Tim Hortons Inc. growth initiatives contribute to increased same-store sales in fourth quarter 2012

 Tim Hortons Inc. growth initiatives contribute to increased same-store sales
                            in fourth quarter 2012

PR Newswire

OAKVILLE, ON, Feb. 21, 2013

Quarterly dividend increased 23.8% to $0.26 per common share; New share
repurchase program of up to $250 million announced

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

                         Financial & Sales Highlights
Performance                                %       2012       2011
                        Q4 2012  Q4 2011 Change Full Year  Full Year  % Change
Total revenues                      $
                     $ 811.6    779.8  4.1%   $ 3,120.5  $ 2,853.0   9.4%
Operating income                    $
                     $ 150.4    152.8 (1.6)% $ 594.5 $ 569.5   4.4%
Adjusted operating                  $
income ^(1)          $ 157.4    150.8  4.4%  $ 604.7 $ 567.8   6.5%
Effective tax rate        28.9%    28.7%            27.7%      29.0%    
Net income                          $
attributable to THI  $ 100.3    103.0 (2.5)% $ 402.9 $ 382.8   5.2%
Diluted earnings per
share
attributable to THI      $   $            $     $
("EPS") ^(2)               0.65     0.65  0.2%        2.59       2.35   9.9%
Fully diluted shares      154.1    158.4 (2.7)%      155.7      162.6  (4.3)%



(All numbers in millions, except EPS and effective tax rate. All numbers
rounded.)
(1) Adjusted operating income is a non-GAAP measure. Refer to
         "Information on non-GAAP Measure" and the reconciliation information
         in this release for details of reconciling items.
(2) The impact of corporate reorganization expenses on EPS was $0.05 in
         Q4 2012 and $0.10 in fiscal 2012.



Same-Store Sales Growth ^ (3) Q4 2012 Q4 2011 2012 Full Year 2011 Full Year
Canada                         2.6%    5.5%        2.8%           4.0%
U.S.                           3.2%    7.2%        4.6%           6.3%



(3) Includes average same-store sales at Franchised and Company-operated
         locations open for 13 months or more. Substantially all of our
         restaurants are franchised.



Highlights

  *Continued same-store sales growth in both the Canada and U.S. segments in
    a challenging economic climate
  *Favourable guest response to Panini sandwiches and single-serve coffee
  *Operating income and EPS impacted by corporate reorganization expenses of
    $9.0 million in Q4 ($0.05 per share) and $18.9 million in fiscal year 2012
    ($0.10 per share)
  *EPS growth of 9.9% in fiscal year 2012
  *Dividend payout range raised and quarterly dividend increased 23.8% to
    $0.26 per common share
  *New share repurchase program of up to $250 million announced
  *2013 performance and financial targets announced

OAKVILLE, ON, Feb. 21, 2013 /PRNewswire/ - Tim Hortons Inc. (TSX: THI), (NYSE:
THI) today announced results for the fourth quarter and fiscal year ended
December 30^th, 2012.

"Menu innovation and other strategic initiatives helped contribute to our
growth in the fourth quarter, as shown by improvements in same-store sales
growth rates compared to the previous quarter. Economic and operating
conditions remain challenging. We are focused on leveraging our unique brand
position, menu innovation, marketing and operational initiatives to help
respond to the operating environment and continue to grow our business," said
Paul House, executive chairman, president and CEO.

Consolidated Results

All percentage increases and decreases represent year-over-year changes for
the fourth quarter of 2012 compared to the four th quarter of 2011, unless
otherwise noted.

Our systemwide sales^(4) increased 6.4% on a constant currency basis. This
growth resulted from new restaurant development in Canada and the U.S., and
from same-store sales growth of 2.6% in Canada, and 3.2% in the U.S.

Total revenues increased 4.1% to $811.6 million, compared to $779.8 million a
year earlier. Revenue growth was below systemwide sales growth mainly because
its largest component, distribution sales, increased at a more modest rate of
3.0% due primarily to lower commodity costs which we passed on to our
restaurant owners and are therefore reflected in lower cost of sales.
Distribution sales benefited from a higher number of system restaurants and
continued same-store sales growth.

Variable interest entities ("VIEs") sales were 8.5% higher due to an increase
in the number of non-owned restaurants that were consolidated for accounting
purposes, primarily in the U.S., and due to same-store sales growth at
existing consolidated restaurants. Rents and royalties grew by 4.8%, driven
by systemwide sales growth. Franchise fees grew 1.7%, due to a higher number
of renovations during the quarter, offset by fewer resales and standard
restaurant sales.

Total costs and expenses were up 5.5% in the fourth quarter, with the majority
of the increase attributable to growth in cost of sales and the corporate
reorganization expenses. Systemwide sales growth drove the increase in cost of
sales, but was partially offset by reduced commodity costs, particularly
coffee.

In the second half of 2012, we began the process of implementing a new
organizational structure and realigning roles and responsibilities under that
new structure. As a result, we incurred $18.9 million of corporate
reorganization expenses in fiscal 2012, including $9.0 million in the fourth
quarter, consisting primarily of termination costs and professional fees.

Operating expenses increased by 11.1%, reflecting higher rent and depreciation
costs related to the impact of increased restaurant development and
renovations, and depreciation related to the digital menu board rollout.
Franchise fee costs grew by 6.6%, due to increased renovations and higher
support costs related in part to operational initiatives including drive-thru
capacity-building programs. General and administrative expenses decreased by
6.7% as a result of several factors including lower performance-based costs,
lower salary and benefits as a result of the reorganization, and timing of
certain expenses.

