Tim Hortons Inc. Announces 2009 Second Quarter Results

Positive sales and earnings growth despite continued challenging economic
conditions

(All amounts in Canadian dollars)

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

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

(1) Operating Income and Effective Tax Rate incorporate adoption of SFAS
# 160 - Noncontrolling Interests in Condensed Consolidated
Financial Statements.

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

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


OAKVILLE, ON, Aug. 6 // PRNewswire-FirstCall // - Tim Hortons Inc. (NYSE: THI, TSX: THI) today announced its results for the second quarter ended June 28th, 2009.

"We overcame anticipated challenges in the second quarter and delivered positive sales and earnings growth, demonstrating the strength and resilience of our business," said Don Schroeder, president and CEO. "We were particularly pleased with growth in transactions in our Canadian business and the operational and earnings improvement in our U.S. business," added Schroeder.

Consolidated Results

Second quarter systemwide sales(3) grew 5.0% on a constant currency basis, supported by new restaurants open in the system and continued same-store sales growth both in Canada and the U.S. In the second quarter total revenues increased 8.9% to $556.1 million compared to $510.7 million in same period of 2008. Systemwide sales growth drove higher rents, royalties and distribution revenues. Total revenues also benefited from higher distribution sales. Foreign exchange translation increased revenues by approximately 1.4%. Continued progress was made during the quarter in transitioning Company-operated restaurants to owner-operated restaurants. While this process provides important longer-term benefits, it tends to offset shorter-term revenue growth as was the case in the second quarter. Revenue growth was also impacted by lower revenues from FIN 46R restaurants, and lower franchise fees.

Sales, consisting primarily of distribution sales, were up 10.8% compared to the same quarter last year. Consistent with the first quarter, Sales growth benefited from new products managed through the supply chain including expansion in the grocery store channel, continued systemwide sales growth, and higher prices on coffee and other commodities as a result of higher underlying costs. Sales were positively impacted by approximately 1.4% due to foreign exchange translation.

In the second quarter rents and royalties increased 7.3%. This rate of growth is generally consistent with systemwide sales. Franchise fees decreased 9.3%. The year over year decline in franchise fees was due primarily to fewer new restaurant openings, lower resales, and fewer renovations, offset in part by the timing of revenue recognition in our U.S. franchise incentive program.

Same-store sales increased 1.7% in Canada and 3.3% in the U.S. Transaction growth and a slight increase in average check, due to minimal levels of previous price increases remaining in the system, helped overcome a shift in product mix, the anticipated timing impact of the Easter holiday reversing, and generally challenging macro economic conditions that continued to persist during the quarter.

Positive same-store sales were driven by continued menu and marketing initiatives that included the launch of Chicken Wrap Snackers immediately prior to the quarter, and the national introduction of Iced Coffee in the Canadian market, supported by a free sample day. In addition to product introductions, Iced Cappuccino, breakfast sandwiches and strawberry bloom donuts were promoted. In the U.S., the sausage and a biscuit product offering, first successfully offered in February, was also promoted during the quarter at an attractive price point.

Foreign exchange translation increased individual cost structure line items on average by about 1.7% in the second quarter.

In the second quarter cost of sales increased by 12.0%. The increase was due mostly to higher product costs associated with new products managed through the supply chain, increased costs of underlying commodities, and systemwide sales growth. Foreign exchange translation contributed approximately 1.4% to the increase in cost of sales. Lower cost of sales from Company-operated and FIN 46R restaurants partially offset these factors.

Operating expenses grew 8.8% in the second quarter. Most of the increase is attributable to the increase in restaurants in the system compared to the same period last year, percentage rent increases on variable rents, and foreign currency translation, which contributed 2.0% of the increased expenses.

During the second quarter franchise fee costs were 1.5% lower than the comparable quarter last year, mostly due to fewer new restaurant openings, lower resales and fewer renovations, offset by the timing of cost recognition related to our U.S. franchise incentive program.

General and administrative expense declined 1.2% compared to the same period last year, and incorporates spending of approximately $2.7 million on professional advisory and filing fees associated with the proposed public company reorganization. Foreign currency translation increased general and administrative costs by 2.0%. The largest factor for the year-over-year improvement in general and administrative expenses was management restructuring costs of approximately $3.1 million incurred in the second quarter of 2008, which did not recur.

Second quarter equity income declined 13.1% compared to the same period last year. In the second quarter of 2008, certain joint ventures benefited from items that did not recur this quarter. In addition, the decline in equity income reflects certain underlying commodity cost increases absorbed by our joint venture bakery and not passed on to franchisees.

Operating income for the second quarter was $121.9 million, up 3.7% from $117.6 million in the same period last year. Continued same-store sales growth, a higher number of restaurants in the system resulting in higher rents, royalties, and distribution income, and improvement in the operating performance of the U.S. segment contributed to the increase in operating income. The fundamentals of our business remained strong, however, the rate of operating income growth during the quarter was reduced in part by the $2.7 million in professional advisory and filing fees associated with the previously announced proposed transaction to reorganize as a Canadian public company, by a decline in franchise fee and equity income, and by lower other income.

