10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2013

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number 001-32843

TIM HORTONS INC.

(Exact name of Registrant as specified in its charter)

Canada	98-0641955
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification Number)
874 Sinclair Road, Oakville, ON, Canada	L6K 2Y1
(Address of principal executive offices)	(Zip code)

905-845-6511

(Registrant’s phone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	x	Accelerated filer	¨
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the Registrant is a shell company (as  defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding at August 5, 2013
Common shares	150,986,208 shares

Exhibit Index on page 47.

TIM HORTONS INC. AND SUBSIDIARIES

INDEX

	Pages
PART I: Financial Information
Item 1. Financial Statements (Unaudited):
Condensed Consolidated Statement of Operations for the second quarters and year-to-date periods ended June 30, 2013 and July 1, 2012		3
Condensed Consolidated Statement of Comprehensive Income for the second quarters and year-to-date periods ended June 30, 2013 and July 1, 2012		4
Condensed Consolidated Balance Sheet as at June 30, 2013 and December 30, 2012		5
Condensed Consolidated Statement of Cash Flows for the year-to-date periods ended June  30, 2013 and July 1, 2012		6
Condensed Consolidated Statement of Equity for the year-to-date-periods ended June  30, 2013 and December 30, 2012		7
Notes to the Condensed Consolidated Financial Statements		8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		22
Item 3. Quantitative and Qualitative Disclosures about Market Risk		41
Item 4. Controls and Procedures		41
PART II: Other Information
Item 1. Legal Proceedings		42
Item 1A. Risk Factors		42
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		44
Item 5. Other Information		45
Item 6. Exhibits		45
Signature		46
Index to Exhibits		47

On August 2, 2013, the noon buying rate in New York City for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York was US$0.9635 for Cdn$1.00.

Availability of Information

Tim Hortons Inc. (the “Company”), a corporation incorporated under the Canada Business Corporations Act (the “CBCA”), qualifies as a foreign private issuer in the U.S. for purposes of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Although, as a foreign private issuer, the Company is no longer required to do so, the Company currently continues to file annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K with the U.S. Securities and Exchange Commission (“SEC”) instead of filing the reporting forms available to foreign private issuers.

We make available, through our internet website for investors (www.timhortons-invest.com), our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after electronically filing such material with the SEC and with the Canadian Securities Administrators (“CSA”). All references to our websites contained herein do not constitute incorporation by reference of the information contained on the website and such information should not be considered part of this document.

Reporting Currency

The majority of the Company’s operations, restaurants and cash flows are based in Canada, and the Company is primarily managed in Canadian dollars. As a result, the Company’s reporting currency is the Canadian dollar. All amounts are expressed in Canadian dollars unless otherwise noted.

2

PART I: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TIM HORTONS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(Unaudited)

(in thousands of Canadian dollars, except share and per share data)

	Second quarter ended						Year-to-date period ended
	June 30, 2013			July 1, 2012			June 30, 2013			July 1, 2012
Revenues
Sales (note 14)	$	568,562		$	563,772		$	1,092,449		$	1,087,074
Franchise revenues
Rents and royalties		209,289			198,973			396,743			379,159
Franchise fees		22,288			22,836			42,484			40,632
		231,577			221,809			439,227			419,791
Total revenues		800,139			785,581			1,531,676			1,506,865
Costs and expenses
Cost of sales (note 14)		489,092			492,900			950,446			957,820
Operating expenses		76,986			72,314			152,719			138,239
Franchise fee costs		23,326			24,794			45,878			45,076
General and administrative expenses		38,038			40,272			76,706			81,695
Equity (income)		(3,916	)		(3,859	)		(7,265	)		(7,105	)
Corporate reorganization expenses (note 2)		604			1,277			10,079			1,277
Other (income) expense, net		(570	)		(956	)		(1,383	)		(599	)
Total costs and expenses, net		623,560			626,742			1,227,180			1,216,403
Operating income		176,579			158,839			304,496			290,462
Interest (expense)		(8,922	)		(8,650	)		(17,585	)		(16,548	)
Interest income		791			723			1,719			1,434
Income before income taxes		168,448			150,912			288,630			275,348
Income taxes (note 3)		43,886			41,675			77,145			76,132
Net income		124,562			109,237			211,485			199,216
Net income attributable to noncontrolling interests (note 13)		826			1,170			1,578			2,370
Net income attributable to Tim Hortons Inc.	$	123,736		$	108,067		$	209,907		$	196,846
Basic earnings per common share attributable to Tim Hortons Inc. (note 4)	$	0.81		$	0.70		$	1.38		$	1.27
Diluted earnings per common share attributable to Tim Hortons Inc. (note 4)	$	0.81		$	0.69		$	1.37		$	1.26
Weighted average number of common shares outstanding (in thousands) – Basic (note 4)		152,083			155,351			152,597			155,589
Weighted average number of common shares outstanding (in thousands) – Diluted (note 4)		152,637			155,995			153,133			156,207
Dividends per common share	$	0.26		$	0.21		$	0.52		$	0.42

See accompanying Notes to the Condensed Consolidated Financial Statements.

3

TIM HORTONS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(Unaudited)

(in thousands of Canadian dollars)

	Second quarter ended						Year-to-date period ended
	June 30, 2013			July 1, 2012			June 30, 2013			July 1, 2012
Net income	$	124,562		$	109,237		$	211,485		$	199,216
Other comprehensive income (loss)
Translation adjustments gain (loss)		15,205			8,342			23,382			506
Unrealized gains (losses) from cash flow hedges (note 9)
Gain (loss) from change in fair value of derivatives		5,307			2,114			8,079			(1,389	)
Amount of net gain (loss) reclassified to earnings during the period		378			(800	)		1,041			(1,948	)
Tax (expense) recovery (note 9)		(1,333	)		(334	)		(2,325	)		951
Other comprehensive income (loss)		19,557			9,322			30,177			(1,880	)
Comprehensive income		144,119			118,559			241,662			197,336
Comprehensive income attributable to noncontrolling interests		826			1,170			1,578			2,370
Comprehensive income attributable to Tim Hortons Inc.	$	143,293		$	117,389		$	240,084		$	194,966

See accompanying Notes to the Condensed Consolidated Financial Statements.

4

TIM HORTONS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEET

(Unaudited)

(in thousands of Canadian dollars, except share and per share data)

	As at
	June 30, 2013			December 30, 2012
Assets
Current assets
Cash and cash equivalents	$	86,603		$	120,139
Restricted cash and cash equivalents		104,780			150,574
Accounts receivable, net		188,989			171,605
Notes receivable, net (note 5)		5,946			7,531
Deferred income taxes		6,844			7,142
Inventories and other, net (note 6)		109,639			107,000
Advertising fund restricted assets (note 13)		38,264			45,337
Total current assets		541,065			609,328
Property and equipment, net		1,588,991			1,553,308
Intangible assets, net		3,195			3,674
Notes receivable, net (note 5)		5,662			1,246
Deferred income taxes		11,540			10,559
Equity investments		41,830			41,268
Other assets		72,603			64,796
Total assets	$	2,264,886		$	2,284,179
Liabilities and equity
Current liabilities
Accounts payable (note 7)	$	140,648		$	169,762
Accrued liabilities
Salaries and wages		14,642			21,477
Taxes		12,574			8,391
Tim Card obligation and other (note 7)		147,913			197,871
Deferred income taxes		1,052			197
Advertising fund liabilities (note 13)		42,624			44,893
Current portion of long-term obligations		20,130			20,781
Total current liabilities		379,583			463,372
Long-term obligations
Long-term debt		364,335			359,471
Long-term debt – Advertising fund		44,393			46,849
Capital leases		115,645			104,383
Deferred income taxes		8,468			10,399
Other long-term liabilities (note 7)		116,601			109,614
Total long-term obligations		649,442			630,716
Commitments and contingencies (note 10)
Equity
Equity of Tim Hortons Inc.
Common shares ($2.84 stated value per share), Authorized: unlimited shares. Issued: 151,319,384 and 153,404,839 shares, respectively (note 11)		429,105			435,033
Common shares held in Trust, at cost:
340,314 and 316,923 shares, respectively (note 13)		(14,969	)		(13,356	)
Contributed surplus		13,388			10,970
Retained earnings		916,421			893,619
Accumulated other comprehensive loss		(108,851	)		(139,028	)
Total equity of Tim Hortons Inc.		1,235,094			1,187,238
Noncontrolling interests (note 13)		767			2,853
Total equity		1,235,861			1,190,091
Total liabilities and equity	$	2,264,886		$	2,284,179

See accompanying Notes to the Condensed Consolidated Financial Statements.

5

TIM HORTONS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)

(in thousands of Canadian dollars)

	Year-to-date period ended
	June 30, 2013			July 1, 2012
Cash flows provided from (used in) operating activities
Net income	$	211,485		$	199,216
Adjustments to reconcile net income to net cash provided from operating activities
Depreciation and amortization		72,368			62,379
Stock-based compensation expense (note 12)		12,535			11,869
Deferred income taxes		(2,539	)		(2,081	)
Changes in operating assets and liabilities
Restricted cash and cash equivalents		46,356			43,290
Accounts receivable		(8,254	)		(32,425	)
Inventories and other		(5,218	)		7,285
Accounts payable and accrued liabilities		(75,262	)		(64,156	)
Taxes		4,144			(8,674	)
Other		2,714			(352	)
Net cash provided from operating activities		258,329			216,351
Cash flows (used in) provided from investing activities
Capital expenditures		(88,272	)		(66,628	)
Capital expenditures – Advertising fund (note 13)		(5,224	)		(30,830	)
Other investing activities		6,125			(8,710	)
Net cash (used in) investing activities		(87,371	)		(106,168	)
Cash flows (used in) provided from financing activities
Repurchase of common shares (note 11)		(113,803	)		(136,509	)
Dividend payments to common shareholders		(79,348	)		(65,661	)
Net proceeds from issue of debt – Advertising fund (note 13)		0			32,262
Principal payments on long-term debt obligations		(8,543	)		(4,078	)
Other financing activities		(5,001	)		(4,739	)
Net cash (used in) financing activities		(206,695	)		(178,725	)
Effect of exchange rate changes on cash		2,201			(222	)
(Decrease) in cash and cash equivalents		(33,536	)		(68,764	)
Cash and cash equivalents at beginning of period		120,139			126,497
Cash and cash equivalents at end of period	$	86,603		$	57,733
Supplemental disclosures of cash flow information:
Interest paid	$	17,131		$	16,199
Income taxes paid	$	77,540		$	94,605
Non-cash investing and financing activities:
Capital lease obligations incurred	$	19,219		$	13,133

See accompanying Notes to the Condensed Consolidated Financial Statements.

6

TIM HORTONS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF EQUITY

(Unaudited)

(in thousands of Canadian dollars or thousands of common shares)

	Common Shares						Common Shares Held in the Trust						Contributed Surplus $		Retained Earnings $			AOCI(1)						Total  Equity THI $			NCI(2) $			Total  Equity $
	Number			$			Number			$								Translation Adjustment $			Cash  Flow Hedges $
Balance as at January 1, 2012		157,815		$	447,558			(277	)	$	(10,136	)	$	6,375	$	836,968		$	(128,170	)	$	(47	)	$	1,152,548		$	1,885		$	1,154,433
Repurchase of common shares(3)		(4,410	)		(12,525	)		(112	)		(6,154	)		0		(212,675	)		0			0			(231,354	)		0			(231,354	)
Disbursed or sold from the Trust(4)		0			0			72			2,934			0		0			0			0			2,934			0			2,934
Stock based compensation		0			0			0			0			4,595		(2,143	)		0			0			2,452			0			2,452
Other comprehensive loss		0			0			0			0			0		0			(7,268	)		(3,543	)		(10,811	)		0			(10,811	)
NCI transactions		0			0			0			0			0		(907	)		0			0			(907	)		907			0
Net income attributable to NCI		0			0			0			0			0		0			0			0			0			4,881			4,881
Net income attributable to THI		0			0			0			0			0		402,885			0			0			402,885			0			402,885
Dividends and distributions, net		0			0			0			0			0		(130,509	)		0			0			(130,509	)		(4,820	)		(135,329	)
Balance as at December 30, 2012		153,405		$	435,033			(317	)	$	(13,356	)	$	10,970	$	893,619		$	(135,438	)	$	(3,590	)	$	1,187,238		$	2,853		$	1,190,091
Repurchase of common shares(3)		(2,086	)		(5,928	)		(43	)		(2,453	)		0		(107,875	)		0			0			(116,256	)		0			(116,256	)
Disbursed or sold from the Trust(4)		0			0			20			840			0		0			0			0			840			0			840
Stock based compensation		0			0			0			0			2,418		171			0			0			2,589			0			2,589
Other comprehensive income before reclassifications(5)		0			0			0			0			0		0			23,382			5,938			29,320			0			29,320
Amounts reclassified from AOCI(5)		0			0			0			0			0		0			0			857			857			0			857
NCI transactions		0			0			0			0			0		(53	)		0			0			(53	)		53			0
Net income attributable to NCI		0			0			0			0			0		0			0			0			0			1,578			1,578
Net income attributable to THI		0			0			0			0			0		209,907			0			0			209,907			0			209,907
Dividends and distributions, net		0			0			0			0			0		(79,348	)		0			0			(79,348	)		(3,717	)		(83,065	)
Balance as at June 30, 2013		151,319		$	429,105			(340	)	$	(14,969	)	$	13,388	$	916,421		$	(112,056	)	$	3,205		$	1,235,094		$	767		$	1,235,861

⁽¹⁾  Accumulated other comprehensive income.

⁽²⁾  Noncontrolling interests.

⁽³⁾  Amounts reflected in Retained earnings represent consideration in excess of the stated value.

⁽⁴⁾  Amounts are net of tax (see note 12).

⁽⁵⁾  Amounts are net of tax (see note 9).

See accompanying Notes to the Condensed Consolidated Financial Statements.

7

TIM HORTONS INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(in thousands of Canadian dollars, except share and per share data)

NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of business

Tim Hortons Inc. is a corporation governed by the Canada Business Corporations Act. References herein to “Tim Hortons”, or the “Company” refer to Tim Hortons Inc. and its subsidiaries. The Company’s principal business is the development and franchising of quick service restaurants primarily in Canada and the U.S., that serve premium coffee, espresso-based 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 the franchisor, we collect royalty revenue from franchised restaurant sales. The Company also controls the real estate underlying a substantial majority of the system restaurants, which generates another source of revenue. In addition, the Company has vertically integrated manufacturing, warehouse and distribution operations which supply a significant portion of our system restaurants with coffee and other beverages, non-perishable food, supplies, packaging and equipment.

The following table outlines the Company’s systemwide restaurant count and activity:

	Second quarter ended						Year-to-date period  ended
	June 30, 2013			July 1, 2012			June 30, 2013			July 1, 2012
Systemwide Restaurant Count
Franchised restaurants in operation – beginning of period		4,271			4,019			4,242			3,996
Restaurants opened		27			38			60			68
Restaurants closed		(12	)		(10	)		(22	)		(12	)
Net transfers within the franchised system		(2	)		3			4			(2	)
Franchised restaurants in operation – end of period		4,284			4,050			4,284			4,050
Company-operated restaurants		20			21			20			21
Total systemwide restaurants – end of period(1)		4,304			4,071			4,304			4,071
% of restaurants franchised – end of period		99.5	%		99.5	%		99.5	%		99.5	%

⁽¹⁾  Includes various types of standard and non-standard restaurant formats in Canada, the U.S. and the Gulf Cooperation Council (“GCC”) with differing restaurant sizes and menu offerings as well as self-serve kiosks, which serve primarily coffee products and a limited product selection. Collectively, the Company refers to all of these restaurants and kiosks as “systemwide restaurants.”

Excluded from the above table are 251 primarily licensed locations in the Republic of Ireland and the United Kingdom as at June 30, 2013 (second quarter fiscal 2012: 243 restaurants).

Basis of presentation and principles of consolidation

The Company prepares its financial statements in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). In the opinion of management, the accompanying Condensed Consolidated Financial Statements contain all adjustments (all of which are normal and recurring in nature) necessary to state fairly the Company’s financial position as at June 30, 2013, and the results of operations, comprehensive income and cash flows for the second quarters ended June 30, 2013 and July 1, 2012. These Condensed Consolidated Financial Statements should be read in conjunction with the 2012 Consolidated Financial Statements which are contained in the Company’s Annual Report on Form 10-K filed with the SEC and the CSA on February 21, 2013. The December 30, 2012 Condensed Consolidated Balance Sheet was derived from the audited 2012 Consolidated Financial Statements, but does not include all of the year-end disclosures required by U.S. GAAP.

The Condensed Consolidated Financial Statements include the results and balances of Tim Hortons Inc., its wholly-owned subsidiaries and certain entities which the Company consolidates as variable interest entities (“VIEs”) (see note 13). Intercompany accounts and transactions among consolidated entities have been eliminated upon consolidation. Investments in non-consolidated affiliates over which the Company exercises significant influence, but for which the Company is not the primary beneficiary and does not have control, are accounted for using the equity method. The Company’s share of the earnings or losses of these non-consolidated affiliates is included in Equity income, which is included as part of operating income because these investments are operating ventures closely integrated into the Company’s business operations.

8

TIM HORTONS INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(in thousands of Canadian dollars, except share and per share data)

Accounting changes – new accounting standards

In the first quarter of fiscal 2013, we prospectively adopted Accounting Standards Update No. 2013-02 – Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, which requires additional disclosure of significant reclassifications out of comprehensive income into net income, if the amount is required to be reclassified in its entirety (see Condensed Consolidated Statement of Equity and note 9).

NOTE 2 CORPORATE REORGANIZATION EXPENSES

The Company completed the realignment of roles and responsibilities under its new organizational structure at the end of the first quarter of fiscal 2013, and incurred the following expenses, as set forth in the table below:

	Second quarter ended				Year-to-date period  ended
	June 30, 2013		July 1, 2012		June 30, 2013		July 1, 2012
Termination costs	$	0	$	0	$	6,632	$	0
Professional fees and other		0		1,277		2,543		1,277
CEO transition costs		604		0		904		0
Total Corporate reorganization expenses	$	604	$	1,277	$	10,079	$	1,277

The CEO transition costs incurred in the second quarter of 2013 consist primarily of stock-based compensation expense. The Company expects to incur an additional approximate $1.0 million related to CEO transition through the remainder of fiscal 2013. CEO transition costs also include expenses related to an employment agreement with an executive officer and retention agreements with certain senior executives. The retention agreements provide bonuses to certain senior executives if they remain employed for a specified time period subsequent to the transition to a new CEO. The expense is being recognized over the estimated service period of these agreements. The Company has accrued $1.1 million as at June 30, 2013 relating to the retention agreements, for which the total expense may be up to $2.8 million.

	Termination costs			Professional fees and other			CEO transition charges			Total
Cost incurred during fiscal 2012	$	9,016		$	7,602		$	2,256		$	18,874
Paid during fiscal 2012		(1,458	)		(3,775	)		(411	)		(5,644	)
Accrued as at December 30, 2012		7,558			3,827			1,845			13,230
Cost incurred during fiscal 2013 to-date		6,632			2,543			904			10,079
Paid during fiscal 2013 to-date		(12,177	)		(5,185	)		(344	)		(17,706	)
Accrued as at June 30, 2013(1)	$	2,013		$	1,185		$	2,405		$	5,603

⁽¹⁾  Of the total accrual, $5.0 million is recognized in Accounts Payable (fiscal 2012: $12.4 million).

NOTE 3 INCOME TAXES

The effective income tax rate was 26.1% for the second quarter ended June 30, 2013 (second quarter fiscal 2012: 27.6%) and 26.7% for the year-to-date period ended June 30, 2013 (year-to-date period fiscal 2012: 27.6%). The reduction in the income tax rate in the second quarter of 2013 compared to the second quarter of 2012 is primarily due to the favourable impact related to a reserve release resulting from a statute of limitations lapse and tax benefits associated with other discrete items, partially offset by an increase to prior year tax reserves as a result of audit activity.

For Canadian federal tax purposes, the 2005 and subsequent taxation years remain open to examination and potential adjustment by the Canada Revenue Agency (“CRA”). The CRA has issued notices of reassessment for the 2005 through 2009 taxation years for transfer pricing adjustments related to our former investment in the Maidstone Bakery joint venture. The proposed adjustments, including tax, penalty and interest, total approximately $60.0 million. We will be required to deposit approximately $35.0 million of the proposed adjustment with the CRA and other taxation authorities by October 2013. Although the outcome of this matter cannot be predicted with certainty, the Company intends to contest this matter vigorously and we believe that we will ultimately prevail based on the merits of our position. At this time, we believe that we have adequately reserved for this matter; however, we will continue to evaluate our reserves as we progress through the appeals or litigation process with the CRA. If the CRA’s position is ultimately sustained as proposed, it may have a material adverse impact on earnings in the period that the matter is settled.

9

TIM HORTONS INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(in thousands of Canadian dollars, except share and per share data)

NOTE 4 EARNINGS PER COMMON SHARE ATTRIBUTABLE TO TIM HORTONS INC.

	Second quarter ended				Year-to-date period  ended
	June 30, 2013		July 1, 2012		June 30, 2013		July 1, 2012
Net income attributable to Tim Hortons Inc.	$	123,736	$	108,067	$	209,907	$	196,846
Weighted average shares outstanding for computation of basic earnings per common share attributable to Tim Hortons Inc. (in thousands)		152,083		155,351		152,597		155,589
Dilutive impact of RSUs(1)		295		317		286		311
Dilutive impact of stock options with tandem SARs(2)		259		327		250		307
Weighted average shares outstanding for computation of diluted earnings per common share attributable to Tim Hortons Inc. (in thousands)		152,637		155,995		153,133		156,207
Basic earnings per common share attributable to Tim Hortons Inc.	$	0.81	$	0.70	$	1.38	$	1.27
Diluted earnings per common share attributable to Tim Hortons Inc.	$	0.81	$	0.69	$	1.37	$	1.26

⁽¹⁾  Restricted stock units (“RSUs”).

⁽²⁾  Stock appreciation rights (“SARs”).

NOTE 5 NOTES RECEIVABLE, NET

	As at
	June 30, 2013								December 30, 2012
	Gross		VIEs(2)			Total			Gross		VIEs(2)			Total
Franchise Incentive Program (“FIP”) notes(1)	$	20,518	$	(15,333	)	$	5,185		$	20,235	$	(14,441	)	$	5,794
Other notes receivable(3)		8,249		0			8,249			4,773		0			4,773
Notes receivable	$	28,767	$	(15,333	)	$	13,434		$	25,008	$	(14,441	)	$	10,567
Allowance							(1,826	)							(1,790	)
Notes receivable, net						$	11,608							$	8,777
Current portion, net							(5,946	)							(7,531	)
Long-term portion, net						$	5,662							$	1,246

	As at
	June 30, 2013								December 30, 2012
Class and Aging	Gross		VIEs(2)			Total			Gross		VIEs(2)			Total
Current status (FIP Notes and other)	$	9,979	$	(1,931	)	$	8,048		$	6,969	$	(1,269	)	$	5,700
Past-due status < 90 days (FIP Notes)		234		(0	)		234			407		(407	)		0
Past-due status > 90 days (FIP Notes)		18,554		(13,402	)		5,152			17,632		(12,765	)		4,867
Notes receivable	$	28,767	$	(15,333	)	$	13,434		$	25,008	$	(14,441	)	$	10,567
Allowance							(1,826	)							(1,790	)
Notes receivable, net						$	11,608							$	8,777

⁽¹⁾  The Company has outstanding FIP arrangements with certain U.S. restaurant owners, which generally provided interest-free financing for the purchase of certain restaurant equipment, furniture, trade fixtures and signage.

⁽²⁾  The notes payable to the Company by VIEs are eliminated on consolidation, which reduces the Notes receivable, net recognized on the Condensed Consolidated Balance Sheet (see note 13).

⁽³⁾  Relates primarily to notes issued to vendors in conjunction with the financing of certain property sales and on various equipment and other financing programs.

10

TIM HORTONS INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(in thousands of Canadian dollars, except share and per share data)

NOTE 6 INVENTORIES AND OTHER, NET

	As at
	June 30, 2013			December 30, 2012
Raw materials	$	29,420		$	19,941
Finished goods		71,064			75,660
		100,484			95,601
Inventory obsolescence provision		(870	)		(1,015	)
Inventories, net		99,614			94,586
Prepaids and other		10,025			12,414
Total Inventories and other, net	$	109,639		$	107,000

NOTE 7 ACCOUNTS PAYABLE, TIM CARD OBLIGATION AND OTHER, AND OTHER LONG–TERM LIABILITIES

Accounts payable

	As at
	June 30, 2013		December 30, 2012
Accounts payable	$	114,881	$	126,312
Construction holdbacks and accruals		20,812		31,008
Corporate reorganization accrual (note 2)		4,955		12,442
Total Accounts payable	$	140,648	$	169,762

Tim Card obligation and other

	As at
	June 30, 2013		December 30, 2012
Tim Card obligation	$	112,508	$	159,745
Contingent rent expense accrual		8,895		9,962
Maidstone Bakeries supply contract deferred liability		7,553		7,929
Other accrued liabilities(1)		18,957		20,235
Total Accrued liabilities, Other	$	147,913	$	197,871

⁽¹⁾  Includes deferred revenues, deposits, and various equipment and other accruals.

Other long-term liabilities

	As at
	June 30, 2013		December 30, 2012
Accrued rent leveling liability	$	30,149	$	29,244
Uncertain tax position liability(1)		32,724		28,610
Stock-based compensation liabilities (note 12)		23,112		17,479
Maidstone Bakeries supply contract deferred liability		11,763		15,352
Other accrued long-term liabilities(2)		18,853		18,929
Total Other long-term liabilities	$	116,601	$	109,614

⁽¹⁾  Includes accrued interest.

⁽²⁾  Includes deferred revenues and various other accruals.

11

TIM HORTONS INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(in thousands of Canadian dollars, except share and per share data)

NOTE 8 FAIR VALUES

Financial assets and liabilities measured at fair value

	As at
	June 30, 2013					December 30, 2012
	Notional value		Fair value hierarchy	Fair  value asset (liability)(1)		Notional value		Fair value hierarchy	Fair  value asset (liability)(1)
Derivatives:
Forward currency contracts(2)	$	151,645	Level 2	$	7,073	$	195,081	Level 2	$	(2,014	)
Interest rate swap(3)		32,500	Level 2		35		0	Level 2		0
Total return swaps (“TRS”)(4)		41,403	Level 2		15,739		41,403	Level 2		7,504
Total Derivatives	$	225,548		$	22,847	$	236,484		$	5,490

⁽¹⁾  The Company values its derivatives using valuations that are calibrated to the initial trade prices. Subsequent valuations are based on observable inputs to the valuation model.

⁽²⁾  The fair value of forward currency contracts is determined using prevailing exchange rates.

⁽³⁾  In February 2013, the Tim Hortons Advertising and Promotion Fund (Canada) Inc. (“Ad Fund”) entered into an amortizing interest rate swap to fix a portion of the interest expense on its term debt. The fair value is estimated using discounted cash flows and market-based observable inputs, including interest rate yield curves and discount rates.

⁽⁴⁾  The fair value of the TRS is determined using the Company’s closing common share price on the last business day of the fiscal period, as quoted on the Toronto Stock Exchange (“TSX”).