Operating income was $150.4 million in the fourth quarter, a decline of 1.6%
compared to $152.8 million a year earlier. The decrease was attributable to
the corporate reorganization expenses noted above. Adjusted operating
income^(5) of $157.4 million, which excludes the impact of the corporate
reorganization expenses, was up 4.4%, in line with revenue growth. (Please
refer to "Information on non-GAAP Measure" below for a reconciliation of
adjusted operating income to operating income, the nearest GAAP measure.)

Net income attributable to Tim Hortons Inc. was $100.3 million, a decrease of
2.5% compared to $103.0 million last year. The decrease was largely the
result of lower operating income, as noted above, and higher net interest
expense.

EPS of $0.65 was flat compared to the fourth quarter of last year, with the
previously noted corporate reorganization expenses reducing EPS by
approximately $0.05. The decline in net income attributable to THI was offset
by the positive, cumulative impact of our share repurchase programs. We had
2.7% fewer average fully diluted common shares outstanding in the fourth
quarter compared to the same period last year.

For the full year, systemwide sales^(4) increased 6.9% in 2012 on a constant
currency basis. Total revenues rose 9.4% to $3.12 billion compared to $2.85
billion last year. Operating income was $594.5 million, up 4.4% from $569.5
million in 2011. Adjusted operating income^(5) grew 6.5% to $604.7 million.
(Please refer to "Information on Non-GAAP Measure" below for a reconciliation
of adjusted operating income to operating income, the nearest GAAP measure.)
Net income attributable to THI in 2012 was up 5.2% to $402.9 million.

EPS for the full year was $2.59, representing growth of 9.9%. Our 2012
earnings outlook communicated in February 2012 of $2.65 to $2.75 per share did
not contemplate the $0.10 per share corporate reorganization charge taken
during the fiscal year. Full-year EPS benefited from 4.3% fewer shares in
2012 due to our share repurchase program. The effective tax rate for the full
year was 27.7% compared to 29.0% last year, with the reduction contributing to
EPS growth.

Segmented Performance Commentary

We delivered same-store sales growth of 2.6% in Canada and 3.2% in the U.S. in
the fourth quarter, building on robust same-store sales growth of 5.5% in
Canada and 7.2% in the U.S. in the fourth quarter of 2011. Challenging
macro-economic conditions and the resulting intensified competitive
environment continued in the quarter.

In both markets, same-store sales benefited marginally from the timing of New
Year's Eve and New Year's Day, which tend to be slower sales days, and which
both occurred in the fourth quarter last year but this year fell in the first
quarter of fiscal 2013.

Canada

The 2.6% increase in same-store sales in Canada was driven by a higher average
cheque due primarily to favourable product mix, highlighted by the launch of
Panini sandwiches and single-serve coffee products, as well as promotions of
specialty hot drinks and holiday lattes. To a lesser extent, pricing also had
a positive impact. These factors more than offset a decline in same-store
transactions. Systemwide transactions continued to increase, reflecting growth
from our ongoing development of new restaurants.

We opened 74 restaurants in Canada in the fourth quarter, the majority of
which were standard format locations.

Operating income in our Canadian segment was $163.7 million in the fourth
quarter, an increase of 2.7% compared to $159.4 million a year earlier. The
increase was due primarily to growth in systemwide sales, which led to higher
rents and royalties and distribution income, partially offset by a decrease in
franchise fee income. In the fourth quarter of 2011, operating income
benefited from a gain on a property disposition which did not recur this year.

In 2012, on a full-year basis, same-store sales growth of 2.8% in the Canadian
segment was slightly below our previously stated target range of 3% to 5%. We
believe the economic conditions and resulting intensified competitive
environment were a factor, and that initiatives currently underway, including
menu innovation and efforts to increase restaurant capacity, will help address
these challenges. We opened 159 restaurants in 2012, within our targeted
range of 155-175 openings. The Canadian segment delivered operating income of
$637.3 million, an increase of 4.9% over 2011.

United States

The U.S. segment had same-store sales growth of 3.2%. The overall increase
was largely attributable to gains in average cheque due to pricing, with
same-store transactions showing slightly positive growth.

We opened 54 restaurants in the U.S. during the quarter, including 29 standard
and 23 non-standard full-serve locations and 2 self-serve kiosks.

Operating income in the U.S. segment was $4.7 million, a decrease of $0.9
million. Strong systemwide sales growth led to an increase in rent, royalty
and distribution revenues, but this was more than offset by higher operating
costs and relief associated mainly with previously opened restaurants, as well
as higher general and administrative expenses to support the growth of the
business.

On a full-year basis, we grew same-store sales in the U.S. segment by 4.6%,
within our targeted range of 4% to 6% growth. We opened 98 new locations in
the U.S. in 2012, comprised of 44 standard full-serve restaurants, 41
full-serve non-standard locations and 13 self-serve kiosks. We had targeted 80
to 100 full-serve restaurants. Operating income for the segment was $16.5
million in 2012, an increase of 9.3% over the prior year.

Internationally, through our master licensee in the Gulf Cooperation Council,
we opened 6 restaurants in the fourth quarter, and 19 locations for the full
year. At year-end, we had 24 restaurants in the GCC.

Corporate Developments

Reorganization and CEO Succession Update

The Company has made significant progress in both its reorganization and CEO
succession processes. We expect to have substantially completed realigning
roles and responsibilities within our new structure by the end of the first
quarter of 2013. At the same time, the Board has made significant progress in
its external CEO search. Although the process is not yet complete, the Board
currently anticipates appointing a new CEO by early summer.