Net income attributable to Tim Hortons was $77.8 million, an increase of 3.7% compared to $75.0 million last year, in line with operating income growth. The effective tax rate was relatively flat in the second quarter of 2009, at 33.2% versus 33.1% last year, as was net interest expense.

Diluted earnings per share attributable to Tim Hortons (EPS) were $0.43, increasing 5.6% compared to $0.41 in the second quarter of 2008. EPS benefited from 1.8% fewer shares outstanding in the quarter compared to the same time last year.

Segmented Performance Commentary

Canada
------

Same-store sales in Canada increased 1.7%, progressively increasing throughout the quarter, compared to a strong growth rate of 5.7% in the second quarter of 2008. Active menu initiatives and promotions resulted in transaction growth in the quarter. Minimal levels of previous price increases remaining in the system helped offset the impact of product mix shift and promotions on average check, which increased slightly. As a result, the Canadian segment overcame general economic weakness and the impact of the timing reversal of Easter during the quarter, which negatively impacted same-store sales by approximately 0.4%. A total of 15 restaurants were opened in Canada during the quarter.

Canadian segment operating income was $131.0 million, increasing 0.4% from $130.4 million in the second quarter of 2008. Operating margin in the Canadian segment was impacted by higher underlying commodity costs, which reduced our distribution income growth and equity income in our joint venture bakery, as not all of the increased commodity costs were passed on to our franchisees. Lower income associated with franchise sales also impacted operating income.

By the end of the quarter, six co-branded Cold Stone Creamery(R) locations had been opened in Ontario, and the Company is expanding with an additional six sites in other Canadian markets this year.

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

For the second straight quarter, the U.S. segment had robust sales performance with a 3.3% increase in same-store sales. A strong menu promotional program and significant benefit from Cold Stone Creamery co-branded locations more than offset the timing shift of Easter in the quarter, which negatively impacted same-store sales by approximately 0.7%. By the end of the second quarter, 39 co-branded Tim Hortons - Cold Stone Creamery locations had been opened, including one co-branded Cold Stone Creamery site, experiencing positive consumer trial and sales contributions. The Company previously announced that it intends to co-brand three existing Cold Stone Creamery locations in Manhattan. Subsequent to the quarter, the Company also announced a significant push into New York City, with 12 franchised locations at key sites such as Penn Station, Times Square and Broadway. A total of 10 restaurants were opened in the U.S. during the quarter.

The U.S. segment had operating income of $3.1 million in the second quarter, a $3.3 million profit improvement over the prior year. Several factors contributed to the improved profitability this quarter, including systemwide and same-store sales growth, a benefit of $1.2 million from the 2008 restaurant closures and related asset impairment charge, lower general and administrative expenses, and contributions from vertical integration in the segment. Relief to Company-operated restaurants converted to owner-operator restaurants, and to restaurants in developing markets open for less than twelve months, were the largest offsetting factors to U.S. segment operating income.

Foreign currency translation raised both U.S. segment revenues and costs by approximately 14% during the quarter compared to the second quarter of 2008.

Internationally, in the Republic of Ireland and the United Kingdom, there are now 297 licensed locations primarily in the convenience store channel under the Tim Hortons brand. While not a material contributor to earnings or revenue at this time, the international business is part of a developing international strategy and potential platform for future growth.

Corporate Developments & Outlook

2009 Outlook & Targets
----------------------

Based on performance year to date, and Management's plans and outlook for the remainder of 2009, the Company expects to meet its previously announced operating income growth target, excluding the impact of $6 million to $7 million in transactional costs associated with the Company's proposed reorganization as a Canadian corporation. Approximately $4.1 million has been incurred year to date on this transaction. Absent these costs, the Company's operating income growth target is 11% to 13%, or 6% to 8% when factoring in the impact of asset impairment and related restaurant closure costs in the fourth quarter of 2008.

The Company also currently expects to meet its same-store sales growth target of 3% to 5% in Canada, and expects it may exceed its target of 0% to 2% same-store sales growth and break-even operating income in the U.S.

Board declares dividend payment of $0.10 per share
--------------------------------------------------

The Board of Directors has declared a quarterly dividend of $0.10 per share payable on September 1st, 2009 to stockholders of record as of August 18th, 2009. The Company's current dividend policy is to pay a total of 20%-25% of prior year, normalized annual net earnings in dividends each year, returning value to stockholders based on the Company's earnings growth.

Dividends are paid in Canadian dollars to all stockholders with Canadian resident addresses whose shares are registered with Computershare (the Company's transfer agent). For all other stockholders, including all stockholders who hold their shares indirectly (i.e., through their broker) and regardless of country of residence, the dividend will be converted to U.S.

dollars on August 25th, 2009 at the daily noon rate established by the Bank of Canada and paid in U.S. dollars on September 1st, 2009.

