Tim Hortons Inc. Announces 2009 Third Quarter Results

    
    (All amounts in Canadian dollars)

               Strong sales performance in Canada and the U.S.;
                Earnings incorporate impact of reorganization
                         as a Canadian public company

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

    -------------------------------------------------------------------------
    Third Quarter Ended                   Q3 2009      Q3 2008     % Change
    -------------------------------------------------------------------------
    Revenues                            $    563.6   $    509.0         10.7%
    Operating Income                    $    129.2   $    122.6          5.4%
    Adjusted Operating Income(1)        $    132.4   $    122.6          8.0%
    Effective Tax Rate(2)                     50.5%        32.5%
    Net Income attributable to THI      $     61.2   $     78.8       (22.3)%
    Diluted Earnings Per Share (EPS)
     attributable to THI                $     0.34   $     0.43       (21.5)%
    Fully Diluted Shares                     180.9        182.7        (1.0)%
    -------------------------------------------------------------------------
    ($ in millions, except EPS. Fully diluted shares in millions. All numbers
    rounded.)

    (1) 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 Measures" and Table 1 in
        this release. The reorganization as a Canadian public company
        affected third quarter operating income by $3.2 million for
        professional advisory fees and shareholder-related transaction costs.

    (2) Effective tax rate includes the $19.9 million in discrete tax items
        pertaining to the reorganization as a Canadian public company.


    -------------------------------------------------------------------------
    Same-Store Sales(3)                    Q3 2009     2009 YTD      Q3 2008
    -------------------------------------------------------------------------
    Canada                                     3.1%         2.7%         3.8%
    U.S.                                       4.3%         3.6%       (0.6)%
    -------------------------------------------------------------------------

    (3) Includes sales at Franchised and Company-operated locations. As of
        September 27th, 2009, 99.4% of the Company's restaurants in Canada
        and 99.1% of its U.S. restaurants were franchised.


    Highlights
    ----------
    -   Same-store sales increased 3.1% in Canada and 4.3% in the U.S.
    -   Quarterly results incorporate costs and discrete tax item impacts
        arising from the Canadian public company reorganization
    -   Operating income increased 5.4% to $129.2 million
    -   Adjusted operating income(1), which excludes impact of the public
        company reorganization, was up 8.0%
    

OAKVILLE, ON, Oct. 30 /CNW/ - Tim Hortons Inc. (TSX: THI, NYSE: THI) today announced its results for the third quarter ended September 27th, 2009.

"The underlying performance of our business was healthy in the third quarter and our results continue to demonstrate the strength and resilience of our brand," said Don Schroeder, president and CEO. "Operating conditions continued to be challenging in the third quarter but we remained focused on executing our growth initiatives and responding to the needs of our customers," added Schroeder.

Consolidated Results

All percentage increases and decreases represent year-over-year changes from the third quarter of 2009 compared to the third quarter of 2008, unless otherwise noted.

Systemwide sales(4) grew 6.2% on a constant currency basis in the third quarter. Total revenues increased 10.7%, to $563.6 million versus $509.0 million last year. Revenues benefited from higher sales, consisting primarily of distribution sales, and from higher rents and royalties. Distribution sales growth was the largest component of the sales increase, driven by new products managed through the supply chain, systemwide sales growth, and higher commodity costs. Sales growth was partially offset by fewer Company-operated restaurants compared to last year, and by lower sales from non-owned consolidated restaurants (formerly referred to as FIN 46R).

Rents and royalties grew 7.5% in the third quarter, relatively consistent with systemwide sales growth including the effects of foreign exchange translation. Franchise fees were up 16.9%, as a result of a higher number of resales and non-standard unit sales that took place compared to 2008, increasing franchise fee costs as well.

Both Canadian and U.S. same-store sales were strong in the third quarter, increasing 3.1% in Canada and 4.3% in the U.S., with contributions from transaction growth and slight improvement in average check.

