Tim Hortons Inc. Announces 2009 Third Quarter Results

(All amounts in Canadian dollars)

Strong sales performance in Canada and the U.S.; Earnings incorporate impact of reorganization as a Canadian public company

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

------------------------------------------------------------------------- Third Quarter Ended Q3 2009 Q3 2008 % Change ------------------------------------------------------------------------- Revenues $ 563.6 $ 509.0 10.7% Operating Income $ 129.2 $ 122.6 5.4% Adjusted Operating Income(1) $ 132.4 $ 122.6 8.0% Effective Tax Rate(2) 50.5% 32.5% Net Income attributable to THI $ 61.2 $ 78.8 (22.3)% Diluted Earnings Per Share (EPS) attributable to THI $ 0.34 $ 0.43 (21.5)% Fully Diluted Shares 180.9 182.7 (1.0)% ------------------------------------------------------------------------- ($ in millions, except EPS. Fully diluted shares in millions. All numbers rounded.)

(1) Adjusted operating income is a non-GAAP measure. For information regarding this measure, and a reconciliation to U.S. GAAP, please refer to "Disclosure of Non-GAAP Financial Measures" and Table 1 in this release. The reorganization as a Canadian public company affected third quarter operating income by $3.2 million for professional advisory fees and shareholder-related transaction costs.

(2) Effective tax rate includes the $19.9 million in discrete tax items pertaining to the reorganization as a Canadian public company.

------------------------------------------------------------------------- Same-Store Sales(3) Q3 2009 2009 YTD Q3 2008 ------------------------------------------------------------------------- Canada 3.1% 2.7% 3.8% U.S. 4.3% 3.6% (0.6)% -------------------------------------------------------------------------

(3) Includes sales at Franchised and Company-operated locations. As of September 27th, 2009, 99.4% of the Company's restaurants in Canada and 99.1% of its U.S. restaurants were franchised.

Highlights ---------- - Same-store sales increased 3.1% in Canada and 4.3% in the U.S. - Quarterly results incorporate costs and discrete tax item impacts arising from the Canadian public company reorganization - Operating income increased 5.4% to $129.2 million - Adjusted operating income(1), which excludes impact of the public company reorganization, was up 8.0%

OAKVILLE, ON, Oct. 30 /PRNewswire-FirstCall/ - Tim Hortons Inc. (TSX: THI, NYSE: THI) today announced its results for the third quarter ended September 27th, 2009.

"The underlying performance of our business was healthy in the third quarter and our results continue to demonstrate the strength and resilience of our brand," said Don Schroeder, president and CEO. "Operating conditions continued to be challenging in the third quarter but we remained focused on executing our growth initiatives and responding to the needs of our customers," added Schroeder.

Consolidated Results

All percentage increases and decreases represent year-over-year changes from the third quarter of 2009 compared to the third quarter of 2008, unless otherwise noted.

Systemwide sales(4) grew 6.2% on a constant currency basis in the third quarter. Total revenues increased 10.7%, to $563.6 million versus $509.0 million last year. Revenues benefited from higher sales, consisting primarily of distribution sales, and from higher rents and royalties. Distribution sales growth was the largest component of the sales increase, driven by new products managed through the supply chain, systemwide sales growth, and higher commodity costs. Sales growth was partially offset by fewer Company-operated restaurants compared to last year, and by lower sales from non-owned consolidated restaurants (formerly referred to as FIN 46R).

Rents and royalties grew 7.5% in the third quarter, relatively consistent with systemwide sales growth including the effects of foreign exchange translation. Franchise fees were up 16.9%, as a result of a higher number of resales and non-standard unit sales that took place compared to 2008, increasing franchise fee costs as well.

Both Canadian and U.S. same-store sales were strong in the third quarter, increasing 3.1% in Canada and 4.3% in the U.S., with contributions from transaction growth and slight improvement in average check.

In the third quarter we had active menu and product-focused promotional programs designed to reinforce value to our customers. We promoted the sausage and a biscuit offering in both Canada and the U.S. at attractive price points. We also continued to benefit from, and provided promotional support for, Chicken Wrap Snackers. This menu item was introduced late in the first quarter to support our focus on the snacking and lunch day parts. Blueberry-themed promotions were featured in both markets. Proving very popular with our customers, these products included Blueberry Bloom donuts, Blueberry Glazed donuts and Whole Grain Blueberry muffins.

