                                   ------------  ------------



                      TIM HORTONS INC. AND SUBSIDIARIES
                    CONDENSED CONSOLIDATED BALANCE SHEET
                     (In thousands of Canadian dollars)

                                                             As at
                                                   --------------------------
                                                    January 3,   December 28,
                                                       2010           2008
                                                   ------------  ------------
                                                          (Unaudited)

    LIABILITIES AND EQUITY

    Current liabilities
      Accounts payable                               $129,563       $157,210
      Accrued liabilities:
        Salaries and wages                             20,324         18,492
        Taxes                                          25,220         25,605
        Other                                         112,173        110,518
      Deferred taxes                                      376              -
      Advertising fund restricted liabilities          43,944         47,544
      Current portion of long-term obligations          7,642          6,691
                                                   ------------  ------------
    Total current liabilities                         339,242        366,060
                                                   ------------  ------------

    Long-term obligations
      Term debt                                       335,995        332,506
      Advertising fund restricted debt                    415          6,929
      Capital leases                                   67,156         59,052
      Deferred income taxes                             4,603         13,604
      Other long-term liabilities                      78,304         72,467
                                                   ------------  ------------
    Total long-term obligations                       486,473        484,558
                                                   ------------  ------------

    Equity
      Equity of Tim Hortons Inc.
      Common shares
        Authorized: unlimited shares
        Issued: 177,318,614 shares                    502,872              -
        Common stock, (US$0.001 par value per
         share)
        Authorized: nil and 1,000,000,000
         shares, respectively
        Issued: nil and 193,302,977 shares,
         respectively                                       -            289
        Capital in excess of par value                      -        929,102
        Treasury stock, at cost: nil and
         11,754,201 shares, respectively                    -       (399,314)
        Common stock held in trust, at cost:
         278,500 and 358,186 shares,
         respectively                                  (9,437)       (12,287)
        Retained earnings                             796,235        677,550
        Accumulated other comprehensive loss         (120,626)       (54,936)
                                                   ------------  ------------
      Total equity of Tim Hortons Inc.              1,169,044      1,140,404
      Noncontrolling interests                          1,894          1,605
                                                   ------------  ------------
    Total equity                                    1,170,938      1,142,009
                                                   ------------  ------------
    Total liabilities and equity                   $1,996,653     $1,992,627
                                                   ------------  ------------
                                                   ------------  ------------



                      TIM HORTONS INC. AND SUBSIDIARIES
               CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                     (In thousands of Canadian dollars)

                                                          Year ended
                                                    January 3,   December 28,
                                                         2010           2008
                                                   ------------  ------------
                                                          (Unaudited)

    CASH FLOWS PROVIDED FROM (USED IN) OPERATING
     ACTIVITIES
    Net income                                       $297,878       $286,894
    Net income attributable to noncontrolling
     interests                                         (1,511)        (2,216)
    Adjustments to reconcile net income to net
     cash provided by operating activities
      Depreciation and amortization                   101,447         91,278
      Asset impairment and related closure costs            -         21,266
      Stock-based compensation expense                  8,869          9,630
      Equity income, net of cash dividends             11,397          4,519
      Deferred income taxes                            25,342        (13,714)
      Changes in operating assets and liabilities
        Restricted cash and cash equivalents              789        (23,820)
        Accounts and notes receivable                 (13,692)       (51,235)
        Inventories and other                           1,012         (3,708)
        Accounts payable and accrued liabilities      (19,726)        22,723
      Other, net                                        3,846         14,398

                                                   ------------  ------------
    Net cash provided from operating activities       415,651        356,015
                                                   ------------  ------------

    CASH FLOWS (USED IN) PROVIDED FROM INVESTING
     ACTIVITIES
    Capital expenditures                             (157,971)      (174,247)
    Purchase of restricted investments                (20,136)       (11,881)
    Proceeds from sale of restricted investments            -         12,000
    Principal payments on notes receivable              2,821          3,939
    Other investing activities                        (22,540)       (13,418)

                                                   ------------  ------------
    Net cash used in investing activities            (197,826)      (183,607)
                                                   ------------  ------------

    CASH FLOWS (USED IN) PROVIDED FROM FINANCING
     ACTIVITIES
    Purchase of common shares                        (113,401)             -
    Purchase of treasury stock                        (16,701)      (165,258)
    Dividend payments                                 (72,506)       (66,086)
    Purchase of common shares/stock held in trust        (713)        (3,842)
    Purchase of common shares/stock for settlement
     of restriced stock units                            (477)          (226)
    Proceeds from issuance of debt, net of
     issuance costs                                     3,507          3,796
    Principal payments on other long-term debt
     obligations                                       (6,582)        (7,376)

                                                   ------------  ------------
    Net cash used in financing activities            (206,873)      (238,992)
                                                   ------------  ------------

    Effect of exchange rate changes on cash            (9,321)        10,618
                                                   ------------  ------------