While the majority of the costs associated with the reorganization were
recognized in fiscal 2012, an additional charge of approximately $9 million is
expected to be incurred in the first quarter of fiscal 2013. We believe that
the new structure will facilitate the execution of strategic initiatives as we
continue to grow our business and streamline decision-making across the
Company. We also believe that the new structure will create scalability for
future growth and reduce our cost structure relative to what it otherwise
would have been had we not undertaken the reorganization.

Quarterly dividend payment increased 23.8% to $0.26 per common share and
target payout range raised

The Board of Directors has approved an increase in the targeted dividend
payout range to 35%-40% of prior-year normalized net income attributable to
Tim Hortons Inc., reflecting its continued confidence in the Company's ability
to generate strong cash flows. Accordingly, the Board has increased the
quarterly dividend by approximately 23.8%, to $0.26 per common share, payable
on March 19^th, 2013 to shareholders of record as of the close of business on
March 4^th, 2013. The payment of future dividends and our targeted payout
range remain subject to Board approval. Dividends declared will be paid in
Canadian dollars to all shareholders with Canadian resident addresses. For
U.S. shareholders, dividends paid will be converted to U.S. dollars based on
prevailing exchange rates at the time of conversion by Tim Hortons for
registered shareholders and by Clearing and Depository Services Inc. for
beneficial shareholders.

New share repurchase program of up to $250 million announced

Tim Hortons has obtained regulatory approval from the Toronto Stock Exchange
("TSX") to commence a new share repurchase program for up to $250 million in
common shares, not to exceed the regulatory maximum of 15,239,531 shares,
representing 10% of the Company's public float as of February 14^th, 2013, as
defined under TSX rules. This normal course issuer bid is planned to commence
on February 26^th, 2013 and to expire on February 25^th, 2014.

Subject to the negotiation and execution of a broker agreement, the Company's
common shares will be purchased under the program through a combination of a
10b5-1 automatic trading plan as well as at management's discretion in
compliance with regulatory requirements, and given market, cost and other
considerations.

Repurchases will be made through the facilities of the TSX (and/or other
Canadian marketplaces), the New York Stock Exchange ("NYSE"), or by such other
means as may be permitted by the TSX and/or the NYSE, and under applicable
laws, including private agreements permitted under issuer bid exemption orders
issued by a securities regulatory authority in Canada. Purchases made by way
of private agreements under an issuer bid exemption order issued by a
securities regulatory authority will be at a discount to the prevailing market
price, as provided in the exemption order.

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.

The maximum number of shares that may be purchased during any trading day may
not exceed 25% of the average daily trading volume on the TSX, excluding
purchases made by Tim Hortons, based on the previous six completed calendar
months, for a daily total of 122,790 common shares. This limit, for which
there are permitted exceptions, is determined in accordance with regulatory
requirements. Under the 2012 program, Tim Hortons purchased 3,899,078 shares
at a weighted average price of $51.29. As of February 14^th, 2013, we had
153,404,839 common shares outstanding.

2013 Outlook

"In accordance with our strategic roadmap, in 2013 we plan to make balanced,
targeted investments to support the continued growth of the business and help
address the impact of a challenging economic environment," said Paul House,
executive chairman, and president and CEO.

The Company has established the following 2013 performance targets:

  *Diluted earnings per share (EPS) of $2.87 to $2.97

       *Items not incorporated into our fiscal 2013 financial outlook include
         the approximately $9 million of reorganization costs expected to be
         incurred in the first quarter, as well as further costs we expect to
         incur during 2013 related to the transition to a new CEO, the amount
         and timing of which are not yet determinable.

  *2013 same-store sales growth of 2% to 4% in Canada and 3% to 5% in the
    U.S.

       *We have experienced weakness in same-store sales growth thus far in
         2013, due mainly to a continued challenging economic environment and
         the resulting intensified competitive environment, and unfavourable
         weather conditions. We expect weaker same-store sales growth in the
         first quarter due to these factors and strong prior-year comparables,
         as same-store sales growth rates in the first quarter of 2012 were
         5.2% in Canada and 8.5% in the U.S.

  *A total of 250 to 290 restaurant openings, including:

       *160 to 180 restaurant openings in Canada
       *70 to 90 full-serve restaurant openings in the U.S.
       *Approximately 20 restaurant openings in the Gulf Cooperation Council

  *Capital expenditures between $250 million to $300 million.

       *Our increased level of capital expenditures in fiscal 2013 reflects
         more contemporary design elements. These design elements will be
         applied to our continued restaurant development activity in both
         Canada and the U.S., and our share of investments of approximately
         300 renovations in Canada. Additionally, we intend to implement
         drive-thru initiatives, such as order station relocations,
         double-orders stations, and double-lane drive-thrus, at more than
         1,000 locations in Canada. We also continue to invest in both
         technology initiatives and in our distribution facilities to support
         business growth.

  *In addition, our Canadian advertising fund will be investing up to $50
    million to continue the exterior menu board program at our Canadian
    drive-thru locations.
  *Effective tax rate of approximately 28%.

The operational objectives and financial outlook (collectively, "targets") are
for 2013 only, are forward-looking, and are based on our expectations and
outlook and shall be effective only as of the date the targets were originally
issued. The targets established for 2013 are based on accounting, tax and/or
other regulatory or legislative rules in place at the time the targets were
issued. The impact of future changes in accounting, tax and/or other
regulatory or legislative rules that may or may not become effective in fiscal
2013, changes to our share repurchase activities, and accounting, tax, audit
or other matters not contemplated at the time the targets were established
that could affect our business, are not included in the determination of these
targets.