In Canada, to increase breadth of our soup program and drive trial, we introduced Italian Wedding soup. We also had a national free sample day for hash browns with the purchase of any breakfast sandwich, and promoted hot beverages featuring French Vanilla Cappuccino. In the U.S. market, we extended blueberry flavors to include Iced Capp and Iced Coffee as part of the Blueberry-themed products promotion, and also featured a US$1.99 Iced Cappuccino promotion.

Cost of sales were up by 11.9% in the third quarter, reflecting the impact of new products managed through the supply chain and increased product costs primarily associated with commodity cost increases. These factors were partially offset by fewer Company-operated restaurants compared to 2008, and lower cost of sales from non-owned consolidated restaurants.

In the third quarter operating expenses increased 10.2%. The year-over-year increase in operating expenses was due mostly to growth in the number of restaurants in the system compared to last year, as well as percentage rent increases.

Franchise fee costs were up 9.6% during the third quarter. A larger number of resales and higher non-standard unit sales contributed to most of the increase, which also drove franchise fees higher, as noted previously.

As anticipated, general and administrative costs were significantly higher in the quarter, increasing 17.9% versus the prior year, due mostly to the professional advisory fees and shareholder-related transaction costs of $3.2 million incurred for the public company reorganization. These expenditures accounted for slightly more than 10% of the year-over-year increase.

Equity income in the third quarter was flat compared to last year at $9.4 million. A slight income decline in the Company's bakery joint venture was entirely offset by slight gains in other joint ventures.

Operating income increased 5.4% to $129.2 million in the third quarter compared to $122.6 million in the prior year, and adjusted operating income(1), excluding $3.2 million in professional advisory fees and shareholder-related transaction costs incurred for the public company reorganization, was up 8.0% to $132.4 million. Higher systemwide sales drove increased rents, and royalties, which contributed to most of the increase in operating income, which also benefited from higher distribution sales, an increase in franchise sales, and operating income improvement in the U.S. segment.

Net income attributable to Tim Hortons declined by 22.3% to $61.2 million compared to $78.8 million last year. This result includes a $23.1 million impact in connection with the reorganization as a Canadian public company. The reorganization drove substantially all of the increase in effective tax rate for the third quarter, which rose to 50.5% compared to 32.5% last year. Lower net interest expense slightly offset the impact of the reorganization on net income attributable to Tim Hortons, and was $4.8 million in the third quarter compared to $5.3 million in the prior year.

Diluted earnings per share attributable to Tim Hortons was $0.34, decreasing 21.5% compared to $0.43 in 2008. This includes a $0.13 impact from public company reorganization costs related to a valuation allowance on deferred tax assets, and professional advisory fees and shareholder-related transaction costs. Diluted earnings per share attributable to Tim Hortons benefited from 1.0% fewer shares outstanding in the quarter compared to the prior year.

Segmented Performance Commentary

Canada ------

Same-store sales growth in Canada increased by 3.1% compared to the third quarter of 2008. Menu and promotion initiatives and operational programs drove most of the same-store sales increase. Same-store sales growth also benefited slightly from pricing increases implemented late in the quarter in Ontario, which faced continued economic and unemployment challenges. A total of 36 restaurants were opened in Canada during the quarter.

By the end of the quarter, twelve co-branded Cold Stone Creamery locations had been opened in Canada. Based on positive results and customer response to date in these initial locations, we have reached an agreement with Kahala Corp., parent company of Cold Stone Creamery, for exclusive development rights in Canada in order to provide us flexibility for future expansion. The timing and extent of future expansion will be evaluated on an annual basis commencing in early 2010 in conjunction with our overall development strategies.

Canadian segment operating income was $140.8 million, a 5.9% improvement from $132.9 million last year. Improvement in the Canadian segment operating income was primarily due to systemwide sales growth, higher distribution sales and higher franchise sales revenue, partially offset by higher commodity costs.

