Tim Hortons outlines plans for Winning in the New Era

            Tim Hortons outlines plans for Winning in the New Era

PR Newswire

OAKVILLE, ON, Feb. 25, 2014

Company unveils five-year strategic roadmap designed to create long-term
profitable growth and above-market returns

  *Significant room for growth in core Canadian business, plan focuses on
    accelerating growth over the life of the plan with new consumer and sales
    levers
  *U.S. focus on driving profitable growth in core and priority markets
    designed to allow the business to be scaled aggressively by the end of
    2018
  *Future international growth will continue with pragmatic, disciplined
    approach
  *Targeting a minimum of 800 net new locations across North America and
    internationally through to the end of 2018

OAKVILLE, ON, Feb. 25, 2014 /PRNewswire/ - Tim Hortons Inc. (TSX: THI, NYSE:
THI) will today outline at an investor conference our 2014-2018 strategic
roadmap "Winning in the New Era" which will also include our longer-term
financial aspirations.

"Consumers are highly inter-connected and have increasingly evolving needs.
Our strategic roadmap is ambitious but achievable, and is designed to
capitalize on our strengths while allowing us to rapidly adapt to deliver on
those changing consumer needs. We are energizing the Tim Hortons brand in all
of our geographic markets and we are focusing on driving long-term,
sustainable, profitable growth which we believe will return us to above-market
total return to shareholders," said Marc Caira, president and CEO.

Key themes and trends shape the "new era" facing consumer companies and the
direction of our new strategic plan:

  *the evolution of consumer tastes and preferences, including new flavours
    and an increasing desire for balanced menu options to address interest in
    health, wellness and nutrition;
  *a continued shift in demographics, including an aging population,
    increasing ethnic diversity and the growing importance of 'Millennials' as
    a consumer segment; and
  *the emergence of technology and data to drive both consumer marketing and
    menu insights and to respond to increasingly inter-connected consumers.

Each of our geographic markets plays a different and important role in our
strategic plan. We have defined a set of strategic pillars and initiatives
within each business unit that are designed to deliver on our shareholder
value creation commitments.

Canada: Lead, Defend and Grow

We believe that our enviable guest loyalty, strong restaurant base and
differentiated brand position, coupled with initiatives planned in our
strategic plan, will present significant opportunities to grow our Canadian
business over the next five years.

  *Delivering the ultimate guest experience: defending our core business by
    delivering on the ultimate guest experience more consistently with a focus
    on flawless restaurant-level execution.
  *Leveraging technology: embracing technology as a key business driver, and
    becoming one of the industry's most consumer-centric companies, enabling
    us to aggregate guest insights and connect and transact with them in new
    and innovative ways.
  *Differentiated innovation / pursuing new occasions: delivering
    differentiated innovation in products and services using guest insights to
    anticipate and act upon evolving needs and expectations. Our focus
    includes new proprietary food platforms that transcend dayparts, coffee
    and food category leadership that responds to consumer demand spaces and
    occasions, and a focus on consumer interest in health, nutrition and
    wellness.
  *Narrowing average cheque gap: narrowing the gap between our average
    cheque and the sector average, while protecting our core value brand
    positioning. We believe we have significant opportunities to increase
    items per order primarily by focusing on combination product offers and
    evaluating size and premium options.
  *Continued restaurant development / channel extensions: developing
    approximately 500 net new locations by 2018, and additionally extending
    our brand reach through new restaurant formats and sizes that target
    under-represented captive audience settings such as office, sporting venue
    and health care settings. We also see opportunity, working together with
    our restaurant owners, to go beyond our restaurant footprint in
    alternative channels.

U.S.: Must-Win Battle

As the largest quick service restaurant market in the world, and one that is
still growing, we are committed to the U.S. Our proprietary research
demonstrates that we have made significant inroads and progress in building
consumer brand awareness and convenience in our core and priority markets. Our
planned initiatives for the U.S. market include the following:

  *Driving average unit volumes in existing restaurants: leveraging the
    strong awareness and convenience we have created in our core and priority
    markets to drive average unit volumes and enhance returns.

       *New and differentiated beverages, snacks and meal items, and
         compelling combos, to grow order size and make us more relevant to a
         broader number of U.S. consumers.
       *Leveraging technology, marketing and promotional initiatives to
         appeal to consumer needs, different dayparts and occasions, all
         designed to drive sales and traffic. Our view on the U.S., similar to
         the Canadian market, is that we have significant opportunities to
         grow average cheque while delivering value to consumers.

