Tim Hortons Inc. announces 2013 fourth quarter results:

           Tim Hortons Inc. announces 2013 fourth quarter results:  PR Newswire  OAKVILLE, ON, Feb. 20, 2014  Same-store sales growth finished ahead of full year  Quarterly dividend increased 23.1% to $0.32 per common share; New share repurchase program of up to $440 million announced  (Unaudited. All amounts in Canadian dollars and presented in accordance with U.S. GAAP.)                   Financial & Sales Highlights                                           %       2013        2012        %   Performance      Q4 2013    Q4 2012  Change  Full Year   Full Year  Change Total revenues    $ 898.5  $ 811.6   10.7% $ 3,255.5  $ 3,120.5    4.3 % Operating income   $ 147.8  $ 150.4  (1.8)% $   621.1  $   594.5    4.5 % Adjusted           $ 167.5  $ 159.4    5.1% $   651.9  $   613.4    6.3 % operating income^(1) Effective tax         25.2 %    28.9 %            26.8 %      27.7 %        rate Net income         $ 100.6  $ 100.3    0.3% $   424.4  $   402.9    5.3 % attributable to THI Diluted earnings per share attributable to THI ("EPS")        $  0.69  $  0.65    6.2% $    2.82  $    2.59    8.9 % Fully diluted        145.5    154.1  (5.6)%     150.6      155.7  (3.2) % shares  (All numbers in millions, except EPS and effective tax rate. All numbers rounded.)  (1) Adjusted operating income is a non-GAAP measure, and excludes corporate     reorganization expenses of $0.7 million in Q4 2013 ($11.8 million in     fiscal 2013), Cold Stone Creamery de-branding costs of $19.0 million in Q4     2013 ($19.0 million in fiscal 2013), and corporate reorganization expenses     of $9.0 million in Q4 2012 ($18.9 million in fiscal 2012). Please refer     to "Information on non-GAAP Measure" and the reconciliation information in     footnote (3) of this release for details of reconciling items.                                                                                            2013       2012 Same-Store Sales^(2)   Q4 2013   Q4 2012   Full Year   Full Year Canada                   1.6%     2.6%       1.1%       2.8% U.S.                     3.1%     3.2%       1.8%       4.6%      Includes average same-store sales at franchised and Company-operated (2) locations open for 13 months or more. Substantially all of our     restaurants are franchised.  Highlights    *In Q4 both the Canadian and U.S. segments delivered same-store sales     growth ahead of full year   *Q4 operating income affected by decisions to de-brand Cold Stone Creamery     within Tim Hortons locations in Canada, and to close certain     underperforming restaurants in the U.S.   *Completed 139 restaurant renovations and 639 drive-thru enhancements in     Canada in Q4   *Completed $450 million private offering of senior unsecured notes during     the fourth quarter   *Quarterly dividend increased 23.1% to $0.32 per common share   *Announced new share repurchase program of up to $440 million   *2014 performance and financial targets announced    OAKVILLE, ON, Feb. 20, 2014 /PRNewswire/ - Tim Hortons Inc. (TSX: THI, NYSE: THI) today announced results for the fourth quarter and fiscal year ended December29, 2013.  "During the fourth quarter, we made important strides to position the Company for further success," said Marc Caira, president and CEO. "We have worked to enhance our capital structure, as well as simplify our operations, strengthen our menu, and refresh our restaurants, all to provide the ultimate guest experience. I believe the choices we are making today and the strategic roadmap we are developing will set the stage for continued long-term growth and profitability."  Consolidated Results  All percentage increases and decreases represent year-over-year changes for the fourth quarter of 2013 compared to the fourth quarter of 2012, unless otherwise noted.  Systemwide sales^(4) increased 5.4% 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 1.6% in Canada and 3.1% in the U.S.  Total revenues increased 10.7% to $898.5 million compared to $811.6 million last year. The revenue growth rate outpaced that of systemwide sales due to a significant increase in franchise fees, primarily resulting from higher levels of renovations and standard restaurant development, which also led to a significant increase in franchise fee costs. Increases of 6.0% in rents and royalties revenues and 5.2% in distribution sales were more in line with the growth in systemwide sales.  Variable interest entities ("VIEs") sales increased 5.0%, as higher sales more than offset a slight decline in the number of non-owned restaurants consolidated for accounting purposes compared to the fourth quarter of 2012.  Cost of sales increased by 3.7%, which was below the growth rate of sales due to lower underlying commodity costs. Franchise fee costs grew significantly due to increased renovation and development activity. G&A expenses increased by 6.7%, resulting primarily from higher professional fees. We recognized corporate reorganization expenses of $0.7 million, compared to $9.0 million in the fourth quarter of 2012. Operating expenses increased by 24.6%, which includes U.S. restaurant closure costs, as described below.  