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

On June 29, 2009, we announced the filing of a registration statement on Form S-4 with the U.S. Securities and Exchange Commission (SEC), as amended by the Form S-4/A filed on July 27, 2009, File # 333-160286, Central Index Key: 0001467019 ("Form S-4"), for a proposed transaction to reorganize the Company as a Canadian public company. The proposed reorganization is subject to various closing conditions, including stockholder approval and the Board of Directors' right in its sole discretion to defer or abandon the reorganization. A special meeting of stockholders to vote on the reorganization is expected to be held during the third quarter of 2009.

Additional Information About the Reorganization and Where to Find It
--------------------------------------------------------------------

The Company's wholly-owned subsidiary, Tim Hortons Inc. (New THI), has filed this Form S-4, which includes a proxy statement/prospectus, and other relevant materials, in connection with the reorganization. The proxy statement/prospectus will be mailed to the stockholders of the Company once the registration statement has been declared effective by the SEC. Investors and security holders of the Company are urged to read the proxy statement/prospectus and the other relevant materials when they become available because they will contain important information about the Company, New THI and the reorganization.

The registration statement, proxy statement/ prospectus and other relevant materials and any other documents filed by the Company or New THI with the SEC, may be obtained free of charge at the SEC's website at www.sec.gov, at the website maintained by the Canadian Securities Administrators at www.sedar.com, or on the Tim Hortons investor relations website at www.timhortons-invest.com. Investors can also receive free copies of these documents by contacting Tim Hortons Inc., 874 Sinclair Road, Oakville, Ontario, Canada, L6K 2Y1, Attention: Investor Relations. The Company and New THI and their respective directors, executive officers and certain other members of management and employees may be deemed to be participants in the solicitation of proxies in respect of the proposed reorganization. Information about the executive officers and directors of the Company and their ownership of shares of Company common stock is included in the registration statement filed with the SEC and the documents and information incorporated by reference therein.

Camp Day
--------

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

 Tim Hortons to host conference call at 11:00 a.m. (EDT) today, August
6th, 2009



Tim Hortons will host a conference call today to discuss the results, scheduled to begin at 11:00 a.m. (EDT). The dial-in number is (416) 641-6712 or (800) 354-6885. No access code is required. A simultaneous web cast will be available at www.timhortons-invest.com. A presentation supporting the call will be available at this web site under the Events and Presentations section. The call will be archived at this site for a period of one-year and will also be available under the Events and Presentations section. A replay of the call will be available for a period of one week and can be accessed at (416) 626-4100 or (800) 558-5253. The call replay reservation number is 21432344.

Safe Harbor Statement

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


(3) Total systemwide sales growth includes restaurant level sales at both
Company and Franchise restaurants. Approximately 99.4% of our
consolidated system is franchised as at June 28th, 2009. Systemwide
sales growth is determined using a constant exchange rate, where
noted, to exclude the effects of foreign currency translation. U.S.
dollar sales are converted to Canadian dollar amounts using the
average exchange rate of the base year for the period covered. For
the second quarter of 2009, systemwide sales growth on a constant
currency basis was up 5.0% compared to the second quarter of 2008.
Systemwide sales are important to understanding our business
performance as they impact our franchise royalties and rental income,
as well as our distribution income. Changes in systemwide sales are
driven by changes in average same-store sales and changes in the
number of systemwide restaurants.

Tim Hortons Inc. Overview

Tim Hortons is the fourth largest publicly-traded quick service restaurant chain in North America based on market capitalization, and the largest in Canada. Tim Hortons appeals to a broad range of consumer tastes, with a menu that includes premium coffee, flavored cappuccinos, specialty teas, home-style soups, fresh sandwiches, donuts and fresh baked goods. As of June 28th, 2009, Tim Hortons had 3,475 systemwide restaurants, including 2,939 in Canada and 536 in the United States. More information about the Company is available at www.timhortons.com.


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

(Unaudited)

Second quarter ended

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

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

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

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

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

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

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

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

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

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

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

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

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

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

N/M - not meaningful
(all numbers rounded)



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

(Unaudited)

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

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

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

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

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

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

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

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

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

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

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

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

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

N/M - not meaningful
(all numbers rounded)



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

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

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

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

Notes receivable, net 16,820 17,645

Deferred income taxes 27,857 29,285

Intangible assets, net 2,336 2,606

Equity investments 127,862 132,364

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




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

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

LIABILITIES AND EQUITY

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

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

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



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

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

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

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

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

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

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

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

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

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

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

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



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

(Unaudited)

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

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

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

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


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

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

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

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


TIM HORTONS INC. AND SUBSIDIARIES
SYSTEMWIDE RESTAURANT COUNT



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

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

% Franchised 99.5% 99.5% 99.3%

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

% Franchised 99.1% 96.3% 91.9%

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

% Franchised 99.4% 99.0% 98.3%



TIM HORTONS INC. AND SUBSIDIARIES
Income Statement Definitions


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

Rents and Royalties Includes franchisee royalties and rental revenues.

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

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

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

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

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

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

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

Noncontrolling
interests Represents restaurants that the Company is required
to consolidate under FIN 46R.

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

SOURCE Tim Hortons Inc.

###

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