Except as required by applicable securities laws, we do not intend to update
our annual targets. These targets and our performance generally are subject to
various risks and uncertainties ("risk factors") which may impact future
performance and our achievement of these targets. Refer to our safe harbor
statement, which incorporates by reference our "risk factors," set forth at
the end of this release, and our Annual Report on Form 10-K for 2011 filed on
February 28^th, 2012, our Quarterly Report on Form 10-Q filed on November
8^th, 2012, and our Annual Report on Form 10-K for 2012 (expected to be filed
on or about February 21^st, 2013).

Annual Meeting of Shareholders

The Board of Directors has set a record date of March 12^th, 2013 for the
annual meeting of shareholders. The meeting will be held on Thursday, May
9^th at 10:30 a.m. EDT at the Westin Harbour Castle, 1 Harbour Square, in
Toronto, Ontario.

Tim Hortons conference call today at 2:30 p.m. (EST) Thursday, February 21^st,
2013

Tim Hortons will host a conference call today to discuss fourth quarter and
fiscal year 2012 results, scheduled to begin at 2:30 p.m. (EST). The dial-in
number is (416) 641-6712 or (800) 773-0497. 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 February 28^th, 2013 and can be accessed at (416) 626-4100 or (800)
558-5253. The call replay reservation number is 21648038. The call and
presentation material will also be archived for a period of one year in the
Events and Presentations section of the Company's investor website.

Safe Harbor Statement

Certain information in this news release, particularly information regarding
future economic performance, finances, and plans, expectations and objectives
of management, and other information, constitutes 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 2011 Annual Report on Form 10-K filed February 28^th, 2012,
our Quarterly Report on Form 10-Q filed on November 8^th, 2012, and our 2012
Annual Report on Form 10-K expected to be filed on or about February 21^st,
2013 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
to management's expectations 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 an adverse event or condition that damages our strong brand
position and reputation; the absence of a material increase in competition or
in volume or type of competitive activity within the quick service restaurant
segment of the food service industry; general worldwide economic conditions;
cost and availability of commodities; the ability to retain our senior
management team or the inability to attract and retain new qualified
personnel; continuing positive working relationships with the majority of the
Company's restaurant owners; the absence of any material adverse effects
arising as a result of litigation; and there being no significant change in
the Company's ability to comply with current or future regulatory
requirements.

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.

^(4) Total systemwide sales growth includes restaurant level sales at both
Franchised and Company-operated restaurants. Approximately 99.5% of our
consolidated system was franchised as at December 30^th, 2012. Systemwide
sales growth is determined using a constant exchange rate where noted, to
exclude the effects of foreign currency translation. U.S. dollar sales are
converted to Canadian dollar amounts using the average exchange rate of the
base year for the period covered. For the fourth quarter of 2012, systemwide
sales on a constant currency basis increased 6.4% compared to the fourth
quarter of 2011. Full-year systemwide sales increased 6.9% in 2012 on a
constant currency basis. 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 same-store sales and changes in the number of systemwide
restaurants, and are ultimately driven by consumer demand.

We believe systemwide sales and same-store sales growth provide meaningful
information to investors regarding the size of our system, the overall health
and financial performance of the system, and the strength of our brand and
restaurant owner base, which ultimately impacts our consolidated and segmented
financial performance. Franchised restaurant sales are not generally included
in our Consolidated Financial Statements (except for certain non-owned
restaurants consolidated in accordance with applicable accounting rules);
however, franchised restaurant sales result in royalties and rental revenues,
which are included in our franchise revenues, and also supports growth in
distribution sales.

^(5) Information on non-GAAP Measure

Adjusted operating income is a non-GAAP measure. See below reconciliations for
adjusting items to calculate adjusted operating income. Management uses
adjusted operating income to assist in the evaluation of year-over-year
performance, and believes that it will be helpful to investors as a measure of
underlying growth rates. This non-GAAP measure is not intended to replace the
presentation of our financial results in accordance with GAAP. The Company's
use of the term adjusted operating income may differ from similar measures
reported by other companies. The reconciliation of operating income, a GAAP
measure, to adjusted operating income, a non-GAAP measure, is set forth in the
table below:

Reconciliation of Adjusted Operating Income

                           Q4 2012      Q4 2011      FY 2012       FY 2011
                                                                      
Operating income         $ 150.4      $152.8      $594.5       $569.5
Add: Corporate                                       18.9       -
Reorganization
expenses                       9.0      - 
Add: CEO Separation                                     -     6.3
Agreement                        -      - 
Less: Amortization of                               (8.3)   (8.3)
Maidstone Bakeries
supply agreement       (2.1)  (2.1) 
Less/Add: Net asset                                 (0.4)    0.4
impairment and closure
costs (recovery)                 -      - 
Adjusted operating                                      $604.7    $
income^(i)               $ 157.4      $ 150.8                       567.8

______________
All numbers rounded

(i) Includes operating income for consolidated non-owned restaurants and from
     the advertising fund of $1.8 million and $1.1 million in the fourth
     quarters of 2012 and 2011, respectively, and $6.9 million and $3.5
     million in fiscal 2012 and 2011, respectively.