Operating income of $147.8 million was down 1.8% from $150.4 million a year earlier. Two key decisions impacted operating income during the fourth quarter. The first decision was to remove Cold Stone Creamery from Tim Hortons locations in Canada, following an evaluation of strategic considerations and the overall performance of the Cold Stone Creamery business in Tim Hortons restaurants in Canada. This decision, which will allow our restaurant owners to simplify their operations and focus entirely on their core business, resulted in de-branding costs of $19.0 million in the fourth quarter. This decision does not affect our U.S. Cold Stone Creamery co-branded operations, as the nature of the business, and the support required by the Company, is significantly different than in Canada. The second decision was to close a small number of underperforming restaurants in various U.S. markets in the fourth quarter, resulting in a $6.6 million charge, which has been included in operating expenses.  Adjusted operating income^(3) of $167.5 million, which excludes the impact of the corporate reorganization and Cold Stone Creamery de-branding costs, increased 5.1%, in line with systemwide sales growth. (Please refer to "Information on non-GAAP Measure" below for a reconciliation of adjusted operating income to operating income, the most directly comparable GAAP measure).  Net income attributable to Tim Hortons Inc. was $100.6 million, a slight increase from $100.3 million a year earlier, as the impact of a lower effective tax rate, due to certain discrete items recognized in Q4 2013, was offset by reduced operating income.  EPS of $0.69 grew by $0.04 or 6.2% due to the expanded share repurchase program, which led to a decrease of 8.6 million shares outstanding year-over-year. The Cold Stone Creamery de-branding costs and corporate reorganization expenses negatively impacted EPS by $0.11 in Q4 2013, and corporate reorganization expenses negatively impacted EPS by $0.04 in Q4 2012.  For the full year, systemwide sales^(4) increased 4.7% in 2013, on a constant currency basis. Total revenues rose 4.3% to $3.3 billion compared to $3.1 billion last year. Operating income was $621.1 million, up 4.5% from $594.5 million in 2012. Adjusted operating income^(3) grew 6.3% to $651.9 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 2013 was up 5.3% to $424.4 million.  EPS for the full year was $2.82, representing growth of 8.9%. The 2013 earnings outlook we communicated in February 2013 of $2.87 to $2.97 per share did not include the $0.06 per share corporate reorganization charge taken during the fiscal year, and did not contemplate the $0.10 per share impact of the Cold Stone Creamery de-branding. Full-year EPS benefited from 3.2% fewer shares in 2013, due to our share repurchase program, which was expanded mid-year. EPS also benefited from an effective tax rate of 26.8% for the full year, compared to the 28% rate assumed in our earnings outlook, and 27.7% in 2012.  Segmented Performance Commentary  We have reclassified the segment data for 2012 to conform to the current period's presentation, consistent with changes to our reportable segments announced in 2013.  We grew same-store sales in both Canada and the U.S. in the fourth quarter, in the face of ongoing challenges relating to macro-economic conditions, weak consumer confidence and persistent competitive intensity in the quick service restaurant sector.  Canada  Same-store sales in our Canadian segment grew by 1.6%, due to gains in average cheque, driven by favourable product mix and pricing. Same-store transactions were lower year-over-year, while systemwide transactions grew as a result of new restaurants added to our system.  Operating income in the Canadian segment was $165.5 million, a decrease of $3.8 million or 2.3%. The $19.0 million charge related to the removal of Cold Stone Creamery from Canadian Tim Hortons locations had the effect of reducing segment operating income growth by 11.2%. A higher allocation of supply chain income and increased rents and royalties income, both resulting from systemwide sales growth of 4.7%, and increased franchise fee income due to additional restaurant sales and renovations, contributed positively to operating income. We opened 89 restaurants in Canada in the fourth quarter.  On a full-year basis, 2013 same-store sales growth of 1.1% in the Canadian segment was below our original target range of 2% to 4%; we believe this was due to ongoing challenging economic conditions and increased competitive intensity in our industry. We opened 168 restaurants in 2013, within our targeted range of 160-180 openings, and we closed 16 locations. The Canadian segment delivered operating income of $665.7 million, an increase of 1.8% over 2012.  United States  U.S. same-store sales increased by 3.1% in the quarter, driven primarily by favourable product mix and pricing.  The U.S. segment had an operating loss of $1.1 million, compared to operating income of $2.4 million in the fourth quarter of 2012. Operating income was negatively affected by $6.6 million of restaurant closure costs. The segment benefited from increased franchise fee income due to a higher number of franchised restaurant openings, and from systemwide sales growth of 10.7%, which led to increased rents and royalties income. We opened 53 restaurants in the U.S. during the quarter.  On a full-year basis, same-store sales growth of 1.8% in the U.S. segment was below our targeted range of 3% to 5% growth. We opened 79 new locations in the U.S. in 2013, comprised of 74 standard and non-standard full-serve restaurants and five self-serve kiosks. Our targeted range was 70 to 90 full-serve restaurants. We also closed 20 full-serve and four self-serve locations during the year. Operating income for the segment was $5.1 million in 2013, compared to $9.6 million in 2012.  