Tim Hortons Inc. Announces 2009 Second Quarter Results



    
    Positive sales and earnings growth despite continued challenging economic
    conditions

    (All amounts in Canadian dollars)

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

    -------------------------------------------------------------------------
    Second Quarter Ended                         Q2 2009   Q2 2008  % Change
    -------------------------------------------------------------------------
    Revenues                                    $  556.1  $  510.7      8.9%
    Operating Income(1)                         $  121.9  $  117.6      3.7%
    Effective Tax Rate(1)                          33.2%     33.1%
    Net Income attributable to THI              $   77.8  $   75.0      3.7%
    Diluted Earnings Per Share (EPS)
     attributable to THI                        $   0.43  $   0.41      5.6%
    Fully Diluted Shares                           180.9     184.3    (1.8)%
    -------------------------------------------------------------------------
    ($ in millions, except EPS. Fully diluted shares in millions. All
     numbers rounded.)

    (1) Operating Income and Effective Tax Rate incorporate adoption of SFAS
        No. 160 - Noncontrolling Interests in Condensed Consolidated
        Financial Statements.

    -------------------------------------------------------------------------
    Same-Store Sales(2)                          Q2 2009  2009 YTD   Q2 2008
    -------------------------------------------------------------------------
    Canada                                          1.7%      2.5%      5.7%
    U.S.                                            3.3%      3.3%      3.1%
    -------------------------------------------------------------------------
    (2) Includes sales at Franchised and Company-operated locations. As of
        June 28th, 2009, 99.5% of the Company's restaurants in Canada and
        99.1% of its U.S. restaurants were franchised.

    Highlights
    ----------
    -   Second quarter systemwide sales(3) increased 5.0% on a constant
        currency basis
    -   25 new locations opened in second quarter, 15 in Canada and 10 in the
        U.S.
    -   Annual operating income, excluding proposed public company
        reorganization costs, and same-store sales growth, expected to be in
        line with previously announced 2009 targets
    -   The $2.7 million (slightly more than $0.01 per share) in costs
        associated with the proposed public company reorganization impacted
        operating income in the quarter
    -   Solid improvement in U.S. segment results in second quarter
    -   Board declares quarterly dividend of $0.10 per share
    

    OAKVILLE, ON, Aug. 6 /CNW/ - Tim Hortons Inc. (NYSE:   THI, TSX: THI) today
announced its results for the second quarter ended June 28th, 2009.
    "We overcame anticipated challenges in the second quarter and delivered
positive sales and earnings growth, demonstrating the strength and resilience
of our business," said Don Schroeder, president and CEO. "We were particularly
pleased with growth in transactions in our Canadian business and the
operational and earnings improvement in our U.S. business," added Schroeder.