In the third quarter we had active menu and product-focused promotional programs designed to reinforce value to our customers. We promoted the sausage and a biscuit offering in both Canada and the U.S. at attractive price points. We also continued to benefit from, and provided promotional support for, Chicken Wrap Snackers. This menu item was introduced late in the first quarter to support our focus on the snacking and lunch day parts. Blueberry-themed promotions were featured in both markets. Proving very popular with our customers, these products included Blueberry Bloom donuts, Blueberry Glazed donuts and Whole Grain Blueberry muffins.

In Canada, to increase breadth of our soup program and drive trial, we introduced Italian Wedding soup. We also had a national free sample day for hash browns with the purchase of any breakfast sandwich, and promoted hot beverages featuring French Vanilla Cappuccino. In the U.S. market, we extended blueberry flavors to include Iced Capp and Iced Coffee as part of the Blueberry-themed products promotion, and also featured a US$1.99 Iced Cappuccino promotion.

Cost of sales were up by 11.9% in the third quarter, reflecting the impact of new products managed through the supply chain and increased product costs primarily associated with commodity cost increases. These factors were partially offset by fewer Company-operated restaurants compared to 2008, and lower cost of sales from non-owned consolidated restaurants.

In the third quarter operating expenses increased 10.2%. The year-over-year increase in operating expenses was due mostly to growth in the number of restaurants in the system compared to last year, as well as percentage rent increases.

Franchise fee costs were up 9.6% during the third quarter. A larger number of resales and higher non-standard unit sales contributed to most of the increase, which also drove franchise fees higher, as noted previously.

As anticipated, general and administrative costs were significantly higher in the quarter, increasing 17.9% versus the prior year, due mostly to the professional advisory fees and shareholder-related transaction costs of $3.2 million incurred for the public company reorganization. These expenditures accounted for slightly more than 10% of the year-over-year increase.

Equity income in the third quarter was flat compared to last year at $9.4 million. A slight income decline in the Company's bakery joint venture was entirely offset by slight gains in other joint ventures.

Operating income increased 5.4% to $129.2 million in the third quarter compared to $122.6 million in the prior year, and adjusted operating income(1), excluding $3.2 million in professional advisory fees and shareholder-related transaction costs incurred for the public company reorganization, was up 8.0% to $132.4 million. Higher systemwide sales drove increased rents, and royalties, which contributed to most of the increase in operating income, which also benefited from higher distribution sales, an increase in franchise sales, and operating income improvement in the U.S. segment.

Net income attributable to Tim Hortons declined by 22.3% to $61.2 million compared to $78.8 million last year. This result includes a $23.1 million impact in connection with the reorganization as a Canadian public company. The reorganization drove substantially all of the increase in effective tax rate for the third quarter, which rose to 50.5% compared to 32.5% last year. Lower net interest expense slightly offset the impact of the reorganization on net income attributable to Tim Hortons, and was $4.8 million in the third quarter compared to $5.3 million in the prior year.

Diluted earnings per share attributable to Tim Hortons was $0.34, decreasing 21.5% compared to $0.43 in 2008. This includes a $0.13 impact from public company reorganization costs related to a valuation allowance on deferred tax assets, and professional advisory fees and shareholder-related transaction costs. Diluted earnings per share attributable to Tim Hortons benefited from 1.0% fewer shares outstanding in the quarter compared to the prior year.

Segmented Performance Commentary

    
    Canada
    ------
    

Same-store sales growth in Canada increased by 3.1% compared to the third quarter of 2008. Menu and promotion initiatives and operational programs drove most of the same-store sales increase. Same-store sales growth also benefited slightly from pricing increases implemented late in the quarter in Ontario, which faced continued economic and unemployment challenges. A total of 36 restaurants were opened in Canada during the quarter.

