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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
 
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