    Consolidated Results

    Second quarter systemwide sales(3) grew 5.0% on a constant currency
basis, supported by new restaurants open in the system and continued
same-store sales growth both in Canada and the U.S. In the second quarter
total revenues increased 8.9% to $556.1 million compared to $510.7 million in
same period of 2008. Systemwide sales growth drove higher rents, royalties and
distribution revenues. Total revenues also benefited from higher distribution
sales. Foreign exchange translation increased revenues by approximately 1.4%.
Continued progress was made during the quarter in transitioning
Company-operated restaurants to owner-operated restaurants. While this process
provides important longer-term benefits, it tends to offset shorter-term
revenue growth as was the case in the second quarter. Revenue growth was also
impacted by lower revenues from FIN 46R restaurants, and lower franchise fees.
    Sales, consisting primarily of distribution sales, were up 10.8% compared
to the same quarter last year. Consistent with the first quarter, Sales growth
benefited from new products managed through the supply chain including
expansion in the grocery store channel, continued systemwide sales growth, and
higher prices on coffee and other commodities as a result of higher underlying
costs. Sales were positively impacted by approximately 1.4% due to foreign
exchange translation.
    In the second quarter rents and royalties increased 7.3%. This rate of
growth is generally consistent with systemwide sales. Franchise fees decreased
9.3%. The year over year decline in franchise fees was due primarily to fewer
new restaurant openings, lower resales, and fewer renovations, offset in part
by the timing of revenue recognition in our U.S. franchise incentive program.
    Same-store sales increased 1.7% in Canada and 3.3% in the U.S.
Transaction growth and a slight increase in average check, due to minimal
levels of previous price increases remaining in the system, helped overcome a
shift in product mix, the anticipated timing impact of the Easter holiday
reversing, and generally challenging macro economic conditions that continued
to persist during the quarter.
    Positive same-store sales were driven by continued menu and marketing
initiatives that included the launch of Chicken Wrap Snackers immediately
prior to the quarter, and the national introduction of Iced Coffee in the
Canadian market, supported by a free sample day. In addition to product
introductions, Iced Cappuccino, breakfast sandwiches and strawberry bloom
donuts were promoted. In the U.S., the sausage and a biscuit product offering,
first successfully offered in February, was also promoted during the quarter
at an attractive price point.
    Foreign exchange translation increased individual cost structure line
items on average by about 1.7% in the second quarter.
    In the second quarter cost of sales increased by 12.0%. The increase was
due mostly to higher product costs associated with new products managed
through the supply chain, increased costs of underlying commodities, and
systemwide sales growth. Foreign exchange translation contributed
approximately 1.4% to the increase in cost of sales. Lower cost of sales from
Company-operated and FIN 46R restaurants partially offset these factors.
    Operating expenses grew 8.8% in the second quarter. Most of the increase
is attributable to the increase in restaurants in the system compared to the
same period last year, percentage rent increases on variable rents, and
foreign currency translation, which contributed 2.0% of the increased
expenses.
    During the second quarter franchise fee costs were 1.5% lower than the
comparable quarter last year, mostly due to fewer new restaurant openings,
lower resales and fewer renovations, offset by the timing of cost recognition
related to our U.S. franchise incentive program.
    General and administrative expense declined 1.2% compared to the same
period last year, and incorporates spending of approximately $2.7 million on
professional advisory and filing fees associated with the proposed public
company reorganization. Foreign currency translation increased general and
administrative costs by 2.0%. The largest factor for the year-over-year
improvement in general and administrative expenses was management
restructuring costs of approximately $3.1 million incurred in the second
quarter of 2008, which did not recur.
    Second quarter equity income declined 13.1% compared to the same period
last year. In the second quarter of 2008, certain joint ventures benefited
from items that did not recur this quarter. In addition, the decline in equity
income reflects certain underlying commodity cost increases absorbed by our
joint venture bakery and not passed on to franchisees.
    Operating income for the second quarter was $121.9 million, up 3.7% from
$117.6 million in the same period last year. Continued same-store sales
growth, a higher number of restaurants in the system resulting in higher
rents, royalties, and distribution income, and improvement in the operating
performance of the U.S. segment contributed to the increase in operating
income. The fundamentals of our business remained strong, however, the rate of
operating income growth during the quarter was reduced in part by the $2.7
million in professional advisory and filing fees associated with the
previously announced proposed transaction to reorganize as a Canadian public
company, by a decline in franchise fee and equity income, and by lower other
income.
    Net income attributable to Tim Hortons was $77.8 million, an increase of
3.7% compared to $75.0 million last year, in line with operating income
growth. The effective tax rate was relatively flat in the second quarter of
2009, at 33.2% versus 33.1% last year, as was net interest expense.
    Diluted earnings per share attributable to Tim Hortons (EPS) were $0.43,
increasing 5.6% compared to $0.41 in the second quarter of 2008. EPS benefited
from 1.8% fewer shares outstanding in the quarter compared to the same time
last year.

    
    Segmented Performance Commentary

    Canada
    ------
    
    Same-store sales in Canada increased 1.7%, progressively increasing
throughout the quarter, compared to a strong growth rate of 5.7% in the second
quarter of 2008. Active menu initiatives and promotions resulted in
transaction growth in the quarter. Minimal levels of previous price increases
remaining in the system helped offset the impact of product mix shift and
promotions on average check, which increased slightly. As a result, the
Canadian segment overcame general economic weakness and the impact of the
timing reversal of Easter during the quarter, which negatively impacted
same-store sales by approximately 0.4%. A total of 15 restaurants were opened
in Canada during the quarter.
    Canadian segment operating income was $131.0 million, increasing 0.4%
from $130.4 million in the second quarter of 2008. Operating margin in the
Canadian segment was impacted by higher underlying commodity costs, which
reduced our distribution income growth and equity income in our joint venture
bakery, as not all of the increased commodity costs were passed on to our
franchisees. Lower income associated with franchise sales also impacted
operating income.
    By the end of the quarter, six co-branded Cold Stone Creamery(R)
locations had been opened in Ontario, and the Company is expanding with an
additional six sites in other Canadian markets this year.