Corporate services  The operating loss in the Corporate services segment was $18.1 million, compared to a loss of $14.1 million in the fourth quarter of 2012. The increased loss was driven by higher G&A expenses associated with strategic activities, and by reduced distribution income due to the reversal of favourability from commodity cost changes recognized earlier in the year, as anticipated. The full-year operating loss in the segment was $44.5 million, compared to a loss of $57.0 million in 2012.  Our international partner, Apparel FZCO, opened five restaurants in the Gulf Cooperation Council (GCC) during the fourth quarter, and 14 locations for the full year. At year-end, we had 38 restaurants in the GCC.  Significant Developments & Initiatives  Private offering of $450 million Senior Notes completed  During the fourth quarter of 2013, we successfully completed a Canadian private placement of $450 million principal amount of senior unsecured 4.52% notes, due December 1, 2023. The debt offering was significantly oversubscribed, indicating strong market support for the Company. Net proceeds from the offering were used primarily to repay a bridge credit facility, which is available for general corporate purposes including share repurchases. The debt offering represented the first phase of our plan to raise up to $900 million in additional debt, as approved by our Board of Directors in August 2013.  Board declares dividend payment of $0.32 per common share  The Board of Directors has approved an increase in the quarterly dividend of approximately 23.1%, to $0.32 per common share, payable on March18, 2014, to shareholders of record as of the close of business on March3, 2014. The payment of future dividends remains 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 CDS Clearing and Depository Services Inc. for beneficial shareholders.  New share repurchase program of up to $440 million announced  Tim Hortons has obtained regulatory approval from the Toronto Stock Exchange (TSX) to commence a new share repurchase program for up to $440 million in common shares, not to exceed the regulatory maximum of 13,726,219 shares, representing 10% of the Company's public float as of February 14th, 2014, as defined under TSX rules. This normal course issuer bid is planned to commence on February 28th, 2014 and to expire on February 27th, 2015. The new program reflects the amount required to complete our expanded share repurchase, as approved by the Board in August 2013, in addition to our traditional annual program.  We have provided additional details on our new share repurchase program in a separate press release issued February 20, 2014.  Expanding single-serve coffee to retail channels  The Company announced that it will begin selling its single-serve coffee through the grocery channel this summer. We currently sell premium Tim Hortons coffee in the TASSIMO® and Tim Hortons RealCup^TM formats exclusively through our network of nearly 4,500 restaurants, online through our website, and in the U.S. through selective other channels. By adding the grocery channel, through which we already distribute our canned coffee, we will increase the convenience for consumers who wish to purchase and enjoy Tim Hortons products. We anticipate that responding to this unmet consumer need will benefit both the Company and our restaurant owners.  Investor Conference and 2014 Outlook  On February 25th, 2014, we will communicate our strategic roadmap, including growth initiatives and long-term financial aspirations beyond 2014. Our Investor Conference will be webcast live, beginning at 11:00 a.m. (EST), at www.timhortons-invest.com under the Events and Presentations tab.  In 2014 we anticipate continued growth, but we will also be investing in key drivers intended to facilitate accelerated growth beyond 2014, which will be outlined at the Investor Conference. The Company has established the following 2014 performance targets:    *Diluted earnings per share (EPS) of $3.17 to $3.27   *2014 same-store sales growth of 1% to 3% in Canada and 2% to 4% in the     U.S.   *A total of 215 to 255 restaurant openings in Canada, the U.S. and the Gulf     Cooperation Council, including:         *140 to 160 restaurant openings in Canada, approximately evenly split          between standard and non-standard format restaurants        *40 to 60 full-serve restaurant openings in the U.S., approximately          evenly split between standard and non-standard format restaurants    *Capital expenditures between $180 million to $220 million, including     approximately US$30 million in the U.S.   *Effective tax rate of approximately 29%.  The operational objectives and financial outlook (collectively, targets) set forth above are for 2014 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 2014 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 2014, changes to our share repurchase activities, and accounting, tax, audit or other matters not contemplated at the time the targets were established, could affect our business and 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 2012 filed on February 21st, 2013, our Quarterly Report on Form 10-Q filed on November 7th, 2013, and our Annual Report on Form 10-K for 2013 (expected to be filed on or about February 25th, 2014).  Annual Meeting of Shareholders The Board of Directors has set a record date of March 11th, 2014 for the annual meeting of shareholders. The meeting will be held on Thursday, May 8th at 10:30 a.m. EDT at the Metro Toronto Convention Centre, 255 Front Street West, in Toronto, Ontario.  Tim Hortons conference call today at 10:00 a.m. (EST) Thursday, February20, 2014  Tim Hortons will host a conference call today to discuss fourth quarter results, scheduled to begin at 10:00 a.m. (EST). The dial-in number is (416) 915-3239 or (877) 881-1303. 