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

The U.S. segment maintained its sales momentum in the third quarter, increasing same-store sales by 4.3% year-over-year. Continued positive results at Cold Stone Creamery co-branded locations made significant contributions to same-store sales growth in the quarter, as the ice cream category entered into its final key selling months for the year. The U.S. segment also continued to benefit from promotional and menu activities. By the end of the third quarter, 65 co-branded Tim Hortons - Cold Stone Creamery locations had been opened, including two Cold Stone locations which were co-branded to include our offering. A total of 20 restaurants were opened in the U.S. during the quarter.

Operating income in the U.S. segment improved by $3.2 million in the third quarter, to $1.1 million, compared to a $2.1 million loss in 2008. Consistent with the last quarter, several factors contributed to the significant improvement in profitability. The decision in late 2008 to close certain underperforming corporate restaurants, and a related market asset impairment charge, resulted in improvement in Company-operated restaurant losses, and lower depreciation and rent expense in the third quarter. These factors collectively benefited operating income in the U.S. segment by $1.2 million. Higher distribution sales, lower general and administrative expenses, higher same-store sales growth, and contributions from vertical integration in the segment also contributed to the operating income improvement. The largest offsetting factors to U.S. segment operating income were higher franchise relief provided to owner-operator restaurants being converted from Company-operated restaurants, and relief provided to new restaurants opened for less than twelve months.

Internationally, in the Republic of Ireland and the United Kingdom, there are now 292 licensed locations primarily in the convenience store channel operating mainly under the Tim Hortons brand. Tim Hortons has initiated a strategic planning process pertaining to future international growth.

Corporate Developments

Outlook -------

We are pleased with the strength of our sales performance in the Canadian segment to the end of the third quarter considering the persistent, challenging economic conditions experienced throughout 2009. Based on year-to-date performance to the end of the third quarter, we currently expect to be at the low end or slightly under our 3% to 5% annual same-store sales growth target for 2009 in the Canadian segment.

We remain confident in our ability to meet our targeted consolidated operating income growth range of 11% to 13% growth excluding the impact of the reorganization as a Canadian public company (targeted rate is 6% to 8% growth excluding the 2008 impacts of asset impairment and related closure costs and the 2009 public company reorganization costs).

Board approves resumption of previously announced share repurchase ------------------------------------------------------------------ program -------

The Company announced in May this year its decision to defer further purchases in its share repurchase program, pending a change in corporate structure, which was subject to shareholder approval at that time. As a result of the subsequent completion of the reorganization as a Canadian public company, the Board has approved resumption of the previously announced program, beginning in the fourth quarter.

"Our decision to resume our share repurchase program reflects in part efficiencies arising from our new corporate structure as well as our continued confidence in our strong cash flow generation capabilities," said Cynthia Devine, chief financial officer.

The Company currently expects to spend up to $150 million during the remainder of the program until it terminates on March 1st, 2010. Under terms of the existing program, the Company is authorized to purchase up to $200 million in common shares, not to exceed the regulatory maximum of 9,077,438 shares or 5% of the outstanding common shares. Prior to the decision to defer the program, the Company spent $16.7 million to repurchase approximately 0.6 million common shares.

Shares will be repurchased through a combination of a 10b5-1, or automatic trading program, and through management's discretion considering regulatory requirements, and market, cost and other considerations. Repurchases will be made by Tim Hortons on either the Toronto Stock Exchange or the New York Stock Exchange. There can be no assurance as to the precise number of shares that will be repurchased under the share repurchase program, or the aggregate dollar amount of the shares purchased. Tim Hortons may discontinue purchases at any time, subject to compliance with applicable regulatory requirements. Shares purchased pursuant to the share repurchase program will be cancelled.

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

The Board of Directors has declared a quarterly dividend of $0.10 per share payable on December 15th, 2009 to shareholders of record as of December 1st, 2009. The Company's current dividend policy is to pay a total of 20%-25% of prior year, normalized annual net earnings in dividends each year, returning value to shareholders based on the Company's earnings growth.

As of September 28th, 2009, dividends are declared and paid in Canadian dollars to all shareholders with Canadian resident addresses. For U.S. resident shareholders, dividends paid will be converted to U.S. dollars based on prevailing exchange rates at time of conversion by the Clearing and Depository Services Inc. for beneficial shareholders and by the Company's transfer agent Computershare Trust Company of Canada for registered shareholders.