    
    United States
    -------------
    
    For the second straight quarter, the U.S. segment had robust sales
performance with a 3.3% increase in same-store sales. A strong menu
promotional program and significant benefit from Cold Stone Creamery
co-branded locations more than offset the timing shift of Easter in the
quarter, which negatively impacted same-store sales by approximately 0.7%. By
the end of the second quarter, 39 co-branded Tim Hortons - Cold Stone Creamery
locations had been opened, including one co-branded Cold Stone Creamery site,
experiencing positive consumer trial and sales contributions. The Company
previously announced that it intends to co-brand three existing Cold Stone
Creamery locations in Manhattan. Subsequent to the quarter, the Company also
announced a significant push into New York City, with 12 franchised locations
at key sites such as Penn Station, Times Square and Broadway. A total of 10
restaurants were opened in the U.S. during the quarter.
    The U.S. segment had operating income of $3.1 million in the second
quarter, a $3.3 million profit improvement over the prior year. Several
factors contributed to the improved profitability this quarter, including
systemwide and same-store sales growth, a benefit of $1.2 million from the
2008 restaurant closures and related asset impairment charge, lower general
and administrative expenses, and contributions from vertical integration in
the segment. Relief to Company-operated restaurants converted to
owner-operator restaurants, and to restaurants in developing markets open for
less than twelve months, were the largest offsetting factors to U.S. segment
operating income.
    Foreign currency translation raised both U.S. segment revenues and costs
by approximately 14% during the quarter compared to the second quarter of
2008.
    Internationally, in the Republic of Ireland and the United Kingdom, there
are now 297 licensed locations primarily in the convenience store channel
under the Tim Hortons brand. While not a material contributor to earnings or
revenue at this time, the international business is part of a developing
international strategy and potential platform for future growth.

    
    Corporate Developments & Outlook

    2009 Outlook & Targets
    ----------------------
    
    Based on performance year to date, and Management's plans and outlook for
the remainder of 2009, the Company expects to meet its previously announced
operating income growth target, excluding the impact of $6 million to $7
million in transactional costs associated with the Company's proposed
reorganization as a Canadian corporation. Approximately $4.1 million has been
incurred year to date on this transaction. Absent these costs, the Company's
operating income growth target is 11% to 13%, or 6% to 8% when factoring in
the impact of asset impairment and related restaurant closure costs in the
fourth quarter of 2008.
    The Company also currently expects to meet its same-store sales growth
target of 3% to 5% in Canada, and expects it may exceed its target of 0% to 2%
same-store sales growth and break-even operating income in the U.S.

    
    Board declares dividend payment of $0.10 per share
    --------------------------------------------------
    
    The Board of Directors has declared a quarterly dividend of $0.10 per
share payable on September 1st, 2009 to stockholders of record as of August
18th, 2009. The Company's current dividend policy is to pay a total of 20%-25%
of prior year, normalized annual net earnings in dividends each year,
returning value to stockholders based on the Company's earnings growth.
    Dividends are paid in Canadian dollars to all stockholders with Canadian
resident addresses whose shares are registered with Computershare (the
Company's transfer agent). For all other stockholders, including all
stockholders who hold their shares indirectly (i.e., through their broker) and
regardless of country of residence, the dividend will be converted to U.S.
    dollars on August 25th, 2009 at the daily noon rate established by the
Bank of Canada and paid in U.S. dollars on September 1st, 2009.

    
    Corporate Structure
    -------------------
    
    On June 29, 2009, we announced the filing of a registration statement on
Form S-4 with the U.S. Securities and Exchange Commission (SEC), as amended by
the Form S-4/A filed on July 27, 2009, File No. 333-160286, Central Index Key:
0001467019 ("Form S-4"), for a proposed transaction to reorganize the Company
as a Canadian public company. The proposed reorganization is subject to
various closing conditions, including stockholder approval and the Board of
Directors' right in its sole discretion to defer or abandon the
reorganization. A special meeting of stockholders to vote on the
reorganization is expected to be held during the third quarter of 2009.