Tim Hortons Inc. Overview

Tim Hortons is one of the largest publicly-traded restaurant chains 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,
espresso-based hot and cold specialty drinks including lattes, cappuccinos and
espresso shots, specialty teas, fruit smoothies, home-style soups, fresh
Panini and classic sandwiches, wraps, hot breakfast sandwiches and fresh baked
goods, including our trademark donuts. As of December 30^th, 2012, Tim Hortons
had 4,264 systemwide restaurants, including 3,436 in Canada, 804 in the United
States and 24 in the Gulf Cooperation Council. More information about the
Company is available at www.timhortons.com.

                                                                     
                      TIM HORTONS INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENT OF OPERATIONS
     (in thousands of Canadian dollars, except share and per share data)
                                 (Unaudited)
                                                                             
                                                                    
                              Fourth quarter ended                      
                             December 30,  January 1,                     
                                    2012         2012   $ Change   % Change
                                                                     
REVENUES                                                              
Sales                            $570,044    $548,147   $21,897      4.0% 
Franchise revenues                                                    
 Rents and royalties            200,277     191,042     9,235      4.8% 
 Franchise fees                  41,278      40,600       678      1.7% 
                                 241,555     231,642     9,913      4.3% 
TOTAL REVENUES                    811,599     779,789    31,810      4.1% 
                                                                     
COSTS AND EXPENSES                                                    
Cost of sales                     502,296     484,728    17,568      3.6% 
Operating expenses                 73,882      66,494     7,388     11.1% 
Franchise fee costs                39,485      37,031     2,454      6.6% 
General and administrative                                                
expenses                           39,877       42,735    (2,858)     (6.7%)
Equity income                     (3,637)     (3,566)      (71)      2.0% 
Corporate reorganization                                                  
expenses                            9,032            0      9,032        n/m
Other (income) expense, net           260       (481)       741       n/m 
TOTAL COSTS AND EXPENSES,                                                 
NET                               661,195      626,941     34,254       5.5%
                                                                     
OPERATING INCOME                  150,404     152,848   (2,444)    (1.6%) 
                                                                     
Interest expense                  (8,652)     (7,754)     (898)     11.6% 
Interest income                     1,102         862       240     27.8% 
                                                                     
INCOME BEFORE INCOME TAXES        142,854     145,956   (3,102)    (2.1%) 
                                                                     
Income taxes                       41,258      41,861     (603)    (1.4%) 
                                                                     
Net income                        101,596     104,095   (2,499)    (2.4%) 
Net income attributable to                                                
noncontrolling interests            1,255        1,142        113       9.9%
                                                                     
NET INCOME ATTRIBUTABLE TO                                                
TIM HORTONS INC.                 $100,341     $102,953   ($2,612)     (2.5%)
                                                                     
Basic earnings per common
share attributable to Tim                                                 
Hortons Inc.                        $0.65        $0.65      $0.00       0.1%
                                                                     
Diluted earnings per common
share attributable to Tim                                                 
Hortons Inc.                        $0.65        $0.65      $0.00       0.2%
                                                                     
Weighted average number of
common shares outstanding                                                 
(in thousands) - Basic           153,713      157,948    (4,235)     (2.7%)
                                                                     
Weighted average number of
common shares outstanding                                                 
(in thousands) - Diluted          154,142      158,447    (4,305)     (2.7%)
                                                                     
Dividends per common share         $0.21       $0.17     $0.04          
                                                                     
n/m - not meaningful                                                  
(all numbers rounded)                                                 
                                                                     




                      TIM HORTONS INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENT OF OPERATIONS
     (In thousands of Canadian dollars, except share and per share data)
                                 (Unaudited)
                                                                    
                                  Year ended                             
                          December 30,   January 1,                     
                                    2012          2012   $ Change   % Change
                                                                    
REVENUES                                                              
Sales                         $2,225,659   $2,012,170  $213,489     10.6% 
Franchise revenues                                                    
 Rents and royalties           780,992      733,217    47,775      6.5% 
 Franchise fees                113,853      107,579     6,274      5.8% 
                                894,845      840,796    54,049      6.4% 
TOTAL REVENUES                 3,120,504    2,852,966   267,538      9.4% 
                                                                     
COSTS AND EXPENSES                                                    
Cost of sales                  1,959,416    1,774,107   185,309     10.4% 
Operating expenses               287,652      259,098    28,554     11.0% 
Franchise fee costs              116,644      104,884    11,760     11.2% 
General and administrative                                                
expenses                         158,476       161,444    (2,968)     (1.8%)
Equity income                   (14,693)     (14,354)     (339)      2.4% 
Corporate reorganization                                                  
expenses                          18,874             0     18,874        n/m
Asset impairment and                                                      
closure costs, net                 (372)           372      (744)        n/m
Other (income) expense, net         (18)      (2,060)     2,042       n/m 
TOTAL COSTS AND EXPENSES,                                                 
NET                            2,525,979     2,283,491    242,488      10.6%
                                                                     
OPERATING INCOME                 594,525      569,475    25,050      4.4% 
                                                                     
Interest expense                (33,709)     (30,000)   (3,709)     12.4% 
Interest income                    3,296        4,127     (831)   (20.1%) 
                                                                     
INCOME BEFORE INCOME TAXES       564,112      543,602    20,510      3.8% 
                                                                     
Income taxes                     156,346      157,854   (1,508)    (1.0%) 
                                                                     
Net income                       407,766      385,748    22,018      5.7% 
Net income attributable to                                                
noncontrolling interests           4,881         2,936      1,945      66.2%
                                                                      
NET INCOME ATTRIBUTABLE TO                                                
TIM HORTONS INC.                $402,885      $382,812    $20,073       5.2%
                                                                     