As a Canadian public company, dividends paid by the Company are designated as "eligible dividends" for Canadian tax purposes. For resident U.S. shareholders, dividends paid by the Company effective after September 28th, 2009 are generally subject to Canadian withholding taxes at a rate of 15% of the gross amount of the dividends paid, which may be eligible as a foreign tax credit for U.S. tax purposes, depending on the individual resident shareholder's tax situation.

Commentary in this release on tax matters is based, as applicable, on current provisions, regulations, administrative and judicial interpretations and proposed provisions or proposed amendments to existing provisions and may not be applicable to all taxpayers, who are urged to consult their own tax or legal advisors for advice applicable to their particular circumstances.

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

Approximately 99% of shareholders who voted on the transaction to become a Canadian public company did so in favor of the reorganization. The reorganization became effective on September 28th, 2009, subsequent to the quarter, and shares in the new Canadian public company began trading on that day under the same symbol ("THI") on both the New York Stock Exchange and on the Toronto Stock Exchange. Tim Hortons stockholders automatically had their existing common stock converted into an equal number of common shares in the Canadian public company. Tim Hortons shares use the identical CUSIP number 88706M103.

Disclosure on Non-GAAP Financial Measure

Adjusted operating income is a non-GAAP measure, which does not have a standardized meaning prescribed by U.S. GAAP, and may not be comparable to similar measures presented by other publicly-traded companies. Therefore, adjusted operating income should not be construed as an alternative to other financial measures determined in accordance with U.S. GAAP. Presentation of this non-GAAP measure is made with operating income, the most directly comparable U.S. GAAP measure. Management believes this pro forma adjusted information is important for comparison purposes to prior periods and for purposes of evaluating the Company's operating earnings performance compared to our target for 2009, which did not include the impact of the excluded item. The Company evaluates its business performance and trends excluding amounts related to such item. Therefore, this measure provides a more consistent view of management's perspectives on underlying performance and is more relevant for comparison purposes between periods than the closest equivalent U.S. GAAP measure.

Table 1 Pro forma: Reconciliation of adjusted operating income to U.S. GAAP

------------------------------------------------------------------------- Quarter Ended Q3 2009 Q3 2008 % Change ------------------------------------------------------------------------- Reported Operating Income $ 129.2 $ 122.6 5.4% Add: Public company reorganization costs 3.2 - N/M ------------ ------------

Adjusted Operating Income $ 132.4 $ 122.6 8.0% ------------------------------------------------------------------------- ($ in millions, all numbers rounded.) N/M - Not Meaningful

Tim Hortons to host conference call at 10:30 a.m. (EDT) Friday, October 30th, 2009

Tim Hortons will host a conference call today to discuss the third quarter results, scheduled to begin at 10:30 a.m. (EDT). The dial-in number is (416) 641-6712 or (800) 354-6885. No access code is required. A simultaneous web cast will be available at www.timhortons-invest.com. A presentation supporting the call will be available at this web site under the Events and Presentations section. The call will be archived at this site for a period of one-year and will also be available under the Events and Presentations section. A replay of the call will be available for a period of one week and can be accessed at (416) 626-4100 or (800) 558-5253. The call replay reservation number is 21440280.

Safe Harbor Statement

Certain information in this news release, particularly information regarding future economic performance, finances, and plans, expectations and objectives of management, is forward-looking as contemplated under the Private Securities Litigation Reform Act of 1995. Various factors including those described as "risk factors" in the Company's 2008 Annual Report on Form 10-K, filed February 26, 2009, and those risk factors set forth in our Safe Harbor Statement, as well as other possible factors not listed or described in the foregoing, could affect the Company's actual results and cause such results to differ materially from those expressed in forward-looking statements. As such, readers are cautioned not to place undue reliance on forward-looking statements contained in this news release, which speak only as of the date hereof.

Except as required by federal or provincial securities laws, the Company undertakes no obligation to publicly release any revisions to the forward looking statements contained in this release, or to update them to reflect events or circumstances occurring after the date of this release, or to reflect the occurrence of unanticipated events, even if new information, future events or other circumstances have made the forward-looking statements incorrect or misleading. Please review the Company's Safe Harbor Statement at www.timhortons.com/en/about/safeharbor.html.

