Tim Hortons Inc. Announces 2010 First Quarter Results: Robust same-store
sales growth contributes to strong consolidated earnings performance

(Unaudited. All amounts in Canadian dollars and presented in accordance with U.S. GAAP)

                         Financial & Sales Highlights

                                                 Q1 2010   Q1 2009  % Change
    Total Revenues                              $  582.6  $  555.7      4.8%
    Operating income                            $  127.7  $  111.2     14.9%
    Effective Tax Rate                             31.0%     32.9%
    Net Income attributable to THI              $   78.9  $   66.4     18.7%
    Diluted Earnings Per Share (EPS)            $   0.45  $   0.37     21.9%
    Fully Diluted Shares                           176.6     181.3    (2.6)%

    ($ in millions, except EPS. Fully diluted shares in millions. All numbers

    Results for 2010, and retroactively for 2009, incorporate adoption of new
    accounting standard SFAS No. 167 - Amendments to FASB No. 46(R), now
    codified within ASC 810 - Consolidations. This standard relates to
    consolidation of certain variable interest entities. Please refer to the
    Company's Form 10-Q for additional information.

    Same-Store Sales(1)                                    Q1 2010   Q1 2009
    Canada                                                    5.2%      3.4%
    U.S.                                                      3.0%      3.2%

    (1) Includes sales at Franchised and Company-operated locations. As of
        April 4th, 2010, 99.5% of our restaurants in Canada and 99.1% of our
        U.S. restaurants were franchised.

    Quarterly Highlights
    -   Solid sales momentum in Canada and the U.S.
           -  Systemwide sales(2) grew 10.0% on a constant currency basis
           -  5.2% increase in same-store sales in Canada
           -  3.0% increase in same-store sales in the U.S.
    -   First quarter EPS growth of 21.9%
    -   Strong Canadian segment earnings, continued year-over-year progress
        in the U.S.
    -   Successful product menu and marketing initiatives contribute to


OAKVILLE, ON, May 13 /CNW/ - Tim Hortons Inc. (TSX: THI, NYSE: THI) today announced its results for the first quarter ended April 4th, 2010.

"Our business achieved strong sales and earnings performance this quarter. Our competitive advantages continue to position our business among the leading companies in our sector, and we look forward to further building upon that position," said Don Schroeder, president and CEO.

Consolidated Results

All percentage increases and decreases represent year-over-year changes for the first quarter of 2010 compared to the first quarter of 2009, unless otherwise noted.

The Company has retroactively adopted new accounting standard SFAS No. 167 which has impacted prior year reported results, and 2010 actual results, for revenues and cost line items. The new standard pertains to the consolidation of variable interest entities ("VIEs"). Under the accounting standard, if the Company is determined to be the primary beneficiary of a VIE, we are required to consolidate the VIE assets, liabilities, results of operations and cash flows.

The Company analyzed its variable interests, including its equity investments and certain operator arrangements. The Company has determined that it is the primary beneficiary of our 50-50 bakery joint venture and has consolidated this operation. This bakery joint venture produces and supplies our restaurant system with par-baked donuts, Timbits(TM), some bread products, and pastries. As a result, the revenues, costs and the remaining 50% of operating income of this joint venture and from approximately 150 additional non-owned restaurants, 100 of which are in the U.S. and 50 in Canada, have also been consolidated as a result of the new standard. The Company has no equity interest in any of its franchisees and none of the Company's assets serve as collateral for the consolidated restaurants. Additional information on the impact of the adoption of the accounting standard is available in our Form 10-Q filed today.

Systemwide sales(2) increased 10.0% on a constant currency basis. During the quarter total revenues were $582.6 million, an increase of 4.8% compared to $555.7 million last year. Higher distribution revenues, and higher rents and royalties due to strong underlying product demand, were partially offset by lower year-over-year revenues from consolidated VIE's and lower revenues from Company-operated restaurants as we continue to convert these locations to the franchise and owner-operator model. Lower franchise fees also impacted total revenues during the quarter, primarily due to timing of resales, replacements and renovations versus last year, and fewer new standard restaurants compared to the first quarter of 2009. The effects of foreign exchange translation negatively impacted revenue growth this quarter by approximately 1.6%.