Other financial assets and liabilities not measured at fair value

The following table summarizes the fair value and carrying value of other financial assets and liabilities that are not recognized at fair value on a recurring basis on the Condensed Consolidated Balance Sheet:

	As at
	June 30, 2013							December 30, 2012
	Fair value hierarchy	Fair value asset (liability)			Carrying value			Fair value hierarchy	Fair value asset (liability)			Carrying value
Cash and cash equivalents(1)	Level 1	$	86,603		$	86,603		Level 1	$	120,139		$	120,139
Restricted cash and cash equivalents(1)	Level 1		104,780			104,780		Level 1		150,574			150,574
Bearer deposit notes(2)	Level 2		41,403			41,403		Level 2		41,403			41,403
Notes receivable, net(3)	Level 3		11,608			11,608		Level 3		8,777			8,777
Senior unsecured notes, series 1(4)	Level 2		(316,764	)		(301,370	)	Level 2		(325,857	)		(301,544	)
Advertising fund term debt(5)	Level 3		(52,464	)		(52,464	)	Level 3		(56,500	)		(56,500	)
Other debt(6)	Level 3		(113,623	)		(65,668	)	Level 3		(125,000	)		(60,223	)

⁽¹⁾  The carrying values approximate fair values due to the short-term nature of these investments.

⁽²⁾  The Company holds these notes as collateral to reduce the carrying costs of the TRS. The interest rate on these notes resets every 90 days; therefore, the fair value of these notes, using a market approach, approximates the carrying value.

⁽³⁾  Management generally estimates the current value of notes receivable, using a cost approach, based primarily on the estimated depreciated replacement cost of the underlying equipment held as collateral.

⁽⁴⁾  The fair value of the senior unsecured notes, using a market approach, is based on publicly disclosed trades between arm’s length institutions as documented on Bloomberg LP.

⁽⁵⁾  Management estimates the fair value of this variable rate debt using a market approach, based on prevailing interest rates plus an applicable margin.

⁽⁶⁾  Management estimates the fair value of its Other debt, primarily consisting of contributions received related to the construction costs of certain restaurants, using an income approach, by discounting future cash flows using a Company risk-adjusted rate, over the remaining term of the debt.

12

TIM HORTONS INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(in thousands of Canadian dollars, except share and per share data)

NOTE 9 DERIVATIVES

	As at
	June 30, 2013								December 30, 2012
	Asset		Liability			Net asset (liability)		Classification on Condensed Consolidated Balance Sheet	Asset		Liability			Net asset (liability)			Classification on Condensed Consolidated Balance Sheet
Derivatives designated as cash flow hedging instruments
Forward currency contracts(1)	$	6,931	$	(14	)	$	6,917	Accounts receivable, net	$	494	$	(2,315	)	$	(1,821	)	Accounts payable
Interest rate swap(2)	$	35	$	0		$	35	Other assets	$	0	$	0		$	0		n/a
Derivatives not designated as hedging instruments
TRS(3)	$	15,739	$	0		$	15,739	Other assets	$	8,614	$	(1,110	)	$	7,504		Other assets
Forward currency contracts(1)	$	156	$	0		$	156	Accounts receivable, net	$	5	$	(198	)	$	(193	)	Accounts payable

⁽¹⁾  Notional value as at June 30, 2013 of $151.6 million (fiscal 2012: $195.1 million), with maturities ranging between July 2013 and May 2014; no associated cash collateral.

⁽²⁾  Notional value as at June 30, 2013 of $32.5 million (fiscal 2012: $nil), with maturities through fiscal 2019; no associated cash collateral.

⁽³⁾  The notional value and associated cash collateral, in the form of bearer deposit notes (see note 8), was $41.4 million as at June 30, 2013 (fiscal 2012: $41.4 million). The TRS have maturities annually, in May, between fiscal 2015 and fiscal 2019.

		Second quarter ended June 30, 2013									Second quarter ended July 1, 2012
Derivatives designated as cash flow hedging instruments(1)	Classification on Condensed Consolidated Statement of Operations	Amount of gain (loss) recognized in OCI(2)			Amount of net (gain)  loss reclassified to earnings			Total effect on OCI(2)			Amount of gain (loss) recognized in OCI(2)			Amount of net (gain)  loss reclassified to earnings			Total effect on OCI(2)
Forward currency contracts	Cost of sales	$	4,851		$	144		$	4,995		$	2,114		$	(973	)	$	1,141
Interest rate swap	Interest (expense)		456			61			517			0			0			0
Interest rate forwards(3)	Interest (expense)		0			173			173			0			173			173
Total			5,307			378			5,685			2,114			(800	)		1,314
Income tax effect	Income taxes		(1,279	)		(54	)		(1,333	)		(545	)		211			(334	)
Net of income taxes		$	4,028		$	324		$	4,352		$	1,569		$	(589	)	$	980

		Year-to-date period ended June 30, 2013									Year-to-date period ended July 1, 2012
Derivatives designated as cash flow hedging instruments(1)	Classification on Condensed Consolidated Statement of Operations	Amount of gain (loss) recognized in OCI(2)			Amount of net (gain)  loss reclassified to earnings			Total effect on OCI(2)			Amount of gain (loss) recognized in OCI(2)			Amount of net (gain)  loss reclassified to earnings			Total effect on OCI(2)
Forward currency contracts	Cost of sales	$	8,124		$	615		$	8,739		$	(1,389	)	$	(2,294	)	$	(3,683	)
Interest rate swap	Interest (expense)		(45	)		80			35			0			0			0
Interest rate forwards(3)	Interest (expense)		0			346			346			0			346			346
Total			8,079			1,041			9,120			(1,389	)		(1,948	)		(3,337	)
Income tax effect	Income taxes		(2,141	)		(184	)		(2,325	)		441			510			951
Net of income taxes		$	5,938		$	857		$	6,795		$	(948	)	$	(1,438	)	$	(2,386	)

⁽¹⁾  Excludes amounts related to ineffectiveness, as they were not significant.

⁽²⁾  Other comprehensive income (“OCI”).

⁽³⁾  The Company entered into and settled interest rate forwards in fiscal 2010 relating to the Company’s outstanding term debt.

13

TIM HORTONS INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(in thousands of Canadian dollars, except share and per share data)

The following table summarizes the (gain) loss on derivatives not designated as hedging instruments:

	Classification on Condensed Consolidated Statement of Operations	Second quarter ended						Year-to-date ended
		June 30, 2013			July 1, 2012			June 30, 2013			July 1, 2012
TRS	General and administrative expenses	$	(1,482	)	$	(180	)	$	(8,235	)	$	(3,412	)
Forward currency contracts	Cost of sales		(69	)		211			(349	)		959
Total (gain) loss, net		$	(1,551	)	$	31		$	(8,584	)	$	(2,453	)

NOTE 10 COMMITMENTS AND CONTINGENCIES

On June 12, 2008, a proposed class action was issued against the Company and certain of its affiliates in the Ontario Superior Court by two of its franchisees, alleging, among other things, that the Company’s Always Fresh baking system and lunch offerings led to lower franchisee profitability. The claim, as amended, asserted damages of approximately $1.95 billion on behalf of certain Canadian restaurant owners. The action was dismissed in its entirety by summary judgment on February 24, 2012 and all avenues of appeal have been exhausted.

In addition, the Company and its subsidiaries are parties to various legal actions and complaints arising in the ordinary course of business. As of the date hereof, the Company believes that the ultimate resolution of such matters will not materially affect the Company’s financial condition and earnings.

NOTE 11 COMMON SHARES

Share repurchase programs

On February 20, 2013, our Board of Directors approved a new share repurchase program (“2013 Program”) authorizing the repurchase of up to $250.0 million in common shares, not to exceed the regulatory maximum of 15,239,531 shares, representing 10% of our public float, as defined under the TSX rules as of February 14, 2013. The 2013 Program received regulatory approval from the TSX. Under the 2013 Program, the Company’s common shares may be purchased through a combination of 10b5-1 automatic trading plan purchases, as well as purchases at management’s discretion in compliance with regulatory requirements, and given market, cost and other considerations. Repurchases may be made on the TSX, the New York Stock Exchange (“NYSE”), and/or other Canadian marketplaces, subject to compliance with applicable regulatory requirements, or by such other means as may be permitted by the TSX and/or NYSE, and under applicable laws, including private agreements under an issuer bid exemption order issued by a securities regulatory authority in Canada. Purchases made by way of private agreements under an issuer bid exemption order by a securities regulatory authority will be at a discount to the prevailing market price as provided in the exemption order. The 2013 Program commenced on February 26, 2013 and is due to expire on February 25, 2014, or earlier if the $250.0 million or 10% share maximum is reached. Common shares purchased pursuant to the 2013 Program will be cancelled. The 2013 Program may be terminated by us at any time, subject to compliance with regulatory requirements. As such, there can be no assurance regarding the total number of shares or the equivalent dollar value of shares that may be repurchased under the 2013 Program.

Share repurchase activity for fiscal 2013 and 2012 is reflected in the Condensed Consolidated Statement of Equity; all shares repurchased were cancelled.

The Company obtained regulatory approval from the TSX to amend its Normal Course Issuer Bid (“NCIB”) to remove the former maximum dollar cap of $250.0 million. The timing of the program and exact number of shares purchased under the NCIB will be at our discretion and subject to the negotiation and execution of a broker agreement. The Company’s common shares will be purchased under the program through a combination of a 10b5-1 automatic trading plan in accordance with pre-set trading instructions established at a time when the Corporation is not in possession of material, non-public information as well as at management’s discretion in compliance with regulatory requirements, and given market, cost and other considerations.

14

TIM HORTONS INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(in thousands of Canadian dollars, except share and per share data)

NOTE 12 STOCK-BASED COMPENSATION

	Second quarter ended				Year-to-date period ended
	June 30, 2013		July 1, 2012		June 30, 2013		July 1, 2012
RSUs	$	2,478	$	3,132	$	3,580	$	5,790
Stock options and tandem SARs		2,264		1,305		7,339		5,050
DSUs(1)		406		251		1,616		1,029
Total stock-based compensation expense(2)	$	5,148	$	4,688	$	12,535	$	11,869

⁽¹⁾  Deferred share units (“DSUs”).

⁽²⁾  Generally included in General and administrative expenses.

The Company has entered into TRS contracts as economic hedges, covering 1.0 million of the Company’s underlying common shares, which represents a portion of its outstanding stock options with tandem SARs, and substantially all of its DSUs. The Company recognized a gain of $1.5 million in the second quarter ended June 30, 2013 (second quarter fiscal 2012: gain of $0.2 million) and a gain of $8.2 million in the year-to-date period ended June 30, 2013 (year-to-date period fiscal 2012: gain of $3.4 million) in General and administrative expenses (see note 9) related to the revaluation of the TRS.

The Company’s Human Resource and Compensation Committee (“HRCC”) approves all stock-based compensation awards. All awards granted in May 2013 were granted under the Company’s 2012 Stock Incentive Plan (the “2012 Plan”). Details of stock-based compensation grants and settlements are set forth below.

Restricted stock units

The following table is a summary of activity for RSUs granted to employees under the Company’s 2006 and 2012 Stock Incentive Plans, for the periods set forth below:

	Restricted  Stock Units			Weighted Average  Grant Value per Unit
	(in thousands)			(in dollars)
Balance as at January 1, 2012		306		$	40.91
Granted		192			54.49
Dividend equivalent rights		6			50.30
Vested and settled(1)		(160	)		36.72
Forfeited		(32	)		46.35
Balance as at December 30, 2012		312		$	50.91
Granted		141			56.12
Dividend equivalent rights		4			53.49
Vested and settled(1)		(44	)		51.39
Forfeited		(15	)		51.23
Balance as at June 30, 2013		398		$	52.72

⁽¹⁾  Generally settled with common shares from the TDL RSU Employee Benefit Plan Trust (“Trust”).

In the second quarter ended June 30, 2013, the Company funded the Trust, which, in turn, purchased approximately 43,000 common shares for $2.5 million (second quarter fiscal 2012: 112,000 common shares for $6.2 million).

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TIM HORTONS INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(in thousands of Canadian dollars, except share and per share data)

RSUs that vested during the second quarter of fiscal 2013 and 2012 were settled with the participants in the following manner:

	RSU Gross  Settlement		RSU Settlement, net of  tax
	Units		Units		Amount
	(in thousands)
2012
Settled with common shares from the Trust		34		18	$	670
Settled by an open market purchase		7		5		250
Total restricted stock settlement		41		23	$	920
2013
Settled with common shares from the Trust		33		17	$	730
Settled by an open market purchase		6		4		210
Total restricted stock settlement		39		21	$	940

Stock options and tandem SARs

	Stock Options  with SARs			Weighted Average Exercise Price
	(in thousands)			(in dollars)
Balance as at January 1, 2012		1,182		$	36.05
Granted		254			54.86
Exercised		(218	)		31.64
Forfeited		(46	)		41.66
Balance as at December 30, 2012		1,172		$	40.73
Granted		241			56.12
Exercised(1)		(181	)		35.64
Forfeited		(10	)		52.38
Balance as at June 30, 2013		1,222		$	44.42

⁽¹⁾  Total cash settlement, net of applicable withholding taxes of $2.5 million of SARs in the year-to-date period ended June 30, 2013 (year-to-date period fiscal 2012: 96,000 units for $1.5 million). The associated options were cancelled.

Deferred share units

Approximately 7,600 DSUs were granted during the year-to-date period of fiscal 2013 (year-to-date period fiscal 2012: 8,100) at a fair market value of $52.54 (year-to-date period fiscal 2012: $53.78). There were no DSU settlements during the second quarter and year-to-date periods of fiscal 2013 (second quarter and year-to-date periods of fiscal 2012: 9,400).

16

TIM HORTONS INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(in thousands of Canadian dollars, except share and per share data)

NOTE 13 VARIABLE INTEREST ENTITIES

VIEs for which the Company is the primary beneficiary

Non-owned restaurants

The Company has consolidated 350 Non-owned restaurants as at June 30, 2013 (fiscal 2012: 365 restaurants), or approximately 8.1% of the Company’s total systemwide restaurants (fiscal 2012: 8.6%). On average, a total of 347 Non-owned restaurants were consolidated during the second quarter of fiscal 2013 (second quarter fiscal 2012: average of 309 restaurants) and 353 were consolidated during the year-to-date period of fiscal 2013 (year-to-date-period of fiscal 2012: 307).

Advertising Funds

The Ad Fund has rolled out a program to acquire and install LCD screens, media engines, drive-thru menu boards and ancillary equipment for our restaurants (“Expanded Menu Board Program”). The advertising levies, depreciation, interest costs, capital expenditures and financing associated with the Expanded Menu Board Program are presented on a gross basis on the Condensed Consolidated Statement of Operations and Cash Flows. The Ad Fund has purchased $58.6 million of equipment cumulatively since fiscal 2011 for the Expanded Menu Board Program. In February 2013, the Ad Fund entered into an amortizing interest rate swap to fix a portion of the interest expense on its term debt related to the Expanded Menu Board Program.

The advertising funds spent approximately $59.7 million in the second quarter of fiscal 2013 (second quarter fiscal 2012: $47.9 million) and $129.2 million in the year-to-date period of fiscal 2013 (year-to-date period fiscal 2012: $121.8 million). Company contributions to the Canadian and U.S. advertising funds consisted of the following:

	Second quarter ended				Year-to-date period ended
	June 30, 2013		July 1, 2012		June 30, 2013		July 1, 2012
Company contributions	$	2,809	$	2,718	$	5,512	$	5,321
Contributions from consolidated non-owned restaurants		3,488		3,167		6,725		6,064
Total Company contributions	$	6,297	$	5,885	$	12,237	$	11,385

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TIM HORTONS INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(in thousands of Canadian dollars, except share and per share data)

The revenues and expenses associated with the Company’s consolidated Non-owned restaurants and advertising funds presented on a gross basis, prior to consolidation adjustments, are as follows:

	Second quarter ended
	June 30, 2013						July 1, 2012
	Restaurant VIEs		Advertising fund VIEs		Total VIEs		Restaurant VIEs		Advertising fund VIEs		Total VIEs
Sales	$	93,464	$	0	$	93,464	$	85,459	$	0	$	85,459
Advertising levies(1)		0		2,569		2,569		0		1,056		1,056
Total revenues		93,464		2,569		96,033		85,459		1,056		86,515
Cost of sales(2)		92,480		0		92,480		84,066		0		84,066
Operating expenses(1)		0		2,293		2,293		0		677		677
Operating income		984		276		1,260		1,393		379		1,772
Interest expense		0		276		276		0		379		379
Income before taxes		984		0		984		1,393		0		1,393
Income taxes		158		0		158		223		0		223
Net income attributable to noncontrolling interests	$	826	$	0	$	826	$	1,170	$	0	$	1,170

	Year-to-date period ended
	June 30, 2013						July 1, 2012
	Restaurant VIEs		Advertising fund VIEs		Total VIEs		Restaurant VIEs		Advertising fund VIEs		Total VIEs
Sales	$	180,224	$	0	$	180,224	$	163,473	$	0	$	163,473
Advertising levies(1)		0		5,100		5,100		0		1,543		1,543
Total revenues		180,224		5,100		185,324		163,473		1,543		165,016
Cost of sales(2)		178,346		0		178,346		160,654		0		160,654
Operating expenses(1)		0		4,392		4,392		0		1,062		1,062
Operating income		1,878		708		2,586		2,819		481		3,300
Interest expense		0		708		708		0		481		481
Income before taxes		1,878		0		1,878		2,819		0		2,819
Income taxes		300		0		300		449		0		449
Net income attributable to noncontrolling interests	$	1,578	$	0	$	1,578	$	2,370	$	0	$	2,370

⁽¹⁾  Generally, the advertising levies that are not related to the Expanded Menu Board Program are netted with advertising and marketing expenses incurred by the advertising funds in operating expenses, as these contributions are designated for specific purposes. The Company acts as an agent with regard to these contributions.

⁽²⁾  Includes rents, royalties, advertising expenses and product purchases from the Company which are eliminated upon the consolidation of these VIEs.

18

TIM HORTONS INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(in thousands of Canadian dollars, except share and per share data)

The assets and liabilities associated with the Company’s consolidated Non-owned restaurants and advertising funds presented on a gross basis, prior to consolidation adjustments, are as follows:

	As at
	June 30, 2013				December 30, 2012
	Restaurant VIEs		Advertising fund VIEs		Restaurant VIEs		Advertising fund VIEs
Cash and cash equivalents	$	7,867	$	0	$	10,851	$	0
Advertising fund restricted assets – current		0		38,264		0		45,337
Other current assets		6,678		0		6,770		0
Property and equipment, net		22,162		57,769		19,536		57,925
Other long-term assets		176		1,633		572		2,095
Total assets	$	36,883	$	97,666	$	37,729	$	105,357
Notes payable to Tim Hortons Inc. – current(1)	$	14,453	$	0	$	13,637	$	0
Advertising fund liabilities – current		0		42,624		0		44,893
Other current liabilities		11,512		8,369		14,548		9,919
Notes payable to Tim Hortons Inc. – long-term(1)		880		0		804		0
Long-term debt(2)		0		44,393		0		46,849
Other long-term liabilities		9,271		2,280		5,887		3,696
Total liabilities		36,116		97,666		34,876		105,357
Equity of VIEs		767		0		2,853		0
Total liabilities and equity	$	36,883	$	97,666	$	37,729	$	105,357

⁽¹⁾  Various assets and liabilities are eliminated upon the consolidation of these VIEs, the most significant of which are the FIP Notes payable to the Company, which reduces the Notes receivable, net reported on the Condensed Consolidated Balance Sheet (see note 5).

⁽²⁾  Balance as at June 30, 2013 includes $52.5 million of debt relating to the Expanded Menu Board Program (fiscal 2012: $56.5 million), of which $8.1 million is recognized in Other current liabilities (fiscal 2012: $9.7 million) with the remainder recognized as Long-term debt.

The liabilities recognized as a result of consolidating these VIEs do not necessarily represent additional claims on the Company’s general assets; rather, they represent claims against the specific assets of the consolidated VIEs. Conversely, assets recognized as a result of consolidating these VIEs do not represent additional assets that could be used to satisfy claims by the Company’s creditors as they are not legally included within the Company’s general assets.

Trust

In connection with RSUs granted to certain employees, the Company established the Trust, which purchases and retains common shares of the Company to satisfy the Company’s contractual obligation to deliver shares to settle the awards for most participating Canadian employees. The cost of the shares held by the Trust of $15.0 million as at June 30, 2013 (fiscal 2012: $13.4 million), is presented as a reduction in outstanding common shares on the Condensed Consolidated Balance Sheet.

VIEs for which the Company is not the primary beneficiary

These VIEs are primarily real estate ventures, the most significant being the TIMWEN Partnership. The Company does not consolidate these entities as control is considered to be shared by both the Company and the other joint owner(s).

19

TIM HORTONS INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(in thousands of Canadian dollars, except share and per share data)

NOTE 14 SEGMENT REPORTING

The Company operates exclusively in the quick service restaurant industry. Effective the first quarter of fiscal 2013, the chief decision maker views and evaluates the Company’s reportable segments as follows:

Canadian and U.S. business units. Each of the Canadian and U.S. business units includes the results of substantially all restaurant-facing activities, such as: (i) rents and royalties; (ii) product sales through our supply chain as well as an allocation of supply chain income based on the unit’s respective systemwide sales; (iii) franchise fees; (iv) corporate restaurants; and (v) business-unit-related general and administrative expenses. The business units exclude the effect of consolidating VIEs, consistent with how the chief decision maker views and evaluates the respective business unit’s results.

Corporate services. Corporate services comprises services to support the Canadian and U.S. business units, including: (i) general and administrative expenses; (ii) manufacturing income, and manufacturing sales to third parties; and (iii) income related to our distribution services, including the timing of variances arising primarily from commodity costs and the related effect on pricing, which generally reverse within a year, associated with our supply chain management. Our supply chain management involves securing a stable source of supply, which is intended to provide our restaurant owners with consistent, predictable pricing, and may extend beyond a quarter. Corporate services also includes the results of our International operations, which are currently not significant.

Previously, the results of manufacturing activities and distribution services were included within the respective geographic segment where the facility was located. Additionally, we have revised the allocation of shared restaurant services, such as restaurant technology and operations standards, between the Canadian and U.S. business units.

The Company has reclassified the segment data for the prior period to conform to the current period’s presentation.

	Second quarter ended						Year-to-date period ended
	June 30, 2013			July 1, 2012			June 30, 2013			July 1, 2012
Revenues(1)
Canada	$	657,682		$	651,361		$	1,251,355		$	1,251,244
U.S.		41,220			43,154			85,668			81,583
Corporate services		5,204			4,551			9,329			9,022
Total reportable segments		704,106			699,066			1,346,352			1,341,849
VIEs		96,033			86,515			185,324			165,016
Total	$	800,139		$	785,581		$	1,531,676		$	1,506,865
Operating Income (Loss)
Canada	$	174,760		$	165,360		$	320,581		$	312,586
U.S.		2,587			4,101			3,497			5,755
Corporate services		(1,424	)		(11,117	)		(12,089	)		(29,902	)
Total reportable segments		175,923			158,344			311,989			288,439
VIEs		1,260			1,772			2,586			3,300
Corporate reorganization expenses		(604	)		(1,277	)		(10,079	)		(1,277	)
Consolidated Operating Income		176,579			158,839			304,496			290,462
Interest, Net		(8,131	)		(7,927	)		(15,866	)		(15,114	)
Income before income taxes	$	168,448		$	150,912		$	288,630		$	275,348

⁽¹⁾  There are no inter-segment revenues included in the above table.

	Second quarter ended				Year-to-date period  ended
	June 30, 2013		July 1, 2012		June 30, 2013		July 1, 2012
Capital expenditures
Canada	$	30,145	$	19,364	$	60,421	$	43,146
U.S.		7,785		10,697		23,146		18,689
Corporate services		2,863		2,298		4,705		4,793
Total reportable segments	$	40,793	$	32,359	$	88,272	$	66,628

20

TIM HORTONS INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(in thousands of Canadian dollars, except share and per share data)

The following table provides a reconciliation of reportable segment Property and equipment, net and Total assets to consolidated Property and equipment, net and consolidated Total assets, respectively:

	As at
	June 30, 2013		December 30, 2012
Total Property and equipment, net
Canada(1)	$	934,006	$	915,733
U.S.(1)		403,294		378,457
Corporate services(2)		175,295		184,938
Total reportable segments		1,512,595		1,479,128
VIEs		76,396		74,180
Consolidated Property and equipment, net	$	1,588,991	$	1,553,308
Total Assets
Canada	$	1,217,356	$	1,175,552
U.S.		427,576		400,231
Corporate services		278,850		281,043
Total reportable segments		1,923,782		1,856,826
VIEs		130,976		139,462
Unallocated assets(3)		210,128		287,891
Consolidated Total assets	$	2,264,886	$	2,284,179

⁽¹⁾  Includes primarily restaurant-related assets such as land, building and leasehold improvements.

⁽²⁾  Includes property and equipment related to distribution services, manufacturing activities, and other corporate assets.

⁽³⁾  Includes Cash and cash equivalents, Restricted cash and cash equivalents, Deferred income taxes and Prepaids, except as related to VIEs.

Consolidated Sales and Cost of sales comprise the following:

	Second quarter ended				Year-to-date period ended
	June 30, 2013		July 1, 2012		June 30, 2013		July 1, 2012
Sales
Distribution sales	$	468,597	$	471,274	$	899,748	$	911,002
Company-operated restaurant sales		6,501		7,039		12,477		12,599
Sales from VIEs		93,464		85,459		180,224		163,473
Total Sales	$	568,562	$	563,772	$	1,092,449	$	1,087,074

	Second quarter ended				Year-to-date period  ended
	June 30, 2013		July 1, 2012		June 30, 2013		July 1, 2012
Cost of sales
Distribution cost of sales	$	399,019	$	410,224	$	774,572	$	800,172
Company-operated restaurant cost of sales		6,613		7,697		13,623		13,777
Cost of sales from VIEs		83,460		74,979		162,251		143,871
Total Cost of sales	$	489,092	$	492,900	$	950,446	$	957,820

21

TIM HORTONS INC. AND SUBSIDIARIES

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

The following discussion of the financial condition and results of operations of the Company should be read in conjunction with the fiscal 2012 Consolidated Financial Statements and accompanying Notes included in our Annual Report on Form 10-K for the year ended December 30, 2012 (“Annual Report”) filed with the U.S. Securities and Exchange Commission (“SEC”) and the Canadian Securities Administrators (“CSA”) on February 21, 2013, and the Condensed Consolidated Financial Statements and accompanying Notes included in our Interim Report on Form 10-Q for the quarter ended June 30, 2013 filed with the SEC and the CSA on August 8, 2013. All amounts are expressed in Canadian dollars unless otherwise noted. The following discussion includes forward-looking statements that are not historical facts, but reflect our current expectations regarding future results. These forward-looking statements include information regarding our future economic and sales performance, expectations and objectives of management including with respect to our ability to obtain financing, our expectations regarding investment grade credit ratings, and our U.S. market strategy, and promotional and marketing initiatives. Actual results may differ materially from the results discussed in the forward-looking statements because of a number of risks and uncertainties, including the matters discussed below. Please refer to Item 1A. “Risk Factors” in Part I of our Annual Report and set forth in our long-form Safe Harbor Statement referred to below under “Safe Harbor Statement” and attached hereto, as well as risks described herein, for a further description of risks and uncertainties affecting our business and financial results. Historical trends should not be taken as indicative of future operations and financial results.