    
    Additional Information About the Reorganization and Where to Find It
    --------------------------------------------------------------------
    
    The Company's wholly-owned subsidiary, Tim Hortons Inc. (New THI), has
filed this Form S-4, which includes a proxy statement/prospectus, and other
relevant materials, in connection with the reorganization. The proxy
statement/prospectus will be mailed to the stockholders of the Company once
the registration statement has been declared effective by the SEC. Investors
and security holders of the Company are urged to read the proxy
statement/prospectus and the other relevant materials when they become
available because they will contain important information about the Company,
New THI and the reorganization.
    The registration statement, proxy statement/ prospectus and other
relevant materials and any other documents filed by the Company or New THI
with the SEC, may be obtained free of charge at the SEC's website at
www.sec.gov, at the website maintained by the Canadian Securities
Administrators at www.sedar.com, or on the Tim Hortons investor relations
website at www.timhortons-invest.com. Investors can also receive free copies
of these documents by contacting Tim Hortons Inc., 874 Sinclair Road,
Oakville, Ontario, Canada, L6K 2Y1, Attention: Investor Relations. The Company
and New THI and their respective directors, executive officers and certain
other members of management and employees may be deemed to be participants in
the solicitation of proxies in respect of the proposed reorganization.
Information about the executive officers and directors of the Company and
their ownership of shares of Company common stock is included in the
registration statement filed with the SEC and the documents and information
incorporated by reference therein.

    
    Camp Day
    --------
    
    Close to 14,000 deserving children will attend one of the six Tim Horton
Children's Foundation camps this year, designed to build self-confidence,
self-esteem and leadership skills and provide campers with a positive view of
their true potential. Tim Hortons restaurants across North America donated
proceeds from their entire coffee sales on Camp Day, held June 3rd this year,
and customers donated money, raising $9.4 million (U.S.$8.5 million).

    
    Tim Hortons to host conference call at 11:00 a.m. (EDT) today, August
    6th, 2009
    
    Tim Hortons will host a conference call today to discuss the results,
scheduled to begin at 11:00 a.m. (EDT). The dial-in number is (416) 641-6712
or (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 (800) 558-5253. The call replay reservation number is 21432344.

    Safe Harbor Statement

    Certain information in this news release, particularly information
regarding future economic performance, finances, and plans, expectations and
objectives of management, is forward-looking as contemplated under the Private
Securities Litigation Reform Act of 1995. Various factors including those
described as "risk factors" in the Company's 2008 Annual Report on Form 10-K,
filed February 26, 2009, and those risk factors set forth in our Safe Harbor
Statement, as well as other possible factors not listed or described in the
foregoing, 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. Except as required by federal or provincial securities laws, the
Company undertakes no obligation to publicly release any revisions to the
forward looking statements contained in this release, or to update them to
reflect events or circumstances occurring after the date of this release, or
to reflect the occurrence of unanticipated events, even if new information,
future events or other circumstances have made the forward-looking statements
incorrect or misleading. Please review the Company's Safe Harbor Statement at
www.timhortons.com/en/about/safeharbor.html.

    
    (3) Total systemwide sales growth includes restaurant level sales at both
        Company and Franchise restaurants. Approximately 99.4% of our
        consolidated system is franchised as at June 28th, 2009. 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 second quarter of 2009, systemwide sales growth on a constant
        currency basis was up 5.0% compared to the second 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.
    

    Tim Hortons Inc. Overview

    Tim Hortons is the fourth largest publicly-traded quick service
restaurant chain in North America based on market capitalization, and the
largest in Canada. 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, donuts and fresh baked goods. As of
June 28th, 2009, Tim Hortons had 3,475 systemwide restaurants, including 2,939
in Canada and 536 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)

                              Second quarter ended

                              June 28,     June 29,
                                 2009        2008     $ Change     % Change
                          ------------ ------------ ------------ ------------

    REVENUES
    Sales                    $372,119     $335,873      $36,246        10.8%
    Franchise revenues:
      Rents and royalties     164,679      153,546       11,133         7.3%
      Franchise fees           19,287       21,273       (1,986)       (9.3%)
                          ------------ ------------ ------------ ------------
                              183,966      174,819        9,147         5.2%
                          ------------ ------------ ------------ ------------
    TOTAL REVENUES            556,085      510,692       45,393         8.9%
                          ------------ ------------ ------------ ------------