By the end of the quarter, twelve co-branded Cold Stone Creamery locations had been opened in Canada. Based on positive results and customer response to date in these initial locations, we have reached an agreement with Kahala Corp., parent company of Cold Stone Creamery, for exclusive development rights in Canada in order to provide us flexibility for future expansion. The timing and extent of future expansion will be evaluated on an annual basis commencing in early 2010 in conjunction with our overall development strategies.

Canadian segment operating income was $140.8 million, a 5.9% improvement from $132.9 million last year. Improvement in the Canadian segment operating income was primarily due to systemwide sales growth, higher distribution sales and higher franchise sales revenue, partially offset by higher commodity costs.

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

The U.S. segment maintained its sales momentum in the third quarter, increasing same-store sales by 4.3% year-over-year. Continued positive results at Cold Stone Creamery co-branded locations made significant contributions to same-store sales growth in the quarter, as the ice cream category entered into its final key selling months for the year. The U.S. segment also continued to benefit from promotional and menu activities. By the end of the third quarter, 65 co-branded Tim Hortons - Cold Stone Creamery locations had been opened, including two Cold Stone locations which were co-branded to include our offering. A total of 20 restaurants were opened in the U.S. during the quarter.

Operating income in the U.S. segment improved by $3.2 million in the third quarter, to $1.1 million, compared to a $2.1 million loss in 2008. Consistent with the last quarter, several factors contributed to the significant improvement in profitability. The decision in late 2008 to close certain underperforming corporate restaurants, and a related market asset impairment charge, resulted in improvement in Company-operated restaurant losses, and lower depreciation and rent expense in the third quarter. These factors collectively benefited operating income in the U.S. segment by $1.2 million. Higher distribution sales, lower general and administrative expenses, higher same-store sales growth, and contributions from vertical integration in the segment also contributed to the operating income improvement. The largest offsetting factors to U.S. segment operating income were higher franchise relief provided to owner-operator restaurants being converted from Company-operated restaurants, and relief provided to new restaurants opened for less than twelve months.

Internationally, in the Republic of Ireland and the United Kingdom, there are now 292 licensed locations primarily in the convenience store channel operating mainly under the Tim Hortons brand. Tim Hortons has initiated a strategic planning process pertaining to future international growth.

Corporate Developments

    
    Outlook
    -------
    

We are pleased with the strength of our sales performance in the Canadian segment to the end of the third quarter considering the persistent, challenging economic conditions experienced throughout 2009. Based on year-to-date performance to the end of the third quarter, we currently expect to be at the low end or slightly under our 3% to 5% annual same-store sales growth target for 2009 in the Canadian segment.

We remain confident in our ability to meet our targeted consolidated operating income growth range of 11% to 13% growth excluding the impact of the reorganization as a Canadian public company (targeted rate is 6% to 8% growth excluding the 2008 impacts of asset impairment and related closure costs and the 2009 public company reorganization costs).

    
    Board approves resumption of previously announced share repurchase
    ------------------------------------------------------------------
    program
    -------
    

The Company announced in May this year its decision to defer further purchases in its share repurchase program, pending a change in corporate structure, which was subject to shareholder approval at that time. As a result of the subsequent completion of the reorganization as a Canadian public company, the Board has approved resumption of the previously announced program, beginning in the fourth quarter.

"Our decision to resume our share repurchase program reflects in part efficiencies arising from our new corporate structure as well as our continued confidence in our strong cash flow generation capabilities," said Cynthia Devine, chief financial officer.

The Company currently expects to spend up to $150 million during the remainder of the program until it terminates on March 1st, 2010. Under terms of the existing program, the Company is authorized to purchase up to $200 million in common shares, not to exceed the regulatory maximum of 9,077,438 shares or 5% of the outstanding common shares. Prior to the decision to defer the program, the Company spent $16.7 million to repurchase approximately 0.6 million common shares.

Shares will be repurchased through a combination of a 10b5-1, or automatic trading program, and through 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.