Our financial results are driven largely by changes in systemwide sales, which include restaurant-level sales at franchisee-owned restaurants and restaurants run by independent operators (collectively, we hereunder refer to both franchisee-owned and franchisee-operated restaurants as “franchised restaurants”), and Company-operated restaurants. Please refer to “Systemwide Sales Growth” and “Same-Store Sales Growth” below for additional information.

We prepare our financial statements in accordance with accounting principles generally accepted in the United States (“U.S. GAAP” or “GAAP”). However, this Management’s Discussion and Analysis of Financial Condition and Results of Operations also contains certain non-GAAP financial measures to assist readers in understanding the Company’s performance. Non-GAAP financial measures either exclude or include amounts that are not reflected in the most directly comparable measure calculated and presented in accordance with GAAP. Where non-GAAP financial measures are used, we have provided the most directly comparable measures calculated and presented in accordance with U.S. GAAP and a reconciliation to GAAP measures.

References herein to “Tim Hortons,” the “Company,” “we,” “our,” or “us” refer to Tim Hortons Inc. and its subsidiaries, unless specifically noted otherwise.

Description of Business

The Company’s principal business is the franchising of Tim Hortons restaurants, primarily in Canada and the U.S., that serve premium coffee, espresso-based 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 the franchisor, Tim Hortons collects royalty revenue from franchised restaurant sales. Our business generates additional revenue by controlling the underlying real estate of our franchised restaurants; at June 30, 2013, we leased or owned the real estate for approximately 83% of our full-serve system restaurants in North America, including 791 owned locations (532 sites in Canada and 259 sites in the U.S.). Real estate that is not controlled by us is generally for our non-standard restaurants, including, for example, full-serve kiosks in offices, retail locations, hospitals, colleges, stadiums, arenas, and airports, as well as self-serve kiosks located in gas stations, grocery stores, and other convenience locations, as well as for our restaurants located outside of North America.

We distribute coffee and other beverages, non-perishable food, supplies, packaging and equipment to most system restaurants in Canada through our five distribution centres, and frozen, refrigerated and shelf stable products from our Guelph and Kingston distribution facilities in our Ontario and Quebec markets. Where we are not able to leverage our scale or create warehousing or transportation efficiencies, such as in the U.S. and in certain Canadian markets, we typically manage and control the supply chain but use third-party warehousing and transportation. Our supply chain activities also include a significant consumer packaged goods business, commanding the second largest market share in sales of large canned coffee grocery retail sales in Canada. Our vertical integration model also includes two coffee roasting facilities located in Hamilton, Ontario, and Rochester, New York, and a fondant and fills manufacturing facility in Oakville, Ontario.

Our management of supply chain activities enables us to leverage our scale in Canada to create efficiencies, build competitive advantage, and provide quality, cost-competitive and timely deliveries to our restaurant owners. Our supply chain model is an important contributor to our profitability, generating strong returns for our shareholders while requiring relatively modest deployment of capital. As such, we view our supply chain activities as being central to our business model and an important means of supporting our business units in meeting the needs of our restaurant owners. We generally invest in vertical integration if we consider that the investment would be strategic, would provide value to our restaurant owners and would generate a reasonable rate of return.

Executive Overview

Systemwide sales grew 5.0% in the second quarter of 2013, driven by new restaurant development and same-store sales growth of 1.5% in Canada and of 1.4% in the U.S. In the first half of 2013, systemwide sales grew by 4.1%, led by new restaurant development and same-store sales growth of 0.6% in Canada and 0.5% in the U.S. In both Canada and the U.S., we grew total systemwide transactions during the second quarter and the first half of 2013.

22

While our systemwide and same-store sales growth have improved in comparison to the first quarter of 2013, we continue to operate in a challenging macro-economic climate with low growth. We believe that the macro-economic climate has impacted consumer confidence and discretionary spending in both Canada and the U.S., leading to an overall intensified competitive environment, and ultimately, negatively impacting the performance of several restaurant chains. We believe that these factors continued to negatively impact our systemwide and same-store sales growth in both Canada and the U.S. during the quarter.

In the second quarter and first half of 2013, same-store sales growth in Canada was driven by gains in average cheque resulting primarily from pricing, and to a lesser extent, favourable product mix, partially offset by a decrease in transactions due in part, we believe, to the factors noted above. Our year-to-date same-store sales growth was negatively impacted by unfavourable weather conditions in the first quarter of 2013 compared to the first quarter of 2012. Additionally, we had strong prior year comparables in the first quarter of 2013 compared to the first quarter of 2012. Although we anticipate positive same-store sales growth in the last half of 2013, given our year-to-date results, we expect to be below our targeted full year same-store sales growth range of 2.0% to 4.0%.

In the second quarter of 2013, same-store sales growth in the U.S. was driven primarily by an increase in transactions, with minimal growth from pricing. For the first half of 2013, same-store sales growth in the U.S. was driven by gains in average cheque, primarily due to pricing in the first quarter of 2013. Similar to Canada, on a year-to-date basis, our same-store sales growth was negatively impacted by unfavourable weather conditions in the first quarter of 2013 compared to the first quarter of 2012. Additionally, we had strong prior year comparables in the first half of 2013 compared to the first half of 2012. Although we anticipate positive same-store sales growth in the last half of 2013, given our year-to-date results, we expect to be below our targeted full year same-store sales growth range of 3.0% to 5.0%.

We have a number of initiatives, including a strong promotional calendar, planned for the balance of fiscal 2013, which we believe will help drive same-store sales growth in both Canada and the U.S. We intend to introduce a number of category extensions, including the expansion of our single-serve products with the introduction of a Tim Hortons RealCup™ product, which is compatible with K-Cup^® brewers, although not affiliated with K-Cup or Keurig^®. We will also continue to focus on our long-term initiatives, such as our drive-thru initiatives, including enhanced menu boards, double order stations, and order station relocations, currently planned at more than 1,000 locations in Canada. These initiatives, as well as a review of other key aspects of the business, will be undertaken in connection with the strategic planning process currently underway, which is anticipated to be completed later in the year.

Marc Caira was appointed President and CEO effective July 2, 2013. Mr. Caira was most recently Global CEO of Nestlé Professional and a member of the Executive Board of Nestlé SA, the world’s largest food and beverage company, and a recognized leader in nutrition, health and wellness. On the same date, Paul House became Chairman of the Board of Directors, having formerly served as President and CEO, and Executive Chairman. Mr. House has agreed to provide transition services through the balance of fiscal 2013.

We completed the realignment of roles and responsibilities within our Corporate Centre and Business Unit design at the end of the first quarter of 2013. As a result of the corporate reorganization, effective from the first quarter of 2013, we have revised our segment reporting to align with our new internal reporting structure, which now comprises the business units in both Canada and the U.S., and Corporate services (see Segment Operating Income).

Operating income increased $17.7 million, or 11.2%, to $176.6 million in the second quarter of 2013, and adjusted operating income (refer to non-GAAP reconciliation), which excludes Corporate reorganization expenses, increased $17.1 million, or 10.7%. The growth was driven primarily by systemwide and same-store sales growth, resulting in higher rents and royalties and supply chain income. Our supply chain also benefited from operational improvements and favourable product margin variability, some of which is expected to reverse in the last half of 2013. Lower general and administrative expenses, due primarily to lower salaries and benefits, also contributed favourably to operating income growth in the second quarter of 2013. Our operating margin improved in the second quarter of 2013 to 22.1%, as compared to 20.2% in the second quarter of 2012.

Year-to-date, operating income increased $14.0 million, or 4.8%, to $304.5 million, and adjusted operating income (refer to non-GAAP table), which excludes our year-to-date Corporate reorganization expenses, increased $22.8 million, or 7.8%. The same factors that impacted the operating income growth in the second quarter of 2013 also impacted the first half of 2013.

Net income attributable to Tim Hortons Inc. increased $15.7 million, or 14.5%, to $123.7 million in the second quarter of 2013, and increased $13.1 million, or 6.6%, to $209.9 million in the first half of 2013. The increase in both periods was driven by higher operating income, as well as a lower effective tax rate of 26.1% in the second quarter of 2013 compared to 27.6% in the second quarter of 2012, and 26.7% in the first half of 2013 compared to the 27.6% in the first half of 2012. Our year-to-date results continue to be significantly impacted by Corporate reorganization expenses of $10.1 million ($7.9 million after-tax).

Diluted earnings per share attributable to Tim Hortons Inc. (“EPS”) increased 17.0% to $0.81 in the second quarter of 2013, compared to $0.69 in the second quarter of 2012. Year-to-date, EPS increased 8.8% to $1.37 in the first half of 2013, compared to $1.26 in the second quarter of 2012. In addition to higher net income attributable to Tim Hortons Inc., our share repurchase program was a contributor to EPS growth in both periods, as we had, on average, 3.4 million, or 2.2%, fewer fully diluted common shares outstanding during the second quarter of 2013 compared to the first half of 2012, and 3.1 million, or 2.0%, fewer fully diluted common shares outstanding in the first half of 2013. Corporate reorganization expenses recognized in the first half of 2013 reduced

23

our EPS by approximately $0.05, and by $0.01 in the first half of 2012. Given our year-to-date results, including our systemwide and same-store sales growth, lower general and administrative expenses, and the benefit of a lower effective tax rate, we expect to be within our targeted full year EPS range of $2.87 – $2.97 for fiscal 2013.

Selected Operating and Financial Highlights

	Second quarter ended						Year-to-date ended
($ in millions, except per share data)	June 30, 2013			July 1, 2012			June 30, 2013			July 1, 2012
Systemwide sales growth(1)		5.0	%		6.0	%		4.1	%		7.6	%
Same-store sales growth(1)
Canada		1.5	%		1.8	%		0.6	%		3.4	%
U.S.		1.4	%		4.9	%		0.5	%		6.6	%
Systemwide restaurants		4,304			4,071			4,304			4,071
Revenues	$	800.1		$	785.6		$	1,531.7		$	1,506.9
Operating income	$	176.6		$	158.8		$	304.5		$	290.5
Adjusted operating income(2)	$	177.2		$	160.1		$	314.6		$	291.7
Net income attributable to Tim Hortons Inc.	$	123.7		$	108.1		$	209.9		$	196.8
Diluted EPS	$	0.81		$	0.69		$	1.37		$	1.26
Weighted average number of common shares outstanding – Diluted (in millions)		152.6			156.0			153.1			156.2

⁽¹⁾  See Systemwide Sales Growth and Same-Store Sales Growth.

⁽²⁾  Adjusted operating income is a non-GAAP measure. See below for reconciliations of adjusting items used to calculate adjusted operating income. Management uses adjusted operating income to assist in the evaluation of year-over-year performance, and believes that it will be helpful to investors as a measure of underlying 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:

	Second quarter ended				Change from prior year
	June 30, 2013		July 1, 2012		$			%
	(in millions)
Operating income	$	176.6	$	158.8	$	17.7			11.2	%
Add: Corporate reorganization expenses		0.6		1.3		(0.7	)		n/m
Adjusted operating income	$	177.2	$	160.1	$	17.1			10.7	%

	Year-to-date period  ended				Change from prior year
	June 30, 2013		July 1, 2012		$		%
	(in millions)
Operating income	$	304.5	$	290.5	$	14.0		4.8	%
Add: Corporate reorganization expenses		10.1		1.3		8.8		n/m
Adjusted operating income	$	314.6	$	291.7	$	22.8		7.8	%

All numbers rounded

^n/m Not meaningful

We believe systemwide sales growth 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.

24

Systemwide Sales Growth

Systemwide sales include restaurant-level sales at both franchised and Company-operated restaurants, but exclude sales from our Republic of Ireland and United Kingdom licensed locations, as these locations operate on a significantly different business model compared to our North American and other International operations. Systemwide sales growth is determined using a constant exchange rate to exclude the effects of foreign currency translation. Foreign currency sales are converted into Canadian dollar amounts using the average exchange rate of the base year for the period covered. Systemwide sales growth in Canadian dollars, including the effects of foreign currency translation, was 5.1% and 6.4% for the second quarters of 2013 and 2012, respectively, and 4.2% and 7.9% in the first half of 2013 and 2012, respectively.

Our financial results are driven largely by changes in systemwide sales primarily in Canada and the U.S., with approximately 99.5% of our system franchised as at June 30, 2013. Franchised restaurant sales and transactional data are reported to us by our restaurant owners. Franchised restaurant sales are not included in our Condensed Consolidated Financial Statements, other than approximately 353 and 307 consolidated Non-owned restaurants, on average, for the first half of 2013 and 2012, respectively. Systemwide sales impact our royalties and rental revenues, as well as our distribution sales.

Changes in systemwide sales are driven by changes in same-store sales and changes in the number of restaurants (i.e., historically, the net addition of new restaurants), and are ultimately driven by consumer demand.

Same-Store Sales Growth

Same-store sales growth represents the average growth in retail sales at restaurants (franchised and Company-operated restaurants) operating systemwide that have been open for 13 or more months. It is one of the key metrics we use to assess our performance and provides a useful comparison between periods. Our same-store sales growth is generally attributable to several key factors, including: new product introductions; improvements in restaurant speed of service and other operational efficiencies; hospitality initiatives; frequency of guest visits; expansion into, and enhancement of, broader menu offerings; promotional activities; pricing; and weather. Restaurant-level price increases are primarily used to offset higher restaurant-level costs on key items such as coffee and other commodities, labour, supplies, utilities and business expenses. There can be no assurance that these price increases will result in an equivalent level of sales growth, which depends upon guests maintaining the frequency of their visits and the same volume of purchases at the new pricing.

Product innovation is one of our long-standing, focused strategies to drive same-store sales growth, including innovation at breakfast, lunch and snacking dayparts. In Canada, we expanded our cold beverage selection with the introduction of the Orange Tangerine Real Fruit Smoothie, and also introduced the Apple Cobbler donut, inspired by the Donut Showdown featured on Food Network^™ Canada. In the U.S., we expanded our breakfast menu with the introduction of the Jalapeno Flatbread Breakfast Sandwich. In both Canada and the U.S., we introduced our Tim Hortons Coffee Partnership Blend, of which $1 from every sale helps support our Coffee Partnership Program.

We had a strong promotional calendar in the second quarter of 2013, including a promotion in Canada in which guests who purchased a Tim Hortons Tassimo T-Disc bundle received a Tassimo brewer. In both Canada and the U.S., we introduced our Iced Capp Chill to Win^TM contest, and beginning in the second quarter and expected to continue throughout the summer of 2013, we are offering a small Iced Coffee, Frozen Lemonade and Iced Latte for $1 each plus applicable taxes.

New Restaurant Development

The opening of restaurants in new and existing markets in Canada and the U.S. has been a significant contributor to our growth. Set forth in the table below is a summary of restaurant openings and closures:

	Second quarter ended June 30, 2013									Second quarter ended July 1, 2012
	Full-serve Standard  and Non-standard			Self-serve Kiosks			Total			Full-serve Standard  and Non-standard			Self-serve Kiosks			Total
Canada
Restaurants opened		19			2			21			19			0			19
Restaurants closed		(5	)		(1	)		(6	)		(3	)		(5	)		(8	)
Net change		14			1			15			16			(5	)		11
U.S.
Restaurants opened		5			0			5			6			9			15
Restaurants closed		(3	)		(3	)		(6	)		(1	)		(1	)		(2	)
Net change		2			(3	)		(1	)		5			8			13
International (GCC)
Restaurants opened		2			0			2			5			—			5
Total Company
Restaurants opened		26			2			28			30			9			39
Restaurants closed		(8	)		(4	)		(12	)		(4	)		(6	)		(10	)
Net change		18			(2	)		16			26			3			29

25

	Year-to-date period ended  June 30, 2013									Year-to-date period ended  July 1, 2012
	Full-serve Standard  and Non-standard			Self-serve Kiosks			Total			Full-serve Standard  and Non-standard			Self-serve Kiosks			Total
Canada
Restaurants opened		41			4			45			40			1			41
Restaurants closed		(12	)		(1	)		(13	)		(5	)		(5	)		(10	)
Net change		29			3			32			35			(4	)		31
U.S.
Restaurants opened		12			1			13			12			10			22
Restaurants closed		(7	)		(3	)		(10	)		(1	)		(1	)		(2	)
Net change		5			(2	)		3			11			9			20
International (GCC)
Restaurants opened		5			0			5			6			—			6
Total Company
Restaurants opened		58			5			63			58			11			69
Restaurants closed		(19	)		(4	)		(23	)		(6	)		(6	)		(12	)
Net change		39			1			40			52			5			57

From the end of the second quarter of 2012 to the end of the second quarter of 2013, we opened 233 system restaurants, net of restaurant closures. Typically, 20 to 40 system restaurants are closed annually, the majority of which have been in Canada. Restaurant closures made in the normal course of operations may result from an opportunity to acquire a more suitable location, which will permit us to upgrade size and layout or add a drive-thru, and typically occur at the end of a lease term or the end of the useful life of the principal asset. We have also closed, and may continue to close, restaurants which have performed below our expectations for an extended period of time, and/or we believe that sales from the restaurant can be absorbed by surrounding restaurants.

Self-serve locations generally have significantly different economics than our full-serve restaurants, including substantially less capital investment, as well as significantly lower sales and, therefore, lower associated royalties and distribution sales. In the U.S., self-serve locations are intended to increase our brand presence and create another outlet to drive convenience, which we believe is important in our developing markets. In Canada, we have used self-serve kiosks in locations where existing full-service locations are at capacity, among other reasons.

We have a master license agreement with Apparel FZCO (“Apparel”) for the development and operation of Tim Hortons restaurants in the Gulf Cooperation Council (“GCC”). The master license agreement is primarily a royalty-based model that includes franchise fees upon the opening of each location, and restaurant equipment and distribution sales. Apparel is responsible for the capital investment and real estate development required to open new restaurants, along with operations and marketing. In the second quarter of 2013, the Company signed an area development agreement with Apparel to develop 100 Tim Hortons multi-format restaurants in Saudi Arabia over the next 5 years. Development in Saudi Arabia will be managed by Apparel and will focus on major urban markets, with opportunity for development beyond the initial 100 targeted locations. We continue to assess additional markets for development in various regions of the world as part of our international strategy, with a view to further expanding our international presence over time.

The Company also had, as at June 30, 2013, 251 primarily licensed locations in the Republic of Ireland and in the United Kingdom compared to 243 locations as at July 1, 2012, which are not included in our new restaurant development or systemwide restaurant count.

26

We have exclusive development rights in Canada, and certain rights to use licenses in the U.S. within Tim Hortons locations, to operate Cold Stone Creamery^® ice cream and frozen confection retail outlets. As at June 30, 2013, we had 256 co-branded locations, 146 in Canada and 110 in the U.S. (103 in Tim Hortons restaurants and 7 in Cold Stone Creamery locations) as compared to 239 locations as at July 1, 2012, 139 in Canada and 100 in the U.S. (93 in Tim Hortons restaurants and 7 in Cold Stone Creamery locations). We have also complemented our Cold Stone Creamery offering in Canada with 39 Cold Stone Creamery self-serve freezers in Tim Hortons locations, which are not included in our Cold Stone Creamery restaurant count.

Set forth in the table below is our restaurant count by restaurant type:

Systemwide Restaurant Count

	As at
	June 30, 2013			December 30, 2012			July 1, 2012
Canada
Company-operated		17			18			11
Franchised – standard and non-standard		3,324			3,294			3,200
Franchised – self-serve kiosk		127			124			115
Total		3,468			3,436			3,326
% Franchised		99.5	%		99.5	%		99.7	%
U.S.
Company-operated		3			4			10
Franchised – standard and non-standard		627			621			551
Franchised – self-serve kiosks		177			179			173
Total		807			804			734
% Franchised		99.6	%		99.5	%		98.6	%
International (GCC)
Franchised – standard and non-standard		29			24			11
% Franchised		100.0	%		100.0	%		100.0	%
Total system
Company-operated		20			22			21
Franchised – standard and non-standard		3,980			3,939			3,762
Franchised – self-serve kiosks		304			303			288
Total		4,304			4,264			4,071
% Franchised		99.5	%		99.5	%		99.5	%

27

Segment Operating Income

We have revised our segment reporting as a result of the realignment of roles and responsibilities within our Business Unit and Corporate Centre design (see Results of Operations – Corporate Reorganization Expenses). Effective the first quarter of 2013, the chief decision maker views and evaluates the Company’s reportable segments as follows:

Canadian and U.S. business units. Each of the Canadian and U.S. business units includes the results of substantially all restaurant-facing activities, such as: (i) rents and royalties; (ii) product sales through our supply chain as well as an allocation of supply chain income based on the unit’s respective systemwide sales; (iii) franchise fees; (iv) corporate restaurants; and (v) business-unit-related general and administrative expenses. The business units exclude the effect of consolidating VIEs, consistent with how the chief decision maker views and evaluates the respective business unit’s results.

Corporate services. Corporate services comprises services to support the Canadian and U.S. business units, including: (i) general and administrative expenses; (ii) manufacturing income, and manufacturing sales to third parties; and (iii) income related to our distribution services, including the timing of variances arising primarily from commodity costs and the related effect on pricing, which generally reverse within a year, associated with our supply chain management. Our supply chain management involves securing a stable source of supply, which is intended to provide our restaurant owners with consistent, predictable pricing, and may extend beyond a quarter. Corporate services also includes the results of our International operations, which are currently not significant.

Previously, the results of manufacturing activities and distribution services were included within the respective geographic segment where the facility was located. Additionally, we have revised the allocation of shared restaurant services, such as restaurant technology and operations standards, between the Canadian and U.S. business units. As a result of the appointment of our new CEO on July 2, 2013, there may be further changes to our segment reporting.

The Company has reclassified the segment data for the prior periods to conform to the current period’s presentation. Set forth in the table below is the operating income (loss) of our reportable segments:

	Second quarter ended			% of Total			Second quarter ended			% of Total			Change
	June 30, 2013			Revenues			July 1, 2012			Revenues			Dollars			Percentage
	($ in thousands)
Operating Income (Loss)
Canada	$	174,760			21.8	%	$	165,360			21.1	%	$	9,400			5.7	%
U.S.		2,587			0.3	%		4,101			0.5	%		(1,514	)		(36.9	)%
Corporate services		(1,424	)		n/m			(11,117	)		n/m			9,693			n/m
Reportable segment operating income		175,923			22.0	%		158,344			20.2	%		17,579			11.1	%
VIEs		1,260			0.2	%		1,772			0.2	%		(512	)		(28.8	)%
Corporate reorganization expenses		(604	)		n/m			(1,277	)		n/m			673			n/m
Consolidated Operating income	$	176,579			22.1	%	$	158,839			20.2	%	$	17,740			11.2	%

	Year-to-date period ended			% of Total			Year-to-date period ended			% of Total			Change
	June 30, 2013			Revenues			July 1, 2012			Revenues			Dollars			Percentage
	($ in thousands)
Operating Income (Loss)
Canada	$	320,581			20.9	%	$	312,586			20.7	%	$	7,995			2.6	%
U.S.		3,497			0.2	%		5,755			0.4	%		(2,258	)		(39.2	)%
Corporate services		(12,089	)		n/m			(29,902	)		n/m			17,813			n/m
Reportable segment operating income		311,989			20.4	%		288,439			19.1	%		23,550			8.2	%
VIEs		2,586			0.2	%		3,300			0.2	%		(714	)		(21.6	)%
Corporate reorganization expenses		(10,079	)		n/m			(1,277	)		n/m			(8,802	)		n/m
Consolidated Operating income	$	304,496			19.9	%	$	290,462			19.3	%	$	14,034			4.8	%

All numbers rounded

^n/m  Not meaningful

28

Canada

Operating income was $174.8 million in the second quarter of 2013, an increase of $9.4 million, or 5.7%, compared to the second quarter of 2012. Systemwide sales growth of 4.4%, driven by the incremental sales of new restaurants year-over-year and same-store sales growth of 1.5%, resulted in higher rents and royalties income, and a higher allocation of supply chain income. Higher franchise fee income due to decreased support costs, and lower general and administrative expenses due primarily to vacancies, some of which may be filled during the balance of fiscal 2013, also contributed favourably to operating income growth in Canada. In the second quarter of 2013, we saw growth in total restaurant transactions as a result of the net addition of new restaurants.

Same-store sales growth in the second quarter of 2013 was driven by gains in average cheque resulting primarily from pricing, and to a lesser extent, favourable product mix, partially offset by a decrease in transactions. In the first half of 2013, we saw growth in total restaurant transactions as a result of the net addition of new restaurants. We opened 21 restaurants and closed 6 in the second quarter of 2013, as compared to opening 19 restaurants and closing 8 in the second quarter of 2012.

For the first half of 2013, operating income was $320.6 million, an increase of $8.0 million, or 2.6%, compared to the first half of 2012. Systemwide sales growth of 3.5% in the first half of 2013, driven by the net addition of new restaurants and same-store sales growth of 0.6%, resulted in higher rents and royalties income, although higher support costs related to property maintenance in the first half of 2013 had an unfavourable impact on operating income growth. The remaining factors influencing operating income growth in the second quarter of 2013 were also prevalent in the first half of 2013. In the first half of 2013, we opened 45 restaurants and closed 13, as compared to opening 41 restaurants and closing 10 in the first half of 2012. Similar to prior years, we expect that our restaurant openings will be concentrated in the second half of 2013.

In Canada, we continue to pursue menu, promotional and operational initiatives to adapt to the current operating environment and grow our business. Recently, our product efforts included the national launch of Panini sandwiches and single-serve coffee. We also continue to execute medium to longer-term growth-oriented strategies. These activities include active development in Canada as we believe there is considerable opportunity to further build our presence in key markets across the country. Our capital investments in Canada have increased in fiscal 2013 as we are targeting to implement our drive-thru capacity and throughput initiatives at approximately 1,000 restaurants, continue our restaurant development, and increase the scale of our renovation program.

U.S.

Operating income was $2.6 million in the second quarter of 2013, a decrease of $1.5 million, compared to the second quarter of 2012. Systemwide sales growth of 8.6% was driven by incremental sales from the net addition of new restaurants, and same-store sales growth of 1.4%. Systemwide sales growth led to growth in rents and royalties revenues, which was more than offset by an increase in relief primarily related to restaurants opened in fiscal 2012, and higher operating expenses due to an overall increase in the number of properties owned or leased. In the second quarter of 2012, we recognized a $0.7 million benefit due primarily to the reversal of previously accrued closure costs related to markets in New England. Franchise fee income also decreased due to variability in support costs. Partially offsetting these unfavourable items was a higher allocation of supply chain income, driven by an increase in systemwide sales growth.

In the second quarter of 2013, growth in the U.S. was driven primarily by an increase in transactions. We had minimal pricing in the second quarter of 2013 and our average cheque remained flat primarily as a result of promotional activity, offset for the most part by favourable product mix. Total systemwide restaurant transactions increased due to the net addition of new restaurants, and due to an increase in same-store transactions. In the second quarter of 2013, we opened 5 restaurants and closed 6 (including the net decrease of 3 self-serve kiosks), as compared to opening 15 restaurants and closing 2 (including the net addition of 8 self-serve kiosks) in the second quarter of 2012.