    Increase (decrease) in cash and cash
     equivalents                                        1,631        (55,966)

    Cash and cash equivalents at beginning of year    101,636        157,602

                                                   ------------  ------------
    Cash and cash equivalents at end of year         $103,267       $101,636
                                                   ------------  ------------
                                                   ------------  ------------


                      TIM HORTONS INC. AND SUBSIDIARIES
                              SEGMENT REPORTING
                     (In thousands of Canadian dollars)

                                 (Unaudited)

                                            Fourth Quarter ended
                               ----------------------------------------------
                                 January        % of    December       % of
                                 3, 2010       Total    28, 2008       Total
                               ----------  ----------  ----------  ----------
    REVENUES
    Canada                      $539,020       87.6%    $483,887       85.8%
    U.S.                          42,699        6.9%      46,234        8.2%
                               ----------  ----------  ----------  ----------
    Total reportable segments    581,719       94.5%     530,121       94.0%
    Noncontrolling interests -
     Non-owned consolidated
     restaurants                  33,595        5.5%      33,568        6.0%
                               ----------  ----------  ----------  ----------
    Total                       $615,314      100.0%    $563,689      100.0%
                               ----------  ----------  ----------  ----------
                               ----------  ----------  ----------  ----------

    SEGMENT OPERATING INCOME
     (LOSS)
    Canada                      $147,005       99.2%    $137,146      118.4%
    U.S.                           1,184        0.8%     (21,300)    (18.4)%
                               ----------  ----------  ----------  ----------
    Reportable Segment
     Operating Income            148,189      100.0%     115,846      100.0%
                                           ----------              ----------
                                           ----------              ----------
    Noncontrolling interests -
     Non-owned consolidated
     restaurants                     449                     978
    Corporate Charges             (9,205)                 (7,981)
                               ----------              ----------
    Consolidated Operating
     Income                      139,433                 108,843
    Interest, net                 (4,709)                 (5,044)
    Income taxes                 (43,345)                (33,890)
                               ----------              ----------
    Net Income                    91,379                  69,909
    Net Income attributable
     to noncontrolling
     interests                       390                     782
                               ----------              ----------
    Net Income attributable
     to Tim Hortons Inc.         $90,989                 $69,127
                               ----------              ----------
                               ----------              ----------


                                                Year ended
                               ----------------------------------------------
                                 January        % of    December       % of
                                 3, 2010       Total    28, 2008       Total
                               ----------  ----------  ----------  ----------

    REVENUES
    Canada                    $1,944,673       86.7%  $1,764,869       86.4%
    U.S.                         168,216        7.5%     142,874        7.0%
                               ----------  ----------  ----------  ----------
    Total reportable
     segments                  2,112,889       94.2%   1,907,743       93.3%
    Noncontrolling interests
     - Non-owned consolidated
     restaurants                 129,249        5.8%     135,950        6.7%
                               ----------  ----------  ----------  ----------
    Total                     $2,242,138      100.0%  $2,043,693      100.0%
                               ----------  ----------  ----------  ----------
                               ----------  ----------  ----------  ----------

    SEGMENT OPERATING INCOME
     (LOSS)
    Canada                      $534,131       99.1%    $507,006      105.5%
    U.S.                           4,840        0.9%     (26,488)     (5.5)%
                               ----------  ----------  ----------  ----------
    Reportable Segment
     Operating Income            538,971      100.0%     480,518      100.0%
                                           ----------              ----------
                                           ----------              ----------
    Noncontrolling interests
     - Non-owned consolidated
     restaurants                   1,732                   2,772
    Corporate Charges            (45,292)                (36,952)
                               ----------              ----------
    Consolidated Operating
     Income                      495,411                 446,338
    Interest, net                (19,270)                (19,632)
    Income taxes                (178,263)               (139,812)
                               ----------              ----------
    Net Income                   297,878                 286,894
    Net Income attributable
     to noncontrolling
     interests                     1,511                   2,216
                               ----------              ----------
    Net Income attributable
     to Tim Hortons Inc.        $296,367                $284,678
                               ----------              ----------
                               ----------              ----------


                                Fourth Quarter ended
                               ----------------------
                                 January    December
                                 3, 2010    28, 2008    $ Change    % Change
                               ----------  ----------  ----------  ----------

    Sales is comprised of:
    Distribution sales          $370,209    $331,770     $38,439       11.6%
    Company-operated
     restaurant sales              5,619       6,717      (1,098)    (16.3)%
    Sales from non-owned
     consolidated restaurants     33,595      33,568          27        0.1%
                               ----------  ----------  ----------  ----------
                                $409,423    $372,055     $37,368       10.0%
                               ----------  ----------  ----------  ----------
                               ----------  ----------  ----------  ----------


                                     Year ended
                               ----------------------
                                 January    December
                                 3, 2010    28, 2008    $ Change    % Change
                               ----------  ----------  ----------  ----------