First quarter operating income grew 14.9% to $127.7 million compared to $111.2 million last year. Solid same-store sales and continued restaurant development, which contributed to higher rents, royalties and distribution income, contributed most to this performance. Costs continued to be well managed during the quarter, with growth in all cost line items below the rate of systemwide sales growth, even considering the approximate 2.0% benefit to costs this quarter from foreign exchange translation. Changes in foreign exchange did not have a significant impact on operating income.

Net income attributable to Tim Hortons, which excludes the impact of noncontrolling interests, was $78.9 million in the first quarter, up 18.7% compared to $66.4 million in the same quarter last year. Higher operating income, and a lower year-over-year tax rate due primarily to the Company's 2009 public company reorganization, contributed to this positive performance. Adoption of the new SFAS No. 167 accounting standard did not have a significant impact on net income attributable to Tim Hortons or earnings per share.

First quarter diluted earnings per share (EPS) was $0.45, growing 21.9% compared to $0.37 per share last year. In addition to the factors benefiting net income, 2.6% fewer outstanding shares due to our share repurchase programs contributed to our EPS growth rate.

Segmented Performance Commentary

In the first quarter, both operating segments had improved same-store sales and earnings compared to the same period last year.


Canadian same-store sales experienced strong growth of 5.2% over the comparable period of 2009. Same-store sales growth benefited from successful menu, marketing and operational programs which led to continued transaction growth, and from previous pricing in place in the system in certain Canadian markets which benefited average cheque.

Our strong same-store sales performance incorporates the slight negative impact of a partial timing shift of the Easter holiday into the first quarter of this year, from the second quarter of 2009. A total of 20 restaurants were opened in the first quarter. At the end of the first quarter, we had 18 restaurants in Canada co-branded as Cold Stone Creamery(C) locations.

Operating income in the Canadian segment was $132.4 million, up 14.3% compared to $115.8 million in the first quarter of last year. Our strong operating income performance in the Canadian segment benefited from higher systemwide sales, including the solid 5.2% same-store sales growth noted previously, which drove rents, royalties and distribution income.

    United States

The U.S. segment increased same-store sales by 3.0% in the first quarter. Significant contributions from co-branded locations featuring Cold Stone Creamery(C), and effective marketing programs and menu initiatives, benefited our performance in economic conditions that continued to be challenging. As in Canada, the partial timing shift of Easter compared to last year had a slight negative impact on same-store sales growth. A total of 4 restaurants were opened in the first quarter. At the end of the first quarter, we had 66 Tim Hortons restaurants in the U.S. co-branded as Cold Stone Creamery(C) locations.

The U.S. segment had a small operating loss of $0.3 million, an improvement compared to the $0.6 million operating loss from the same period last year. The first quarter is typically the most challenging for our business. Our systemwide sales in the U.S. benefited from continued restaurant development, and from continued same-store sales growth. Higher sales led to increased rents and royalties, offset in part by higher general and administrative costs and lower distribution contributions in the segment.

The overall rate of growth in relief we provide to franchisees in the U.S. slowed compared to historical levels, and while slightly higher in the first quarter of 2010 compared to the same period last year, the increase in relief is primarily related to either restaurants that were previously Company-operated locations or those opened for less than twelve months.

Corporate Developments

    Company receives notice invoking buy/sell provisions for its bakery joint

The Company received notice from IAWS Group Ltd., a subsidiary of Aryzta AG, the Company's 50-50 partner under the Maidstone Bakeries joint venture, invoking the buy/sell provisions of the joint venture. As a result, the Company has the option to either sell its interest or acquire IAWS' interest in the joint venture. Aryzta believes that the business of the joint venture will be better served under an alternative ownership structure rather than under the existing joint venture arrangement. The parties have agreed to an extended negotiation period to consider amendments to the ownership structure and the underlying arrangements.