(4) Total systemwide sales growth includes restaurant level sales at both Company and Franchise restaurants. Approximately 99.3% of our consolidated system is franchised as at September 27th, 2009. Systemwide sales growth is determined using a constant exchange rate, where noted, to exclude the effects of foreign currency translation. U.S. dollar sales are converted to Canadian dollar amounts using the average exchange rate of the base year for the period covered. For the third quarter of 2009, systemwide sales growth on a constant currency basis was up 6.2% compared to the third quarter of 2008. Systemwide sales are important to understanding our business performance as they impact our franchise royalties and rental income, as well as our distribution income. Changes in systemwide sales are driven by changes in average same-store sales and changes in the number of systemwide restaurants.

Tim Hortons Inc. Overview

Tim Hortons is the fourth largest publicly-traded quick service restaurant chain in North America based on market capitalization, and the largest in Canada. Tim Hortons appeals to a broad range of consumer tastes, with a menu that includes premium coffee, flavored cappuccinos, specialty teas, home-style soups, fresh sandwiches, donuts and fresh baked goods. As of September 27th, 2009, Tim Hortons had 3,527 systemwide restaurants, including 2,971 in Canada and 556 in the United States. More information about the Company is available at www.timhortons.com.

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

(Unaudited)

Third quarter ended September September 27, 2009 28, 2008 $ Change % Change ------------ ------------ ------------ ------------ REVENUES Sales $373,035 $333,581 $39,454 11.8% Franchise revenues: Rents and royalties 166,914 155,214 11,700 7.5% Franchise fees 23,605 20,200 3,405 16.9% ------------ ------------ ------------ ------------ 190,519 175,414 15,105 8.6% ------------ ------------ ------------ ------------ TOTAL REVENUES 563,554 508,995 54,559 10.7% ------------ ------------ ------------ ------------

COSTS AND EXPENSES Cost of sales 327,923 293,056 34,867 11.9% Operating expenses 59,053 53,596 5,457 10.2% Franchise fee costs 21,754 19,840 1,914 9.6% General and administrative expenses 35,363 29,986 5,377 17.9% Equity (income) (9,415) (9,429) 14 (0.1%) Other (income), net (359) (664) 305 N/M ------------ ------------ ------------ ------------ TOTAL COSTS AND EXPENSES, NET 434,319 386,385 47,934 12.4% ------------ ------------ ------------ ------------

OPERATING INCOME 129,235 122,610 6,625 5.4%

Interest (expense) (5,068) (6,288) 1,220 (19.4%) Interest income 272 957 (685) N/M ------------ ------------ ------------ ------------

INCOME BEFORE INCOME TAXES 124,439 117,279 7,160 6.1%

INCOME TAXES 62,873 38,092 24,781 65.1% ------------ ------------ ------------ ------------

Net Income 61,566 79,187 (17,621) (22.3%) Net income attributable to noncontrolling interests 387 430 (43) (10.0%) ------------ ------------ ------------ ------------

NET INCOME ATTRIBUTABLE TO TIM HORTONS INC. $61,179 $78,757 ($17,578) (22.3%) ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------

Basic earnings per share of common stock attributable to Tim Hortons Inc. $0.34 $0.43 ($0.09) (21.6%) ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------

Diluted earnings per share of common stock attributable to Tim Hortons Inc. $0.34 $0.43 ($0.09) (21.5%) ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------

Weighted average number of shares of common stock - Basic (in thousands) 180,681 182,431 (1,750) (1.0%) ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------

Weighted average number of shares of common stock - Diluted (in thousands) 180,864 182,662 (1,798) (1.0%) ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------

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

N/M - not meaningful (all numbers rounded)

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

(Unaudited)

Year-to-date period ended September September 27, 2009 28, 2008 $ Change % Change ------------ ------------ ------------ ------------

REVENUES Sales $1,084,773 $975,960 $108,813 11.1% Franchise revenues: Rents and royalties 478,732 444,640 34,092 7.7% Franchise fees 63,319 59,404 3,915 6.6% ------------ ------------ ------------ ------------ 542,051 504,044 38,007 7.5% ------------ ------------ ------------ ------------ TOTAL REVENUES 1,626,824 1,480,004 146,820 9.9% ------------ ------------ ------------ ------------