    Sales is comprised of:
    Distribution sales        $1,340,711  $1,173,738    $166,973       14.2%
    Company-operated
     restaurant sales             24,236      38,327     (14,091)    (36.8)%
    Sales from non-owned
     consolidated restaurants    129,249     135,950      (6,701)     (4.9)%
                               ----------  ----------  ----------  ----------
                              $1,494,196  $1,348,015    $146,181       10.8%
                               ----------  ----------  ----------  ----------
                               ----------  ----------  ----------  ----------



                      TIM HORTONS INC. AND SUBSIDIARIES
                         SYSTEMWIDE RESTAURANT COUNT

                                                                   Increase/
                                             As of        As of    (Decrease)
                                           January     December         From
                                           3, 2010     28, 2008     Year End
                                        -------------------------------------
    Tim Hortons
    -----------

    Canada
      Company-operated                          13           15           (2)
      Franchised                             3,002        2,902          100
                                        -------------------------------------
    Total                                    3,015        2,917           98

    % Franchised                             99.6%        99.5%

    U.S.
      Company-operated                           5           19          (14)
      Franchised                               558          501           57
                                        -------------------------------------
    Total                                      563          520           43

    % Franchised                             99.1%        96.3%

    Total Tim Hortons
      Company-operated                          18           34          (16)
      Franchised                             3,560        3,403          157
                                        -------------------------------------
    Total                                    3,578        3,437          141
                                        -------------------------------------
                                        -------------------------------------

    % Franchised                             99.5%        99.0%



                      TIM HORTONS INC. AND SUBSIDIARIES
                         Income Statement Definitions


    Sales                 Primarily includes sales of products, supplies and
                          restaurant equipment (except for initial equipment
                          packages sold to franchisees as part of the
                          establishment of their restaurant's business - see
                          "Franchise Fees") that are shipped directly from
                          our warehouses or by third party distributors to
                          the restaurants, which we include in distribution
                          sales. Sales include canned coffee sales through
                          the grocery channel. Sales also include sales from
                          Company-operated restaurants and sales from certain
                          non-owned restaurants that are consolidated in
                          accordance with ASC 810 (formerly FIN 46R).

    Rents and Royalties   Includes franchisee royalties and rental revenues.

    Franchise Fees        Includes the sales revenue from initial equipment
                          packages, as well as fees for various costs and
                          expenses related to establishing a franchisee's
                          business.

    Cost of Sales         Includes costs associated with our distribution
                          business, including cost of goods, direct labour
                          and depreciation, as well as the cost of goods
                          delivered by third-party distributors to the
                          restaurants, and for canned coffee sold through
                          grocery stores. Cost of sales also includes food,
                          paper and labour costs for Company-operated
                          restaurants and certain non-owned restaurants that
                          are consolidated in accordance with ASC 810
                          (formerly FIN 46R).

    Operating Expenses    Includes rent expense related to properties leased
                          to franchisees and other property-related costs
                          (including depreciation).

    Franchise fee costs   Includes costs of equipment sold to franchisees as
                          part of the commencement of their restaurant
                          business, as well as training and other costs
                          necessary to ensure a successful restaurant
                          opening.

    General and           Includes costs that cannot be directly related to
     Administrative       generating revenue, including expenses associated
                          with our corporate and administrative functions,
                          and depreciation of office equipment, the majority
                          of our information technology systems, and head
                          office real estate.

    Equity Income         Includes income from equity investments in joint
                          ventures and other minority investments over which
                          we exercise significant influence. Equity income
                          from these investments is considered to be an
                          integrated part of our business operations and is,
                          therefore, included in operating income. Income
                          amounts are shown as reductions to total costs and
                          expenses.

    Asset Impairment and  Represents non-cash charges relating to the
     related closure      impairment of long-lived assets. It also includes
     costs                costs related to restaurant closures made outside
                          of the normal course of operations as part of the
                          southern New Engalnd restaurant closures in the
                          fourth quarter of 2008.

    Other (Income), net   Includes expenses (income) that are not directly
                          derived from the Company's primary businesses.
                          Items include foreign currency adjustments, gains
                          and losses on asset sales, and other asset write-
                          offs.

    Noncontrolling        Represents certain non-owned restaurants that the
     interests            Company is required to consolidate under ASC 810
                          (formerly FIN 46R).

    Comprehensive Income  Represents the change in our net assets during the
                          reporting period from transactions and other events
                          and circumstances from non-owner sources. It
                          includes net income and other comprehensive income
                          such as foreign currency translation adjustments
                          and the impact of cash flow hedges.
    

SOURCE Tim Hortons

For further information: For further information: Investors: Scott Bonikowsky, (905) 339-6186 or investor_relations@timhortons.com; Media: David Morelli, (905) 339-6277 or morelli_david@timhortons.com


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