    
    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 December 15th, 2009 to shareholders of record as of December 1st, 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 shareholders based on the Company's earnings growth.

As of September 28th, 2009, dividends are declared and paid in Canadian dollars to all shareholders with Canadian resident addresses. For U.S. resident shareholders, dividends paid will be converted to U.S. dollars based on prevailing exchange rates at time of conversion by the Clearing and Depository Services Inc. for beneficial shareholders and by the Company's transfer agent Computershare Trust Company of Canada for registered shareholders.

As a Canadian public company, dividends paid by the Company are designated as "eligible dividends" for Canadian tax purposes. For resident U.S. shareholders, dividends paid by the Company effective after September 28th, 2009 are generally subject to Canadian withholding taxes at a rate of 15% of the gross amount of the dividends paid, which may be eligible as a foreign tax credit for U.S. tax purposes, depending on the individual resident shareholder's tax situation.

Commentary in this release on tax matters is based, as applicable, on current provisions, regulations, administrative and judicial interpretations and proposed provisions or proposed amendments to existing provisions and may not be applicable to all taxpayers, who are urged to consult their own tax or legal advisors for advice applicable to their particular circumstances.

    
    Corporate Structure
    -------------------
    

Approximately 99% of shareholders who voted on the transaction to become a Canadian public company did so in favor of the reorganization. The reorganization became effective on September 28th, 2009, subsequent to the quarter, and shares in the new Canadian public company began trading on that day under the same symbol ("THI") on both the New York Stock Exchange and on the Toronto Stock Exchange. Tim Hortons stockholders automatically had their existing common stock converted into an equal number of common shares in the Canadian public company. Tim Hortons shares use the identical CUSIP number 88706M103.

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 item. The Company evaluates its business performance and trends excluding amounts related to such item. 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

    -------------------------------------------------------------------------
    Quarter Ended                         Q3 2009      Q3 2008     % Change
    -------------------------------------------------------------------------
    Reported Operating Income           $    129.2   $    122.6          5.4%
    Add: Public company reorganization
     costs                                     3.2            -          N/M
                                       ------------ ------------

    Adjusted Operating Income           $    132.4   $    122.6          8.0%
    -------------------------------------------------------------------------
    ($ in millions, all numbers rounded.) N/M - Not Meaningful



    Tim Hortons to host conference call at 10:30 a.m. (EDT) Friday,
    October 30th, 2009
    

Tim Hortons will host a conference call today to discuss the third quarter results, scheduled to begin at 10:30 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 21440280.

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.

    
    (4) Total systemwide sales growth includes restaurant level sales at both
        Company and Franchise restaurants. Approximately 99.3% of our
        consolidated system is franchised as at September 27th, 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 third quarter of 2009, systemwide sales growth on a constant
        currency basis was up 6.2% compared to the third 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 September 27th, 2009, Tim Hortons had 3,527 systemwide restaurants, including 2,971 in Canada and 556 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)

                             Third quarter ended
                            September    September
                             27, 2009     28, 2008     $ Change     % Change
                          ------------ ------------ ------------ ------------
    REVENUES
    Sales                    $373,035     $333,581      $39,454        11.8%
    Franchise revenues:
      Rents and royalties     166,914      155,214       11,700         7.5%
      Franchise fees           23,605       20,200        3,405        16.9%
                          ------------ ------------ ------------ ------------
                              190,519      175,414       15,105         8.6%
                          ------------ ------------ ------------ ------------
    TOTAL REVENUES            563,554      508,995       54,559        10.7%
                          ------------ ------------ ------------ ------------

    COSTS AND EXPENSES
    Cost of sales             327,923      293,056       34,867        11.9%
    Operating expenses         59,053       53,596        5,457        10.2%
    Franchise fee costs        21,754       19,840        1,914         9.6%
    General and
     administrative expenses   35,363       29,986        5,377        17.9%
    Equity (income)            (9,415)      (9,429)          14        (0.1%)
    Other (income), net          (359)        (664)         305          N/M
                          ------------ ------------ ------------ ------------
    TOTAL COSTS AND
     EXPENSES, NET            434,319      386,385       47,934        12.4%
                          ------------ ------------ ------------ ------------