The existing joint venture documentation provides that the Company's supply rights for products extend for seven years after either party's exit from the joint venture, and sourcing commitments extend until early 2016 for donuts and Timbits, allowing the Company sufficient flexibility to secure alternative means of supply, if desired. The existing agreements also have protections regarding intellectual property rights and dealing with competitors, as well as terms relating to price determination, that remain in effect after the closing of the transaction. Given that the discussions regarding the transaction are in the preliminary stages, the resolution of these matters may change as the ultimate ownership structure is determined. The parties expect to reach final agreement by year-end 2010.

    New debt offering anticipated to refinance a portion of existing debt

Subject to market conditions, in the second quarter of 2010 we expect to complete a private bond offering in Canada of between $200 million and $250 million. The proceeds of this anticipated offering are expected to be used to refinance a portion of our $300 million term loan and for general corporate purposes.

In anticipation of the transaction, we entered into interest rate forwards as a cash flow hedge to limit a significant portion of the interest rate volatility during the period prior to the consummation of the anticipated refinancing transaction. The interest rate forwards are designed to protect the Company from volatility in the Government of Canada interest rate by fixing the rate at the time the forwards were entered into for the expected term of the private bonds. The credit spread risk has not been hedged and is therefore subject to volatility.

Deferred debt issuance costs relating to the existing term debt are expected to be expensed proportionately at the time of any repayment and are expected to be less than $0.3 million. We also expect to settle between $30 million and $80 million of our interest rate swaps at the time we consummate the anticipated transaction. Given current market rates, this will result in a mark to market expense of approximately $1 million to $2 million in the second quarter of 2010 when the early termination of a portion of the term debt is expected to occur. This news release does not constitute an offer to sell, or the solicitation of an offer to buy, in the United States the securities referenced herein. Such securities have not been and will not be registered under the U.S. Securities Act or applicable state securities laws and may not be offered or sold in the United States absent registration or an exemption from the registration requirement under the U.S. Securities Act and applicable state securities laws.

    Construction of new Distribution Centre

The Board has approved construction of a replacement distribution centre in Kingston, Ontario to provide greater supply capacity for dry goods and to expand into frozen and refrigerated product distribution from this location for our restaurant owners. Total planned capital expenditures on this facility are estimated to be approximately $45 million, with approximately $20 million to be incurred in 2010. Exploring additional system and corporate benefits through vertical integration is an initiative outlined in our More than a Great Brand strategic plan for 2010 to 2013. When fully operational in the second half of 2011, the facility is expected to serve more than 650 restaurants in eastern Ontario, and Quebec, responding to continued projected growth in that market. As with other vertical integration initiatives, we expect this new facility will deliver important system benefits, including improved efficiency and cost-effective service for our restaurant owners, as well as provide a reasonable return to the Company.

    Board declares dividend payment of $0.13 per common share

The Board of Directors has declared a quarterly dividend of $0.13 per common share, consistent with our previously announced change in dividend rate and targeted payout range. The dividend is payable on June 15th, 2010 to shareholders of record as of May 28th, 2010. Dividends are declared and paid in Canadian dollars to all shareholders with Canadian resident addresses. For U.S. shareholders, dividends paid will be converted to U.S. dollars based on prevailing exchange rates at the time of conversion by Tim Hortons for registered shareholders and by Clearing and Depository Services Inc. for beneficial shareholders.

    Annual Meeting of Shareholders

The annual meeting of shareholders will be held on Friday, May 14th at 10:30 a.m. (EDT) at the School of Hospitality Management, Ryerson University, 55 Dundas Street West, 7th Floor Auditorium in Toronto, Ontario. A live web cast of the meeting, including presentation material, will be available at www.timhortons-invest.com in the Events and Presentations section, where an archive of the web cast and presentation material will also be available for a period of one year.

Tim Hortons conference call today at 2:30 p.m. (EDT) Thursday, May 13th, 2010

Tim Hortons will host a conference call today to discuss the first quarter results, scheduled to begin at 2:30 p.m. (EDT). The dial-in number is (416) 641-6712 or (800) 354-6885. No access code is required. A simultaneous web cast of the call, including presentation material, will be available at www.timhortons-invest.com. A replay of the call will be available until May 20th, 2010 and can be accessed at (416) 626-4100 or (800) 558-5253. The call replay reservation number is 21466458. The call and presentation material will also be archived for a period of one-year in the Events and Presentations section.