Basic earnings per common
share attributable to Tim                                                 
Hortons Inc.                       $2.60         $2.36      $0.24      10.0%
                                                                     
Diluted earnings per common
share attributable to Tim                                                 
Hortons Inc.                       $2.59         $2.35      $0.24       9.9%
                                                                     
Weighted average number of
common shares outstanding                                                 
(in thousands) - Basic          155,160       162,145    (6,985)     (4.3%)
                                                                     
Weighted average number of
common shares outstanding                                                 
(in thousands) - Diluted         155,676       162,597    (6,921)     (4.3%)
                                                                     
Dividends per common share        $0.84        $0.68     $0.16          
                                                                     
n/m - not meaningful                                                  
(all numbers rounded)                                                 
                                                                    




                    TIM HORTONS INC. AND SUBSIDIARIES
                       CONSOLIDATED BALANCE SHEET
                    (in thousands of Canadian dollars)
                                                      
                                                    As at
                                     December 30, 2012  January 1, 2012
                                                              
                                                 (Unaudited)
                                                                     
ASSETS                                                                 
                                                                     
Current assets                                                         
 Cash and cash equivalents                     $120,139         $126,497
 Restricted cash and cash equivalents           150,574          130,613
 Accounts receivable, net                       171,605          173,667
 Notes receivable, net                            7,531           10,144
 Deferred income taxes                            7,142            5,281
 Inventories and other, net                     107,000          136,999
 Advertising fund restricted assets              45,337           37,765
Total current assets                             609,328          620,966
                                                                     
Property and equipment, net                    1,553,308        1,463,765
                                                                     
Intangible assets, net                             3,674            4,544
                                                                     
Notes receivable, net                              1,246            3,157
                                                                     
Deferred income taxes                             10,559           12,197
                                                                     
Equity investments                                41,268           43,014
                                                                     
Other assets                                      64,796           56,307
Total assets                                  $2,284,179       $2,203,950
                                                                     




                      TIM HORTONS INC. AND SUBSIDIARIES
                         CONSOLIDATED BALANCE SHEET
     (in thousands of Canadian dollars, except share and per share data)
                                                                         
                                                        As at
                                         December 30, 2012  January 1, 2012
                                                                         
                                                     (Unaudited)
                                                                         
LIABILITIES AND EQUITY                                                     
                                                                         
Current liabilities                                                        
 Accounts payable                                  $169,762         $177,918
 Accrued liabilities                                                      
   Salaries and wages                               21,477           23,531
   Taxes                                             8,391           26,465
   Other                                           197,871          179,315
 Deferred income taxes                                  197                0
 Advertising fund liabilities                        44,893           59,420
 Current portion of long-term obligations            20,781           10,001
Total current liabilities                            463,372          476,650
                                                                         
Long-term obligations                                                      
 Long-term debt                                     359,471          352,426
 Long-term debt - Advertising fund                   46,849                0
 Capital leases                                     104,383           94,863
 Deferred income taxes                               10,399            4,608
 Other long-term liabilities                        109,614          120,970
Total long-term obligations                          630,716          572,867
                                                                         
Commitments and contingencies                                              
                                                                         
Equity                                                                     
 Equity of Tim Hortons Inc.                                               
   Common shares                                                         
        $2.84 stated value per share,                     
           Authorized: unlimited shares,                                    
           Issued: 153,404,839 and
        157,814,980 shares,                               
           respectively                              435,033           447,558
     Common shares held in Trust, at cost:
   316,923 and 277,189 shares,                             
     respectively                                   (13,356)          (10,136)
   Contributed surplus                              10,970            6,375
   Retained earnings                               893,619          836,968
   Accumulated other comprehensive loss          (139,028)        (128,217)
Total equity of Tim Hortons Inc.                   1,187,238        1,152,548
Noncontrolling interests                               2,853            1,885
Total equity                                       1,190,091        1,154,433
Total liabilities and equity                      $2,284,179       $2,203,950
                                                                         




                      TIM HORTONS INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENT OF CASH FLOWS
                      (in thousands of Canadian dollars)
                                                                        
                                                       Year ended  
                                               December 30,  January 1, 2012
                                                    2012
                                                                   
                                                     (Unaudited)  
                                                                   
CASH FLOWS PROVIDED FROM (USED IN) OPERATING                        
ACTIVITIES
Net income                                          $407,766         $385,748
Adjustments to reconcile net income to net cash                          
provided by operating activities
             Depreciation and amortization        132,167          115,869
             Asset impairment                          0            1,850
             Stock-based compensation              11,862           17,323
                expense
             Deferred income taxes                  5,065          (5,433)
       Changes in operating assets and                                  
        liabilities
             Restricted cash and cash            (20,182)         (63,264)
                equivalents
             Accounts receivable                  (1,346)            2,099
             Inventories and other                 33,415         (32,057)
             Accounts payable and accrued           6,692              349
                liabilities
             Taxes                               (18,065)         (39,197)
       Other, net                                     1,913            8,180
                                                                       
Net cash provided from operating activities          559,287          391,467
                                                                       
CASH FLOWS (USED IN) PROVIDED FROM INVESTING                             
ACTIVITIES
Capital expenditures                               (186,777)        (176,890)
Capital expenditures - Advertising Fund             (49,031)          (4,377)
Proceeds from sale of restricted investments               0           38,000
Other investing activities                           (6,400)          (9,460)
                                                                       
Net cash (used in) investing activities            (242,208)        (152,727)
                                                                       