    OPERATING INCOME          129,235      122,610        6,625         5.4%

    Interest (expense)         (5,068)      (6,288)       1,220       (19.4%)
    Interest income               272          957         (685)         N/M
                          ------------ ------------ ------------ ------------

    INCOME BEFORE INCOME
     TAXES                    124,439      117,279        7,160         6.1%

    INCOME TAXES               62,873       38,092       24,781        65.1%
                          ------------ ------------ ------------ ------------

    Net Income                 61,566       79,187      (17,621)      (22.3%)
    Net income
     attributable to
     noncontrolling
     interests                    387          430          (43)      (10.0%)
                          ------------ ------------ ------------ ------------

    NET INCOME
     ATTRIBUTABLE TO
     TIM HORTONS INC.         $61,179      $78,757     ($17,578)      (22.3%)
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------

    Basic earnings per
     share of common
     stock attributable
     to Tim Hortons Inc.        $0.34        $0.43       ($0.09)      (21.6%)
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------

    Diluted earnings per
     share of common
     stock attributable
     to Tim Hortons Inc.        $0.34        $0.43       ($0.09)      (21.5%)
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------

    Weighted average
     number of shares of
     common stock - Basic
     (in thousands)           180,681      182,431       (1,750)       (1.0%)
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------

    Weighted average
     number of shares of
     common stock -
     Diluted (in thousands)   180,864      182,662       (1,798)       (1.0%)
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------

    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
                            September    September
                             27, 2009     28, 2008     $ Change     % Change
                          ------------ ------------ ------------ ------------

    REVENUES
    Sales                  $1,084,773     $975,960     $108,813        11.1%
    Franchise revenues:
      Rents and royalties     478,732      444,640       34,092         7.7%
      Franchise fees           63,319       59,404        3,915         6.6%
                          ------------ ------------ ------------ ------------
                              542,051      504,044       38,007         7.5%
                          ------------ ------------ ------------ ------------
    TOTAL REVENUES          1,626,824    1,480,004      146,820         9.9%
                          ------------ ------------ ------------ ------------

    COSTS AND EXPENSES
    Cost of sales             956,219      858,440       97,779        11.4%
    Operating expenses        175,586      158,227       17,359        11.0%
    Franchise fee costs        61,147       58,028        3,119         5.4%
    General and
     administrative
     expenses                 104,533       96,996        7,537         7.8%
    Equity (income)           (25,964)     (26,792)         828        (3.1%)
    Other (income), net          (675)      (2,390)       1,715          N/M
                          ------------ ------------ ------------ ------------
    TOTAL COSTS AND
     EXPENSES, NET          1,270,846    1,142,509      128,337        11.2%
                          ------------ ------------ ------------ ------------

    OPERATING INCOME          355,978      337,495       18,483         5.5%

    Interest (expense)        (15,617)     (18,608)       2,991       (16.1%)
    Interest income             1,056        4,020       (2,964)         N/M
                          ------------ ------------ ------------ ------------

    INCOME BEFORE INCOME
     TAXES                    341,417      322,907       18,510         5.7%

    INCOME TAXES              134,918      105,922       28,996        27.4%
                          ------------ ------------ ------------ ------------

    Net Income                206,499      216,985      (10,486)       (4.8%)
    Net income
     attributable to
     noncontrolling
     interests                  1,121        1,434         (313)      (21.8%)
                          ------------ ------------ ------------ ------------

    NET INCOME
     ATTRIBUTABLE TO TIM
     HORTONS INC.            $205,378     $215,551     ($10,173)       (4.7%)
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------

    Basic earnings per
     share of common stock
     attributable to Tim
     Hortons Inc.               $1.14        $1.17       ($0.03)       (2.7%)
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------