    COSTS AND EXPENSES
    Cost of sales             328,345      293,101       35,244        12.0%
    Operating expenses         59,427       54,622        4,805         8.8%
    Franchise fee costs        19,615       19,908         (293)       (1.5%)
    General and
     administrative expenses   35,694       36,124         (430)       (1.2%)
    Equity (income)            (8,694)     (10,001)       1,307       (13.1%)
    Other (income), net          (152)        (615)         463          N/M
                          ------------ ------------ ------------ ------------
    TOTAL COSTS AND
     EXPENSES, NET            434,235      393,139       41,096        10.5%
                          ------------ ------------ ------------ ------------

    OPERATING INCOME          121,850      117,553        4,297         3.7%

    Interest (expense)         (5,092)      (5,969)         877       (14.7%)
    Interest income               230        1,073         (843)         N/M
                          ------------ ------------ ------------ ------------

    INCOME BEFORE
     INCOME TAXES             116,988      112,657        4,331         3.8%

    INCOME TAXES               38,784       37,341        1,443         3.9%
                          ------------ ------------ ------------ ------------

    Net Income                 78,204       75,316        2,888         3.8%
    Net income attributable
     to noncontrolling
     interests                    444          342          102        29.8%
                          ------------ ------------ ------------ ------------

    NET INCOME ATTRIBUTABLE
     TO TIM HORTONS INC.      $77,760      $74,974       $2,786         3.7%
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------

    Basic earnings per
     share of common
     stock attributable
     to Tim Hortons Inc.        $0.43        $0.41        $0.02         5.6%
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------

    Diluted earnings per
     share of common
     stock attributable
     to Tim Hortons Inc.        $0.43        $0.41        $0.02         5.6%
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------

    Weighted average number
     of shares of common
     stock - Basic
     (in thousands)           180,731      183,983       (3,252)       (1.8%)
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------

    Weighted average number
     of shares of common
     stock - Diluted
     (in thousands)           180,923      184,258       (3,334)       (1.8%)
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------

    Dividend per share of
     common stock               $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 to date period ended
                              June 28,     June 29,
                                 2009         2008     $ Change     % Change
                          ------------ ------------ ------------ ------------
    REVENUES
    Sales                    $711,738     $642,379      $69,359        10.8%
    Franchise revenues:
      Rents and royalties     311,818      289,426       22,392         7.7%
      Franchise fees           39,714       39,204          510         1.3%
                          ------------ ------------ ------------ ------------
                              351,532      328,630       22,902         7.0%
                          ------------ ------------ ------------ ------------
    TOTAL REVENUES          1,063,270      971,009       92,261         9.5%
                          ------------ ------------ ------------ ------------

    COSTS AND EXPENSES
    Cost of sales             628,296      565,384       62,912        11.1%
    Operating expenses        116,533      104,631       11,902        11.4%
    Franchise fee costs        39,393       38,188        1,205         3.2%
    General and
     administrative
     expenses                  69,170       67,010        2,160         3.2%
    Equity (income)           (16,549)     (17,363)         814        (4.7%)
    Other (income), net          (316)      (1,726)       1,410          N/M
                          ------------ ------------ ------------ ------------
    TOTAL COSTS AND
     EXPENSES, NET            836,527      756,124       80,403        10.6%
                          ------------ ------------ ------------ ------------

    OPERATING INCOME          226,743      214,885       11,858         5.5%

    Interest (expense)        (10,549)     (12,320)       1,771       (14.4%)
    Interest income               784        3,063       (2,279)         N/M
                          ------------ ------------ ------------ ------------

    INCOME BEFORE INCOME
     TAXES                    216,978      205,628       11,350         5.5%

    INCOME TAXES               72,045       67,830        4,215         6.2%
                          ------------ ------------ ------------ ------------

    Net Income                144,933      137,798        7,135         5.2%
    Net income attributable
     to noncontrolling
     interests                    734        1,004         (270)      (26.9%)
                          ------------ ------------ ------------ ------------

    NET INCOME ATTRIBUTABLE
     TO TIM HORTONS INC.     $144,199     $136,794       $7,405         5.4%
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------