CASH FLOWS (USED IN) PROVIDED FROM FINANCING                             
ACTIVITIES
Repurchase of common shares                        (225,200)        (572,452)
Dividend payments to common shareholders           (130,509)        (110,187)
Distributions, net to noncontrolling interests       (3,913)          (6,692)
Net proceeds from debt                               51,850            3,699
Principal payments on long-term debt                 (7,710)          (8,586)
obligations
Other financing activities                           (6,885)            6,398
                                                                       
Net cash (used in) financing activities            (322,367)        (687,820)
                                                                       
Effect of exchange rate changes on cash              (1,070)            1,223
                                                                        
Decrease in cash and cash equivalents               (6,358)        (447,857)
                                                                        
Cash and cash equivalents at beginning of year       126,497          574,354
                                                                        
Cash and cash equivalents at end of year            $120,139         $126,497
                                                                        






                     TIM HORTONS INC. AND SUBSIDIARIES
                             SEGMENT REPORTING
                    (in thousands of Canadian dollars)
                                                    
                                    Fourth quarter ended     
                             December 30, 2012  January 1, 2012     
                                                           
                                         (Unaudited)     
                                                           
REVENUES ^(1)                                        
Canada                                 $675,211         $649,380     
U.S.                                     44,944           48,147     
Total reportable segments               720,155          697,527     
Variable interest entities               91,444           82,262     
Total                                  $811,599         $779,789     
                                                    
OPERATING INCOME                                     
Canada                                $163,677         $159,406     
U.S.                                      4,732            5,614     
Total reportable segments               168,409          165,020     
Variable interest entities                1,800            1,148     
Corporate charges ^(2)(3)              (19,805)         (13,320)     
Consolidated operating income           150,404          152,848     
Interest, net                           (7,550)          (6,892)     
Income before income taxes             $142,854         $145,956     

^(1) Inter-segment revenues have been eliminated.
^(2) Corporate charges include certain overhead costs which are not allocated
     to individual business segments, the impact of certain foreign currency
     exchange gains and losses, and the net operating results from the
     Company's Irish, United Kingdom and Gulf Cooperation Council
     international operations, which continue to be managed corporately.
^(3) Includes $9.0 million in the fourth quarter of 2012 of corporate
     reorganization expenses.
                                                                     





 
                                           Fourth quarter ended
                              December 30,  January 1,            % Change
                                       2012         2012   $ Change
                                                               
                                                (Unaudited)
Sales is comprised of:                                          
 Distribution sales               $474,438    $460,465   $13,973      3.0%
 Company-operated restaurant                                         16.4%
  sales                               6,515        5,598        917
 Sales from variable interest                                         8.5%
  entities                           89,091       82,084      7,007
Total Sales                        $570,044    $548,147   $21,897      4.0%
                                                               
                                           Fourth quarter ended
                              December 30,  January 1,            % Change
                                       2012         2012   $ Change
                                                               
                                                (Unaudited)
Cost of sales is comprised of:                                  
 Distribution cost of sales       $416,875    $407,472    $9,403      2.3%
 Company-operated restaurant                                         14.1%
  cost of sales                       7,038        6,168        870
 Cost of sales from variable                                         10.3%
  interest entities                  78,383       71,088      7,295
Total Cost of sales                $502,296    $484,728   $17,568      3.6%
                                                               




                      TIM HORTONS INC. AND SUBSIDIARIES
                              SEGMENT REPORTING
                      (in thousands of Canadian dollars)
                                                     
                                                    
                                          Year ended    
                              December 30, 2012  January 1, 2012    
                                                           
                                          (Unaudited)    
                                                           
REVENUES ^(1)                                        
Canada                                $2,610,886       $2,413,435    
U.S.                                     165,989          156,513    
Total reportable segments              2,776,875        2,569,948    
Variable interest entities               343,629          283,018    
Total                                 $3,120,504       $2,852,966    
                                                    
OPERATING INCOME                                     
Canada                                  $637,262         $607,749    
U.S. ^ (2)                                16,506           15,106    
Total reportable segments                653,768          622,855    
Variable interest entities ^                                3,531    
(3)                                        6,876
Corporate charges ^(4)                  (66,119)         (56,911)    
Consolidated operating income            594,525          569,475    
Interest, net                           (30,413)         (25,873)    
Income before income taxes              $564,112         $543,602    



^(1) Inter-segment revenues have been eliminated.
^(2) Fiscal 2011 includes asset impairment charges of $1.0 million which
     primarily reflected real estate values then current in the Company's
     Portland market, and the reversal of approximately $1.5 million of
     accrued closure costs upon the substantial conclusion of closure
     activities related to the Company's New England markets. Both items are
     included in Asset impairment and closure costs, net in the Consolidated
     Statement of Operations.
^(3) Includes an asset impairment charge of $0.9 million in fiscal 2011
     related to VIEs in the Portland market.
^(4) Corporate charges include certain overhead costs which are not allocated
     to individual business segments, the impact of certain foreign currency
     exchange gains and losses, and the net operating results from the
     Company's Irish, United Kingdom and Gulf Cooperation Coucil international
     operations, which continue to be managed corporately. In fiscal 2012,
     corporate charges include $18.9 million of corporate reorganization
     expenses and, in fiscal 2011, $6.3 million of severance charges, advisory
     fees, and related costs and expenses related to the separation agreement
     with our former President and Chief Executive Officer.
                                                               



  
                                                Year ended
                             December 30,  January 1,   $ Change  % Change
                                  2012          2012
                                                               