    Diluted earnings per
     share of common stock
     attributable to Tim
     Hortons Inc.               $1.13        $1.17       ($0.03)       (2.6%)
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------

    Weighted average number
     of shares of common
     stock - Basic (in
     thousands)               180,878      184,735       (3,857)       (2.1%)
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------

    Weighted average number
     of shares of common
     stock - Diluted (in
    thousands)                181,076      185,013       (3,937)       (2.1%)
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------

    Dividend per share of
     common stock               $0.30        $0.27        $0.03
                          ------------ ------------ ------------
                          ------------ ------------ ------------

    N/M - not meaningful
    (all numbers rounded)



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


                                                             As at
                                                  ---------------------------
                                                  September 27,  December 28,
                                                          2009          2008
                                                  ------------- -------------
                                                          (Unaudited)
    ASSETS

    Current assets
      Cash and cash equivalents                       $213,745      $101,636
      Restricted cash and cash equivalents              13,534        62,329
      Restricted investments                            20,152             -
      Accounts receivable, net                         159,016       159,505
      Notes receivable, net                             27,457        22,615
      Deferred income taxes                             11,596        19,760
      Inventories and other, net                        60,916        71,505
      Advertising fund restricted assets                23,173        27,684
                                                  ------------- -------------
    Total current assets                               529,589       465,034

    Property and equipment, net                      1,330,941     1,332,852

    Notes receivable, net                               13,503        17,645

    Deferred income taxes                                8,517        29,285

    Intangible assets, net                               2,202         2,606

    Equity investments                                 126,159       132,364

    Other assets                                        16,677        12,841
                                                  ------------- -------------
    Total assets                                    $2,027,588    $1,992,627
                                                  ------------- -------------
                                                  ------------- -------------



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


                                                             As at
                                                  ---------------------------
                                                  September 27,  December 28,
                                                          2009          2008
                                                  ------------- -------------
                                                          (Unaudited)

    LIABILITIES AND EQUITY

    Current liabilities
      Accounts payable                                $152,302      $157,210
      Accrued liabilities:
        Salaries and wages                              14,474        18,492
        Taxes                                           32,681        25,605
        Other                                           70,821       110,518
      Advertising fund restricted liabilities           40,255        47,544
      Current portion of long-term obligations           7,795         6,691
                                                  ------------- -------------
    Total current liabilities                          318,328       366,060
                                                  ------------- -------------

    Long-term obligations
      Term debt                                        334,155       332,506
      Advertising fund restricted debt                   2,092         6,929
      Capital leases                                    61,759        59,052
      Deferred income taxes                              5,635        13,604
      Other long-term liabilities                       77,553        72,467
                                                  ------------- -------------
    Total long-term obligations                        481,194       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                 928,780       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:
         316,129 and 358,186 shares, respectively      (10,712)      (12,287)
        Retained earnings                              828,345       677,550
        Accumulated other comprehensive loss          (104,451)      (54,936)
                                                  ------------- -------------
      Total equity of Tim Hortons Inc.               1,226,500     1,140,404
      Noncontrolling interests                           1,566         1,605
                                                  ------------- -------------
    Total equity                                     1,228,066     1,142,009
                                                  ------------- -------------
    Total liabilities and equity                    $2,027,588    $1,992,627
                                                  ------------- -------------
                                                  ------------- -------------



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

                                                   Year-to-date period ended
                                                  September 27, September 28,
                                                          2009          2008
                                                  ------------- -------------
                                                          (Unaudited)