    Basic earnings per share
     of common stock
     attributable to
     Tim Hortons Inc.           $0.80        $0.74        $0.06         7.6%
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------

    Diluted earnings per
     share of common stock
     attributable to
     Tim Hortons Inc.           $0.80        $0.74        $0.06         7.7%
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------

    Weighted average number
     of shares of common
     stock - Basic
     (in thousands)           180,975       84,749       (3,774)       (2.0%)
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------

    Weighted average number
     of shares of common
     stock - Diluted
     (in thousands)           181,140      185,003       (3,862)       (2.1%)
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------

    Dividend per share of
     common stock               $0.20        $0.18        $0.02
                          ------------ ------------ ------------
                          ------------ ------------ ------------

    N/M - not meaningful
     (all numbers rounded)



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

                                                              As at
                                                    -------------------------
                                                       June 28,  December 28,
                                                         2009        2008
                                                    ------------ ------------
                                                            (Unaudited)
    ASSETS

    Current assets
      Cash and cash equivalents                        $141,928     $101,636
      Restricted cash and cash equivalents               36,862       62,329
      Accounts receivable, net                          138,569      159,505
      Notes receivable, net                              25,767       22,615
      Deferred income taxes                              17,862       19,760
      Inventories and other, net                         64,066       71,505
      Advertising fund restricted assets                 23,314       27,684
                                                    ------------ ------------
    Total current assets                                448,368      465,034

    Property and equipment, net                       1,324,189    1,332,852

    Notes receivable, net                                16,820       17,645

    Deferred income taxes                                27,857       29,285

    Intangible assets, net                                2,336        2,606

    Equity investments                                  127,862      132,364

    Other assets                                         16,441       12,841
                                                    ------------ ------------
    Total assets                                     $1,963,873   $1,992,627
                                                    ------------ ------------
                                                    ------------ ------------




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

                                                               As at
                                                    -------------------------
                                                       June 28,  December 28,
                                                           2009         2008
                                                    ------------ ------------
                                                            (Unaudited)

    LIABILITIES AND EQUITY

    Current liabilities
      Accounts payable                                 $113,895     $157,210
      Accrued liabilities:
        Salaries and wages                               13,081       18,492
        Taxes                                            24,251       25,605
        Other                                            71,000      110,518
      Advertising fund restricted liabilities            40,174       47,544
      Current portion of long-term obligations            6,965        6,691
                                                    ------------ ------------
    Total current liabilities                           269,366      366,060
                                                    ------------ ------------

    Long-term obligations
      Term debt                                         334,335      332,506
      Advertising fund restricted debt                    3,759        6,929
      Capital leases                                     60,515       59,052
      Deferred income taxes                              16,953       13,604
      Other long-term liabilities                        72,344       72,467
                                                    ------------ ------------
    Total long-term obligations                         487,906      484,558
                                                    ------------ ------------

    Equity
      Equity of Tim Hortons Inc.
        Common stock, (US$0.001 par value per share)
          Authorized:  1,000,000,000 shares
          Issued:  193,302,977 shares                       289          289
        Capital in excess of par value                  927,318      929,102
        Treasury stock, at cost: 12,306,100
         and 11,754,201 shares, respectively           (415,751)    (399,314)
        Common stock held in trust, at cost: 316,892
         and 358,186 shares, respectively               (10,738)     (12,287)
        Retained earnings                               785,496      677,550
        Accumulated other comprehensive loss            (81,067)     (54,936)
                                                    ------------ ------------
        Total equity of Tim Hortons Inc.              1,205,547    1,140,404
        Noncontrolling interests                          1,054        1,605
                                                    ------------ ------------
    Total equity                                      1,206,601    1,142,009
                                                    ------------ ------------
    Total liabilities and equity                     $1,963,873   $1,992,627
                                                    ------------ ------------
                                                    ------------ ------------



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

                                                   Year to date period ended
                                                       June 28,     June 29,
                                                           2009         2008
                                                    ------------ ------------
                                                          (Unaudited)