COSTS AND EXPENSES Cost of sales 956,219 858,440 97,779 11.4% Operating expenses 175,586 158,227 17,359 11.0% Franchise fee costs 61,147 58,028 3,119 5.4% General and administrative expenses 104,533 96,996 7,537 7.8% Equity (income) (25,964) (26,792) 828 (3.1%) Other (income), net (675) (2,390) 1,715 N/M ------------ ------------ ------------ ------------ TOTAL COSTS AND EXPENSES, NET 1,270,846 1,142,509 128,337 11.2% ------------ ------------ ------------ ------------

OPERATING INCOME 355,978 337,495 18,483 5.5%

Interest (expense) (15,617) (18,608) 2,991 (16.1%) Interest income 1,056 4,020 (2,964) N/M ------------ ------------ ------------ ------------

INCOME BEFORE INCOME TAXES 341,417 322,907 18,510 5.7%

INCOME TAXES 134,918 105,922 28,996 27.4% ------------ ------------ ------------ ------------

Net Income 206,499 216,985 (10,486) (4.8%) Net income attributable to noncontrolling interests 1,121 1,434 (313) (21.8%) ------------ ------------ ------------ ------------

NET INCOME ATTRIBUTABLE TO TIM HORTONS INC. $205,378 $215,551 ($10,173) (4.7%) ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------

Basic earnings per share of common stock attributable to Tim Hortons Inc. $1.14 $1.17 ($0.03) (2.7%) ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------

Diluted earnings per share of common stock attributable to Tim Hortons Inc. $1.13 $1.17 ($0.03) (2.6%) ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------

Weighted average number of shares of common stock - Basic (in thousands) 180,878 184,735 (3,857) (2.1%) ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------

Weighted average number of shares of common stock - Diluted (in thousands) 181,076 185,013 (3,937) (2.1%) ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------

Dividend per share of common stock $0.30 $0.27 $0.03 ------------ ------------ ------------ ------------ ------------ ------------

N/M - not meaningful (all numbers rounded)

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

As at --------------------------- September 27, December 28, 2009 2008 ------------- ------------- (Unaudited) ASSETS

Current assets Cash and cash equivalents $213,745 $101,636 Restricted cash and cash equivalents 13,534 62,329 Restricted investments 20,152 - Accounts receivable, net 159,016 159,505 Notes receivable, net 27,457 22,615 Deferred income taxes 11,596 19,760 Inventories and other, net 60,916 71,505 Advertising fund restricted assets 23,173 27,684 ------------- ------------- Total current assets 529,589 465,034

Property and equipment, net 1,330,941 1,332,852

Notes receivable, net 13,503 17,645

Deferred income taxes 8,517 29,285

Intangible assets, net 2,202 2,606

Equity investments 126,159 132,364

Other assets 16,677 12,841 ------------- ------------- Total assets $2,027,588 $1,992,627 ------------- ------------- ------------- -------------

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

As at --------------------------- September 27, December 28, 2009 2008 ------------- ------------- (Unaudited)

LIABILITIES AND EQUITY

Current liabilities Accounts payable $152,302 $157,210 Accrued liabilities: Salaries and wages 14,474 18,492 Taxes 32,681 25,605 Other 70,821 110,518 Advertising fund restricted liabilities 40,255 47,544 Current portion of long-term obligations 7,795 6,691 ------------- ------------- Total current liabilities 318,328 366,060 ------------- -------------

Long-term obligations Term debt 334,155 332,506 Advertising fund restricted debt 2,092 6,929 Capital leases 61,759 59,052 Deferred income taxes 5,635 13,604 Other long-term liabilities 77,553 72,467 ------------- ------------- Total long-term obligations 481,194 484,558 ------------- -------------

Equity Equity of Tim Hortons Inc. Common stock, (US$0.001 par value per share) Authorized: 1,000,000,000 shares Issued: 193,302,977 shares 289 289 Capital in excess of par value 928,780 929,102 Treasury stock, at cost: 12,306,100 and 11,754,201 shares, respectively (415,751) (399,314) Common stock held in trust, at cost: 316,129 and 358,186 shares, respectively (10,712) (12,287) Retained earnings 828,345 677,550 Accumulated other comprehensive loss (104,451) (54,936) ------------- ------------- Total equity of Tim Hortons Inc. 1,226,500 1,140,404 Noncontrolling interests 1,566 1,605 ------------- ------------- Total equity 1,228,066 1,142,009 ------------- ------------- Total liabilities and equity $2,027,588 $1,992,627 ------------- ------------- ------------- -------------