Safe Harbor Statement

Certain information in this news release, particularly information regarding future economic performance, finances, and plans, expectations and objectives of management, including as they relate to any anticipated refinancing transaction, constitute forward-looking information within the meaning of Canadian securities laws and forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We refer to all of these as forward-looking statements. Various factors including competition in the quick service segment of the food service industry, general economic conditions and others described as "risk factors" in the Company's 2009 Annual Report on Form 10-K, filed March 4th, 2010 with the U.S. Securities and Exchange Commission and Canadian Securities Administrators, could affect the Company's actual results and cause such results to differ materially from those expressed in forward-looking statements. As such, readers are cautioned not to place undue reliance on forward-looking statements contained in this news release, which speak only as of the date hereof. Forward-looking statements are based on a number of assumptions which may prove to be incorrect, including, but not limited to, assumptions about: the absence of a material increase in competition within the quick service restaurant segment of the food service industry; the absence of an adverse event or condition that damages our strong brand position and reputation; continuing positive working relationships with the majority of the Company's franchisees; there being no significant change in the Company's ability to comply with current or future regulatory requirements; the absence of any material adverse effects arising as a result of litigation; and general worldwide economic conditions. We are presenting this information for the purpose of informing you of management's current expectations regarding these matters, and this information may not be appropriate for any other purpose. We assume no obligation to update or alter any forward-looking statements after they are made, whether as a result of new information, future events, or otherwise, except as required by applicable law. Please review the Company's Safe Harbor Statement at www.timhortons.com/en/about/safeharbor.html.

    (2) 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 April 4th, 2010. Systemwide
        sales growth is determined using a constant exchange rate, where
        noted, to exclude the effects of foreign currency translation. U.S.
        dollar sales are converted to Canadian dollar amounts using the
        average exchange rate of the base year for the period covered. For
        the first quarter of 2010, systemwide sales growth on a constant
        currency basis was up 10.0% compared to the first quarter of 2009.
        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 restaurant chain in North America based on market capitalization, and the largest in Canada. Operating in the quick service segment of the restaurant industry, Tim Hortons appeals to a broad range of consumer tastes, with a menu that includes premium coffee, flavored cappuccinos, specialty teas, home-style soups, fresh sandwiches, wraps, hot breakfast sandwiches and fresh baked goods, including our trademark donuts. As of April 4th, 2010, Tim Hortons had 3,596 systemwide restaurants, including 3,029 in Canada and 567 in the United States. More information about the Company is available at www.timhortons.com.

    (In thousands of Canadian dollars, except share and per share data)


                                 First quarter ended
                                April 4,   March 29,
                                 2010        2009      $ Change    % Change
                              ----------- ----------- ----------- -----------
                                             (Note 1)
    Sales                       $405,948    $391,116     $14,832        3.8%
    Franchise revenues:
      Rents and royalties        159,960     144,164      15,796       11.0%
      Franchise fees              16,704      20,427      (3,723)     (18.2%)
                              ----------- ----------- ----------- -----------
                                 176,664     164,591      12,073        7.3%
                              ----------- ----------- ----------- -----------
    TOTAL REVENUES               582,612     555,707      26,905        4.8%
                              ----------- ----------- ----------- -----------

    Cost of sales                347,047     337,873       9,174        2.7%
    Operating expenses            58,725      56,593       2,132        3.8%
    Franchise fee costs           17,826      19,778      (1,952)      (9.9%)
    General and
     administrative expenses      34,672      33,476       1,196        3.6%
    Equity (income)               (3,257)     (3,065)       (192)       6.3%
    Other (income), net             (137)       (164)         27      (16.5%)
                              ----------- ----------- ----------- -----------
     EXPENSES, NET               454,876     444,491      10,385        2.3%
                              ----------- ----------- ----------- -----------