For the first half of 2013, operating income was $3.5 million, a decrease of $2.3 million compared to the first half of 2012. Systemwide sales growth of 8.2% was driven by the net addition of new restaurants and same-store sales growth of 0.5%. The same factors influencing operating income growth in the second quarter of 2013 were also prevalent in the first half of 2013. We opened 13 restaurants and closed 10 (including the net decrease of 2 self-serve kiosks) in the first half of 2013, as compared to opening 22 restaurants and closing 2 (including the net addition of 9 self-serve kiosks) in the first half of 2012. All of the restaurant closures in the first half of 2013 were non-standard restaurants or self-serve kiosks. Similar to prior years, we expect that our restaurant openings will be concentrated in the second half of 2013.

We believe the U.S. market has the potential to significantly contribute to the Company’s long-term earnings growth, and we are committed to driving market success. Our sales progression in many U.S. markets mirrors that of many of our Canadian markets in their early development stages. However, overall sales volumes in our newer U.S. markets do not yet match our larger, more developed markets in the U.S., and, as a result, do not generate a strong return. We are seeking meaningful improvement in the returns on the capital we have deployed in the U.S. segment, and we have accordingly begun to accelerate our initiative to partner with well-capitalized franchisees in the U.S. as part of our development approach. While development capital in 2013 is mostly committed, starting in 2014, we expect to reduce capital being deployed in the U.S. segment as we look to new ways to develop in the U.S. market.

29

Corporate services

Our Corporate services segment had an operating loss of $1.4 million in the second quarter of 2013, compared to an operating loss of $11.1 million in the second quarter of 2012. Year-to-date, our Corporate services segment had an operating loss of $12.1 million, compared to an operating loss of $29.9 million in the first half of 2012. The primary driver of the lower operating loss in both periods was income from distribution services resulting from operational improvements in our distribution centres, and favourable product margin variability, some of which we expect will reverse in the second half of 2013. Also contributing to the reduced operating loss were lower general and administrative expenses due primarily to lower salaries and benefits (see Results of Operations – General and Administrative Expenses), and increased manufacturing income driven by lower manufacturing costs. Our International operations also contributed positively, due in part to our expansion into Saudi Arabia. In the first half of 2013, other income related primarily to a corporate property sale, was recognized in Corporate services and also contributed favourably to the lower operating loss.

Variable interest entities (“VIEs”)

Operating income from our VIEs was $1.3 million in the second quarter of 2013, a decrease of $0.5 million compared to the second quarter of 2012. In the first half of 2013, operating income from our VIEs was $2.6 million, a decrease of $0.7 million compared to the first half of 2012. We consolidated, on average, an additional 38 and 46 Non-owned restaurants in the second quarter and first half of 2013, respectively, compared to the second quarter and first half of 2012. The increase in consolidated Non-Owned restaurants in both periods was driven primarily by U.S. restaurants, which generally have lower profitability than our Canadian restaurants, and resulted in the decline in operating income from VIEs.

30

Results of Operations

	Second quarter ended			% of			Second quarter ended			% of			Change(1)
	June 30, 2013			Revenues			July 1, 2012			Revenues			Dollars			Percentage
	($ in thousands)
Revenues
Sales	$	568,562			71.1	%	$	563,772			71.8	%	$	4,790			0.8	%
Franchise revenues:
Rents and royalties(2)		209,289			26.2	%		198,973			25.3	%		10,316			5.2	%
Franchise fees		22,288			2.8	%		22,836			2.9	%		(548	)		(2.4	)%
		231,577			28.9	%		221,809			28.2	%		9,768			4.4	%
Total revenues		800,139			100.0	%		785,581			100	%		14,558			1.9	%
Costs and expenses
Cost of sales		489,092			61.1	%		492,900			62.7	%		(3,808	)		(0.8	)%
Operating expenses		76,986			9.6	%		72,314			9.2	%		4,672			6.5	%
Franchise fee costs		23,326			2.9	%		24,794			3.2	%		(1,468	)		(5.9	)%
General and administrative expenses		38,038			4.8	%		40,272			5.1	%		(2,234	)		(5.5	)%
Equity (income)		(3,916	)		(0.5	)%		(3,859	)		(0.5	)%		(57	)		1.5	%
Corporate reorganization expenses		604			0.1	%		1,277			0.2	%		(673	)		n/m
Other (income), net		(570	)		(0.1	)%		(956	)		(0.1	)%		386			n/m
Total costs and expenses, net		623,560			77.9	%		626,742			79.8	%		(3,182	)		(0.5	)
Operating income		176,579			22.1	%		158,839			20.2	%		17,740			11.2	%
Interest (expense)		(8,922	)		(1.1	)%		(8,650	)		(1.1	)%		(272	)		3.1	%
Interest income		791			0.1	%		723			0.1	%		68			9.4	%
Income before income taxes		168,448			21.1	%		150,912			19.2	%		17,536			11.6	%
Income taxes		43,886			5.5	%		41,675			5.3	%		2,211			5.3	%
Net income		124,562			15.6	%		109,237			13.9	%		15,325			14.0	%
Net income attributable to noncontrolling interests		826			0.1	%		1,170			0.1	%		(344	)		(29.4	)%
Net income attributable to Tim Hortons Inc.	$	123,736			15.5	%	$	108,067			13.8	%	$	15,669			14.5	%

31

	Year-to-date period ended			% of			Year-to-date period ended			% of			Change(1)
	June 30, 2013			Revenues			July 1, 2012			Revenues			Dollars			Percentage
	($ in thousands)
Revenues
Sales	$	1,092,449			71.3	%	$	1,087,074			72.1	%	$	5,375			0.5	%
Franchise revenues:
Rents and royalties(2)		396,743			25.9	%		379,159			25.2	%		17,584			4.6	%
Franchise fees		42,484			2.8	%		40,632			2.7	%		1,852			4.6	%
		439,227			28.7	%		419,791			27.9	%		19,436			4.6	%
Total revenues		1,531,676			100.0	%		1,506,865			100	%		24,811			1.6	%
Costs and expenses
Cost of sales		950,446			62.1	%		957,820			63.6	%		(7,374	)		(0.8	)%
Operating expenses		152,719			10.0	%		138,239			9.2	%		14,480			10.5	%
Franchise fee costs		45,878			3.0	%		45,076			3.0	%		802			1.8	%
General and administrative expenses		76,706			5.0	%		81,695			5.4	%		(4,989	)		(6.1	)%
Equity (income)		(7,265	)		(0.5	)%		(7,105	)		(0.5	)%		(160	)		2.3	%
Corporate reorganization expenses		10,079			0.7	%		1,277			0.1	%		8,802			n/m
Other (income), net		(1,383	)		(0.1	)%		(599	)		0.0	%		(784	)		n/m
Total costs and expenses, net		1,227,180			80.1	%		1,216,403			80.7	%		10,777			0.9	%
Operating income		304,496			19.9	%		290,462			19.3	%		14,034			4.8	%
Interest (expense)		(17,585	)		(1.1	)%		(16,548	)		(1.1	)%		(1,037	)		6.3	%
Interest income		1,719			0.1	%		1,434			0.1	%		285			19.9	%
Income before income taxes		288,630			18.8	%		275,348			18.3	%		13,282			4.8	%
Income taxes		77,145			5.0	%		76,132			5.1	%		1,013			1.3	%
Net income		211,485			13.8	%		199,216			13.2	%		12,269			6.2	%
Net income attributable to noncontrolling interests		1,578			0.1	%		2,370			0.2	%		(792	)		(33.4	)%
Net income attributable to Tim Hortons Inc.	$	209,907			13.7	%	$	196,846			13.1	%	$	13,061			6.6	%

^n/m  Not meaningful

⁽¹⁾  The financial results of our U.S. segment are denominated in U.S. dollars and translated into Canadian dollars for consolidated reporting purposes. The change of the Canadian dollar relative to the U.S. dollar year-over-year did not have a significant impact on any component of net income in the second quarter of 2013. The exchange rates were as follows:

	As at
	June 30, 2013		March 31, 2013		December 30, 2012		July 1, 2012		April 1, 2012		January 1, 2012
US $1.00	$	1.0518	$	1.0160	$	0.9965	$	1.0181	$	0.9975	$	1.0170

⁽²⁾  Rents and royalties revenues includes rents and royalties derived from our franchised restaurant sales, and advertising levies of $2.6 million and $1.1 million in the second quarters of 2013 and 2012, respectively, and $5.1 million and $1.5 million in the first half of 2013 and 2012, respectively, primarily associated with the Ad Fund’s program to acquire LCD screens, media engines, drive-thru menu boards and ancillary equipment for our restaurants (“Expanded Menu Board Program”). Franchised restaurant sales are reported to us by our restaurant owners, and are not included in our Condensed Consolidated Financial Statements, other than consolidated Non-owned restaurants. Franchised restaurant sales do, however, result in royalties and rental revenues, which are included in our franchise revenues, as well as distribution sales. The reported franchised restaurant sales (including consolidated Non-owned restaurants) were:

	Second quarter ended				Year-to-date ended
	June 30, 2013		July 1, 2012		June 30, 2013		July 1, 2012
	(in thousands)
Franchised restaurant sales
Canada (Canadian dollars)	$	1,570,814	$	1,504,083	$	2,979,268	$	2,879,357
U.S. (U.S. dollars)	$	145,498	$	133,120	$	282,667	$	259,602

32

Revenues

Sales

Sales for the second quarter of 2013 increased $4.8 million, or 0.8%, over the second quarter of 2012 to $568.6 million and, in the first half of 2013, increased $5.4 million or 0.5% to $1,092.4 million. Systemwide sales growth drove an increase in distribution sales, which was more than offset by a decrease due to lower commodity costs. Sales increased due to an increase in the number of consolidated Non-owned restaurants.

Distribution sales. Distribution sales were $468.6 million in the second quarter of 2013, compared to $471.3 million in the second quarter of 2012, decreasing $2.7 million, or 0.6%. Pricing, driven primarily by lower prices for coffee and other commodities and reflective of their lower underlying costs, and to a lesser extent, product mix, decreased distribution sales by approximately $12.5 million. Partially offsetting the decrease was systemwide sales growth, which increased distribution sales by approximately $9.6 million.

For the first half of 2013, distribution sales decreased $11.3 million, or 1.2% to $899.7 million. Similar to the second quarter of 2013, pricing, driven primarily by lower prices for coffee and other commodities and reflective of their underlying costs, and to a lesser extent product mix, decreased distribution sales by approximately $33.8 million, partially offset by an increase of approximately $22.1 million driven by systemwide sales growth.

Our distribution sales continue to be subject to changes related to underlying costs of key commodities, such as coffee, wheat, edible oils, sugar, and other products. Changes in underlying costs are largely passed through to restaurant owners, but will typically occur after changes in spot market prices as we generally utilize fixed-price contracts as a method to provide restaurant owners with consistent, predictable pricing and to secure a stable source of supply. We generally have forward purchasing contracts in place for a 6-month period of future supply for our key commodities, but have occasionally extended beyond this time frame in periods of elevated market volatility or tight supply conditions. Underlying commodity costs can also be impacted by currency changes. These cost changes can impact distribution sales, and cost of sales, and can create volatility quarter-over-quarter and year-over-year. These changes may impact margins in a quarter as many of these products are typically priced based on a fixed-dollar mark-up and can relate to a pricing period which may extend beyond a quarter.

Company-operated restaurant sales. Company-operated restaurant sales were $6.5 million in the second quarter of 2013, compared to $7.0 million in the second quarter of 2012, decreasing $0.5 million due to the type of Company-operated restaurants. On average, we operated 21 Company restaurants in both the second quarter of 2013 and 2012. Company-operated restaurant sales varies with the average number and mix (i.e., size, location and type) of Company-operated restaurants.

For the first half of 2013, Company-operated restaurant sales were $12.5 million compared to $12.6 million in the first half of 2012, decreasing $0.1 million. Similar to the second quarter of 2013, the type of Company-operated restaurants drove the decline in Company-operated restaurant sales, partially offset by an average of 2 additional Company-operated restaurants.

We ended the second quarter of 2013 with 17 Company-operated restaurants in Canada, and 3 in the U.S., representing approximately 0.5% of total systemwide restaurants. Comparatively, we ended the second quarter of 2012 with 11 Company-operated restaurants in Canada, and 10 in the U.S., representing 0.6% of total systemwide restaurants. On occasion, we may repurchase restaurants from existing restaurant owners, operate them corporately for a short period of time, and then refranchise these restaurants. As such, Company-operated revenue is also impacted by the timing of these events throughout the year.

Variable interest entities’ sales. VIEs’ sales were $93.5 million and $85.5 million in the second quarters of 2013 and 2012, respectively, an increase of $8.0 million, or 9.4%. VIEs’ sales were $180.2 million and $163.5 million in the first half of 2013 and 2012, respectively, an increase of $16.8 million, or 10.2%. The increase in VIEs’ sales in both periods was driven by the increase in the average number of consolidated Non-owned restaurants, partially offset by a higher proportion of U.S. restaurants, which generally have lower sales. The following table outlines the number of consolidated Non-owned restaurants in each respective period:

	Second quarter ended				Year-to-date period  ended				As at
	June 30, 2013		July 1, 2012		June 30, 2013		July 1, 2012		June 30, 2013		December 30, 2012
	Average				Average
Canada		114		121		118		120		117		131
U.S.		233		188		235		187		233		234
Total		347		309		353		307		350		365

Franchise Revenues

Rents and Royalties. Revenue from rents and royalties was $209.3 million in the second quarter of 2013, as compared to $199.0 million in the second quarter of 2012, increasing $10.3 million, or 5.2%. Rents and royalties growth was driven primarily by sales

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from the net addition of 217 new full-serve restaurants across all of our markets and same-store sales growth, both of which resulted in an approximate $9.0 million, or 4.5%, growth in rents and royalties revenues. We also recognized an additional $1.2 million of advertising levies primarily attributed to the Ad Fund’s Expanded Menu Board Program.

In the first half of 2013, revenue from rents and royalties was $396.7 million, as compared to $379.2 million in the first half of 2012, increasing $17.6 million, or 4.6%. Similar to the second quarter of 2013, the primary driver of growth was higher systemwide sales, which resulted in an approximate additional $14.2 million, or 3.8%. We also recognized an additional $3.6 million of advertising levies primarily attributed to the Ad Fund’s Expanded Menu Board Program.

Franchise Fees. Franchise fees were $22.3 million in the second quarter of 2013, decreasing $0.5 million, or 2.4%, from the second quarter of 2012. The decrease in franchise fees was due to a lower number and the type of restaurant sales and resales, partially offset by an increase in renovations. We also recognized the initial franchise fee related to our international expansion in Saudi Arabia.

In the first half of 2013, franchise fees were $42.5 million, increasing $1.9 million, or 4.6%, from the first half of 2012. The increase in franchise fees was due to an increase in renovations, and the recognition of the initial franchise fee related to our international expansion in Saudi Arabia, partially offset by a decrease in the number and the type of restaurant sales.

Total Costs and Expenses

Cost of Sales

Cost of sales was $489.1 million in the second quarter of 2013, compared to $492.9 million in the second quarter of 2012, a decrease of $3.8 million, or 0.8%. For the first half of 2013, cost of sales was $950.4 million as compared to $957.8 million, a decrease of $7.4 million, or 0.8%. The decrease during both of these periods was driven by lower distribution cost of sales, partially offset by higher cost of sales from VIEs.

Distribution cost of sales. Distribution cost of sales was $399.0 million in the second quarter of 2013, compared to $410.2 million in the second quarter of 2012, decreasing $11.2 million, or 2.7%. Pricing, related primarily to lower underlying commodity costs for coffee and other commodities, and to a lesser extent, operational improvements in our distribution centres, contributed approximately $19.8 million to the decrease, partially offset by systemwide sales growth, which drove an increase in distribution cost of sales of approximately $8.4 million.

For the first half of 2013, distribution cost of sales was $774.6 million, compared to $800.2 million in the first half of 2012, decreasing $25.6 million or 3.2%. Similar to the second quarter of 2013, pricing, related primarily to lower underlying commodity costs for coffee and other commodities, and to a lesser extent, operational improvements in our distribution centres, contributed approximately $45.6 million of the decrease, partially offset by an increase of approximately $19.6 million driven by systemwide sales growth.

Company-operated restaurants’ cost of sales. Cost of sales for our Company-operated restaurants, which includes food, paper, labour and occupancy costs, varies with the average number and mix (i.e., size, location and type) of Company-operated restaurants. Cost of sales for our Company-operated restaurants was $6.6 million in the second quarter of 2013, decreasing $1.1 million, or 14.1%, compared to the second quarter of 2012, driven primarily by the type of Company-operated restaurants, with lower sales resulting in lower cost of sales.

For the first half of 2013, cost of sales for our Company-operated restaurants was $13.6 million, representing a decrease of $0.2 million, or 1.1% compared to the first half of 2012. The decrease was primarily due to the type of Company-operated restaurants, with lower sales resulting in lower cost of sales, partially offset by an increase in the average number of Company-operated restaurants.

Variable interest entities’ cost of sales. VIEs’ cost of sales was $83.5 million and $75.0 million in the second quarters of 2013 and 2012, respectively, an increase of $8.5 million. For the first half of 2013, VIEs’ cost of sales was $162.3 million compared to $143.9 million in the first half of 2012, an increase of $18.4 million. The increase in VIEs’ cost of sales in both periods was primarily driven by the increase in the average number of consolidated restaurants.

Operating Expenses

Total operating expenses were $77.0 million in the second quarter of 2013, as compared to $72.3 million in the second quarter of 2012, increasing $4.7 million, or 6.5%. Property-related depreciation expense increased by $2.4 million, due to an increase of 172 properties that we either own or lease, and then sublease to restaurant owners. Additionally, rent expense increased by $1.6 million year-over-year, primarily due to 152 additional properties that were leased and then subleased to restaurant owners. Operating expenses related to the Ad Fund, consisting primarily of depreciation expense related to the Expanded Menu Board Program, also increased by $1.4 million. Partially offsetting these increases were favourable support and other expenses in the second quarter of 2013.

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In the first half of 2013, operating expenses increased $14.5 million, or 10.5%, to $152.7 million compared to $138.2 million in the first half of 2012. Year-over-year, property-related depreciation expense increased by $4.5 million, and rent expense increased by $4.3 million, due primarily to additional properties opened. Operating expenses related to the Ad Fund, consisting primarily of depreciation expense related to the Expanded Menu Board Program, increased by $3.3 million. Operating expenses also increased by approximately $2.0 million related to property maintenance.

Franchise Fee Costs

Franchise fee costs were $23.3 million in the second quarter of 2013, a decrease of $1.5 million, or 5.9%, over the second quarter of 2012. The decrease in franchise fee costs was primarily due to a lower number and the type of restaurant sales, and favourable support costs year-over-year, partially offset by an increase in renovations in the second quarter of 2013 compared to the second quarter of 2012.

Year-to-date in 2013, franchise fee costs were $45.9 million, an increase of $0.8 million, or 1.8%, over the first half of 2012. The increase in franchise fee costs was primarily driven by an increase in renovations in the first half of 2013 compared to the first half of 2012, partially offset by a lower number and the type of restaurant sales and favourable support costs year-over-year.

General and Administrative Expenses

General and administrative expenses were $38.0 million in the second quarter of 2013, decreasing by $2.2 million, or 5.5%, from the second quarter of 2012. The primary driver of the decrease was lower salaries and benefits due to vacancies, some of which we expect may be filled in the balance of fiscal 2013, and lower stock-based compensation expenses due to variability in stock-based compensation. Partially offsetting these decreases were additional promotional expenses incurred, primarily related to our international expansion, in the second quarter of 2013 as compared to the second quarter of 2012.

For the first half of 2013, general and administrative expenses decreased by $5.0 million, or 6.1%, to $76.7 million compared to the first half of 2012. Similar to the second quarter of 2013, the primary driver of the decrease was lower salaries and benefits from lower stock-based compensation expenses due to an additional equity grant in the first half of 2012 and variability in stock-based compensation, and vacancies, some which we expect may be filled in the balance of fiscal 2013. Partially offsetting these decreases was the unfavourable timing of certain benefit and other expenses year-over-year, and additional promotional expenses incurred in the first half of 2013 compared to the first half of 2012.

In general, our objective is for general and administrative expense growth not to exceed systemwide sales growth over the longer term. There can be quarterly fluctuations in general and administrative expenses due to the timing of certain expenses or events that may impact growth rates in any particular quarter. We expect general and administrative expenses to increase in the second half of 2013, as some vacancies may be filled.

Equity Income

Equity income was $3.9 million in the second quarter of 2013, which was comparable to $3.9 million in the second quarter of 2012. For the first half of 2013, equity income was $7.3 million, compared to $7.1 million in the first half of 2012. Our most significant equity investment is our 50% interest in TIMWEN Partnership, which controls the real estate for the Canadian Tim Hortons/Wendy’s^® combination restaurants.

Corporate Reorganization Expenses

In August 2012, we began the realignment of roles and responsibilities within a new organizational structure, which includes a Corporate Centre and Business Unit design, and completed that realignment at the end of the first quarter of 2013. We believe that the new structure will facilitate the execution of strategic initiatives as we continue to grow our business and streamline decision-making across the Company. We also believe that the new structure will create scalability for future growth and reduce our cost structure relative to what it otherwise would have been had we not undertaken the reorganization.

In the second quarter of 2013, we recognized $0.6 million of CEO transition costs comprised primarily of stock-based compensation expense, and costs related to an employment agreement and retention agreements with certain senior executives, which are being recognized over the estimated service period. In the second quarter of 2012, we incurred $1.3 million of professional fees.

In the first half of 2013, we recognized a total charge of $10.1 million, consisting primarily of termination costs and professional fees, compared to $1.3 million of professional fees in the first half of 2012. We do not anticipate significant further costs related to the reorganization, with the exception of approximately $1.0 million related to CEO transition in the balance of fiscal 2013.

Other (Income), net

Other (income), net, was $0.6 million in the second quarter of 2013, compared to other (income), net, of $1.0 million in the second quarter of 2012. In the second quarter of 2013, we recognized the favourable impact resulting from the settlement of a claim under the separation agreements with Wendy’s International, Inc. (“Wendy’s”) (see Results of Operations – Income Taxes), offset by the loss on the sale of a corporate asset. The remaining balance consists primarily of favourable foreign exchange. In comparison, in the second quarter of 2012, we recognized a $0.7 million benefit due primarily to the reversal of previously accrued closure costs related to markets in New England.

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For the first half of 2013, other (income), net, was $1.4 million compared to other (income), net of $0.6 million in the first half of 2012. In addition to the items recognized in the second quarter of 2013, we also recognized, in the first half of 2013, the gain on a corporate property sale, and more favourable foreign exchange in comparison to the first half of 2012.

Interest Expense

Total interest expense, including interest on our long-term debt, capital leases and credit facilities, was $8.9 million and $8.7 million in the second quarters of 2013 and 2012, respectively. On a year-to-date basis, interest expense was $17.6 million in 2013 and $16.5 million in 2012. The increase in both periods was primarily due to an increase in the number of capital leases outstanding.

Interest Income

Interest income is comprised primarily of interest earned on our cash and cash equivalents. Interest income was $0.8 million and $0.7 million in the second quarters of 2013 and 2012, respectively. On a year-to-date basis, interest income was $1.7 million in 2013 and $1.4 million in 2012. The increase in both periods was primarily due to higher average cash balances.

Income Taxes

The effective income tax rate was 26.1% for the second quarter ended June 30, 2013, compared to 27.6% for the second quarter ended July 1, 2012. The effective income tax rate for the year-to-date periods ended June 30, 2013 and July 1, 2012 was 26.7% and 27.6%, respectively. The reduction in the income tax rate in the second quarter of 2013 compared to the second quarter of 2012 was primarily due to the favourable impact related to a reserve release resulting from a statute of limitations lapse and tax benefits associated with other discrete items, partially offset by an increase to prior year tax reserves as a result of audit activity.

For Canadian federal tax purposes, the 2005 and subsequent taxation years remain open to examination and potential adjustment by the Canada Revenue Agency (“CRA”). The CRA has issued notices of reassessment for the 2005 through 2009 taxation years for transfer pricing adjustments related to our former investment in the Maidstone Bakery joint venture. The proposed adjustments, including tax, penalty and interest, total approximately $60.0 million. We will be required to deposit approximately $35.0 million of the proposed adjustment with the CRA and other taxation authorities by October 2013. The cash deposit requirement will not have a material adverse impact on our liquidity. Although the outcome of this matter cannot be predicted with certainty, the Company intends to contest this matter vigorously and we believe that we will ultimately prevail based on the merits of our position. At this time, we believe that we have adequately reserved for this matter; however, we will continue to evaluate our reserves as we progress through the appeals or litigation process with the CRA. If the CRA’s position is ultimately sustained as proposed, it may have a material adverse impact on earnings in the period that the matter is settled.

A Notice of Appeal to the Tax Court of Canada was filed on July 27, 2012 in respect of a dispute with the CRA related to the deductibility of approximately $10.0 million of interest expense for the 2002 taxation year. As of the date hereof, the Company believes that it will ultimately prevail in sustaining the tax benefit of the interest deduction. In addition, the CRA is conducting a general examination of various subsidiaries of the Company for the 2009 taxation year. For U.S. federal income tax purposes, the Company remains open to examination commencing with the 2009 taxation year. Income tax returns filed with various provincial and state jurisdictions are generally open to examination for periods of 3 to 5 years subsequent to the filing of the respective return. Except as described previously, the Company does not currently expect any material impact on earnings to result from the resolution of matters related to open taxation years; however, it is possible that actual settlements may differ from amounts accrued.

During the quarter, the Company and Wendy’s agreed to a settlement of claims under the separation agreements relating to our initial public offering and spin-off from Wendy’s. The agreed upon settlement was reflected positively in our earnings, and did not have a material impact. As part of the settlement, the Company and Wendy’s agreed to a full and final release of all claims under the separation agreements, provided, however, that any matters arising in connection with outstanding Competent Authority claims remain open.

XBRL Filing

Attached as Exhibit 101 to this report are documents formatted in Extensible Business Reporting Language (“XBRL”). The financial information contained in the XBRL-related documents is “unaudited” and/or “unreviewed,” as applicable.

As a result of the inherent limitations within the rendering tools, we have identified discrepancies that could not be corrected and, therefore, our XBRL tagged financial statements and footnotes should be read in conjunction with our Condensed Consolidated Financial Statements contained within this Form 10-Q.

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Liquidity and Capital Resources

Overview

Our primary source of liquidity has historically been, and continues to be, cash generated from Canadian operations which has for the most part self-funded our operations, growth in new restaurants, capital expenditures, dividends, normal course share repurchases, acquisitions and investments. Our U.S. operations have historically been a net user of cash given investment plans and stage of growth, and we expect this trend to continue through the remainder of fiscal 2013. Our $250.0 million revolving bank facility (“Revolving Bank Facility”) provides an additional source of liquidity (see Credit Facilities below for additional information).