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

Year-to-date period ended September 27, September 28, 2009 2008 ------------- ------------- (Unaudited)

CASH FLOWS PROVIDED FROM (USED IN) OPERATING ACTIVITIES Net income $206,499 $216,985 Net income attributable to noncontrolling interests (1,121) (1,434) Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 74,605 66,811 Stock-based compensation expense 6,801 7,909 Equity income, net of cash dividends 7,204 3,782 Deferred income taxes 18,725 (3,034) Changes in operating assets and liabilities Restricted cash and cash equivalents 48,447 30,094 Accounts and notes receivable (1,292) (12,483) Inventories and other 8,985 2,748 Accounts payable and accrued liabilities (40,662) (77,920) Other, net 6,694 11,368

------------- ------------- Net cash provided from operating activities 334,885 244,826 ------------- -------------

CASH FLOWS (USED IN) PROVIDED FROM INVESTING ACTIVITIES Capital expenditures (111,382) (112,060) Purchase of restricted investments (20,136) (11,959) Principal payments on notes receivable 2,263 2,563 Other investing activities (14,991) (8,979)

------------- ------------- Net cash used in investing activities (144,246) (130,435) ------------- -------------

CASH FLOWS (USED IN) PROVIDED FROM FINANCING ACTIVITIES Purchase of treasury stock (16,701) (149,770) Dividend payments (54,583) (49,748) Purchase of common stock held in trust (713) (3,842) Purchase of common stock for settlement of restriced stock units (232) (226) Proceeds from issuance of debt, net of issuance costs 2,707 2,068 Principal payments on other long-term debt obligations (3,893) (4,897)

------------- ------------- Net cash used in financing activities (73,415) (206,415) ------------- -------------

Effect of exchange rate changes on cash (5,115) 2,036 ------------- -------------

Increase (decrease) in cash and cash equivalents 112,109 (89,988)

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

------------- ------------- Cash and cash equivalents at end of period $213,745 $67,614 ------------- ------------- ------------- -------------

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

(Unaudited)

Third Quarter Ended --------------------------------------------------- September September 27, 2009 % of Total 28, 2008 % of Total ------------ ------------ ------------ ------------

REVENUES Canada $492,043 87.3% $442,295 86.9% U.S. 38,909 6.9% 31,162 6.1% ------------ ------------ ------------ ------------ Total reportable segments 530,952 94.2% 473,457 93.0% Noncontrolling interests - Non-owned consolidated restaurants 32,602 5.8% 35,538 7.0% ------------ ------------ ------------ ------------ Total $563,554 100.0% $508,995 100.0% ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------

SEGMENT OPERATING INCOME (LOSS) Canada $140,783 99.2% $132,892 101.6% U.S. 1,079 0.8% (2,119) (1.6)% ------------ ------------ ------------ ------------ Reportable Segment Operating Income 141,862 100.0% 130,773 100.0% ------------ ------------ ------------ ------------ Noncontrolling interests - Non-owned consolidated restaurants 426 538 Corporate Charges (13,053) (8,701) ------------ ------------ Consolidated Operating Income 129,235 122,610 Interest, net (4,796) (5,331) Income taxes (62,873) (38,092) ------------ ------------ Net Income 61,566 79,187 Net Income attributable to noncontrolling interests 387 430 ------------ ------------ Net Income attributable to Tim Hortons Inc. $61,179 $78,757 ------------ ------------ ------------ ------------

Year-to date-period ended --------------------------------------------------- September September 27, 2009 % of Total 28, 2008 % of Total ------------ ------------ ------------ ------------

REVENUES Canada $1,405,653 86.4% $1,280,982 86.6% U.S. 125,517 7.7% 96,640 6.5% ------------ ------------ ------------ ------------ Total reportable segments 1,531,170 94.1% 1,377,622 93.1% Noncontrolling interests - Non-owned consolidated restaurants 95,654 5.9% 102,382 6.9% ------------ ------------ ------------ ------------ Total $1,626,824 100.0% $1,480,004 100.0% ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------