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 27, 2014 and can be accessed at (800) 319-6413. The call replay reservation number is 6842#. The call and presentation material will also be archived for one year in the Events and Presentations section of our 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 2012 Annual Report on Form 10-K filed February 21st, 2013, our Quarterly Report on Form 10-Q filed on November 7th, 2013, and our 2013 Annual Report on Form 10-K expected to be filed on or about February 25th, 2014 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, or implied by, 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; our ability to obtain financing on favourable terms; our ability to maintain investment grade credit ratings; prospects and execution risks concerning our U.S. market strategy; general worldwide economic conditions; cost and availability of commodities; the ability to retain our senior management team or the inability to attract and retain 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/ca/en/about/safeharbor.html.  ^(3) Information on non-GAAP Measure  Adjusted operating income is a non-GAAP measure. 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 operational 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 2013    Q4 2012   YTD 2013 YTD 2012                                      (in millions)       (in millions) Operating income                  $ 147.8  $ 150.4  $ 621.1  $    594.5  Add: Corporate reorganization          0.7      9.0     11.8        18.9  expenses Add: Cold Stone Creamery              19.0      0.0     19.0         0.0  de-branding costs Adjusted operating income         $ 167.5  $ 159.4  $ 651.9  $    613.4    ______________  All numbers rounded  ^(4) Total systemwide sales growth includes restaurant level sales at both Company-operated and franchised restaurants. Approximately 99.6% of our systemwide restaurants were franchised as at December29, 2013. 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 2013, systemwide sales on a constant currency basis increased 5.4% compared to the fourth quarter of 2012. Systemwide sales growth in Canadian dollars, including the effects of foreign currency translation, was 5.9% in the fourth quarter of 2013. Full-year systemwide sales increased 4.7% on a constant currency basis in 2013, and 5.0% in Canadian dollars. 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, 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 Condensed Consolidated Financial Statements (except for certain non-owned restaurants consolidated in accordance with applicable accounting rules). The amount of systemwide sales impacts our rental and royalties revenues, as well as distribution revenues.  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, hot and cold specialty drinks (including lattes, cappuccinos and espresso shots), specialty teas and fruit smoothies, fresh baked goods, grilled Panini and classic sandwiches, wraps, soups, prepared foods and other food products. As of December29, 2013, Tim Hortons had 4,485 systemwide restaurants, including 3,588 in Canada, 859 in the United States and 38 in the Gulf Cooperation Council. More information about the Company is available at www.timhortons.com.  For Further information:                        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                      December 29,      30,                                                 2013         2012       $ Change      % Change Revenues                                                          Sales               $   597,655  $  570,044  $    27,611      4.8 %   Franchise                                                      revenues                                                                   Rents and                                                      royalties          212,364    200,277       12,087         6.0 %       Franchise                                                      fees                88,485     41,278       47,207           n/m                         300,849   241,555     59,294     24.5 % Total revenues           898,504   811,599     86,905     10.7 % Costs and expenses                                                Cost of sales         520,601   501,901     18,700      3.7 %   Operating                                                      expenses                 90,810     72,877       17,933        24.6 %   Franchise fee                                                  costs                    78,862     39,485       39,377           n/m    General and   administrative                                                 expenses                 44,030     41,277        2,753         6.7 %   Equity (income)       (3,830)   (3,637)      (193)      5.3 %    Corporate   reorganization                                                 expenses                    729      9,032      (8,303)           n/m   De-branding                                                    costs                    19,016          —       19,016           n/m   Other (income)                                                 expense, net                515        260          255           n/m Total costs and                                                expenses, net              750,733    661,195       89,538        13.5 % Operating income         147,771   150,404    (2,633)     (1.8)%   Interest                                                       (expense)              (12,087)    (8,652)      (3,435)        39.7 %   Interest income           974     1,102      (128)    (11.6)% Income before                                                  income taxes               136,658    142,854      (6,196)        (4.3)% Income taxes              34,449    41,258    (6,809)    (16.5)% Net income               102,209   101,596        613      0.6 % Net income attributable to non                                            controlling interests                    1,610      1,255          355        28.3 % Net income attributable to Tim                                            Hortons Inc.             $   100,599   $  100,341   $        258         0.3 % Basic earnings per common share                                                   attributable to Tim Hortons Inc.      $      0.69   $     0.65         0.04         6.2 % Diluted earnings per common share                                               attributable to Tim Hortons Inc.             $      0.69   $     0.65         0.04         6.2 % Weighted average number of common shares                                                         outstanding (in thousands) - Basic         145,083    153,713      (8,630)        (5.6)% Weighted average number of common shares                                                         outstanding (in thousands) - Diluted                    145,533    154,142      (8,609)        (5.6)% Dividends per                                      common share             $      0.26   $     0.21         0.05                                                                                                                TIM HORTONS INC. AND SUBSIDIARIES                      CONSOLIDATED STATEMENT OF OPERATIONS      (in thousands of Canadian dollars, except share and per share data)                                  (Unaudited)                                                                                           Year-ended                                                  December 29,   December 30,                                           2013          2012        $ Change      % Change Revenues                                                          Sales            $  2,265,884  $  2,225,659  $    40,225      1.8 %   Franchise                                                     revenues                                                                   Rents and                                                     royalties         821,221      780,992        40,229         5.2 %      Franchise                                                     fees              168,428      113,853        54,575        47.9 %                       989,649     894,845     94,804     10.6 % Total revenues       3,255,533   3,120,504    135,029      4.3 % Costs and                                                     expenses                                                                   Cost of sales     1,972,903   1,957,338     15,565      0.8 %   Operating                                                     expenses              321,836      284,321        37,515        13.2 %   Franchise fee                                                 costs                 162,605      116,644        45,961        39.4 %    General and   administrative                                                expenses              159,523      163,885       (4,362)        (2.7)%   Equity                                                        (income)             (15,170)     (14,693)         (477)         3.2 %    Corporate   reorganization                                                expenses               11,761       18,874       (7,113)       (37.7)%   De-branding                                                   costs                  19,016            —        19,016           n/m   Asset                                                         impairment              2,889        (372)         3,261           n/m   Other (income)                                                expense, net            (925)         (18)         (907)           n/m Total costs and                                               expenses, net          2,634,438    2,525,979       108,459         4.3 % Operating income       621,095     594,525     26,570      4.5 %   Interest                                                      (expense)            (39,078)     (33,709)       (5,369)        15.9 %   Interest                                                      income                  3,612        3,296           316         9.6 % Income before                                                 income taxes             585,629      564,112        21,517         3.8 % Income taxes           156,980     156,346        634      0.4 % Net income             428,649     407,766     20,883      5.1 % Net income attributable to                                               non controlling interests                  4,280        4,881         (601)       (12.3)% Net income attributable to                                 $              Tim Hortons Inc.      $    424,369   $    402,885         21,484         5.3 % Basic earnings per common share attributable                                                  to Tim Hortons Inc.                  $       2.83   $       2.60          0.23         8.8 % Diluted earnings per common share                                              attributable to Tim Hortons Inc.      $       2.82   $       2.59          0.23         8.9 % Weighted average number of common shares                                                        outstanding (in thousands) - Basic                    150,155      155,160       (5,005)        (3.2)% Weighted average number of common shares                                                        outstanding (in thousands) - Diluted                  150,622      155,676       (5,054)        (3.2)% Dividends per                                     common share          $       1.04   $       0.84          0.20                                                                  TIM HORTONS INC. AND SUBSIDIARIES                           CONSOLIDATED BALANCE SHEET      (in thousands of Canadian dollars, except share and per share data)                                  (Unaudited)                                                                                                                                 As at                                                December 29,  December 30,                                                        2013           2012 Assets                                                                  Current assets                                                        Cash and cash equivalents                     $     50,414  $    120,139  Restricted cash and cash equivalents             155,006     150,574  Accounts receivable, net                         210,664     171,605  Notes receivable, net                              4,631       7,531  Deferred income taxes                             10,165       7,142  Inventories and other, net                       104,326     107,000  Advertising fund restricted assets                39,783      45,337 Total current assets                               574,989     609,328 Property and equipment, net                      1,685,043   1,553,308 Notes receivable, net                                4,483       1,246 Deferred income taxes                               11,018      10,559 Equity investments                                  40,738      41,268 Other assets                                       117,552      68,470 Total assets                                    $  2,433,823  $  2,284,179 Liabilities and equity                                                  Current liabilities                                                   Accounts payable                              $    204,514  $    169,762  Accrued liabilities                              274,008     227,739  Deferred income taxes                                  —         197  Advertising fund liabilities                      59,912      44,893  Short-term borrowings                             30,000           —  Current portion of long-term obligations          17,782      20,781 Total current liabilities                          586,216     463,372  Long-term obligations                                                   Long-term debt                                843,020     406,320    Capital leases                                121,049     104,383    Deferred income taxes                           9,929      10,399    Other long-term liabilities                   112,090     109,614 Total long-term obligations                      1,086,088     630,716 Commitments and contingencies                                          Equity                                                                  Equity of Tim Hortons Inc.                                                Common shares ($2.84 stated value per    share). Authorized: unlimited                                 shares. Issued:141,329,010 and      153,404,839 shares, respectively                  400,738       435,033      Common shares held in Trust, at cost:    293,816 and 316,923 shares,                                   respectively                                     (12,924)      (13,356)    Contributed surplus                            11,033      10,970    Retained earnings                             474,409     893,619    Accumulated other comprehensive loss        (112,102)   (139,028) Total equity of Tim Hortons Inc.                   761,154   1,187,238 Non controlling interests                              365       2,853 Total equity                                       761,519   1,190,091 Total liabilities and equity                    $  2,433,823  $  2,284,179                                                                      TIM HORTONS INC. AND SUBSIDIARIES                      CONSOLIDATED STATEMENT OF CASH FLOWS                       (in thousands of Canadian dollars)                                  (Unaudited)                                                                                                                                Year-ended                                                 December 29,  December 30,                                                        2013           2012 Cash flows provided from (used in) operating                            activities Net income                                       $    428,649  $    407,766 Adjustments to reconcile net income to net cash provided from operating                                            activities       Depreciation and amortization                161,809     132,167       Stock-based compensation expense              21,989      11,862       Deferred income taxes                        (4,885)       5,065 Changes in operating assets and liabilities                                   Restricted cash and cash equivalents         (3,391)    (20,182)       Accounts receivable                         (24,650)     (1,346)       Inventories and other                          2,836      33,415       Accounts payable