In the first half of 2013, we generated $258.3 million of cash from operations, compared to $216.4 million in the first half of 2012, an increase of $41.9 million (see Comparative Cash Flows below for a description of sources and uses of cash). We believe that we will continue to generate adequate operating cash flows to fund both our capital expenditures, excluding the Expanded Menu Board Program which is a capital expenditure of the Ad Fund, and our expected debt service requirements over the next 12 months. If additional funds are needed for strategic initiatives or other corporate purposes beyond those currently available under our Revolving Bank Facility, we believe that, with the strength of our balance sheet and our strong capital structure, we could borrow additional funds. Our ability to incur additional indebtedness will be limited by our financial and other covenants under our Revolving Bank Facility. Our Senior Unsecured Notes, 4.2% coupon, Series 1, due June 1, 2017 (“Senior Notes”) are not subject to any financial covenants; however, the Senior Notes contain certain other covenants, which are described below. Any such borrowings may result in an increase in our borrowing costs. If such additional borrowings are significant, our credit rating may be downgraded, and it is possible that we would not be able to borrow on terms which are favourable to us.

When evaluating our leverage position, we look at metrics that consider the impact of long-term operating and capital leases as well as other long-term debt obligations. We believe this provides a more meaningful measure of our leverage position given our significant investments in real estate. As at June 30, 2013, we had approximately $480.0 million in long-term debt (excluding current portion) and capital leases on our balance sheet, excluding Ad Fund debt related to the Expanded Menu Board Program. We continue to believe that the strength of our balance sheet, including our cash position, provides us with opportunity and flexibility for future growth while still enabling us to return excess cash to our shareholders through a combination of dividends and our share repurchase program.

Capital Allocation

The Company regularly assesses our optimal capital structure and seeks to identify opportunities to generate value for shareholders. Consistent with this approach, early in 2013 the Company began reviewing its capital structure considering both external factors, such as the interest rate environment, as well as internal factors, such as our cross border inter-corporate structure and our future financial flexibility.

After careful consideration, the Board has approved a $900.0 million increase in debt levels of the Company, intended to be used to repurchase common shares. We are targeting a total of $1 billion in share repurchases over the next twelve months, subject to market conditions, the negotiation and execution of agreements, and regulatory approvals. This amount includes approximately $100.0 million from the authorization remaining in the existing share repurchase program, and the additional $900.0 million that we plan to finance by bank debt and/or bond issuance. The Company believes that our debt will remain investment grade at this increased leverage and our goal would be to maintain investment grade status in the future.

Consistent with this approach, the Company has obtained regulatory approval from the Toronto Stock Exchange (“TSX”) to amend our Normal Course Issuer Bid (“NCIB”) to remove the former maximum dollar cap of $250.0 million. As a result, under our amended NCIB, we will be entitled to purchase up to 10% of our “public float” as at February 14, 2013 (being 15,239,531 common shares). In order to commence the share purchases immediately, the amended NCIB will begin in August subject to negotiation and execution of an amended broker agreement. We plan to retain flexibility and evaluate alternative means of purchasing shares, including, for example, implementing a new normal course or substantial issuer bid (“SIB”), subject to market conditions, the negotiation and execution of agreements, and regulatory approvals, for the remainder of the targeted $1 billion in share purchases in the most effective, efficient means possible.

The Company also assesses its capital structure in the context of strategic planning. While strategic planning activity will not be concluded until later in the year, we do expect to initiate a higher level of share repurchases now in order to take advantage of current historically low interest rates, which may begin to rise. We believe that this recapitalization would place our debt ratios more in line with both our Canadian retail peer group and many of our U.S. restaurant peers with similar capital intensity. We believe this planned additional leverage preserves our strong balance sheet, cash flows, and access to capital as we complete our strategic planning work later this year while allowing us to return value to shareholders. In assessing the appropriate capital structure, the Company took the following into account:

• Remaining consistent with our focus on building shareholder value and our strong track record of returning capital to shareholders. We have repurchased approximately $1.7 billion in common shares since our initial public offering in 2006 while regularly increasing our dividends. We believe that leveraging our balance sheet strength and strong cash flows to buy back the targeted level of shares would be accretive, enhance shareholder value, and remain within the boundaries of a disciplined capital structure with adequate liquidity to execute our plans.

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• Maintaining a structure that is aligned with the capital intensity of our business. Our business model requires us to invest in our system to grow our business and drive Company returns and profitability over time, unlike some highly leveraged peers who do not have the same level of capital intensity. Our capital investments in Canada have generated significant return on invested capital and substantial profitability. In our view, the additional leverage is appropriate, given comparable benchmarks among Canadian consumer companies and U.S. restaurant chains with similar levels of capital intensity.

• Preserving strategic flexibility. We believe that increasing leverage while maintaining an overall investment grade credit rating would allow us to responsibly manage our business in the future during all stages of the economic cycle and would protect our ability to access capital to invest in and grow our business for both the short- and long-term.

• Addressing the constraints arising within our corporate structure. Our cross-border structure was a key consideration in determining the appropriate level of additional debt. The accretive benefits of our proposed heightened share repurchases are expected to more than offset the non-deductible portion of interest that results from increasing the amount of our debt to fund such repurchases. Under our current structure, increasing our debt levels substantially beyond an additional $900.0 million to repurchase shares could significantly accelerate our obligation to pay Canadian withholding taxes on distributions from our Canadian operating company to our parent corporation, and/or could also result in our incurring additional interest expense that may not be deductible for Canadian tax purposes. The Company carefully evaluates its cross-border structure with a view to mitigating the potential for a future increase in our effective tax rate. Addressing these constraints is an important consideration to maintaining our lower effective tax rate over the longer term.

In addition to evaluating our capital structure, the Company has periodically evaluated options regarding the possible transfer of real estate under our control to a real estate investment trust (“REIT”) structure. More recently, there have been a significant number of REIT transactions in both Canada and the U.S. Unlike many of the companies pursuing such transactions, the majority of our real estate is most often single-purpose use and leased, and, under current arrangements with our restaurant owners, a significant portion of the income we derive in connection with the real estate under our control may not be qualifying income for a REIT. As a result, the Company has determined that establishing a REIT structure at this time would not create significant value. The Company’s analysis and conclusions in this regard have been reviewed and confirmed by the Company’s external financial and legal advisors. The Company will continue to review regularly its portfolio and structure.

Common Shares

On February 20, 2013, our Board of Directors approved a new share repurchase program (“2013 Program”) authorizing the repurchase of up to $250.0 million in common shares, not to exceed the regulatory maximum of 15,239,531 shares, representing 10% of our public float as defined under the TSX rules as of February 14, 2013. The 2013 Program received regulatory approval from the TSX. Our common shares may be purchased under the 2013 Program through a combination of a 10b5-1 automatic trading plan purchases, as well as purchases at management’s discretion in compliance with regulatory requirements, and given market, cost and other considerations. Repurchases may be made on the TSX, the New York Stock Exchange (“NYSE”), and/or other Canadian marketplaces, subject to compliance with applicable regulatory requirements, or by such other means as may be permitted by the TSX and/or NYSE, and under applicable laws, including private agreements under an issuer bid exemption order issued by a securities regulatory authority in Canada. Purchases made by way of private agreements under an issuer bid exemption order by a securities regulatory authority will be at a discount to the prevailing market price as provided in the exemption order. The 2013 Program began on February 26, 2013 and will expire on February 25, 2014, or earlier if the $250.0 million or the 10.0% share maximum is reached. Common shares purchased pursuant to the 2013 Program will be cancelled. The 2013 Program may be terminated by us at any time, subject to compliance with regulatory requirements. As such, there can be no assurance regarding the total number of shares or the equivalent dollar value of shares that may be repurchased under the 2013 Program.

During the first half of 2013, we repurchased 2.1 million of our common shares at a cost of $113.8 million as part of the 2013 Program at an average cost of $54.52 per share.

On August 7, 2013, the Company obtained regulatory approval from the TSX to amend its Normal Course Issuer Bid (“NCIB”) to remove the former maximum dollar cap of $250.0 million. The timing of the program and exact number of shares purchased under the NCIB will be at our discretion and subject to the negotiation and execution of a broker agreement. The Company’s common shares will be purchased under the program through a combination of a 10b5-1 automatic trading plan in accordance with pre-set trading instructions established at a time when the Corporation is not in possession of material, non-public information as well as at management’s discretion in compliance with regulatory requirements, and given market, cost and other considerations.

Our outstanding share capital is comprised of common shares. An unlimited number of common shares, without par value, is authorized, and we had 151,319,384 common shares outstanding as at June 30, 2013. As at this same date, we had outstanding stock options with tandem stock appreciation rights to acquire 1,222,346 of our common shares held by current and former officers of the Corporation pursuant to our 2006 Stock Incentive Plan and 2012 Stock Incentive Plan, of which 722,294 were exercisable.

Dividends

In February 2013, our Board of Directors approved an increase in the targeted dividend payout range to 35% to 40% of prior year, normalized annual net income attributable to Tim Hortons Inc., which is net income attributable to Tim Hortons Inc. adjusted for certain items, such as gains on divestitures, tax impacts and asset impairments that affect our annual net income attributable to Tim

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Hortons Inc. Also in February 2013, our Board of Directors approved an increase of 23.8% in the quarterly dividend to $0.26 per common share. The Board declared and we paid our March and June 2013 dividend at this new rate. On August 7, 2013, our Board of Directors declared a $0.26 per share quarterly dividend, payable on September 4, 2013 to shareholders of record at the close of business on August 19, 2013. 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 the time of conversion by the Clearing and Depository Services Inc. for beneficial shareholders and by us for registered shareholders. Notwithstanding our targeted payout range and the recent increase in our dividend, the declaration and payment of all future dividends remain subject to the discretion of our Board of Directors and the Company’s continued financial performance, debt covenant compliance, and other risk factors.

Credit Facilities

We have an unsecured Revolving Bank Facility, which will mature on January 26, 2017. The facility is supported by a syndicate of 7 financial institutions, of which Canadian financial institutions hold approximately 64% of the total funding commitment. We may use the borrowings under the Revolving Bank Facility for general corporate purposes, including potential acquisitions and other business initiatives.

The Revolving Bank Facility is for $250.0 million (which includes $25.0 million overdraft availability and a $25.0 million letter of credit facility). As at June 30, 2013, we had utilized $6.8 million of the facility to support standby letters of credit.

The Revolving Bank Facility provides variable rate funding options including bankers’ acceptances, LIBOR, or prime rate plus an applicable margin. This facility does not carry a market disruption clause. The Revolving Bank Facility contains various covenants which, among other things, require the maintenance of 2 financial ratios: a consolidated maximum total debt coverage ratio, and a minimum fixed charge coverage ratio. We were in compliance with these covenants as at June 30, 2013.

Ad Fund

As at June 30, 2013, the Ad Fund had a 7-year Term Loan (“Term Loan”) of $52.5 million with a Canadian financial institution related to the Expanded Menu Board Program. The Term Loan matures in November 2019 and will be repaid in equal quarterly installments. It bears interest of a Banker’s Acceptance Fee plus an applicable margin, with interest payable quarterly in arrears. In February 2013, the Ad Fund entered into an amortizing interest rate swap to fix a portion of the interest expense on the Term Loan. Prepayment of the loan is permitted without penalty at any time in whole or in part. We expect this debt to be serviced by the Ad Fund, and not from cash from operations.

The Ad Fund also has a Revolving Credit Facility bearing interest of a Banker’s Acceptance Fee, plus an applicable margin, which was undrawn as at June 30, 2013. The Term Loan and Revolving Credit Facility are secured by the Ad Fund’s assets and are not guaranteed by Tim Hortons Inc. or any of its subsidiaries.

There are no other financial covenants associated with the Revolving Credit Facility or the Term Loan. Events of default under the Term Loan include: a default in the payment of the obligations under the Term Loan; certain events of bankruptcy, insolvency or liquidation; and any material adverse effect in the financial or environmental condition of the Ad Fund.

Comparative Cash Flows

Operating Activities. Net cash provided from operating activities in the first half of 2013 was $258.3 million compared to $216.4 million in the first half of 2012, an increase of $41.9 million. The increase was due to higher earnings in the first half of 2013 compared to the first half of 2012, and working capital movements, specifically higher cash receipts driven by the timing of a statutory holiday in the comparative period and changes in tax balances receivable or payable to the comparative quarter related to specific transactions, partially offset by increased inventory balances and higher payments in the first half of 2013 related to the Corporate reorganization.

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Investing Activities. Net cash used in investing activities was $87.4 million in the first half of 2013 compared to $106.2 million in the first half of 2012, a decrease of $18.8 million. The decrease year-over-year is primarily due to a reduction in capital expenditures relating to our Expanded Menu Board Program and proceeds from the sale of corporate assets, partially offset by increased capital expenditures for new and existing restaurants year-over-year. Capital expenditures are typically the largest ongoing component of our investing activities and include expenditures for new restaurants, improvements to existing restaurants, and other corporate capital needs. A summary of capital expenditures is as follows:

	Year-to-date period ended
	June 30, 2013		July 1, 2012
	(in millions)
Capital expenditures(1)
New restaurants	$	38.9	$	31.7
Existing restaurants(2)		36.6		27.3
Other capital expenditures		12.8		7.7
Total capital expenditures, excluding Ad Fund	$	88.3	$	66.7
Ad Fund(3)		5.2		30.8
Total capital expenditures, including Ad Fund	$	93.5	$	97.5

⁽¹⁾  Reflected on a cash basis, which can be impacted by the timing of payments compared to the actual date of acquisition.

⁽²⁾  Related primarily to renovations and restaurant replacements.

⁽³⁾  Related to the Expanded Menu Board Program, which is being funded by the Ad Fund.

Capital expenditures for new restaurants in Canada and the U.S. were as follows:

	Year-to-date period ended
	June 30, 2013		July 1, 2012
	(in millions)
Canada	$	20.3	$	17.2
U.S.		18.6		14.5
Total	$	38.9	$	31.7

Financing Activities. Financing activities used cash of $206.7 million in the first half of 2013 compared to $178.7 million in the first half of 2012, an increase of $28.0 million. This increase was primarily due to the receipt of borrowings related to the Expanded Menu Board Program in the first half of 2012. We purchased and cancelled $113.8 million of common shares and paid dividends of $79.3 million in the first half of 2013, compared to $136.5 million and $65.7 million, respectively, in the first half of 2012.

Off-Balance Sheet Arrangements

We do not have “off-balance sheet” arrangements as at June 30, 2013 or December 30, 2012 as that term is described by the SEC.

The Application of Critical Accounting Policies

The Condensed Consolidated Financial Statements and accompanying footnotes included in this report have been prepared in accordance with U.S. GAAP, with certain amounts based on management’s best estimates and judgments. To determine appropriate carrying values of assets and liabilities that are not readily available from other sources, management uses assumptions based on historical results and other factors that they believe are reasonable. Actual results could differ from those estimates. Also, materially different amounts may result under materially different conditions or from using materially different assumptions. However, management currently believes that any materially different amounts resulting from materially different conditions or material changes in facts or circumstances are unlikely.

Other than the adoption of a new accounting standard, as noted in Note 1 of the Condensed Consolidated Financial Statements, there have been no significant changes in critical accounting policies or management estimates since the year ended December 30, 2012. A comprehensive discussion of our critical accounting policies and management estimates is included in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2012 Form 10-K for the year ended December 30, 2012, filed with the SEC and the CSA on February 21, 2013.

Market Risk

Our exposure to various foreign exchange, commodity, interest rate, and inflationary risks remains substantially the same as reported in our 2012 Form 10-K for the year ended December 30, 2012.

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SAFE HARBOR STATEMENT

Certain information contained in our Report on Form 10-Q for the second quarter ended June 30, 2013 (“Report”), including information regarding future financial performance and plans, expectations, and objectives of management constitute forward-looking information within the meaning of Canadian securities laws and forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. We refer to all of these as forward-looking statements. A forward-looking statement is not a guarantee of the occurrence of future events or circumstances, and such future events or circumstances may not occur. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words such as “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “seeks,” “outlook,” “forecast” or words of similar meaning, or future or conditional verbs, such as “will,” “should,” “could” or “may.” Examples of forward-looking statements in the Report include, but are not limited to, statements concerning management’s expectations relating to possible or assumed future results, our strategic goals and our priorities, and the economic and business outlook for us, for each of our business segments and for the economy generally. The forward-looking statements contained in our Report are based on currently-available information and are subject to various risks and uncertainties, including, but not limited to, risks described in our Report on Form 10-K filed on February 21, 2013 (the “2012 Form 10-K”) with the U.S. Securities and Exchange Commission and the Canadian Securities Administrators, and the risks and uncertainties discussed in the Report, that could materially and adversely impact our business, financial condition and results of operations (i.e., the “risk factors”). Additional risks and uncertainties not currently known to us or that we currently believe to be immaterial may also materially adversely affect our business, financial condition, and/or operating results. 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 within the quick service restaurant segment of the food service industry; ability to obtain financing on favourable terms; ability to maintain investment grade credit ratings; prospects and execution risks concerning the U.S. market strategy; cost and availability of commodities; 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; there being no significant change in the Company’s ability to comply with current or future regulatory requirements; and general worldwide economic conditions. 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 other purposes.

Many of the factors that could determine our future performance are beyond our ability to control or predict. Investors should carefully consider our risk factors and the other information set forth in our Report (including our long-form Safe Harbor statement contained in Exhibit 99 thereto), and our 2012 Form 10-K, and are further cautioned not to place undue reliance on the forward-looking statements contained in our Report, which speak only as to management’s expectations as of the date of the Report. The events and uncertainties outlined in the risk factors, as well as other events and uncertainties not set forth below, could cause our actual results to differ materially from the expectation(s) included in the forward-looking statement, and if significant, could materially affect the Company’s business, sales revenues, stock price, financial condition, and/or future results, including, but not limited to, causing the Company to: (i) close restaurants, (ii) fail to realize our same-store sales, which are critical to achieving our operating income and other financial targets, (iii) fail to meet the expectations of our securities analysts or investors, or otherwise fail to perform as expected, (iv) experience a decline and/or increased volatility in the market price of its stock, (v) have insufficient cash to engage in or fund expansion activities, dividends, or share repurchase programs, or (vi) increase costs, corporately or at restaurant-level, which may result in increased restaurant-level pricing, which, in turn, may result in decreased guest demand for our products resulting in lower sales, revenues, and earnings. 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.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

This information is incorporated by reference from the section titled “Market Risk” on page 40 of this Form 10-Q.

ITEM 4. CONTROLS AND PROCEDURES

(a) The Company, under the supervision and with the participation of its management, including its Chief Executive Officer and Chief Financial Officer, performed an evaluation of the Company’s disclosure controls and procedures, as contemplated by Securities Exchange Act Rule 13a-15. Disclosure controls and procedures include those designed to ensure that information required to be disclosed is accumulated and communicated to the Company’s management as appropriate to allow timely decisions regarding disclosure. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded, as of the end of the period covered by this report, that such disclosure controls and procedures were effective.

(b) There was no change in the Company’s internal control over financial reporting during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II: OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

On June 12, 2008, a proposed class action was issued against the Company and certain of its affiliates in the Ontario Superior Court by two of its franchisees, alleging, among other things, that the Company’s Always Fresh baking system and lunch offerings led to lower franchisee profitability. The claim, as amended, asserted damages of approximately $1.95 billion on behalf of certain Canadian restaurant owners. The action was dismissed in its entirety by summary judgment on February 24, 2012 and all avenues of appeal have been exhausted.

In addition, the Company and its subsidiaries are parties to various legal actions and complaints arising in the ordinary course of business. As of the date hereof, the Company believes that the ultimate resolution of such matters will not materially affect the Company’s financial conditions and earnings.

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this Form 10-Q, you should carefully consider the factors discussed under the heading “Risk Factors” in our 2012 Form 10-K filed on February 21, 2013 with the SEC and the CSA, as well as information in our other public filings, press releases, and in our Safe Harbor statement. Any of these “risk factors” could materially affect our business, financial condition or future results. The risks described in the 2012 Form 10-K, and the additional information provided in this Form 10-Q and elsewhere, as described above, may not describe every risk facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

We are updating certain of the risk factors previously disclosed in Part I, Item 1A of our 2012 Form 10-K, as set forth below, in order to reflect certain events which have occurred since the 2012 Form 10-K was filed.

Failure to retain our existing senior management team or the inability to attract and retain new qualified personnel could hurt our business and inhibit our ability to operate and grow successfully.

Our success will continue to depend to a significant extent on our executive management team and the ability of other key management personnel to replace executives who retire or resign. We may not be able to retain our executive officers and key personnel or attract additional qualified management personnel to replace executives who retire or resign. Failure to retain our leadership team and attract and retain other important personnel could lead to ineffective management and operations, which would likely decrease our profitability.

We are currently in a CEO transition period and our Board of Directors has appointed Mr. Marc Caira to the position of President and Chief Executive Officer, effective July 2, 2013. With the change in leadership, there is a risk to retention of other members of senior management, even with the existing retention program in place, as well as to continuity of business initiatives, plans and strategies through the transition period.

In August 2012, we announced the implementation of an organizational structure which includes a Corporate Centre and Business Unit design. We completed the process of realigning roles and responsibilities under that new structure at the end of the first quarter of 2013. As a result of the Corporate reorganization, there has been a slight net reduction in the size of our employee base due to the departure of certain employees, and we currently have vacancies in certain positions. Any lack of required resources for a prolonged period of time could negatively impact our operations and ability to execute our strategic initiatives; harm our ability to retain and motivate employees; and negatively impact our ability to attract new employees.

42

Tax regulatory authorities may disagree with our positions and conclusions regarding certain tax attributes and treatment, including relating to certain of our corporate reorganizations, resulting in unanticipated costs or non-realization of expected benefits.

A taxation authority may disagree with certain views of the Company, including, for example, the allocation of profits by tax jurisdiction, and may take the position that material income tax liabilities, interests, penalties or amounts are payable by us, in which case, we expect that we would contest such assessment. Contesting such an assessment may be lengthy and costly and if we were unsuccessful in disputing the assessment, the implications could be materially adverse to us and affect our anticipated effective tax rate or operating income, where applicable.

Based on the provisions of the Income Tax Act (Canada), the U.S. Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder at the time of completing certain of our public or internal company corporate reorganizations (the “Reorganizations”), we anticipated that the Reorganizations would not result in any ongoing material Canadian and/or U.S. federal income tax liabilities to us. However, there can be no assurance that the Canada Revenue Agency (the “CRA”) and/or the U.S. Internal Revenue Service (the “IRS”) will agree with our interpretation of the tax aspects of the Reorganizations or any related matters associated therewith. The CRA or the IRS may disagree with our view and take the position that material Canadian or U.S. federal income tax liabilities, interest and penalties, respectively, are payable as a result of the Reorganizations. If we are unsuccessful in disputing the CRA’s or the IRS’ assertions, we may not be in a position to take advantage of the effective tax rates and the level of benefits that we anticipated to achieve as a result of the Reorganizations and the implications could be materially adverse to us. Even if we are successful in maintaining our positions, we may incur significant expense in contesting positions asserted or claims made by tax authorities that could have a material impact on our financial position and results of operations. Similarly, other costs or difficulties related to the Reorganizations and related transactions, which could be greater than expected, could also affect our projected results, future operations, and financial condition.

See additional disclosure under “Liquidity and Capital Resources – Capital Allocation” in Part I, Item 2 of this Form 10-Q that is incorporated into this section by reference.

Increases in the cost of commodities or decreases in the availability of commodities could have an adverse impact on our restaurant owners and on our business and financial results.

Our restaurant system is exposed to price volatility in connection with certain key commodities that we purchase in the ordinary course of business such as coffee, wheat, edible oils and sugar, which can impact revenues, costs and margins. Although we monitor our exposure to commodity prices and our forward hedging program (of varied duration, depending upon the type of underlying commodity) partially mitigates the negative impact of any cost increases, price volatility for commodities we purchase has increased due to conditions beyond our control, including economic and political conditions, currency fluctuations, availability of supply, weather conditions, pest damage and changing global consumer demand and consumption patterns. Increases and decreases in commodity costs are largely passed through to restaurant owners, and we and our restaurant owners have some ability to increase product pricing to offset a rise in commodity prices, subject to restaurant owner and guest acceptance, respectively. Notwithstanding the foregoing, while it is not our operating practice, we may choose not to pass along all price increases to our restaurant owners. As a result, commodity cost increases could have a more significant effect on our business and results of operations than if we had passed along all increases to our restaurant owners. Price fluctuations may also impact margins as many of these commodities are typically priced based on a fixed-dollar mark-up. Although we generally secure commitments for most of our key commodities that typically extend over a 6-month period, we may be forced to purchase commodities at higher prices at the end of the respective terms of our current commitments. See Item 7A. Quantitative and Qualitative Disclosures about Market Risk – Commodity Risk of our 2012
Form 10-K Report.

If the supply of commodities, including coffee, fail to meet demand, our restaurant owners may experience reduced sales which in turn, would reduce our rents and royalty revenues as well as distribution sales. Such a reduction in our rents and royalty revenues and distribution sales may adversely impact our business and financial results.

Our international operations are subject to various factors of uncertainty and there is no assurance that international operations will be profitable.

We have granted a master license for the development of Tim Hortons restaurants in the GCC. The licensee is expected to open and operate up to 120 multi-format restaurants over 5 years ending in 2016, which includes the 24 restaurant locations that were open for business by the end of 2012. We have also granted a 5 year master license for the development of 100 multi-format restaurants in Saudi Arabia with the same master licensee. Notwithstanding the foregoing, there can be no assurance that our international licensee will satisfy its development commitments to open the number of Tim Hortons restaurants stated in the master license agreement. From time to time, we may grant additional master licenses to licensees in other international markets in the future. International licensees may fail to meet their development commitments or may open restaurants more slowly than forecasted at the time such master license agreements are entered into, which would impact the level of expected financial return from such agreements.

43

The implementation of our international strategic plan may require considerable or dedicated management time as well as start-up expenses for market development before any significant revenues and earnings are generated. Expansion into new international markets carries risks similar to those risks described above relative to expansion into new markets in the U.S.; however, some or all of these factors, including food safety; brand protection and intellectual property protection; and difficulty in staffing, developing and managing operations and supply chain logistics, including consistency of product quality and service; may be more pronounced in markets outside Canada and the U.S. due to cultural, political, legal, economic, regulatory and other conditions and differences. As such, our international business operations are subject to additional legal, accounting, tax and regulatory risks associated with doing business internationally, including: tariffs, quotas, other trade protection measures; import or export regulations and licensing requirements; foreign exchange controls; restrictions on our ability to own or operate or repatriate profits from our subsidiaries, make investments or acquire new businesses in foreign jurisdictions; difficulties in enforcement of contractual obligations governed by non-Canadian or non-U.S. law due to differing interpretation of rights and obligations in connection with international franchise or licensing agreements; difficulties collecting royalties from international restaurant owners; compliance with multiple and potentially conflicting laws; new and potentially untested laws and judicial systems; reduced or diminished protection of intellectual property; and anti-corruption laws.

For example, we currently export our proprietary products to our licensee in the GCC. Numerous government regulations apply to both the export of food products from Canada and the U.S., as well as the import of food products into other countries. If one or more of the ingredients in our products are banned, alternative ingredients would need to be identified and sourced. Although we intend to be proactive in addressing any product ingredient issues, such requirements may delay our ability to open restaurants in other countries in accordance with our planned or desired schedule.