SEGMENT OPERATING INCOME (LOSS) Canada $387,126 99.1% $369,860 101.4% U.S. 3,656 0.9% (5,188) (1.4)% ------------ ------------ ------------ ------------ Reportable Segment Operating Income 390,782 100.0% 364,672 100.0% ------------ ------------ ------------ ------------ Noncontrolling interests - Non-owned consolidated restaurants 1,283 1,794 Corporate Charges (36,087) (28,971) ------------ ------------ Consolidated Operating Income 355,978 337,495 Interest, net (14,561) (14,588) Income taxes (134,918) (105,922) ------------ ------------ Net Income 206,499 216,985 Net Income attributable to noncontrolling interests 1,121 1,434 ------------ ------------ Net Income attributable to Tim Hortons Inc. $205,378 $215,551 ------------ ------------ ------------ ------------

Third Quarter Ended ------------------------- September September 27, 2009 28, 2008 $ Change % Change ------------ ------------ ------------ ------------ Sales is comprised of: Distribution sales $334,557 $289,174 $45,383 15.7% Company-operated restaurant sales 5,876 8,869 (2,993) (33.7)% Sales from non-owned consolidated restaurants 32,602 35,538 (2,936) (8.3)% ------------ ------------ ------------ ------------ $373,035 $333,581 $39,454 11.8% ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------

Year-to-date period ended ------------------------- September September 27, 2009 28, 2008 $ Change % Change ------------ ------------ ------------ ------------ Sales is comprised of: Distribution sales $970,502 $841,968 $128,534 15.3% Company-operated restaurant sales 18,617 31,610 (12,993) (41.1)% Sales from non-owned consolidated restaurants 95,654 102,382 (6,728) (6.6)% ------------ ------------ ------------ ------------ $1,084,773 $975,960 $108,813 11.1% ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------

TIM HORTONS INC. AND SUBSIDIARIES SYSTEMWIDE RESTAURANT COUNT

Increase/ Increase/ As of As of (Decrease) As of (Decrease) September December From September From 27, 2009 28, 2008 Year End 28, 2008 Prior Year -----------------------------------------------------------

Tim Hortons -----------

Canada Company- operated 18 15 3 13 5 Franchised 2,953 2,902 51 2,857 96 ----------------------------------------------------------- Total 2,971 2,917 54 2,870 101

% Franchised 99.4% 99.5% 99.5%

U.S. Company- operated 5 19 (14) 30 (25) Franchised 551 501 50 394 157 ----------------------------------------------------------- Total 556 520 36 424 132

% Franchised 99.1% 96.3% 92.9%

Total Tim Hortons Company- operated 23 34 (11) 43 (20) Franchised 3,504 3,403 101 3,251 253 ----------------------------------------------------------- Total 3,527 3,437 90 3,294 233 ----------------------------------------------------------- -----------------------------------------------------------

% Franchised 99.3% 99.0% 98.7%

TIM HORTONS INC. AND SUBSIDIARIES Income Statement Definitions

Sales Primarily includes sales of products, supplies and restaurant equipment (except for initial equipment packages sold to franchisees as part of the establishment of their restaurant's business - see "Franchise Fees") that are shipped directly from our warehouses or by third party distributors to the restaurants, which we include in warehouse or distribution sales. Sales include canned coffee sales through the grocery channel. Sales also include sales from Company-operated restaurants and sales from certain non-owned restaurants that are consolidated in accordance with ASC 810 (formerly FIN 46R).

Rents and Royalties Includes franchisee royalties and rental revenues.

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

Cost of Sales Includes costs associated with our distribution business, including cost of goods, direct labour and depreciation, as well as the cost of goods delivered by third-party distributors to the restaurants, and for canned coffee sold through grocery stores. Cost of sales also includes food, paper and labour costs for Company-operated restaurants and certain non-owned restaurants that are consolidated in accordance with ASC 810 (formerly FIN 46R).

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

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

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

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

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

Noncontrolling Represents certain non-owned restaurants that the interests Company is required to consolidate under ASC 810 (formerly FIN 46R).

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

SOURCE Tim Hortons Inc.