    CASH FLOWS PROVIDED FROM (USED IN)
     OPERATING ACTIVITIES
    Net income                                        $206,499      $216,985
    Net income attributable to noncontrolling
     interests                                          (1,121)       (1,434)
    Adjustments to reconcile net income to net
     cash provided by operating activities
      Depreciation and amortization                     74,605        66,811
      Stock-based compensation expense                   6,801         7,909
      Equity income, net of cash dividends               7,204         3,782
      Deferred income taxes                             18,725        (3,034)
      Changes in operating assets and liabilities
        Restricted cash and cash equivalents            48,447        30,094
        Accounts and notes receivable                   (1,292)      (12,483)
        Inventories and other                            8,985         2,748
        Accounts payable and accrued liabilities       (40,662)      (77,920)
      Other, net                                         6,694        11,368

                                                  ------------- -------------
    Net cash provided from operating activities        334,885       244,826
                                                  ------------- -------------

    CASH FLOWS (USED IN) PROVIDED FROM
     INVESTING ACTIVITIES
    Capital expenditures                              (111,382)     (112,060)
    Purchase of restricted investments                 (20,136)      (11,959)
    Principal payments on notes receivable               2,263         2,563
    Other investing activities                         (14,991)       (8,979)

                                                  ------------- -------------
    Net cash used in investing activities             (144,246)     (130,435)
                                                  ------------- -------------

    CASH FLOWS (USED IN) PROVIDED FROM
     FINANCING ACTIVITIES
    Purchase of treasury stock                         (16,701)     (149,770)
    Dividend payments                                  (54,583)      (49,748)
    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                                      2,707         2,068
    Principal payments on other long-term debt
     obligations                                        (3,893)       (4,897)

                                                  ------------- -------------
    Net cash used in financing activities              (73,415)     (206,415)
                                                  ------------- -------------

    Effect of exchange rate changes on cash             (5,115)        2,036
                                                  ------------- -------------

    Increase (decrease) in cash and cash equivalents   112,109       (89,988)

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

                                                  ------------- -------------
    Cash and cash equivalents at end of period        $213,745       $67,614
                                                  ------------- -------------
                                                  ------------- -------------



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

                                 (Unaudited)

                                          Third Quarter Ended
                          ---------------------------------------------------
                            September                 September
                             27, 2009   % of Total     28, 2008   % of Total
                          ------------ ------------ ------------ ------------

    REVENUES
    Canada                   $492,043        87.3%     $442,295        86.9%
    U.S.                       38,909         6.9%       31,162         6.1%
                          ------------ ------------ ------------ ------------
    Total reportable
     segments                 530,952        94.2%      473,457        93.0%
    Noncontrolling
     interests - Non-owned
     consolidated
     restaurants               32,602         5.8%       35,538         7.0%
                          ------------ ------------ ------------ ------------
    Total                    $563,554       100.0%     $508,995       100.0%
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------

    SEGMENT OPERATING
     INCOME (LOSS)
    Canada                   $140,783        99.2%     $132,892       101.6%
    U.S.                        1,079         0.8%       (2,119)      (1.6)%
                          ------------ ------------ ------------ ------------
    Reportable Segment
     Operating Income         141,862       100.0%      130,773       100.0%
                                       ------------              ------------
                                       ------------              ------------
    Noncontrolling
     interests - Non-owned
     consolidated
     restaurants                  426                       538
    Corporate Charges         (13,053)                   (8,701)
                          ------------              ------------
    Consolidated Operating
     Income                   129,235                   122,610
    Interest, net              (4,796)                   (5,331)
    Income taxes              (62,873)                  (38,092)
                          ------------              ------------
    Net Income                 61,566                    79,187
    Net Income attributable
     to noncontrolling
     interests                    387                       430
                          ------------              ------------
    Net Income attributable
     to Tim Hortons Inc.      $61,179                   $78,757
                          ------------              ------------
                          ------------              ------------


                                       Year-to date-period ended
                          ---------------------------------------------------
                            September                 September
                             27, 2009   % of Total     28, 2008   % of Total
                          ------------ ------------ ------------ ------------