                                               (Unaudited)
Sales is comprised of:                                          
  Distribution sales           $1,860,683   $1,705,692  $154,991      9.1%
   Company-operated
  restaurant sales                 26,970       24,094     2,876     11.9%
   Sales from variable
  interest entities               338,006      282,384    55,622     19.7%
Total Sales                     $2,225,659   $2,012,170  $213,489     10.6%
                                                               
                                                Year ended
                             December 30,  January 1,   $ Change  % Change
                                  2012          2012
                                                               
                                               (Unaudited)
Cost of sales is comprised                                      
of:
  Distribution cost of sales   $1,633,169   $1,503,235  $129,934      8.6%
   Company-operated
  restaurant cost of sales         28,857       24,720     4,137     16.7%
   Cost of sales from
  variable interest entities      297,390      246,152    51,238     20.8%
Total Cost of sales             $1,959,416   $1,774,107  $185,309     10.4%
                                                               



                                                                       
                      TIM HORTONS INC. AND SUBSIDIARIES
                         SYSTEMWIDE RESTAURANT COUNT
                                                                     
                                                           Increase/
                                  As at         As at       (Decrease)
                               December 30,   January 1,  
                                         2012           2012     From Year End
                                                                     
                                                                     
Canada                                                                
  Company-operated                       18           10               8
  Franchised - standard and                               
   non-standard                         3,294          3,166               128
  Franchised - self-serve                                 
   kiosks                                 124            119                 5
Total                                  3,436        3,295             141
                                                                     
% Franchised                           99.5%        99.7%               
                                                                     
U.S.                                                                  
  Company-operated                        4            8             (4)
  Franchised - standard and                               
   non-standard                           621            542                79
  Franchised - self-serve                                 
   kiosks                                 179            164                15
Total                                    804          714              90
                                                                     
% Franchised                           99.5%        98.9%               
                                                                     
International (Gulf                                        
Cooperation Council)                                                      
  Franchised - standard and                               
   non-standard                            24              5                19
Total                                     24            5              19
                                                                     
% Franchised                          100.0%       100.0%               
                                                                     
Total system                                                          
  Company-operated                       22           18               4
  Franchised - standard and                               
   non-standard                         3,939          3,713               226
  Franchised - self-serve                                 
   kiosks                                 303            283                20
Total                                  4,264        4,014             250
                                                                     
% Franchised                           99.5%        99.6%               
                                                                     




                      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 restaurant owners 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 or retailers for which we manage
                           the supply chain logistics, which we include in
                           distribution sales. Sales also include sales from
                           Company-operated restaurants and sales from
                           Non-owned restaurants that are consolidated
                           pursuant to applicable accounting rules. The
                           consolidation of Non-owned restaurants essentially
                           replaces our rents and royalties with restaurant
                           sales, which are included in variable interest
                           entity ("VIE") sales.
                          
Rents and royalties        Includes royalties and rental revenues earned, net
                           of relief, and certain advertising levies
                           associated with our Canadian Advertising Fund
                           relating primarily to the Expanded Menu Board
                           Program.
                          
Franchise fees             Includes license fees and equipment packages, at
                           initiation of a restaurant and in connection with
                           the renewal or renovation, and revenues related to
                           master license agreements.
                          
Cost of sales             Includes costs associated with our distribution
                           business, consisting of cost of goods sold, direct
                           labour and depreciation, as well as the cost of
                           goods delivered by third-party distributors to the
                           restaurants for which we manage the supply chain
                           logistics, and for canned coffee sold through
                           grocery stores. Cost of sales also includes food,
                           paper and labour costs for Company-operated
                           restaurants and consolidated Non-owned
                           restaurants.
                          
Operating expenses         Includes rent expense related to properties leased
                           to restaurant owners and other property-related
                           costs including depreciation. Also included are
                           certain operating expenses related to our
                           distribution business such as order entry system
                           connectivity costs and utilities and product
                           development costs.
                          
Franchise fee costs        Includes the cost of equipment sold to restaurant
                           owners at the commencement or in connection with
                           the renovation of their restaurant business,
                           including training and other costs necessary to
                           assist with a successful restaurant opening, and/or
                           the introduction of our Cold Stone Creamery^®
                           co-branding offering into existing locations. Also
                           includes support costs related to project-related
                           and/or operational initiatives.
                          
General and administrative Includes costs that cannot be directly related to
expenses                   generating revenue, including expenses associated
                           with our corporate and administrative functions,
                           depreciation of head office buildings and office
                           equipment, and the majority of our information
                           technology systems.
                          
Corporate reorganization   Includes termination costs and professional fees
expenses                   related to the implementation of our new Corporate
                           Centre and Business Unit organizational structure,
                           as well as CEO transition costs.
                          
Equity income              Includes income from equity investments in
                           partnerships and 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.
                          
Asset impairment and       Represents non-cash charges relating to the
closure costs, net        impairment of long-lived assets, and costs related
                           to certain restaurant closures resulting from
                           strategic reviews, including any reversals of
                           previously recognized charges deemed no longer
                           required.
                          
Other (income) expense,    Includes (income) expenses that are not directly
net                        derived from the Company's primary businesses, such
                           as foreign currency adjustments, gains and losses
                           on asset sales, and other asset write-offs.
                          
Net income attributable to Relates to the consolidation of Non-owned
noncontrolling interests   restaurants pursuant to applicable accounting
                           rules.
                          



SOURCE Tim Hortons Inc.

Contact:

Investors: Scott Bonikowsky, (905) 339-6186
orinvestor_relations@timhortons.com
Media: Alexandra Cygal, (905) 339-5960 orcygal_alexandra@timhortons.com
 
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