and accrued                  46,766       6,692        liabilities       Taxes                                          6,092    (18,065) Settlement of interest rate forwards                (9,841)           — Deposit with tax authorities                       (36,532)           — Other                                                 9,893       1,913 Net cash provided from operating activities         598,735     559,287 Cash flows (used in) provided from investing                            activities       Capital expenditures                       (221,000)   (186,777)       Capital expenditures - Advertising fund     (21,970)    (49,031)       Other investing activities                     5,708     (6,400) Net cash (used in) investing activities           (237,262)   (242,208) Cash flows (used in) provided from financing                            activities       Repurchase of common shares                (720,549)   (225,200)       Dividend payments to common                (156,141)   (130,509)        shareholders       Distributions, net to non controlling        (2,858)     (3,913)        interests       Net proceeds from issue of debt              448,092           —       Net proceeds from issue of debt -                  —      51,850        Advertising fund       Short-term borrowing                          30,000           —       Principal payments on long-term debt        (36,175)     (7,710)        obligations       Other financing activities                     3,550     (6,885) Net cash (used in) financing activities           (434,081)   (322,367) Effect of exchange rate changes on cash               2,883     (1,070) (Decrease) in cash and cash equivalents            (69,725)     (6,358) Cash and cash equivalents at beginning of           120,139     126,497 period Cash and cash equivalents at end of period       $     50,414  $    120,139 Supplemental disclosures of cash flow                                   information:       Interest paid                             $     36,268  $     31,447       Income taxes paid                         $    191,503  $    175,877 Non-cash investing and financing activities:                                  Capital lease obligations incurred        $     34,712  $     26,095                                                                                       TIM HORTONS INC. AND SUBSIDIARIES                                 SEGMENT REPORTING                        (in thousands of Canadian dollars)                                    (Unaudited)                                                                                           Fourth quarter ended              Year-ended                           December      December     December 29,   December 30,                          29,          30,          2013          2012                             2013          2012 Revenues^(1)                                                         Canada              $   732,997  $   671,993  $  2,660,358  $  2,595,921  U.S.                   64,539     44,886     197,226      165,723  Corporate                                                    services                    4,645        3,276        17,388         15,231 Total reportable                                             segments                    802,181      720,155     2,874,972      2,776,875 VIEs^(2)                 96,323     91,444     380,561      343,629 Total                 $   898,504  $   811,599  $  3,255,533   $  3,120,504 Operating Income                                             (Loss)                                                                         Canada              $   165,497  $   169,340  $    665,675   $    653,916  U.S.                  (1,107)      2,407       5,107        9,620  Corporate                                                    services                 (18,103)     (14,111)      (44,517)       (57,013) Total reportable                                             segments                    146,287      157,636       626,265        606,523 VIEs^(2)                  2,213      1,800       6,591        6,876 Corporate reorganization                                               expenses                      (729)      (9,032)      (11,761)       (18,874) Consolidated                                                 Operating Income            147,771      150,404       621,095        594,525 Interest, net          (11,113)    (7,550)    (35,466)     (30,413) Income before         $   136,658  $   142,854  $    585,629   $    564,112 income taxes  ^(1) There are no inter-segment revenues included in the above table. ^(2) Variable interest entities.                         Fourth quarter ended              Year-ended                           December      December     December 29,   December 30,                          29,          30,          2013          2012                             2013          2012 Consolidated sales                                                  is comprised of:  Distribution        $   498,907  $   474,438  $  1,872,296   $  1,860,683   sales  Company-operated        5,171      6,515      23,738       26,970   restaurant sales  Sales from VIEs        93,577     89,091     369,850      338,006 Total Sales           $   597,655  $   570,044  $  2,265,884   $  2,225,659                                                                                                                                                              Fourth quarter ended              Year-ended                           December      December     