Any operational shortcoming of a licensee is likely to be attributed by guests to our entire system, thus damaging our brand reputation and potentially affecting revenues and profitability. Additionally, we may also have difficulty finding suppliers and distributors to provide us with adequate and stable supplies of ingredients meeting our standards in a cost-effective manner. We also may become subject to lawsuits or other legal actions resulting from the acts or omissions of a licensee and, even though we may have taken reasonable steps to protect against such liabilities, including by obtaining contractual indemnifications and insurance coverage, there is no assurance that we will not incur costs and expenses as a result of a licensee’s conduct even when we are not legally liable.

Although we believe we have developed the support structure required for international growth, there can be no assurance that our international operations will achieve or maintain profitability or meet planned growth rates. There also can be no assurance that appropriate restaurant owners and/or other licensees will be available in our new international markets. We currently expect that our international restaurant owners may be responsible for the development of a larger number of restaurants than typical for our Canadian or U.S. restaurant owners. As a result, our international operations may be more closely tied to the success of a smaller number of our restaurant owners than is typical for our Canadian and U.S. operations. Operating results from our international operations are currently insignificant to us.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

ISSUER PURCHASES OF EQUITY SECURITIES

Period	(a) Total Number of Shares Purchased(1)		(b) Average Price Paid per Share (Cdn.)(2)		(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		(d) Maximum Approximate Dollar Value of Shares that May Yet be  Purchased Under the Plans or Programs (Cdn.)(3) (4)
Monthly Period #1 (April 1, 2013 – May 5, 2013)		291,455		54.56		291,455	$	234,100,000
Monthly Period #2 (May 6, 2013 – June 2, 2013)		1,586,027		54.53		1,539,000		150,273,052
Monthly Period #3 (June 3, 2013 – June 30, 2013)		257,000		54.76		257,000		136,200,707
Total		2,134,482		54.56		2,087,455	$	136,200,707

⁽¹⁾  Based on settlement date.

⁽²⁾  Inclusive of commissions paid to the broker to repurchase the common shares.

⁽³⁾  Exclusive of commissions paid to the broker to repurchase the common shares.

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⁽⁴⁾  On February 21, 2013, we announced we obtained regulatory approval from the TSX to commence a new share repurchase program (“2013 Program”) authorizing the repurchase of up to $250.0 million in common shares, not to exceed the regulatory maximum of 15,239,531 shares, representing 10% of our public float as of February 14, 2013, as defined under the TSX rules. The 2013 Program commenced on February 26, 2013 and is due to terminate on February 25, 2014, or earlier if the $250.0 million or 10% share maximum is reached. On August 7, 2013, the Company obtained regulatory approval to amend the 2013 Program to remove the former maximum dollar cap of $250.0 million. Common shares purchased pursuant to the 2013 Program will be cancelled. The 2013 Program may be terminated by us at any time, subject to compliance with regulatory requirements. As such, there can be no assurance regarding the total number of shares or the equivalent dollar value of shares that may be repurchased under the 2013 Program.

Dividend Restrictions with Respect to Part II, Item 2 Matters

The Company’s Revolving Bank Facility limits the payment of dividends by the Company. The Company may not make any dividend distribution unless, at the time of, and after giving effect to the aggregate dividend payment, the Company is in compliance with the financial covenants contained in the Revolving Bank Facility, and there is no default outstanding under the Revolving Bank Facility.

ITEM 5. OTHER INFORMATION

Automatic Share Disposition Program

During the second quarter of 2013, Paul D. House, then, the Executive Chairman, President and Chief Executive Officer of the Company (effective as of July 2, 2013, the Chairman of the Company), adopted an automatic securities disposition plan (the “Plan”). Pursuant to the Plan, commencing on the third business day after the release of the Corporation’s earnings release for the second quarter of 2013, a brokerage firm will be authorized to exercise a certain number of vested stock appreciation rights (“SARs”) held by Mr. House based on pre-established trading instructions. The Plan expires on May 30, 2014, but may terminate sooner in accordance with its terms. The maximum number of SARs that can be exercised over the duration of the Plan is 99,708. The Plan is intended to assist Mr. House with diversifying his personal investment holdings and tax and estate planning given his retirement as President and CEO of the Company.

Appointment of New Directors

Sherri Brillon and Thomas V. Milroy have been appointed to the Tim Hortons Board of Directors, effective August 8, 2013. Both new directors bring considerable financial expertise and leadership experience to the Board.

Ms. Brillon is Executive Vice-President and Chief Financial Officer of Encana Corporation, a leading North American energy producer. In her current role, Ms. Brillon directs the financial operations of the company and manages the availability of financial resources to enable the company to execute its strategy. Since joining one of Encana’s predecessor companies in 1985, her achievements have included key leadership roles in helping the company achieve some of its most significant milestones, including structuring the $22.5 billion merger that created Encana in 2002 and restructuring the organization into a pure play natural gas company in 2009. She has played a pivotal role in evaluating Encana’s investment opportunities and resource allocation and has been instrumental in assisting with corporate and operations planning, strategic planning and supply management. Ms. Brillon’s professional accomplishments include recognition as one of Canada’s Most Powerful Women: Top 100 Hall of Fame^®. She has also been recognized by the Women of Influence organization.

Mr. Milroy is Chief Executive Officer of BMO Capital Markets, and is responsible for all of BMO Financial Group’s businesses involving corporate, institutional and government clients in North America and globally. Prior to his current role, to which he was appointed in 2008, Mr. Milroy had senior roles in investment and corporate banking, and was responsible for the integration of Bank of Montreal’s corporate banking with the investment banking capabilities of Nesbitt Burns. He was subsequently also responsible for the integration of the corporate banking business of Harris Bank and Nesbitt Burns in the U.S. In 2001, Mr. Milroy was appointed Vice-Chair and Global Head of Investment and Corporate Banking, and in 2006 he was named Co-President of BMO Capital Markets. Previously, Mr. Milroy worked in the Mergers and Acquisition group of a U.S. investment banking firm in New York and Toronto. Prior to that, he practiced securities law as a partner in a Toronto-based law firm.

Compensation Program Review

        At the Corporation’s Annual Meeting of Shareholders held on May 9, 2013, the Corporation’s non-binding advisory resolution regarding executive compensation (“say-on-pay”) received 94.9% approval from shareholders. In order to consider shareholder sentiment, the say-on-pay policy provides that the Human Resource and Compensation Committee of the Board of Directors (the “HRCC”) consider whether any adjustments should be made to the Corporation’s executive compensation policies in light of the results of the say-on-pay vote. The HRCC undertook this assessment and acknowledged the strong say-on-pay approval. As described in the Corporation’s management proxy circular dated March 12, 2013, however, the HRCC, with the assistance of its independent compensation consultant, has commenced a comprehensive review of the Corporation’s executive compensation programs. Following completion of the review, the HRCC expects that changes will be made to the Corporation’s executive compensation programs, including with respect to new and/or additional performance objectives under the short- and long-term incentive plans. These changes are expected to be adopted during 2013 and apply to 2014 compensation.

ITEM 6. EXHIBITS

(a) Index to Exhibits on Page 47.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	TIM HORTONS INC. (Registrant)
Date: August 8, 2013	/s/ CYNTHIA J. DEVINE
	Cynthia J. Devine
	Chief Financial Officer

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TIM HORTONS INC. AND SUBSIDIARIES

INDEX TO EXHIBITS

Exhibit	Description	Where found
*10(a)	Employment Offer Letter by and between Tim Hortons Inc. and Marc Caira	Incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of the Registrant.
*10(b)	Employment and Post-Employment Covenants Agreement by and between Tim Hortons Inc. and Marc Caira	Incorporated herein by reference to Exhibit 10.2 to the Current Report on Form 8-K of the Registrant.
*10(c)	Change in Control Agreement by and between Tim Hortons Inc. and Marc Caira	Incorporated herein by reference to Exhibit 10.3 to the Current Report on Form 8-K of the Registrant.
*10(d)	Amended and Restated Supplemental Executive Retirement Plan, adopted to be effective January 1, 2009 and most recently amended on May 8, 2013	Filed herewith.
31(a)	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer	Filed herewith.
31(b)	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer	Filed herewith.
32(a)	Section 1350 Certification of Chief Executive Officer	Filed herewith.
32(b)	Section 1350 Certification of Chief Financial Officer	Filed herewith.
99	Safe Harbor under the Private Securities Litigation Reform Act 1995 and Canadian securities laws	Filed herewith.
101.INS	XBRL Instance Document.	Filed herewith.
101.SCH	XBRL Taxonomy Extension Schema Document.	Filed herewith.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.	Filed herewith.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.	Filed herewith.
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.	Filed herewith.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.	Filed herewith.

* Denotes management contract or compensatory arrangement.

Attached as Exhibit 101 to this report are documents formatted in XBRL (Extensible Business Reporting Language). The financial information contained in the XBRL-related documents is “unaudited” and/or “unreviewed.”

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EX-10.(D)

Exhibit 10(d)

AMENDED AND RESTATED PERSONAL SUPPLEMENTAL EXECUTIVE

RETIREMENT SAVINGS PLAN

ADOPTED TO BE EFFECTIVE JANUARY 1, 2009;

MOST RECENTLY AMENDED ON MAY 8, 2013

Table of Contents

Section 1—Establishment and Purpose	1
Section 2—Definitions	1
Section 3—Participation	6
Section 4—Payments To Vested Accounts	7
Section 5—Vested Accounts, Tax Free Savings Accounts and Registered Retirement Savings Plans	9
Section 6—Bonuses to Non-Vested Participants; Notional Accounts	11
Section 7—Termination and Retirement	14
Section 8—Total Disability	16
Section 9—Administration of the Savings Plan	17
Section 10—General Provisions	18
Section 11—Amendment To or Termination of the Savings Plan	20
Appendix “A”—List of Participants as of the Effective Date	21
Appendix “B”—List of Permitted Investments	22
Schedule “A”—Acknowledgment and Direction	23
Schedule “B”—Tax Free Savings Account/Registered Retirement Savings Plan – Acknowledgment and Direction	25

Section 1—Establishment and Purpose

1.01 Effective January 1, 2009, The TDL Group Corp. establishes The TDL Group Corp. Personal Supplemental Executive Retirement Savings Plan (the “Savings Plan”), as amended and restated effective September 28, 2009, the terms and conditions of which are contained in this document.

1.02 The purpose of the Savings Plan is to provide designated employees of THI, TDL and/or Participating Affiliates (as defined below) with additional compensation to be saved for their retirements in accordance with and subject to the provisions and limitations of this Savings Plan.

1.03 In connection with the reorganization of THI USA as a Canada Business Corporations Act incorporated public company, THI has assumed all the rights and obligations of THI USA under this Savings Plan, effective upon the Merger Date.

Section 2—Definitions

2.01 “Administration Agreement” means the agreement between the Corporation and the Administrative Agent to be entered into on or prior to the Effective Date relating to the Administrative Agent’s responsibilities in connection with this Savings Plan.

2.02 “Administrative Agent” means the financial, or other institution selected by the Corporation to act as Administrative Agent for this Savings Plan.

2.03 “Affiliate” means any Person which is subsidiary to, or associated or affiliated with, THI where:

(a) in the case of a Person that is a corporation, THI and/or its Affiliates beneficially own, directly or indirectly, shares representing 50% or more of the votes that may be cast to elect directors of such corporation;

(b) in the case of a Person that is a limited partnership, the general partner of such limited partnership is an Affiliate of THI;

(c) in the case of a Person that is a trust where the trustees have discretionary powers in respect of the trust assets, THI and/or its Affiliates have the right to elect or appoint a majority of the trustees of such trust; and

(d) in the case of a Person other than a corporation, limited partnership or trust, THI and/or its Affiliates possess, directly or indirectly, at least a majority ownership interest in such Person and have the power to determine the policies and conduct of the management of such Person;

2.04 “Acknowledgment and Direction” means an irrevocable Acknowledgment and Direction executed by a Participant in the form attached hereto as Schedule A.

2.05 “Board” means the Board of Directors of THI, a committee thereof, including the HRCC, or any person authorized by the Board to act on its behalf.

2.06 “Business Day” means a day on which banks are open for business in the City of Toronto.

2.07 “CEO” means the Chief Executive Officer of the Corporation.

2.08 “Change in Control” means:

(a) the direct or indirect acquisition of a majority of the voting shares of TDL or THI by any unaffiliated entity after the Effective Date;

(b) the merger or amalgamation of TDL or THI into an unaffiliated entity the effect of which is that a majority of the voting shares of TDL or THI are acquired, directly or indirectly, by any unaffiliated entity after the Effective Date;

(c) the acquisition of all or substantially all of the assets of TDL or THI by any unaffiliated entity after the Effective Date; or

(d) with respect to any Participant who is and continues to be employed by an Affiliate other than THI or TDL, such employer ceasing to be an Affiliate of THI for any reason whatsoever;

provided that the following events shall be deemed not to constitute a Change in Control:

(e) the amalgamation or merger of TDL, THI or an Affiliate with TDL, THI or an Affiliate;

(f) the dissolution of TDL, THI or an Affiliate into TDL, THI or an Affiliate; or

(g) the acquisition of all or substantially all of the assets or voting shares of TDL, THI or an Affiliate by an Affiliate.

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2.09 “Corporation” means THI, TDL and any Affiliate, and their successors and assigns so long as such entities remain Affiliates; provided that, where any action is to be taken or decision to be made, “Corporation” shall mean only TDL.

2.10 “Earnings” means the aggregate of each Participant’s base salary and short-term incentive compensation (i.e., annual bonus) received during the Plan Year from the Corporation at the Vice President officer level or above for the Corporation or as otherwise designated by the HRCC from the Corporation, excluding special bonuses and allowances, as these terms are used by the Corporation in the ordinary course of its business and also excluding any amount paid or credited to the Participant’s Vested Account, Tax Free Savings Account, Registered Retirement Savings Plan or Notional Account pursuant to this Savings Plan during the Plan Year. For sake of greater clarity, “Earnings” does not include stock-based incentives granted to Participants or disability benefits paid to a Participant under the TDL Group Benefit Program or a similar program maintained for the benefit of employees of one or more Participating Affiliates. In addition, “Earnings” does not include any base salary and short-term incentive compensation received during the Plan Year by an Employee prior to becoming a Participant in this Savings Plan.

2.11 “Effective Date” means January 1, 2009.

2.12 “Employee” means an employee of the Corporation or a Participating Affiliate who is a Canadian resident for purposes of the Tax Act.

2.13 “HRCC” means the Human Resource and Compensation Committee.

2.14 “Merger Date” means September 28, 2009.

2.15 “Non-Vested Participant” means an Employee who has satisfied the eligibility conditions in Section 3.02 but has not yet completed three years of Service.

2.16 “Notional Account” means the notional account established by the Corporation or the Administrative Agent for a Non-Vested Participant pursuant to Section 6.01.

2.17 “Participant” means both a Vested Participant and a Non-Vested Participant.

2.18 “Participating Affiliate” means an Affiliate established or continued under Canadian law that has employees meeting the eligibility requirements to be able to participate in this Savings Plan.

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2.19 “Permitted Investment” means one of the investments or portfolios that is listed in Appendix B or designated by the Corporation and the Administrative Agent pursuant to Section 5.02.

2.20 “Person” means an individual, partnership, limited partnership, general partnership, joint stock company, joint venture, association, company, trust, pension fund, bank, trust company, loan company, insurance company, land trust, business trust or other organization, whether or not legal entities, and government and agency and any political subdivision thereof.

2.21 “Plan Year” means the calendar year.

2.22 “Recoupment Policy Relating to Performance-Based Compensation” means the recoupment policy originally adopted by the approval of the board of directors of Tim Hortons Inc., a Delaware corporation, on February 19, 2009 and adopted by the Board of New THI to be effective on September 28, 2009, as the same may be updated and amended thereafter.

2.23 “Registered Plan” means the defined contribution pension plan for, as the case may be, the employees of THI, TDL and certain other Participating Affiliates registered under the Pension Benefits Act of Ontario and the Tax Act.

2.24 “Registered Retirement Savings Plan” means a “registered retirement savings plan” within the meaning of the Tax Act established for a Vested Participant pursuant to Section 5.01 on terms acceptable to the Corporation.

2.25 “Savings Plan” has the meaning set forth in Section 1.01.

2.26 “Service” means a Participant’s period of employment with the Corporation commencing on the Participant’s date of hire. Service will not be considered to be broken by periods of absence (with or without pay), granted by the Corporation in accordance with its regular and established practices or by periods of absence while benefits are being paid to the Participant under the Corporation’s salary continuance or long term disability plan. For any Participant for whom a prior period of employment would be disregarded following a prior termination of such employment, the Corporation may, in its sole discretion, treat such prior and current periods of employment as Service.

2.27 “Tax Act” means the Income Tax Act (Canada), as amended.

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2.28 “Tax Free Savings Account” means the account established for a Vested Participant pursuant to Section 5.01 on terms acceptable to the Corporation that is a “qualifying arrangement” for purposes of subsection 146.2(1) of the Tax Act.

2.29 “TDL” means The TDL Group Corp., a Nova Scotia unlimited liability company and its successors and assigns.

2.30 “TDL Group Benefit Program” means the TDL group benefits program G001 16072 issued by Manulife Financial, or such replacement policy or policies that the Corporation may arrange.

2.31 “TDL Supplemental Plan” means The TDL Group Corp. Amended and Restated Supplementary Retirement Plan, established effective November 1, 2006.

2.32 “THI” means Tim Hortons Inc., a Canada Business Corporations Act corporation, and its successors and assigns.

2.33 “THI Mergeco” means THI Mergeco Inc., a Delaware corporation.

2.34 “THI USA” means Tim Hortons Inc., a Delaware corporation.

2.35 “Total Disability” (or “Totally Disabled”) means a disability that qualifies a Participant for disability benefits under the TDL Group Benefit Program or a similar program maintained for the benefit of employees of one or more Participating Affiliates.

2.36 “Vested Account” means the account established for a Vested Participant pursuant to Section 5.01 on terms acceptable to the Corporation.

2.37 “Vested Participant” means an Employee who has satisfied:

(a) the eligibility requirements of Section 3.01; or

(b) the eligibility requirements of Section 3.03.

2.38 “Withholding Tax” means all taxes, charges, fees, levies and other amounts (whether federal, provincial, local or foreign), including Canada Pension Plan and Employment Insurance premiums or similar amounts, required to be deducted and withheld and remitted to the Canada Revenue Agency, any federal, provincial, local or foreign governmental authority in respect of any payment paid to a Participant or his or her estate.

2.39 “Yearly Amount” means:

(a) for the 2009 Plan Year of a Participant whose contribution rate for 2008 under the TDL Supplemental Plan (as determined pursuant to Section 4.02(a) thereof) was at either 6% or 8% of Earnings, an amount equal to 10% of the Participant’s Earnings, less the amount of the Corporation’s contribution on the Participant’s behalf to the Registered Plan in the 2009 Plan Year;

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(b) for the 2009 Plan Year of a Participant whose contribution rate for 2008 under the TDL Supplemental Plan (as determined pursuant to Section 4.02(a) thereof) was at 22% of Earnings, an amount equal to 18% of the Participant’s Earnings, less the amount of the Corporation’s contribution on the Participant’s behalf to the Registered Plan in the 2009 Plan Year;

(c) for the 2010 Plan Year of a Participant whose contribution rate for 2008 under the TDL Supplemental Plan (as determined pursuant to Section 4.02(a) thereof) was at 22% of Earnings, an amount equal to 15% of the Participant’s Earnings, less the amount of the Corporation’s contribution on the Participant’s behalf to the Registered Plan in the 2010 Plan Year; and

(d) in all other cases, an amount equal to 12% of the Participant’s Earnings, less the amount of the Corporation’s contribution on the Participant’s behalf to the Registered Plan in the applicable Plan Year.

In this Savings Plan, words importing the singular number include the plural and vice versa; and, references to a Section or Sections means a Section or Sections in this Savings Plan.

Section 3—Participation

3.01 Participants on the Effective Date

Each Employee of the Corporation who was an active member of the TDL Supplemental Plan immediately before the Effective Date and who has delivered an Acknowledgment and Direction to the Corporation with effect from the Effective Date:

(a) shall become a Vested Participant in the Savings Plan on the Effective Date, provided that such Employee has completed three years of Service; or

(b) shall become a Non-Vested Participant in the Savings Plan on the Effective Date, where such Employee has not completed three years of Service.

Appendix A to the Savings Plan lists the Participants as of the Effective Date.

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3.02 Participants After the Effective Date

Each Employee of the Corporation who after the Effective Date:

(a) is an individual who is promoted to or hired at the Vice President officer level or above for the Corporation or a Participating Affiliate, or who is otherwise designated as a Participant by the HRCC as eligible for participation in the Savings Plan;

(b) is a member of the Registered Plan; and

(c) has delivered an Acknowledgment and Direction to the Corporation,

shall become a Non-Vested Participant in the Savings Plan on the first day of the month coincident with or next following the month in which the Employee becomes eligible for participation in the Savings Plan in accordance with this Section 3.02.

3.03 Becoming a Vested Participant

Each Non-Vested Participant shall become a Vested Participant on the earlier of:

(a) the day that the Non-Vested Participant has completed three years of Service; or

(b) a Change of Control,

provided that, in each case, the Participant has delivered a signed Acknowledgement and Direction to the Corporation.

3.04 Other Employee Plans

Notwithstanding anything to the contrary herein, an Employee is not eligible to participate in the Savings Plan during any period of employment in which the Employee is a participant of a plan or arrangement maintained by the Corporation or an Affiliate that provides additional salary, wages or retirement benefits, which the Corporation designates as a plan or arrangement that precludes its participants from participating in the Savings Plan.

Section 4—Payments To Vested Accounts

4.01 Participant Contributions

Subject to Section 4.04, a Participant may only make contributions to the Savings Plan out of the additional compensation paid to the Participant by the Corporation pursuant to this Savings Plan, which the Participant directs to the Participant’s Vested Account, Tax Free Savings Account or Registered Retirement Savings Plan in accordance with the Participant’s Acknowledgment and Direction and the provisions of this Savings Plan.

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4.02 Corporation Payments to Vested Participants

No later than the 15^th day of the third month following the end of each Plan Year, the Corporation shall, in accordance with the Vested Participant’s Acknowledgment and Direction and subject to Section 4.03, pay the Yearly Amount, less applicable Withholding Taxes, to the Vested Account of each Vested Participant who was actively employed as an Employee and who had not attained age 69 at the end of such Plan Year (including a Vested Participant who became a Vested Participant in that Plan Year).

4.03 Tax Free Savings Account and Registered Retirement Savings Plan

In any Plan Year, a Participant may direct the Corporation, as agent for the Participant, to pay all or a portion of any amount that would otherwise be paid to the Participant’s Vested Account pursuant to Sections 4.02 or Section 6.03 in a Plan Year to the Participant’s Tax Free Savings Account and/or Registered Retirement Savings Plan, by providing direction to the Corporation on the form attached hereto as Schedule B; provided that (a) the aggregate of all amounts paid to the Participant’s Tax Free Savings Account under this Section 4.03 together with any other contributions by the Participant to the Tax Free Savings Account or any other tax free savings account established by the Participant in a Plan Year may not exceed the “TFSA dollar limit” in subsection 207.01(1) of the Tax Act for that Plan Year and (b) the aggregate of all amounts paid to the Participant’s Registered Retirement Savings Plan under this Section 4.03 together with any other contributions by the Participant to the Registered Retirement Savings Plan or any other registered retirement savings plan in a Plan Year may not exceed the Participant’s “RRSP deduction limit” (within the meaning of subsection 146(1) of the Tax Act) for the Plan Year. For greater certainty, all amounts paid under this Savings Plan to a Participant’s Tax Free Savings Account or Registered Retirement Savings Plan are contributions of the Participant and not the Corporation to such Tax Free Savings Account or Registered Retirement Savings Plan, as the cases may be.

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4.04 Contribution of TDL Supplemental Plan Balances

Any Participant who was a Participant under the TDL Supplemental Plan and who received a cash distribution, net of any applicable Withholding Tax, on the liquidation and wind-up of the TDL Supplemental Plan (the “Wind-up Funds”) may deposit all or a portion of the Wind-up Funds into his or her Vested Account, Tax Free Savings Account and/or his or her Registered Retirement Savings Plan within 30 days of the Effective Date in the manner determined by the Corporation, provided that the Participant has given written notice to the Corporation of his or her intention to make such a deposit no later than 45 days after the Effective Date. Any funds so deposited to the Vested Account, Tax Free Savings Account or Registered Retirement Savings Plan will be subject to the provisions of this Savings Plan.

Section 5—Vested Accounts, Tax Free Savings Accounts and Registered Retirement Savings Plans

5.01 Vested Participant’s Account

Each Vested Participant shall establish a Vested Account and, if desired, a Tax Free Savings Account and/or Registered Retirement Savings Plan with the Administrative Agent, into which payments under Sections 4.02 and 6.03 of this Savings Plan shall be made, Permitted Investments acquired pursuant to Section 5.02 shall be held, and that shall otherwise be subject to the terms of this Savings Plan.

5.02 Permitted Investments

Subject to the Administration Agreement:

(a) Appendix B sets forth the investments in which the Participants may invest the funds held in their Vested Accounts, Tax Free Savings Accounts and Registered Retirement Savings Plans (“Permitted Investments”);

(b) at any time and from time to time, the Corporation and the Administrative Agent may, in accordance with the Administration Agreement, designate one or more additional Permitted Investments; and

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(c) the Corporation and the Administrative Agent may cause an investment to cease to be a Permitted Investment; however, unless otherwise required by the Administrative Agent, any Vested Participant who holds such a Permitted Investment in his or her Vested Account, Tax Free Savings Account and/or Registered Retirement Savings Plan shall not be required to sell the investment because it ceases to be a Permitted Investment in accordance with this Section 5.02(c).

5.03 Investment Elections

Subject to the Administration Agreement:

(a) each Vested Participant shall have the right and obligation to designate the Permitted Investments in which the funds in his or her Vested Account, Tax Free Savings Account and Registered Retirement Savings Plan will be invested;

(b) a Vested Participant may change the designation made under Section 5.03(a) or transfer an amount invested in one Permitted Investment to another Permitted Investment by filing an election with the Administrative Agent in a manner prescribed by the Administration Agreement or which is otherwise acceptable to the Administrative Agent;

(c) if a Vested Participant does not make an election with respect to the investment of the funds in his or her Vested Account, Tax Free Savings Account and/or Registered Retirement Savings Plan, the Vested Participant shall be deemed to have elected a short-term interest fund or the Permitted Investment that is designated under Section 5.02 which, in the opinion of the Corporation, is most similar to a short-term interest fund; and

(d) the Corporation may establish rules, regulations and procedures regarding the Permitted Investments as it deems appropriate in its sole discretion, provided that no such rule, regulation or procedure may be enacted if it would cause (i) a Tax Free Savings Account to cease to be a “qualifying arrangement” within the meaning of subsection 146.2(1) of the Tax Act, (ii) cause the Permitted Investments held by any Registered Retirement Savings Plan to be “non-qualifying investments” within the meaning of subsection 146(2) of the Tax Act, or (iii) would cause this Savings Plan to be a “salary deferral arrangement”, “employee benefit plan” or “retirement compensation arrangement” as defined in subsection 248(1) of the Tax Act.