    OPERATING INCOME             127,736     111,216      16,520       14.9%

    Interest (expense)            (5,447)     (5,457)         10       (0.2%)
    Interest income                  347         664        (317)     (47.7%)
                              ----------- ----------- ----------- -----------

    INCOME BEFORE INCOME TAXES   122,636     106,423      16,213       15.2%

    INCOME TAXES                  38,063      35,041       3,022        8.6%
                              ----------- ----------- ----------- -----------

    Net Income                    84,573      71,382      13,191       18.5%
    Net income attributable
     to noncontrolling
     interests                     5,684       4,943         741       15.0%
                              ----------- ----------- ----------- -----------

     TO TIM HORTONS INC.         $78,889     $66,439     $12,450       18.7%
                              ----------- ----------- ----------- -----------
                              ----------- ----------- ----------- -----------

    Basic earnings per common
     share attributable to
     Tim Hortons Inc.              $0.45       $0.37       $0.08       21.8%
                              ----------- ----------- ----------- -----------
                              ----------- ----------- ----------- -----------

    Diluted earnings per
     common share attributable
     to Tim Hortons Inc.           $0.45       $0.37       $0.08       21.9%
                              ----------- ----------- ----------- -----------
                              ----------- ----------- ----------- -----------

    Weighted average number of
     common shares outstanding -
     Basic (in thousands)        176,456     181,072      (4,616)      (2.5%)
                              ----------- ----------- ----------- -----------
                              ----------- ----------- ----------- -----------

    Weighted average number
     of common shares
     outstanding - Diluted
     (in thousands)              176,648     181,301      (4,653)      (2.6%)
                              ----------- ----------- ----------- -----------
                              ----------- ----------- ----------- -----------

    Dividend per common share      $0.13       $0.10       $0.03
                              ----------- ----------- -----------
                              ----------- ----------- -----------

    N/M - not meaningful
    (all numbers rounded)

    Note 1 - For comparative purposes, prior year figures have been
             presented on a consistent basis to reflect the Company's
             adoption of SFAS No. 167

                     (In thousands of Canadian dollars)

                                                              As at
                                                       April 4,    January 3,
                                                         2010        2010
                                                     ------------ -----------
                                                                   (Note 1)

    Current assets
      Cash and cash equivalents                         $100,123    $121,653
      Restricted cash and cash equivalents                33,071      60,629
      Restricted investments                              17,015      20,186
      Accounts receivable, net                           163,496     179,942
      Notes receivable, net                               19,098      20,823
      Deferred income taxes                                4,438       3,475
      Inventories and other, net                          93,267      80,490
      Advertising fund restricted assets                  28,323      26,681
                                                     ------------ -----------
    Total current assets                                 458,831     513,879

    Property and equipment, net                        1,467,126   1,494,032

    Notes receivable, net                                  4,452       3,475

    Deferred income taxes                                  8,993       8,919

    Intangible assets, net                                 7,923       8,405

    Equity investments                                    45,782      45,875

    Other assets                                          19,929      19,706
                                                     ------------ -----------
    Total assets                                      $2,013,036  $2,094,291
                                                     ------------ -----------
                                                     ------------ -----------

    Note 1 - For comparative purposes, prior year figures have been presented
             on a consistent basis to reflect the Company's adoption of SFAS
             No. 167

                     (In thousands of Canadian dollars)

                                                              As at
                                                       April 4,    January 3,
                                                         2010        2010
                                                     ------------ -----------
                                                                   (Note 1)

    Current liabilities
      Accounts payable                                  $121,556    $135,248
      Accrued liabilities:
        Salaries and wages                                14,190      23,268
        Taxes                                             22,178      27,586
        Other                                             82,828     111,401
      Deferred income taxes                                   94         376
      Advertising fund restricted liabilities             43,920      43,944
      Current portion of long-term obligations           307,795       7,821
                                                     ------------ -----------
    Total current liabilities                            592,561     349,644
                                                     ------------ -----------

    Long-term obligations
      Term debt                                           35,994     336,302
      Advertising fund restricted debt                       300         415
      Capital leases                                      67,183      67,156
      Deferred income taxes                               13,110      10,159
      Other long-term liabilities                         69,985      74,929
                                                     ------------ -----------
    Total long-term obligations                          186,572     488,961
                                                     ------------ -----------