    CASH FLOWS PROVIDED FROM (USED IN)
     OPERATING ACTIVITIES
    Net income                                         $144,933     $137,798
    Net income attributable to noncontrolling
     interests                                             (734)      (1,004)
    Adjustments to reconcile net income to net cash
     provided by operating activities
      Depreciation and amortization                      49,890       44,135
      Stock-based compensation expense                    4,073        5,552
      Equity income, net of cash dividends                4,419        2,902
      Deferred income taxes                               3,678         (979)
      Changes in operating assets and liabilities
        Restricted cash and cash equivalents             25,316       19,052
        Accounts and notes receivable                    20,202      (17,521)
        Inventories and other                             7,589        3,890
        Accounts payable and accrued liabilities        (82,070)     (78,955)
      Other, net                                           (226)       6,416

                                                    ------------ ------------
    Net cash provided from operating activities         177,070      121,286
                                                    ------------ ------------

    CASH FLOWS (USED IN) PROVIDED FROM INVESTING
     ACTIVITIES
    Capital expenditures                                (68,818)     (66,074)
    Principal payments on notes receivable                  733        1,075
    Other investing activities                          (11,841)      (4,274)

                                                    ------------ ------------
    Net cash used in investing activities               (79,926)     (69,273)
                                                    ------------ ------------

    CASH FLOWS (USED IN) PROVIDED FROM FINANCING
     ACTIVITIES
    Purchase of treasury stock                          (16,701)    (100,294)
    Dividend payments                                   (36,253)     (33,277)
    Purchase of common stock held in trust                 (713)      (3,842)
    Purchase of common stock for settlement of
     restriced stock units                                 (232)        (226)
    Proceeds from issuance of debt, net of
     issuance costs                                       1,150        1,514
    Principal payments on other long-term debt
     obligations                                         (2,551)      (2,611)

                                                    ------------ ------------
    Net cash used in financing activities               (55,300)    (138,736)
                                                    ------------ ------------

    Effect of exchange rate changes on cash              (1,552)       1,285
                                                    ------------ ------------

    Increase (decrease) in cash and cash equivalents     40,292      (85,438)

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

                                                    ------------ ------------
    Cash and cash equivalents at end of period         $141,928      $72,164
                                                    ------------ ------------
                                                    ------------ ------------



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

                                       (Unaudited)

                                            Second Quarter Ended
                          ---------------------------------------------------
                             June 28,                  June 29,
                                 2009   % of Total         2008   % of Total
                          ------------ ------------ ------------ ------------
    REVENUES
    Canada                   $477,007        85.8%     $438,537        85.9%
    U.S.                       46,135         8.3%       35,514         7.0%
                          ------------ ------------ ------------ ------------
    Total reportable
     segments                 523,142        94.1%      474,051        92.8%
    Noncontrolling
     interests -
     Restaurants
     consolidated under
     FIN 46R                   32,943         5.9%       36,641         7.2%
                          ------------ ------------ ------------ ------------
    Total                    $556,085       100.0%     $510,692       100.0%
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------

    SEGMENT OPERATING
     INCOME (LOSS)
    Canada                   $130,967        97.7%     $130,433       100.1%
    U.S.                        3,141         2.3%         (190)      (0.1)%
                          ------------ ------------ ------------ ------------
    Reportable Segment
     Operating Income         134,108       100.0%      130,243       100.0%
                                       ------------              ------------
                                       ------------              ------------
    Noncontrolling
     interests - Restaurants
     consolidated under
     FIN 46R                      460                       428
    Corporate Charges         (12,718)                  (13,118)
                          ------------              ------------
    Consolidated
     Operating Income         121,850                   117,553
    Interest, net              (4,862)                   (4,896)
    Income taxes              (38,784)                  (37,341)
                          ------------              ------------
    Net Income                 78,204                    75,316
    Net Income attributable
     to noncontrolling
     interests                    444                       342
                          ------------              ------------
    Net Income attributable
     to Tim Hortons Inc.      $77,760                   $74,974
                          ------------              ------------
                          ------------              ------------

                                          Year to date period ended
                          ---------------------------------------------------
                             June 28,                  June 29,
                                 2009   % of Total         2008   % of Total
                          ------------ ------------ ------------ ------------
    REVENUES
    Canada                   $913,610        85.9%     $838,687        86.4%
    U.S.                       86,608         8.1%       65,478         6.7%
                          ------------ ------------ ------------ ------------
    Total reportable
     segments               1,000,218        94.1%      904,165        93.1%
    Noncontrolling
     interests -
     Restaurants
     consolidated
     under FIN 46R             63,052         5.9%       66,844         6.9%
                          ------------ ------------ ------------ ------------
    Total                  $1,063,270       100.0%     $971,009       100.0%
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------