    REVENUES
    Canada                 $1,405,653        86.4%   $1,280,982        86.6%
    U.S.                      125,517         7.7%       96,640         6.5%
                          ------------ ------------ ------------ ------------
    Total reportable
     segments               1,531,170        94.1%    1,377,622        93.1%
    Noncontrolling
     interests - Non-owned
     consolidated
     restaurants               95,654         5.9%      102,382         6.9%
                          ------------ ------------ ------------ ------------
    Total                  $1,626,824       100.0%   $1,480,004       100.0%
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------

    SEGMENT OPERATING
     INCOME (LOSS)
    Canada                   $387,126        99.1%     $369,860       101.4%
    U.S.                        3,656         0.9%       (5,188)      (1.4)%
                          ------------ ------------ ------------ ------------
    Reportable Segment
     Operating Income         390,782       100.0%      364,672       100.0%
                                       ------------              ------------
                                       ------------              ------------
    Noncontrolling
     interests - Non-owned
     consolidated
     restaurants                1,283                     1,794
    Corporate Charges         (36,087)                  (28,971)
                          ------------              ------------
    Consolidated Operating
     Income                   355,978                   337,495
    Interest, net             (14,561)                  (14,588)
    Income taxes             (134,918)                 (105,922)
                          ------------              ------------
    Net Income                206,499                   216,985
    Net Income attributable
     to noncontrolling
     interests                  1,121                     1,434
                          ------------              ------------
    Net Income attributable
     to Tim Hortons Inc.     $205,378                  $215,551
                          ------------              ------------
                          ------------              ------------


                             Third Quarter Ended
                          -------------------------
                            September    September
                             27, 2009     28, 2008     $ Change     % Change
                          ------------ ------------ ------------ ------------
    Sales is comprised of:
    Distribution sales       $334,557     $289,174      $45,383        15.7%
    Company-operated
     restaurant sales           5,876        8,869       (2,993)     (33.7)%
    Sales from non-owned
     consolidated
     restaurants               32,602       35,538       (2,936)      (8.3)%
                          ------------ ------------ ------------ ------------
                             $373,035     $333,581      $39,454        11.8%
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------


                          Year-to-date period ended
                          -------------------------
                            September    September
                             27, 2009     28, 2008     $ Change     % Change
                          ------------ ------------ ------------ ------------
    Sales is comprised of:
    Distribution sales       $970,502     $841,968     $128,534        15.3%
    Company-operated
     restaurant sales          18,617       31,610      (12,993)     (41.1)%
    Sales from non-owned
     consolidated
     restaurants               95,654      102,382       (6,728)      (6.6)%
                          ------------ ------------ ------------ ------------
                           $1,084,773     $975,960     $108,813        11.1%
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------



                      TIM HORTONS INC. AND SUBSIDIARIES
                         SYSTEMWIDE RESTAURANT COUNT

                                           Increase/               Increase/
                       As of       As of   (Decrease)      As of   (Decrease)
                   September    December        From   September        From
                    27, 2009    28, 2008    Year End    28, 2008  Prior Year
                  -----------------------------------------------------------

    Tim Hortons
    -----------

    Canada
      Company-
       operated           18          15           3          13           5
      Franchised       2,953       2,902          51       2,857          96
                  -----------------------------------------------------------
    Total              2,971       2,917          54       2,870         101

    % Franchised       99.4%       99.5%                   99.5%

    U.S.
      Company-
       operated            5          19         (14)         30         (25)
      Franchised         551         501          50         394         157
                  -----------------------------------------------------------
    Total                556         520          36         424         132

    % Franchised       99.1%       96.3%                   92.9%

    Total Tim Hortons
      Company-
       operated           23          34         (11)         43         (20)
      Franchised       3,504       3,403         101       3,251         253
                  -----------------------------------------------------------
    Total              3,527       3,437          90       3,294         233
                  -----------------------------------------------------------
                  -----------------------------------------------------------

    % Franchised       99.3%       99.0%                   98.7%



                          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 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,
                          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 (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        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


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890