      Equity of Tim Hortons Inc.
      Common shares
         Authorized: unlimited shares
         Issued: 175,412,510 and 177,318,614 shares,
          respectively                                   497,535     502,872
         Common stock held in trust, at cost:
          278,500 shares                                  (9,437)     (9,437)
         Retained earnings                               797,517     796,235
         Accumulated other comprehensive loss           (137,597)   (120,061)
                                                     ------------ -----------
      Total equity of Tim Hortons Inc.                 1,148,018   1,169,609
      Noncontrolling interests                            85,885      86,077
                                                     ------------ -----------
    Total equity                                       1,233,903   1,255,686
                                                     ------------ -----------
    Total liabilities and equity                      $2,013,036  $2,094,291
                                                     ------------ -----------
                                                     ------------ -----------

    Note 1 - For comparative purposes, prior year figures have been presented
             on a consistent basis to reflect the Company's adoption of SFAS
             No. 167

                     (In thousands of Canadian dollars)

                                                        First Quarter Ended
                                                       April 4,    March 29,
                                                         2010        2009
                                                     ------------ -----------
                                                                  (Note 1)

    Net income                                           $84,573     $71,382
    Adjustments to reconcile net income to net
     cash provided by operating activities
      Depreciation and amortization                       28,865      27,713
      Stock-based compensation expense                     2,295       1,481
      Equity income, net of cash dividends                   (59)      1,401
      Deferred income taxes                                1,782         834
      Changes in operating assets and liabilities
        Restricted cash and cash equivalents              27,397      28,166
        Accounts and notes receivable                     15,790       5,993
        Inventories and other                            (11,887)     (7,136)
        Accounts payable and accrued liabilities         (56,924)    (97,487)
      Other, net                                           2,177       1,963

                                                     ------------ -----------
    Net cash provided from operating activities           94,009      34,310
                                                     ------------ -----------

    Capital expenditures                                 (24,289)    (36,134)
    Proceeds from sale of restricted investments           3,200           -
    Principal payments received on notes receivable          209         585
    Other investing activities                            (1,621)     (1,286)

                                                     ------------ -----------
    Net cash used in investing activities                (22,501)    (36,835)
                                                     ------------ -----------

    Purchase of common shares/treasury stock             (61,655)    (16,706)
    Dividend payments to common shareholders             (22,698)    (18,154)
    Distributions to noncontrolling interests             (5,876)     (8,109)
    Proceeds from issuance of debt,
     net of issuance costs                                 1,160         572
    Principal payments on other
     long-term debt obligations                           (1,604)     (1,261)

                                                     ------------ -----------
    Net cash used in financing activities                (90,673)    (43,658)
                                                     ------------ -----------

    Effect of exchange rate changes on cash               (2,365)      1,245
                                                     ------------ -----------

    Decrease in cash and cash equivalents                (21,530)    (44,938)

    Cash and cash equivalents at beginning of period     121,653     124,717

                                                     ------------ -----------
    Cash and cash equivalents at end of period          $100,123     $79,779
                                                     ------------ -----------
                                                     ------------ -----------

    Note 1 - For comparative purposes, prior year figures have been presented
             on a consistent basis to reflect the Company's adoption of SFAS
             No. 167

                              SEGMENT REPORTING
                     (In thousands of Canadian dollars)
                               (Note 1 and 2)


                                             First Quarter ended
                                April 4,     % of       March 29,    % of
                                  2010       Total        2009       Total
                              ----------- ----------- ----------- -----------
    Canada                      $468,665       80.4%    $428,605       77.1%
    U.S.                          27,713        4.8%      34,327        6.2%
                              ----------- ----------- ----------- -----------
    Total reportable
     segments                    496,378       85.2%     462,932       83.3%
    Variable interest
     entities                     86,234       14.8%      92,775       16.7%
                              ----------- ----------- ----------- -----------
    Total                       $582,612      100.0%    $555,707      100.0%
                              ----------- ----------- ----------- -----------
                              ----------- ----------- ----------- -----------