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5.04 Expenses

(a) Participant Taxes:

Each Participant is solely responsible for the payment and reporting of all taxes payable in respect of amounts paid or credited to the Participant under this Savings Plan, and any taxes payable in respect of the Participant’s Vested Account, Tax Free Savings Account or Registered Retirement Savings Plan (or penalties and interest in respect of such taxes), provided that Withholding Taxes shall be withheld out of amounts payable to the Participants hereunder, and the Person making such Withholding Taxes will make any reporting in respect of such Withholding Taxes. For greater certainty, each Participant is solely responsible for any taxes, penalties and other charges that are imposed in the event that the amounts paid or credited to the Participant’s Tax Free Savings Account or Registered Retirement Savings Plan in a Plan Year exceed the “TFSA dollar limit” or “RRSP Deduction Limit”, as the case may be, for such Plan Year, and the Corporation shall not be responsible for any such taxes, penalties or other charges.

(b) Account Expenses:

Each Participant shall be solely responsible for the costs and expenses relating to the establishment, maintenance and operation of the Participant’s Vested Accounts, Tax Free Savings Accounts and Registered Retirement Savings Plans.

(c) Corporation Expenses:

Subject to the foregoing, the Corporation shall pay all other costs and expenses related to the establishment, maintenance and operation of the Savings Plan.

Section 6—Bonuses to Non-Vested Participants; Notional Accounts

6.01 Timing of Bonus

(a) No later than the 15^th day of the third month following the end of each Plan Year, the Corporation shall, in accordance with and subject to this Section 6, declare a

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bonus effective as of the last Business Day of such Plan Year equal to the Yearly Amount to each Non-Vested Participant who was actively employed as an Employee and who had not attained age 69 at the end of such Plan Year. Any such bonus will be in respect of the services rendered by such Participant during such Plan Year, provided that such bonus shall be subject to the provisions and limitations of this Savings Plan and, as such, shall be recorded in the Notional Account of the Non-Vested Participant.

(b) The CEO or the Board, in the case of the CEO, if applicable, has the sole and absolute discretion whether any bonus will be declared to a Non-Vested Participant pursuant to this Savings Plan during any Plan Year and may further reduce the amount that would otherwise be credited to a Non-Vested Participant’s Notional Account if the Non-Vested Participant does not report for his or her employment for any reason or does not perform to the Corporation’s expectations.

6.02 Notional Accounts

Either the Corporation or the Administrative Agent shall establish and maintain in its records a Notional Account for each Non-Vested Participant that records the aggregate of all amounts recorded to the Notional Account pursuant to Section 6.01 or Section 8.01.

6.03 Payments at Vesting

(a) In addition to any payments made in accordance with Section 4.02, the Corporation shall, in accordance with the Participant’s Acknowledgment and Direction and subject to Section 4.03, pay to the Vested Account of a Participant the total balance in that Participant’s Notional Account, less applicable Withholding Taxes, on or before the earlier of: (i) the last Business Day of the Plan Year in which the Participant becomes a Vested Participant; and (ii) the last Business Day of the Plan Year that is three years after the Plan Year in respect of which an amount was first recorded in the Participant’s Notional Account; and

(b) upon making the payment contemplated by Section 6.03(a), the Corporation shall notify the Administrative Agent, if applicable, and the balance in the Participant’s Notional Account shall be reduced to nil and such Notional Account shall thereupon be terminated.

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6.04 Payments Prior to Vesting

(a) Triggering Event Payments

Notwithstanding any other provision herein to the contrary, if any of the following events occur during any Plan Year (each a “Triggering Event”):

(i) the Non-Vested Participant’s employment is terminated for any reason, including retirement, after the Participant attains age 65;

(ii) the Non-Vested Participant’s employment is terminated following a period of Total Disability;

(iii) the Non-Vested Participant’s employment is terminated by the Corporation without cause prior to the date of a Change in Control, a Change of Control occurs after the termination, and the Non-Vested Participant reasonably demonstrates that the termination: (A) was at the request of a third party who has indicated an intention or taken steps reasonably calculated to effect a Change in Control; or (B) otherwise arose in connection with, or in anticipation of, a Change in Control which was threatened or proposed;

(iv) the Non-Vested Participant dies; or

(v) in such other circumstances as the HRCC may, in its sole discretion, determine; then,

the Corporation shall, on the last day of the first full month following the occurrence of the Triggering Event, notify the Administrative Agent, if applicable, and pay to the Non-Vested Participant, or, in the case of the Triggering Event in Section 6.04(a)(iv), his or her estate, the total balance in that Participant’s Notional Account, less applicable Withholding Taxes. In addition to the foregoing, in the case of a Triggering Events other than the Triggering Event in Section 6.04(a)(ii), the Corporation shall also, on the last day of the first full month following the occurrence of the Triggering Event, pay to the Non-Vested Participant, or, in the case of the Triggering Event in Section 6.04(a)(iv), his or her estate, an amount calculated in accordance with Subsection 4.02 as though the Participant was a Vested Participant who was actively employed by the

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Corporation at such time, based on the Participant’s Earnings for the period from the commencement of the Plan Year in which the Triggering Event occurred to the date of the Triggering Event, less applicable Withholding Taxes. For greater certainty, in the case of a Triggering Event in Section 6.04(a)(ii), the Corporation shall also make the payment to the Participant in accordance with Section 8.01(a)(i) (based on the Participant’s Earnings for periods of active employment), as though the Participant was a Vested Participant at that time, provided that in the case of termination of employment due to Total Disability as described in Section 6.04(a)(ii), no return to active employment shall be required.

(b) Termination

Except as otherwise provided in this Section 6.04, a Non-Vested Participant whose employment is terminated for any reason is not entitled to any payment under the Savings Plan, and the balance in the Non-Vested Participant’s Notional Account as at the date of such termination shall be reduced to nil without any payment.

Section 7—Termination and Retirement

7.01 General

Regardless of the manner of a Participant’s termination of employment (i.e., whether without cause, for cause or otherwise, including if a Participant has been found by a court of competent jurisdiction to have been wrongfully terminated), the Participant will not be entitled to make contributions to the Savings Plan, nor will the Corporation be obligated or required to make contributions to the Savings Plan for any period extending after the Participant’s termination date. For greater clarity, a Participant shall not be entitled to make any contributions or receive contributions to the Savings Plan from the Corporation during any period of “notice” of termination and/or as part of any payment or contribution in lieu of notice of termination. With respect to the latter, no such payment or contribution that the Participant may receive will have any component for damages representing any such contributions by the Participant or the Corporation.

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7.02 Vested Participant’s Accounts

(a) In accordance with the Acknowledgment and Direction of the Participant, each Vested Participant will direct the Administrative Agent to hold the Permitted Investments in the Vested Participant’s Vested Account, Tax Free Savings Account and/or Registered Retirement Savings Plan until such time as the Administrative Agent is notified by the Corporation that:

(i) the Participant’s employment was terminated for any reason;

(ii) the Participant’s employment is terminated following a period of Total Disability;

(iii) the Savings Plan is terminated;

(iv) the Participant dies; or

(v) in such other circumstances as the HRCC may, in its sole discretion, determine.

(b) At any time and from time to time following the delivery of the notice described in Section 7.02(a) in respect of a Vested Participant, the Vested Participant may:

(i) direct the Administrative Agent to sell any of the Permitted Investments held in the Vested Participant’s Vested Account, Tax Free Savings Account and/or Registered Retirement Savings Plan;

(ii) pay any or all of the money in the Vested Participant’s Vested Account, Tax Free Savings Account and/or Registered Retirement Savings Plan to the Vested Participant or such other person as the Vested Participant may direct;

(iii) transfer the Permitted Investments in the Vested Participant’s Vested Account to the Vested Participant or such other person as the Vested Participant may direct;

(iv) transfer the Permitted Investments in the Tax Free Savings Account to another tax free savings account designated by the Vested Participant; and

(v) transfer the Permitted Investments in the Registered Retirement Savings Plan to another registered retirement savings plan designated by the Vested Participant.

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7.03 Additional Payments During a Plan Year

Notwithstanding any other provision herein to the contrary, if a Vested Participant:

(a) retires from employment after the Vested Participant has attained age 60 and has completed at least 10 years of Service with the Corporation or a Participating Affiliate;

(b) retires from employment after the Vested Participant has attained age 65;

(c) is terminated following a Change in Control;

(d) is terminated by the Corporation without cause prior to the date of a Change in Control, a Change of Control occurs after the termination, and the Vested Participant reasonably demonstrates that the termination: (A) was at the request of a third party who has indicated an intention or taken steps reasonably calculated to effect a Change in Control; or (B) otherwise arose in connection with, or in anticipation of, a Change in Control which was threatened or proposed; or

(e) dies; then,

the Corporation shall, on the last day of the first full month following the occurrence of an event described in paragraphs 7.03(a) to (e), pay to the Vested Participant, or his or her estate, as applicable, an amount that is equal to the payment calculated in accordance with Subsection 4.02, based on the Vested Participant’s Earnings for the period from the commencement of the Plan Year in which such event occurred to the date of such event, less Withholding Tax.

Section 8—Total Disability

8.01 Total Disability

(a) If a Participant becomes Totally Disabled during a Plan Year and returns to active employment with the Corporation during that Plan Year or a subsequent Plan Year, then the Corporation shall:

(i) in the case of a Vested Participant, pay an amount to the Vested Participant’s Vested Account, Tax Free Savings Account and/or Registered Retirement Savings Plan in accordance with Section 4.02 or Section 4.03, as applicable, based on the Vested Participant’s Earnings for

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the periods of his or her active employment with the Corporation during the Plan Year or Plan Years, as applicable, in which the Vested Participant became or continued to be Totally Disabled, but nonetheless performed services for at least part of such Plan Year or Plan Years; and

(ii) in the case of a Non-Vested Participant, declare a bonus to the Non-Vested Participant in accordance with Section 6.01 based on the Non-Vested Participant’s Earnings for the periods of his or her active employment with the Corporation during the Plan Year or Plan Years, as applicable, in which the Non-Vested Participant became or continued to be Totally Disabled, but nonetheless performed services for at least part of such Plan Year or Plan Years, which shall be recorded in the Non-Vested Participant’s Notional Account.

(b) If a Vested Participant becomes Totally Disabled and their employment is terminated as a result of becoming Totally Disabled, then the Corporation shall notify the Administrative Agent in accordance with Section 7.02, and the Corporation will pay an amount to the Participant in accordance with Section 8.01(a)(i) for periods of active employment with return to active service not required. If a Non-Vested Participant becomes Totally Disabled and their employment is terminated as a result of becoming Totally Disabled, then the Corporation shall notify the Administrative Agent in accordance with Section 6.04, and the Corporation will pay an amount to the Participant in accordance with Section 8.01(a)(i) for periods of active employment (as if the Participant were a Vested Participant) with return to active service not required.

Section 9—Administration of the Savings Plan

9.01 Responsibility for Administration

(a) The HRCC shall be responsible for the overall administration, interpretation and application of this Savings Plan, and all decisions of the HRCC in connection with the administration of the Savings Plan shall be final and binding upon each Participant. The HRCC may enact such rules and regulations relating to the

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operation of the Savings Plan as it considers necessary for the carrying out of its provisions and may amend or revoke such rules and regulations from time to time, provided that any such rules and regulations and amendments thereto will not: (A) be inconsistent with the terms of this Savings Plan; (B) cause a Tax Free Savings Account established in connection with this Savings Plan to cease to be a “qualifying arrangement” within the meaning of subsection 146.2 of the Tax Act; (C) cause a Registered Retirement Savings Plan to hold a “non-qualifying investment” within the meaning of subsection 146(2) of the Tax Act; or (D) cause this Savings Plan to be a “salary deferral arrangement”, “employee benefit plan” or “retirement compensation arrangement” as defined in subsection 248(1) of the Tax Act.

(b) This Savings Plan is intended for Participants who are residents of Canada for purposes of the Tax Act. The Corporation has the right to modify the terms of any award, payment, or credit made hereunder, amend any of the terms hereof, or suspend or terminate this Savings Plan with respect to any individual Participant who becomes a non-resident of Canada for purposes of the Tax Act or who, in its opinion, is subject to the taxation laws of a country other than Canada, including without limitation Section 409A of the Internal Revenue Code of 1986, on amounts paid or credited in accordance with this Savings Plan.

9.02 Delegation of Duties

The HRCC may delegate certain duties with respect to the administration of the Savings Plan to such committee or person or persons as it may determine, whether or not the member of the committee or the person or persons are employees, officers or directors of the Corporation. The Corporation may authorize the committee, person or persons so determined by it to act on its behalf and to execute instruments on its behalf.

Section 10—General Provisions

10.01 Rights of Employee

Participation in this Savings Plan does not confer on the Participant any rights that the Participant did not otherwise possess as an Employee, except to such benefits as have

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specifically accrued to the Participant under the terms of the Savings Plan. Nothing contained in the Savings Plan shall be deemed to give the Participant the right to be retained in the employ of the Corporation or to interfere with the right of the Corporation to discharge the Participant at any time without regard to the effect that such discharge might have upon the Participant under the Savings Plan.

10.02 Non-Alienation

Except as otherwise provided in this Savings Plan, all payments made under the terms of the Savings Plan are for the Participant’s own use and benefit, are not capable of assignment or alienation, and do not confer upon the Participant, the Participant’s personal representative or dependent, or any other person, any right or interest in the benefit or deferred benefit that is capable of being assigned or otherwise alienated.

10.03 Recoupment Policy Relating to Performance-Based Compensation

Notwithstanding anything to the contrary contained herein, any payment made hereunder to, or to the benefit of, a Participant is subject to the Corporation’s right to reclaim any performance-based portion of such payment in the event of a financial restatement in accordance with the Corporation’s Recoupment Policy Relating to Performance-Based Compensation adopted by the Board, as amended from time.

10.04 Records

Whenever used for the purposes of the Savings Plan, the records of the Corporation will be deemed to be conclusive as to the facts with which they are concerned.

10.05 Applications, Notices and Elections

Any application, notice, or election under the Savings Plan shall be made, given, or communicated, as the case may be, in such manner as the Corporation may determine.

10.06 Construction

The Savings Plan and all rights thereunder will be governed, construed, and administered in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein.

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Section 11—Amendment To or Termination of the Savings Plan

11.01 Amendment or Termination of the Savings Plan

Subject to the approval of THI, the Corporation intends to maintain the Savings Plan in force indefinitely, but, nevertheless, reserves the sole right to amend or terminate the Savings Plan in whole or in part at any time, provided, however, that any amount that is payable to a Participant under the Savings Plan immediately prior to the date of the amendment or termination shall not be reduced by such amendment or termination. For greater certainty, the Vested Account, the Tax Free Savings Account and the Registered Retirement Savings Plan of each Vested Participant are the Participant’s accounts and, except as provided by Section 7.02, will not otherwise affected by such termination.

11.02 Notice of Termination

Should the Savings Plan be terminated at any time, the Corporation shall immediately notify the Administrative Agent of such termination for purposes of Section 7.02.

11.03 Wind-Up or Bankruptcy of the Corporation

In the event that THI or the Corporation at any time files an assignment in bankruptcy, has a petition into bankruptcy filed on its behalf, is in receivership or is wound-up (other than in a reorganization with or involving an Affiliate where all or substantially all of its assets are transferred to an Affiliate or otherwise is effected for restructuring the group of companies of which THI is a part), the Savings Plan shall be deemed to be fully terminated and the Corporation shall be deemed to have been given notice of the Savings Plan’s termination immediately prior to such time to the Administrative Agent. For greater certainty, the Vested Account, the Tax Free Savings Account and the Registered Retirement Savings Plan of each Vested Participant are the Participant’s accounts and are not to be subject to the claims of creditors of THI or the Corporation.

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Appendix “A” – List of Participants as of the Effective Date

Participant Name

n

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Appendix “B” – List of Permitted Investments

Permitted Investments

n

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Schedule “A” – Acknowledgment and Direction

TO: THE TDL GROUP CORP. (the “Corporation”)

AND TO: n (the “Administrative Agent”)

WHEREAS, as of the date hereof, the undersigned qualifies under the Corporation’s Personal Supplemental Executive Retirement Savings Plan (the “Plan”) as a Participant (as defined in the Plan);

AND WHEREAS the undersigned has received and reviewed a copy of the Plan and desires to participate in the Plan as a Participant;

AND WHEREAS capitalized terms used and not otherwise defined in this Acknowledgment and Direction have the meanings given to such terms in the Plan;

NOW THEREFORE,

(a) The undersigned acknowledges that he or she will be receiving amounts under the Plan after he or she becomes Vested Participant, and that he or she will direct such amounts be paid to the undersigned’s Vested Account, Tax Free Savings Account and/or Registered Retirement Savings Plan in accordance with the terms of this Acknowledgment and Direction and the Plan.

(b) The undersigned acknowledges that the Corporation will deduct and withhold all applicable Withholding Taxes from amounts directed to the undersigned’s Vested Account, Tax Free Savings Account and/or Registered Retirement Savings Plan.

(c) Subject to Section 4.03 of the Plan, the undersigned hereby directs the Corporation to pay any amounts payable to the undersigned under Sections 4.02 and 6.03 of the Plan to the undersigned’s Vested Account.

(d) The undersigned acknowledges that he or she will cause all funds held in the undersigned’s Vested Account, Tax Free Savings Account and/or Registered Retirement Savings Plan to be invested exclusively in Permitted Investments.

(e) The undersigned directs the Administrative Agent not to disburse any amount from his or her Vested Account, Tax Free Savings Account and/or Registered Retirement Savings Plan until such time as the Corporation gives notice to Administrative Agent in accordance with the Plan.

(f) This Acknowledgment and Direction is irrevocable.

Dated as of the             day of                     ,             .

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SIGNED, SEALED & DELIVERED in the presence of:			(seal)
Witness		Name

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Schedule “B” – Tax Free Savings Account/Registered Retirement Savings Plan – Acknowledgment and Direction

TO: THE TDL GROUP CORP. (THE “CORPORATION”)

AND TO: n (THE “ADMINISTRATIVE AGENT”)

WHEREAS, the undersigned is entitled to receive $                    (the “Payment”) no later than the 15^th day of the third month following the end of the Corporation’s fiscal year (the “Plan Year”) in accordance with the Personal Supplemental Executive Retirement Savings Plan (the “Plan”);

AND WHEREAS, in accordance with Section 4.03 of the Plan, the undersigned wishes to contribute $                    of the Payment to the Tax Free Savings Account and $                    to the Registered Retirement Savings Plan established for the undersigned in accordance with the Plan;

AND WHEREAS capitalized terms used and not otherwise defined in this Acknowledgment and Direction have the meanings given to such terms in the Plan;

NOW THEREFORE:

(a) The undersigned directs the Corporation to pay $                    from the Payment to the undersigned’s Tax Free Savings Account and to pay $                    from the payment to the undersigned’s Registered Retirement Savings Plan.

(b) The undersigned certifies that the amount it directs the Corporation to pay to the undersigned’s Tax Free Savings Account together with any other contributions from any source that have been or will be made by the undersigned to the Tax Free Savings Account or any other tax free savings account established by the undersigned during the Plan Year does not and will not exceed the TFSA dollar limit as defined in subsection 207.01(1) of the Tax Act for the Plan Year.

(c) The undersigned acknowledges that any taxes, penalties or other charges that are imposed in the event that the amounts paid or credited to the undersigned’s Tax Free Savings Account exceed the “TFSA dollar limit” for such Plan Year are the sole responsibility of the undersigned and not those of the Corporation.

(d) The undersigned certifies that the amount it directs the Corporation to pay to the undersigned’s Registered Retirement Savings Plan together with any other contributions from any source that have been or will be made by the undersigned to the Registered Retirement Savings Plan or any other registered retirement savings plan during the Plan Year does not and will not exceed the undersigned’s “RRSP Deduction Limit” (within the meaning of subsection 146(1) of the Tax Act) for the Plan Year.

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(e) The undersigned acknowledges that any taxes, penalties or other charges that are imposed in the event that the amounts paid or credited to the undersigned’s Registered Retirement Savings Plan exceed the “RRSP Deduction Limit” for such Plan Year are the sole responsibility of the undersigned and not those of the Corporation.

(f) This Acknowledgment and Direction is irrevocable.

Dated as of the             day of                     ,             .

SIGNED, SEALED & DELIVERED in the presence of:			(seal)
Witness		Name

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EX-31.(A)

Exhibit 31(a)

CERTIFICATIONS

I, Marc Caira, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Tim Hortons Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 8, 2013

/s/ MARC CAIRA
Name:	Marc Caira
Title:	Chief Executive Officer

EX-31.(B)

Exhibit 31(b)

CERTIFICATIONS

I, Cynthia J. Devine, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Tim Hortons Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 8, 2013

/s/ CYNTHIA J. DEVINE
Name:	Cynthia J. Devine
Title:	Chief Financial Officer

EX-32.(A)

Exhibit 32(a)

Certification of CEO Pursuant to

18 U.S.C. Section 1350,

As Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002 *

This certification is provided pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and accompanies the quarterly report on Form 10-Q (the “Form 10-Q”) for the quarter ended March 31, 2013 of Tim Hortons Inc. (the “Issuer”).

I, Marc Caira, the Chief Executive Officer of Issuer certify that, to the best of my knowledge:

(i) the Form 10-Q fully complies with the requirements of section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and

(ii) the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Issuer.

Dated: August 8, 2013

/s/ MARC CAIRA
Name:	Marc Caira

* This certification is being furnished as required by Rule 13a-14(b) under the Securities Exchange Act of 1934 (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code, and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section. This certification shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act, except to the extent that the Company specifically incorporates this certification therein by reference.

EX-32.(B)

Exhibit 32(b)

Certification of CFO Pursuant to

18 U.S.C. Section 1350,

As Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002 *

This certification is provided pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and accompanies the quarterly report on Form 10-Q (the “Form 10-Q”) for the quarter ended March 31, 2013 of Tim Hortons Inc. (the “Issuer”).

I, Cynthia J. Devine, the Chief Financial Officer of Issuer certify that, to the best of my knowledge:

(i) the Form 10-Q fully complies with the requirements of section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and

(ii) the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Issuer.

Dated: August 8, 2013

/s/ CYNTHIA J. DEVINE
Name:	Cynthia J. Devine

* This certification is being furnished as required by Rule 13a-14(b) under the Securities Exchange Act of 1934 (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code, and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section. This certification shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act, except to the extent that the Company specifically incorporates this certification therein by reference.

EX-99

Exhibit 99

TIM HORTONS INC.

Safe Harbor Under the Private Securities Litigation Reform Act of 1995 and Canadian Securities Laws

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements to encourage companies to provide prospective information, so long as those statements are identified as forward-looking and are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those disclosed in the statement. Canadian securities laws have corresponding safe harbor provisions, subject to certain additional requirements including the requirement to state the assumptions used to make the forecasts set out in forward-looking statements. Tim Hortons Inc. (the “Company”) desires to take advantage of these “safe harbor” provisions.

Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words such as “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “seeks,” “outlook,” “forecast” or words of similar meaning, or future or conditional verbs, such as “will,” “should,” “could” or “may.” Examples of forward-looking statements that may be contained in our public disclosure from time-to-time include, but are not limited to, statements concerning management’s expectations relating to possible or assumed future results, our strategic goals and our priorities, and the economic and business outlook for us, for each of our business segments and for the economy generally. Many of the factors that could determine our future performance are beyond our ability to control or predict. The following factors, in addition to other factors set forth in our Form 10-K filed on February 21, 2013 (“Form 10-K”) and in our Form 10-Q filed on August 8, 2013 (the “Form 10-Q”) with the U.S. Securities and Exchange Commission (“SEC”) and the Canadian Securities Administrators (“CSA”), and in other press releases, communications, or filings made with the SEC or the CSA, could cause our actual results to differ materially from the expectation(s) included in forward-looking statements and, if significant, could materially affect the Company’s business, sales revenue, share price, financial condition, and/or future results, including causing the Company to (i) close restaurants, (ii) fail to realize same-store sales growth targets, which are critical to achieving our financial targets, (iii) fail to meet the expectations of our securities analysts or investors, or otherwise fail to perform as expected, (iv) experience a decline and/or increased volatility in the market price of its stock, (v) have insufficient cash to engage in or fund expansion activities, dividends, or share repurchase programs, or (vi) increase costs, corporately or at restaurant-level, which may result in increased restaurant-level pricing, which in turn may result in decreased guest demand for our products resulting in lower sales, revenue, and earnings. Additional risks and uncertainties not currently known to us or that we currently believe to be immaterial may also materially adversely affect our business, financial condition, and/or operating results. 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.

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 of type of competitive activity within the quick service restaurant segment of the food service industry; ability to obtain financing on favourable terms; ability to maintain investment grade credit ratings; prospects and execution risks concerning the 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 new qualified personnel; continuing positive working relationships with the majority of the Company’s restaurant owners; the absence of any material adverse effects arising as a result of litigation; and there being no significant change in the Company’s ability to comply with current or future regulatory requirements. We are presenting this information for the purpose of informing you of management’s current expectations regarding these matters, and this information may not be appropriate for any other purposes.

Factors Affecting Growth and Other Important Strategic Initiatives. There can be no assurance that the Company will be able to achieve new restaurant or same-store sales growth objectives, that new restaurants will be profitable or that strategic initiatives will be successfully implemented. Early in the development of new markets, the opening of new restaurants may have a negative effect on the same-store sales of existing restaurants in the market. The Company may also enter markets where its brand is not well-known and where it has little or no operating experience and, as a result, may not achieve the level of penetration needed in order to drive brand recognition, convenience, increased leverage to marketing dollars, and other benefits the Company believes penetration yields. When the Company enters new markets, it may be necessary to increase restaurant owner relief and support costs, which lowers its earnings. There can be no assurance that the Company will be able to successfully adapt its brand, development efforts, and restaurants to these differing market conditions. The Company’s failure to successfully implement growth and various other strategies and initiatives related to international development may have a negative impact on the overall operation of its business and may result in increased costs or inefficiencies that it cannot currently anticipate. The Company may also continue to selectively close restaurants that are not achieving acceptable levels of profitability or change its growth strategies over time, where appropriate. Such closures may be accompanied by impairment charges that may have a negative impact on the Company’s earnings. The success of any restaurant depends in substantial part on its location. There can be no assurance that current locations will continue to be attractive as demographic patterns or economic conditions change. If we cannot obtain desirable locations for restaurants at reasonable prices, the Company’s ability to affect its growth strategy will be adversely affected. The Company has vertically integrated manufacturing, warehouse and distribution capabilities which may at times result in delays or difficulties. The Company also intends to evaluate

potential mergers, acquisitions, joint-venture investments, alliances, vertical integration opportunities and divestitures, which are subject to many of the same risks that also affect new store development as well as various other risks. In addition, there can be no assurance that the Company will be able to complete the desirable transactions, for reasons including restrictive covenants in debt instruments or other agreements with third parties. The Company may continue to pursue strategic alliances (including co-branding) with third parties for different types of development models and products and there can be no assurance that: significant value will be recognized through such strategic alliances; the Company will be able to maintain its strategic alliances; or, the Company will be able to enter into new strategic relationships in the future. Entry into such relationships as well as the expansion of the Company’s current business through such initiatives may expose it to additional risks that may adversely affect the Company’s brand and business. The Company’s financial outlook and long-range targets are based on the successful implementation, execution and guest acceptance of the Company’s strategic plans and initiatives; accordingly, the failure of any of these criteria could cause the Company to fall short of achievement of its financial objectives and long-range aspirational goals.