December 29,   December 30,                          29,          30,          2013          2012                             2013          2012 Consolidated cost of sales is                                                         comprised of:  Distribution        $   433,996  $   416,480  $  1,619,858   $  1,631,091   cost of sales   Company-operated  restaurant cost         5,616      7,038      25,446       28,857   of sales  Cost of sales          80,989     78,383     327,599      297,390   from VIEs Total Cost of         $   520,601  $   501,901  $  1,972,903   $  1,957,338 sales    TIM HORTONS INC. AND SUBSIDIARIES Income Statement Definitions                                Sales                            Sales include Distribution sales, sales from                                  Company-operated restaurants, and                                  sales from consolidated Non-owned                                  restaurants. Distribution sales comprise                                  sales                                  of products (including a minimal amount of                                  manufacturing product sales to third                                  parties), supplies, and restaurant equipment                                  excluding equipment sales related to                                  initial restaurant establishment or                                renovations (see "Franchise Fees") that are                                  shipped directly from our warehouses or by                                  third-party distributors to restaurants                                  or retailers through our supply chain. Sales                                  from Company-operated restaurants                                  and consolidated Non-owned restaurants                                  comprise restaurant-level sales to our                                  guests. The consolidation of Non-owned                                  restaurants essentially replaces our rents                                  and royalties with restaurant sales, which                                  are included in VIEs' sales.                                Rents and royalties              Includes royalties and rental revenues                                  earned, net of relief, and certain                                advertising                                  levies associated with our Ad Fund relating                                  primarily to the Expanded Menu Board                                  Program.                                Franchise fees                   Includes revenues derived from 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                    Cost of sales includes costs associated with                                  the management of our supply chain,                                  including cost of goods, direct labour and                                  depreciation, as well as the cost of goods                                  delivered by third-party distributors to                                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 of                                  Company-operated restaurants and                                  consolidated Non-owned restaurants.                                Operating expenses               Includes property-related costs, including                                  depreciation and rent expense related to                                  properties leased to restaurant owners and                                other property-related costs. Also included                                  are certain operating expenses related to our                                  distribution business such as 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. Also includes support                                  costs related to project-related and/or                                  operational initiatives.                                General and administrative       Includes costs that cannot be directly expenses                         related to 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 expenses                         fees related to the implementation of our                                new Corporate Centre and Business Unit                                  organizational structure, as well as CEO                                  transition costs.                                De-branding costs                Represents de-branding costs related to                                removing the Cold Stone Creamery brand                                  from Tim Hortons restaurants in Canada.                                Asset Impairment                 Represents non-cash charges relating to the                                impairment of long-lived assets, including                                  any reversals of previously recognized                                  charges deemed no longer required.                                Other (income) expense, net      Includes (income) expenses that are not                                  directly derived from the Company's primary                                businesses, such as foreign currency                                  adjustments, gains and losses on asset sales,                                  and other asset write-offs.                SOURCE Tim Hortons  Contact:  Investors: Scott Bonikowsky, (905) 339-6186 orbonikowsky_scott@timhortons.com Media: Olga Petrycki, (905) 339-5960 orpetrycki_olga@timhortons.com