    SEGMENT OPERATING
     INCOME (LOSS)
    Canada                   $246,343        99.0%     $236,968       101.3%
    U.S.                        2,577         1.0%       (3,069)      (1.3)%
                          ------------ ------------ ------------ ------------
    Reportable Segment
     Operating Income         248,920       100.0%      233,899       100.0%
                                       ------------              ------------
                                       ------------              ------------
    Noncontrolling interests
     - Restaurants
     consolidated
     under FIN 46R                857                     1,256
    Corporate Charges         (23,034)                  (20,270)
                          ------------              ------------
    Consolidated
     Operating Income         226,743                   214,885
    Interest, net              (9,765)                   (9,257)
    Income taxes              (72,045)                  (67,830)
                          ------------              ------------
    Net Income                144,933                   137,798
    Net Income attributable
     to noncontrolling
     interests                    734                     1,004
                          ------------              ------------
    Net Income attributable
     to Tim Hortons Inc.     $144,199                  $136,794
                          ------------              ------------
                          ------------              ------------


                             Second Quarter Ended
                          -------------------------
                             June 28,     June 29,
                                 2009         2008    $ Change     % Change
                          ------------ ------------ ------------ ------------

    Sales is comprised of:
    Warehouse sales          $332,571     $288,089      $44,482        15.4%
    Company-operated
     restaurant sales           6,605       11,143       (4,538)     (40.7)%
    Sales from restaurants
     consolidated under
     FIN 46R                   32,943       36,641       (3,698)     (10.1)%
                          ------------ ------------ ------------ ------------
                             $372,119     $335,873      $36,246       10.8%
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------

                         Year to date period ended
                          -------------------------
                             June 28,     June 29,
                                 2009         2008    $ Change     % Change
                          ------------ ------------ ------------ ------------

    Sales is comprised of:
    Warehouse sales          $635,945     $552,794      $83,151        15.0%
    Company-operated
     restaurant sales          12,741       22,741      (10,000)     (44.0)%
    Sales from restaurants
     consolidated under
     FIN 46R                   63,052       66,844       (3,792)      (5.7)%
                          ------------ ------------ ------------ ------------
                             $711,738     $642,379      $69,359        10.8%
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------


                      TIM HORTONS INC. AND SUBSIDIARIES
                         SYSTEMWIDE RESTAURANT COUNT



                                           Increase/               Increase/
                      As of      As of     (Decrease)     As of    (Decrease)
                    June 28,  December 28,   From        June 29,     From
    Tim Hortons       2009        2008     Year End       2008     Prior Year
    -----------   -----------------------------------------------------------

    Canada
      Company-operated     15          15           0          21         (6)
      Franchised        2,924       2,902          22       2,830         94
                  -----------------------------------------------------------
    Total               2,939       2,917          22       2,851         88

    % Franchised        99.5%       99.5%                   99.3%

    U.S.
      Company-operated      5          19         (14)         33        (28)
      Franchised          531         501          30         373        158
                  -----------------------------------------------------------
    Total                 536         520          16         406        130

    % Franchised        99.1%       96.3%                   91.9%

    Total Tim Hortons
      Company-operated     20          34         (14)         54        (34)
      Franchised        3,455       3,403          52       3,203        252
                  -----------------------------------------------------------
    Total               3,475       3,437          38       3,257        218
                  -----------------------------------------------------------
                  -----------------------------------------------------------

    % Franchised        99.4%       99.0%                   98.3%



                         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 warehouse or
                         distribution sales. Sales include canned coffee
                         sales through the grocery channel. Sales also
                         include sales from Company-operated restaurants and
                         sales from restaurants that are consolidated in
                         accordance with 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 restaurants
                         that are consolidated in accordance with 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
     Administrative      Includes costs that cannot be directly related to
                         generating revenue, including expenses associated
                         with our corporate and administrative functions,
                         allocation of expenses related to corporate
                         functions, 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.

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

    Noncontrolling
     interests           Represents restaurants that the Company is required
                         to consolidate under 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.

    




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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