  *Developing restaurants: optimizing our business model and restaurant-level
    economics with the goal of generating increased profit and growth.
    Focused on our core and priority markets, through a less capital intense
    model, we expect an increase of approximately 300 restaurants in the U.S.
    by the end of 2018. Our development plans will be complemented by brand
    and channel extensions to drive brand awareness and penetration.
  *Traditional franchising development: to complement our own development,
    pursuing traditional franchising development such as Area Development
    Agreements and Master Licensing Agreements, where partners deploy their
    capital and local market knowledge. We have signed our first development
    agreements consistent with this strategy, with close to 100 (mix of
    standard and non-standard) units over the next five years in: St. Louis,
    Missouri (40); Youngstown, Ohio, 25 (all non-standard to complement our
    existing development); Fort Wayne, Indiana (15) and Fargo and Minot, North
    Dakota (15).

We expect this multi-layered, disciplined approach to developing our U.S.
business will result in substantial progress in the U.S. segment and U.S.
operating income of up to $50 million by 2018.

International: Grow, Learn, Expand

We are adopting a pragmatic and disciplined approach to continued
international growth. We intend to do this through:

  *Further expansion in Gulf Cooperation Council (GCC): continuing to learn
    and grow in the GCC where we have demonstrated initial success and have a
    roadmap to approximately 220 locations.
  *Validation of international market opportunities and approach: refining
    our existing market research, business assessments and views on market
    opportunities.
  *Position for potential market entries: prioritize markets and develop due
    diligence to position us to enter new international markets in 2015.

* * *

Plan Summary

"We are setting out to be bold, different and daring. We envision a Tim
Hortons that is one of the industry's most consumer-centric brands, leveraging
technology to build our understanding of emerging consumer insights and to
connect with them in new and innovative ways. We are focusing on flawless
execution and creating the ultimate guest experience. We are asserting our
coffee and food leadership, simplifying our operations and pursuing
differentiated innovation. Our team is aligned, focused and committed to
strong execution and market leadership," added Caira.

2014 Financial Outlook and Longer-term Financial Aspirations

The Company has disclosed its 2014 financial outlook with our fourth quarter
results, as follows:

  *Diluted earnings per share (EPS) of $3.17 to $3.27
  *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%.

In support of the strategic initiatives outlined above, the Company has
established the following aspirations beyond 2014, from 2015 to 2018:

  *EPS: 11%-13% compounded annual growth rate;
  *Collectively, we plan to open more than 800 locations in North America and
    the GCC (between 2014 and 2018);
  *Cumulative free cash flow^1 of approximately $2 billion;

We expect to reduce total capital intensity of the business as the plan
progresses, and we are targeting to improve return on assets and total return
to shareholders.

Executive compensation measures have been changed to better align with the
strategy, shareholder value creation and same-store sales growth, which is
directly linked to the success of our partnership with our franchise
community.

The operational objectives, financial outlook and aspirational goals
(collectively, "targets") established for 2014 and for our long-term
aspirations are based on the accounting, tax and other legislative rules in
place at the time the targets were issued and on the continuation of share
repurchase programs as expected. The impact of future changes in accounting,
tax and/or other legislative rules that may or may not become effective in
fiscal 2014 and future years, changes to our share repurchase activities, and
other matters not contemplated at the time the targets were established that
could affect our business, are not included in the determination of these
targets. In addition, the targets are forward-looking and are based on our
expectations and outlook on, and shall only be effective as of, the date the
targets were originally issued.

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).

^1Free cash flow is a non-GAAP measure. Free cash flow is generally defined as
net income adjusted for amortization and depreciation, net of capital
requirements to sustain business growth. Management believes that free cash
flow is an important tool to compare underlying cash flow generated from core
operating activities once capital investment requirements have been met. Free
cash flow does not represent residual cash flow available for discretionary
expenditures. 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 free cash flow may differ from similar measures reported by
other companies. Free cash flow as contemplated above, was calculated as
follows: Net income attributable to THI, plus depreciation and amortization
(excluding VIEs), less capital expenditures (excluding VIEs).

Safe Harbor Statement

Certain information in this news release, particularly information regarding
future 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.

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 December 29, 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.

SOURCE Tim Hortons

Contact:

Investors: Scott Bonikowsky, (905) 339-6186 orbonikowsky_scott@timhortons.com
Media: Olga Petrycki, (905) 339-5960 orpetrycki_olga@timhortons.com
 
Press spacebar to pause and continue. Press esc to stop.