    Canada                      $132,386      100.2%    $115,822      100.5%
    U.S.                            (246)     (0.2)%        (564)     (0.5)%
                              ----------- ----------- ----------- -----------
    Reportable Segment
     Operating Income            132,140      100.0%     115,258      100.0%
                                          -----------             -----------
                                          -----------             -----------
    Variable interest entities     6,480                   6,274
    Corporate Charges            (10,884)                (10,316)
                              -----------             -----------
     Operating Income            127,736                 111,216
    Interest, net                 (5,100)                 (4,793)
    Income taxes                 (38,063)                (35,041)
                              -----------             -----------
    Net Income                    84,573                  71,382
    Net Income attributable
     to noncontrolling
     interests                     5,684                   4,943
                              -----------             -----------
    Net Income attributable
     to Tim Hortons Inc.         $78,889                 $66,439
                              -----------             -----------
                              -----------             -----------

                                 First quarter ended
                                April 4,   March 29,
                                 2010        2009      $ Change    % Change
                              ----------- ----------- ----------- -----------
    Sales is comprised of:
    Distribution sales          $314,724    $292,205     $22,519        7.7%
     restaurant sales              4,990       6,136      (1,146)    (18.7)%
    Sales from variable
     interest entities            86,234      92,775      (6,541)     (7.1)%
                              ----------- ----------- ----------- -----------
                                $405,948    $391,116     $14,832        3.8%
                              ----------- ----------- ----------- -----------
                              ----------- ----------- ----------- -----------

    Note 1 - For comparative purposes, prior year figures have been presented
             on a consistent basis to reflect the Company's adoption of SFAS
             No. 167

    Note 2 - While the adoption of SFAS No. 167 resulted in the consolidation
             of its 50-50 bakery joint venture, the Company's chief decision
             maker continues to view and evaluate the performance of the
             Canadian segment with this 50-50 bakery joint venture accounted
             for on an equity accounting basis, which reflects 50% of its
             operating income (consistent with views and evaluations prior to
             the adoption of the Standard). As a result, the net revenues,
             and the remaining 50% of operating income of this joint venture
             have been included in Variable interest entities along with
             revenues and operating income from our non-owned consolidated

                         SYSTEMWIDE RESTAURANT COUNT

                                             Increase/              Increase/
                        As of     As of     (Decrease)    As of    (Decrease)
                       April 4,  January 3,    From     March 29,  From Prior
                         2010      2010      Year End     2009        Year

    Tim Hortons

      Company-operated        15         13          2         17         (2)
      Franchised           3,014      3,002         12      2,913        101
    Total                  3,029      3,015         14      2,930         99

    % Franchised           99.5%      99.6%                 99.4%

      Company-operated         5          5          0         19        (14)
      Franchised             562        558          4        508         54
    Total                    567        563          4        527         40

    % Franchised           99.1%      99.1%                 96.4%

    Total Tim Hortons
      Company-operated        20         18          2         36        (16)
      Franchised           3,576      3,560         16      3,421        155
    Total                  3,596      3,578         18      3,457        139

    % Franchised           99.4%      99.5%                 99.0%

                                TIM HORTONS INC. AND SUBSIDIARIES
                                Income Statement Definitions

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

    Rents and Royalties         Includes franchisee royalties and rental

    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) as well as cost of
                                sales from our bakery joint venture.

    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, and depreciation of
                                office equipment, the majority of our
                                information technology systems, and head
                                office real estate.

    Equity Income               Includes income from equity investments in
                                joint ventures and other minority investments
                                over which we exercise significant influence,
                                excluding joint ventures that we are required
                                to consolidate. 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 foreign currency
                                adjustments, gains and losses on asset sales,
                                and other asset write-offs.

    Noncontrolling interests    Relates to the consolidation of our bakery
                                joint venture and certain non-owned
                                restaurants that the Company is required to
                                consolidate under ASC 810 (formerly SFAS No.
                                167 and FIN 46R).

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

SOURCE Tim Hortons

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

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