The Importance of Canadian Segment Performance and Brand Reputation. The Company’s financial performance is highly dependent upon its Canadian operating segment, which accounted for 94.0% of our reportable segment revenues, and 97.5% of our reportable segment operating income in fiscal 2012. Any substantial or sustained decline in the Company’s Canadian business would materially and adversely affect its financial performance. The Company’s success is also dependent on its ability to maintain and enhance the value of its brand, its guests’ connection to and perception of its brand, and a positive relationship with its restaurant owners. Brand value can be severely damaged, even by isolated incidents, including those that may be beyond the Company’s control such as: actions taken or not taken by its restaurant owners relating to health, safety, environmental, welfare, labour, public policy or social issues; contaminated food; litigation and claims (including litigation by, other disputes with, or negative relationship with restaurant owners); failure of security breaches or other fraudulent activities associated with its networks and systems; illegal activity targeted at the Company; and negative incidents occurring at or affecting its strategic business partners (including in connection with co-branding initiatives, international licensing arrangements and its self-serve kiosk model), affiliates, and corporate social responsibility programs. The Company’s brand could also be damaged by falsified claims or the quality of products from its vertically integrated manufacturing plants, and potentially negative publicity from various sources, including social media sites on a variety of topics and issues, whether true or not, which are beyond its control.

Competition. The quick service restaurant industry is intensely competitive with respect to price, service, location, personnel, qualified restaurant owners, real estate sites and type and quality of food. The Company and its restaurant owners compete with international, regional and local organizations, primarily through the quality, variety, and value perception of food products offered. The number and location of units, quality and speed of service, attractiveness of facilities, effectiveness of advertising/marketing, promotional and operational programs, discounting activities, price, changing demographic patterns and trends, changing consumer preferences and spending patterns, including weaker consumer spending in difficult economic times, or a desire for a more diversified menu, changing health or dietary preferences and perceptions, and new product development by the Company and its competitors are also important factors. Certain of the Company’s competitors, most notably in the U.S., have greater financial and other resources than it does, including substantially larger marketing budgets and greater leverage from their marketing spend. In addition, the Company’s major competitors continue to engage in discounting, free sampling and other promotional activities.

Economic Conditions. The Company’s operating results and financial condition are sensitive to and dependent upon discretionary spending by guests, which may be affected by uncertainty in general economic conditions that could drive down demand for its products and result in fewer transactions or decrease average cheque per transaction at our restaurants. The Company cannot predict the timing or duration of suppressed economic conditions which could have an adverse effect on our business, results of operations and financial condition.

Product Innovation and Extensions. Achievement of the Company’s same-store sales strategy is dependent, among other things, on its ability to extend the product offerings of its existing brands and introduce innovative new products. Although it devotes significant focus to the development of new products, the Company may not be successful in developing innovative new products or its new products may not be commercially successful. The Company’s financial results and its ability to maintain or improve its competitive position will depend on its ability to effectively gauge the direction of the market and consumer trends and initiatives and successfully identify, develop, manufacture, market and sell new or improved products in response to such trends.

Senior Management Team. Our success will continue to depend to a significant extent on our executive management team and the ability of other key management personnel to replace executives who retire or resign. We may not be able to retain our executive officers and key personnel or attract additional qualified management personnel to replace executives who retire or resign. Failure to retain our leadership team and attract and retain other important personnel could lead to ineffective management and operations, which would likely decrease our profitability. We are currently in a CEO transition period and our Board of Directors has appointed Mr. Marc Caira to the position of President and Chief Executive Officer, effective July 2, 2013. With the change in leadership, there is a risk to retention of other members of senior management, even with the existing retention program in place, as well as to continuity of business initiatives, plans and strategies through the transition period. In August 2012, we announced the implementation of an organizational structure which includes a Corporate Centre and Business Unit design. We completed the process of realigning roles and responsibilities under that new structure at the end of the first quarter of 2013. As a result of the Corporate reorganization, there has been a slight net reduction in the size of our employee base due to the departure of certain employees, and we currently have vacancies in certain positions. Any lack of required resources for a prolonged period of time could negatively impact our operations and ability to execute our strategic initiatives; harm our ability to retain and motivate employees; and negatively impact our ability to attract new employees.

Commodities. The Company is exposed to price volatility in connection with certain key commodities that it purchases in the ordinary course of business such as coffee, wheat, edible oils, sugar, and other product costs which can impact revenues, costs and

margins. Although the Company monitors its exposure to commodity prices and its forward hedging program partially mitigates the negative impact of any costs increases, price volatility for commodities it purchases has increased due to conditions beyond its control, including recent economic and political conditions, currency fluctuations, availability of supply, weather conditions, pest damage and consumer demand and consumption patterns. Increases and decreases in commodity costs are largely passed through to restaurant owners and the Company and its restaurant owners have some ability to increase product pricing to offset a rise in commodity prices, subject to restaurant owner and guest acceptance, respectively. Although the Company generally secures commitments for most of its key commodities that generally extend over a six-month period, these may be at higher prices than its previous commitments. Notwithstanding the foregoing, while it is not our operating practice, we may choose not to pass along all price increases to our restaurant owners. As a result, commodity cost increases could have a more significant effect on our business and results of operations than if we had passed along all increases to our restaurant owners. Price fluctuations may also impact margins as many of these commodities are typically priced based on a fixed-dollar mark-up. If the supply of commodities, including coffee, fails to meet demand, the Company’s restaurant owners may experience reduced sales which in turn, would reduce our rents and royalty income as well as distribution income. Such a reduction in the Company’s income may adversely impact the Company’s business and financial results.

Food Safety and Health Concerns. Incidents or reports, whether true or not, of food-borne illness and injuries caused by or claims of food tampering, employee hygiene and cleanliness failures or impropriety at Tim Hortons, and the potential health impacts of consuming certain of the Company’s products or other quick service restaurants unrelated to Tim Hortons, could result in negative publicity, damage the Company’s brand value and potentially lead to product liability or other claims. Any decrease in guest traffic or temporary closure of any of the Company’s restaurants as a result of such incidents or negative publicity may have a material adverse effect on its business, results of operations and financial condition.

Distribution Operations and Supply Chain. The occurrence of any of the following factors is likely to result in increased operating costs and decreased profitability of the Company’s distribution operations and supply chain and may also injure its brand, negatively affect its results of operations and its ability to generate expected earnings and/or increase costs, and/or negatively impact the Company’s relationship with its restaurant owners: higher transportation or shipping costs; inclement weather; increased food and other supply costs; having a single source of supply for certain of its food products; potential cost and disruption of a product recall; shortages or interruptions in the availability or supply of perishable food products and/or their ingredients; potential negative impacts on our relationship with our restaurant owners associated with an increase of required purchases, or prices, of products purchased from the Company’s distribution business; and political, physical, environmental, labour or technological disruptions in the Company’s or its suppliers’ manufacturing and/or warehouse plants, facilities or equipment.

Importance of Restaurant Owners. A substantial portion of the Company’s earnings come from royalties and other amounts paid by restaurant owners, who operated 99.5% of the Tim Hortons restaurants as of December 30, 2012. The Company’s revenues and profits would decline and its brand reputation could also be harmed if a significant number of restaurant owners were to experience, among other things, operational or financial difficulties or labour shortages or significant increases in labour costs. Although the Company generally enjoys a positive working relationship with the vast majority of its restaurant owners, active and/or potential disputes with restaurant owners could damage its reputation and/or its relationships with the broader restaurant owner group. The Company’s restaurant owners are independent contractors and, as a result, the quality of their operations may be diminished by factors beyond the Company’s control. Any operational shortcoming of a franchise restaurant is likely to be attributed by consumers to the Company’s entire system, thus damaging its brand reputation and potentially affecting revenues and profitability. There can be no assurance that the Company will be able to continue to attract, retain and motivate higher performing restaurant owners.

Litigation. The Company is or may be subject to claims incidental to the business, including: obesity litigation; health and safety risks or conditions of the Company’s restaurants associated with design, construction, site location and development, indoor or airborne contaminants and/or certain equipment utilized in operations; employee claims for employment or labour matters, including potentially, class action suits regarding wages, discrimination, unfair or unequal treatment, harassment, wrongful termination, or overtime compensation claims; claims from restaurant owners and/or operators regarding profitability or wrongful termination of their franchise or operating (license) agreement(s); taxation authorities regarding certain tax disputes; and falsified claims. The Company’s current exposure with respect to pending legal matters could change if determinations by judges and other finders of fact are not in accordance with management’s evaluation of these claims and the Company’s exposure could exceed expectations and have a material adverse effect on its financial condition and results of operations.

Government Regulation. The Company and its restaurant owners are subject to various international, federal, state, provincial, and local (“governmental”) laws and regulations. The development and operation of restaurants depend to a significant extent on the selection, acquisition, and development of suitable sites, which are subject to laws and regulations regarding zoning, land use, environmental matters (including limitation of vehicle emissions in drive-thrus; anti-idling bylaws; regulation of litter, packaging and recycling requirements; regulation relating to discharge, storage, handling, release and/or disposal of hazardous or toxic substances; and other governmental laws and regulations), traffic, franchise, design and other matters. Additional governmental laws and regulations affecting the Company and its restaurant owners include: business licensing; franchise laws and regulations; health, food preparation, sanitation and safety; privacy; immigration, employment and labour (including applicable minimum wage requirements, benefits, overtime, working and safety conditions, family leave and other employment matters, and citizenship requirements); advertising and marketing; product safety and regulations regarding nutritional content, including menu labeling; existing, new or

future regulations, laws, treaties or the interpretation or enforcement thereof relating to tax matters that may affect the Company’s ongoing tax disputes, realization of the Company’s tax assets, disclosure of tax-related matters, and expansion of the Company’s business into new territories through its strategic initiatives, joint-ventures, or other types of programs, projects or activities; tax laws affecting restaurant owners’ business; accounting and reporting requirements and regulations; anti-corruption; and new or future regulations regarding sustainability. Compliance with these laws and regulations and planning initiatives undertaken in connection therewith could increase the cost of doing business and, depending upon the nature of the Company’s and its restaurant owners’ responsive actions thereto, could damage the Company’s reputation. Changes in these laws and regulations, or the implementation of additional regulatory requirements, particularly increases in applicable minimum wages, tax law, planning or other matters may, among other things, adversely affect the Company’s financial results; anticipated effective tax rate, tax liabilities, and/or tax reserves; business planning within its corporate structure; its strategic initiatives and/or the types of projects it may undertake in furtherance of its business; or franchise requirements.

In addition, a taxation authority may disagree with certain views of the Company with respect to the interpretation of tax treaties, laws and regulations and take the position that material income tax liabilities, interests, penalties or amounts are payable by the Company, including in connection with certain of its public or internal company reorganizations. Contesting such disagreements or assessments may be lengthy and costly and, if the Company were unsuccessful in disputing the same, the implications could be materially adverse to it and affect its anticipated effective tax rate, projected results, future operations and financial condition, where applicable.

International Operations. The Company’s international operations are and will continue to be subject to various factors of uncertainty, and there is no assurance that international operations will achieve or maintain profitability or meet planned growth rates. The implementation of the Company’s international strategic plan may require considerable management time as well as start-up expenses for market development before any significant revenues and earnings are generated. Expansion into new international markets carries risks similar to those risks described above and more fully in the Form 10-K and the Form 10-Q relative to expansion into new markets in the U.S.; however, some or all of these factors may be more pronounced in markets outside Canada and the U.S. due to cultural, political, legal, economic, regulatory and other conditions and differences. Additionally, the Company may also have difficulty exporting its proprietary products into international markets or finding suppliers and distributors to provide it with adequate supplies of ingredients meeting its standards in a cost-effective manner.

Market and Other Conditions. The quick service restaurant industry is affected by changes in international, national, regional, and local economic and political conditions, consumer preferences and perceptions (including food safety, health or dietary preferences and perceptions), discretionary spending patterns, consumer confidence, demographic trends, seasonality, weather events and other calamities, traffic patterns, the type, number and location of competing restaurants, enhanced governmental regulation, changes in capital market conditions that affect valuations of restaurant companies in general or the value of the Company’s stock in particular, and litigation relating to food quality, handling or nutritional content. Factors such as inflation, higher energy and/or fuel costs, food costs, the cost and/or availability of a qualified workforce and other labour issues, benefit costs, legal claims, legal and regulatory compliance (including environmental regulations), new or additional sales tax on the Company’s products, disruptions in its supply chain or changes in the price, availability and shipping costs of supplies, and utility and other operating costs, also affect restaurant operations and expenses and impact same-store sales and growth opportunities. The ability of the Company and its restaurant owners to finance new restaurant development, improvements and additions to existing restaurants, acquire and sell restaurants, and pursue other strategic initiatives (such as acquisitions and joint-ventures), are affected by economic conditions, including interest rates and other government policies impacting land and construction costs and the cost and availability of borrowed funds. In addition, unforeseen catastrophic or widespread events affecting the health and/or welfare of large numbers of people in the markets in which the Company’s restaurants are located and/or which otherwise cause a catastrophic loss or interruption in the Company’s ability to conduct its business, would affect its ability to maintain and/or increase sales and build new restaurants. Unforeseen events, including war, armed conflict, terrorism and other international, regional or local instability or conflicts (including labour issues), embargos, trade barriers, public health issues (including tainted food, food-borne illness, food tampering and water supply or widespread/pandemic illness such as the avian, H1N1 or norovirus flu), and natural disasters such as flooding, earthquakes, hurricanes, or other adverse weather and climate conditions could disrupt the Company’s operations, disrupt the operations of its restaurant owners, suppliers, or guests, or result in political or economic instability.

Reliance on Systems. If the network and information systems and other technology systems that are integral to retail operations at system restaurants and at the Company’s manufacturing and distribution facilities, and at its office locations are damaged or interrupted from power outages, computer and telecommunications failures, computer worms, viruses, phishing and other destructive or disruptive software, security breaches, catastrophic events and improper or personal usage by employees, such an event could have an adverse impact on the Company and its guests, restaurant owners and employees, including a disruption of its operations, guest dissatisfaction or a loss of guests or revenues. The Company relies on third-party vendors to retain data, process transactions and provide certain services. In the event of failure in such third-party vendors’ systems and processes, the Company could experience business interruptions or privacy and/or security breaches surrounding its data. The Company continues to enhance its integrated enterprise resource planning system. The introduction of new modules for inventory replenishment, sustainability, and business

reporting and analysis will be implemented. There may be risks associated with adjusting to and supporting the new modules which may impact the Company’s relations with its restaurant owners, vendors and suppliers and the conduct of its business generally. If the Company fails to comply with new and/or increasingly demanding laws and regulations regarding the protection of guest, supplier, vendor, restaurant owner, employee and/or business data, or if the Company (or a third-party with which it has entered into a strategic alliance) experiences a significant breach of guest, supplier, vendor, restaurant owner, employee or Company data, the Company’s reputation could be damaged and result in lost sales, fines, lawsuits and diversion of management attention. The use of electronic payment systems and the Company’s reloadable cash card makes it more susceptible to a risk of loss in connection with these issues, particularly with respect to an external security breach of guest information that the Company, or third parties under arrangement(s) with it, control.

Other Significant Risk Factors. The following factors could also cause the Company’s actual results to differ from its expectations: fluctuations in the U.S. and Canadian dollar exchange rates; an inability to adequately protect the Company’s intellectual property and trade secrets from infringement actions or unauthorized use by others (including in certain international markets that have uncertain or inconsistent laws and/or application with respect to intellectual property and contract rights); liabilities and losses associated with owning and leasing significant amounts of real estate; changes in its debt levels and a downgrade on its credit ratings; and certain anti-takeover provisions that may have the effect of delaying or preventing a change in control.

Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date and time made. Except as required by federal or provincial securities laws, the Company undertakes no obligation to publicly release any revisions to forward-looking statements, or to update them to reflect events or circumstances occurring after the date forward-looking statements are made, or to reflect the occurrence of unanticipated events.

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2013

Commitments and Contingencies

NOTE 10 COMMITMENTS AND CONTINGENCIES

On June 12, 2008, a proposed class action was issued against the Company and certain of its affiliates in the Ontario Superior Court by two of its franchisees, alleging, among other things, that the Company’s Always Fresh baking system and lunch offerings led to lower franchisee profitability. The claim, as amended, asserted damages of approximately $1.95 billion on behalf of certain Canadian restaurant owners. The action was dismissed in its entirety by summary judgment on February 24, 2012 and all avenues of appeal have been exhausted.

In addition, the Company and its subsidiaries are parties to various legal actions and complaints arising in the ordinary course of business. As of the date hereof, the Company believes that the ultimate resolution of such matters will not materially affect the Company’s financial condition and earnings.

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Summary Of Effect Of Derivative Instruments On Consolidated Statement Of Comprehensive Income (Detail) (CAD) In Thousands, unless otherwise specified	3 Months Ended				6 Months Ended
	Jun. 30, 2013		Jul. 01, 2012		Jun. 30, 2013		Jul. 01, 2012
Derivative Instruments, Gain (Loss) [Line Items]
Amount of net (gain) loss reclassified to earnings	(378)		800		(1,041)		1,948
Cash Flow Hedging
Derivative Instruments, Gain (Loss) [Line Items]
Amount of gain (loss) recognized in OCI	5,307	[1],[2]	2,114	[1],[2]	8,079	[1],[2]	(1,389)	[1],[2]
Amount of gain (loss) recognized in OCI, Income tax effect	(1,279)	[1],[2]	(545)	[1],[2]	(2,141)	[1],[2]	441	[1],[2]
Amount of gain (loss) recognized in OCI, Net of income taxes	4,028	[1],[2]	1,569	[1],[2]	5,938	[1],[2]	(948)	[1],[2]
Amount of net (gain) loss reclassified to earnings	378	[1]	(800)	[1]	1,041	[1]	(1,948)	[1]
Amount of net (gain) loss reclassified to earnings, Income tax effect	(54)	[1]	211	[1]	(184)	[1]	510	[1]
Amount of net (gain) loss reclassified to earnings, Net of income taxes	324	[1]	(589)	[1]	857	[1]	(1,438)	[1]
Total effect on OCI	5,685	[1],[2]	1,314	[1],[2]	9,120	[1],[2]	(3,337)	[1],[2]
Total effect on OCI, Net of income taxes	4,352	[1],[2]	980	[1],[2]	6,795	[1],[2]	(2,386)	[1],[2]
Cash Flow Hedging | Income Taxes
Derivative Instruments, Gain (Loss) [Line Items]
Total effect on OCI, Income tax effect	(1,333)	[1],[2]	(334)	[1],[2]	(2,325)	[1],[2]	951	[1],[2]
Cash Flow Hedging | Forward Currency Contracts
Derivative Instruments, Gain (Loss) [Line Items]
Amount of gain (loss) recognized in OCI	4,851	[1],[2]	2,114	[1],[2]	8,124	[1],[2]	(1,389)	[1],[2]
Amount of net (gain) loss reclassified to earnings	144	[1]	(973)	[1]	615	[1]	(2,294)	[1]
Cash Flow Hedging | Forward Currency Contracts | Cost Of Sales
Derivative Instruments, Gain (Loss) [Line Items]
Total effect on OCI	4,995	[1],[2]	1,141	[1],[2]	8,739	[1],[2]	(3,683)	[1],[2]
Cash Flow Hedging | Interest Rate Swap | Ad Fund
Derivative Instruments, Gain (Loss) [Line Items]
Amount of gain (loss) recognized in OCI	456	[1],[2]	0	[1],[2]	(45)	[1],[2]	0	[1],[2]
Amount of net (gain) loss reclassified to earnings	61	[1]	0	[1]	80	[1]	0	[1]
Cash Flow Hedging | Interest Rate Swap | Interest (Expense) | Ad Fund
Derivative Instruments, Gain (Loss) [Line Items]
Total effect on OCI	517	[1],[2]	0	[1],[2]	35	[1],[2]	0	[1],[2]
Cash Flow Hedging | Interest Rate Forwards
Derivative Instruments, Gain (Loss) [Line Items]
Amount of gain (loss) recognized in OCI	0	[1],[2],[3]	0	[1],[2],[3]	0	[1],[2],[3]	0	[1],[2],[3]
Amount of net (gain) loss reclassified to earnings	173	[1],[3]	173	[1],[3]	346	[1],[3]	346	[1],[3]
Cash Flow Hedging | Interest Rate Forwards | Interest (Expense)
Derivative Instruments, Gain (Loss) [Line Items]
Total effect on OCI	173	[1],[2],[3]	173	[1],[2],[3]	346	[1],[2],[3]	346	[1],[2],[3]

[1] Excludes amounts related to ineffectiveness, as they were not significant.

[2] Other comprehensive income ("OCI").

[3] The Company entered into and settled interest rate forwards in fiscal 2010 relating to the Company's outstanding term debt.

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Condensed Consolidated Balance Sheet (CAD) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 30, 2012
Current assets
Cash and cash equivalents	86,603	120,139
Restricted cash and cash equivalents	104,780	150,574
Accounts receivable, net	188,989	171,605
Notes receivable, net (note 5)	5,946	7,531
Deferred income taxes	6,844	7,142
Inventories and other, net (note 6)	109,639	107,000
Advertising fund restricted assets (note 13)	38,264	45,337
Total current assets	541,065	609,328
Property and equipment, net	1,588,991	1,553,308
Intangible assets, net	3,195	3,674
Notes receivable, net (note 5)	5,662	1,246
Deferred income taxes	11,540	10,559
Equity investments	41,830	41,268
Other assets	72,603	64,796
Total assets	2,264,886	2,284,179
Current liabilities
Accounts payable (note 7)	140,648	169,762
Accrued liabilities
Salaries and wages	14,642	21,477
Taxes	12,574	8,391
Tim Card obligation and other (note 7)	147,913	197,871
Deferred income taxes	1,052	197
Advertising fund liabilities (note 13)	42,624	44,893
Current portion of long-term obligations	20,130	20,781
Total current liabilities	379,583	463,372
Long-term obligations
Long-term debt	364,335	359,471
Long-term debt - Advertising fund	44,393	46,849
Capital leases	115,645	104,383
Deferred income taxes	8,468	10,399
Other long-term liabilities (note 7)	116,601	109,614
Total long-term obligations	649,442	630,716
Commitments and contingencies (note 10)
Equity of Tim Hortons Inc.
Common shares ($2.84 stated value per share), Authorized: unlimited shares. Issued: 151,319,384 and 153,404,839 shares, respectively (note 11)	429,105	435,033
Common shares held in Trust, at cost: 340,314 and 316,923 shares, respectively (note 13)	(14,969)	(13,356)
Contributed surplus	13,388	10,970
Retained earnings	916,421	893,619
Accumulated other comprehensive loss	(108,851)	(139,028)
Total equity of Tim Hortons Inc.	1,235,094	1,187,238
Noncontrolling interests (note 13)	767	2,853
Total equity	1,235,861	1,190,091
Total liabilities and equity	2,264,886	2,284,179

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Income Taxes

6 Months Ended

Jun. 30, 2013

Income Taxes

NOTE 3 INCOME TAXES

The effective income tax rate was 26.1% for the second quarter ended June 30, 2013 (second quarter fiscal 2012: 27.6%) and 26.7% for the year-to-date period ended June 30, 2013 (year-to-date period fiscal 2012: 27.6%). The reduction in the income tax rate in the second quarter of 2013 compared to the second quarter of 2012 is primarily due to the favourable impact related to a reserve release resulting from a statute of limitations lapse and tax benefits associated with other discrete items, partially offset by an increase to prior year tax reserves as a result of audit activity.

For Canadian federal tax purposes, the 2005 and subsequent taxation years remain open to examination and potential adjustment by the Canada Revenue Agency (“CRA”). The CRA has issued notices of reassessment for the 2005 through 2009 taxation years for transfer pricing adjustments related to our former investment in the Maidstone Bakery joint venture. The proposed adjustments, including tax, penalty and interest, total approximately $60.0 million. We will be required to deposit approximately $35.0 million of the proposed adjustment with the CRA and other taxation authorities by October 2013. Although the outcome of this matter cannot be predicted with certainty, the Company intends to contest this matter vigorously and we believe that we will ultimately prevail based on the merits of our position. At this time, we believe that we have adequately reserved for this matter; however, we will continue to evaluate our reserves as we progress through the appeals or litigation process with the CRA. If the CRA’s position is ultimately sustained as proposed, it may have a material adverse impact on earnings in the period that the matter is settled.

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Corporate Reorganization Expenses (Tables)

6 Months Ended

Jun. 30, 2013

Corporate Reorganization Expenses

The Company completed the realignment of roles and responsibilities under its new organizational structure at the end of the first quarter of fiscal 2013, and incurred the following expenses, as set forth in the table below:

	Second quarter ended				Year-to-date period  ended
	June 30, 2013		July 1, 2012		June 30, 2013		July 1, 2012
Termination costs	$	0	$	0	$	6,632	$	0
Professional fees and other		0		1,277		2,543		1,277
CEO transition costs		604		0		904		0
Total Corporate reorganization expenses	$	604	$	1,277	$	10,079	$	1,277

Accrued Reorganization Expenses

Termination costs			Professional fees and other			CEO transition charges			Total
Cost incurred during fiscal 2012	$	9,016		$	7,602		$	2,256		$	18,874
Paid during fiscal 2012		(1,458	)		(3,775	)		(411	)		(5,644	)
Accrued as at December 30, 2012		7,558			3,827			1,845			13,230
Cost incurred during fiscal 2013 to-date		6,632			2,543			904			10,079
Paid during fiscal 2013 to-date		(12,177	)		(5,185	)		(344	)		(17,706	)
Accrued as at June 30, 2013(1)	$	2,013		$	1,185		$	2,405		$	5,603

⁽¹⁾  Of the total accrual, $5.0 million is recognized in Accounts Payable (fiscal 2012: $12.4 million).

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Assets and Liabilities of Variable Interest Entities (Parenthetical) (Detail) (CAD) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 30, 2012
Variable Interest Entity [Line Items]
Other liabilities	20,130	20,781
Ad Fund
Variable Interest Entity [Line Items]
Advertising fund debt	52,500	56,500
Other liabilities	8,100	9,700

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Common Shares - Additional Information (Detail) In Millions, except Share data, unless otherwise specified	6 Months Ended
	Jun. 30, 2013	Aug. 07, 2013 Subsequent Event 2013 Program Amendment USD ($)	Feb. 20, 2013 2013 Program CAD
Common Shares [Line Items]
Amended maximum value of common shares to be repurchased		$ 250.0	250.0
Maximum shares of common shares to be repurchased			15,239,531
Percentage of outstanding shares, regulatory maximum for repurchase			10.00%
Share repurchase program expiration date	Feb. 25, 2014

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Common Shares

6 Months Ended

Jun. 30, 2013

Common Shares

NOTE 11 COMMON SHARES

Share repurchase programs

On February 20, 2013, our Board of Directors approved a new share repurchase program (“2013 Program”) authorizing the repurchase of up to $250.0 million in common shares, not to exceed the regulatory maximum of 15,239,531 shares, representing 10% of our public float, as defined under the TSX rules as of February 14, 2013. The 2013 Program received regulatory approval from the TSX. Under the 2013 Program, the Company’s common shares may be purchased through a combination of 10b5-1 automatic trading plan purchases, as well as purchases at management’s discretion in compliance with regulatory requirements, and given market, cost and other considerations. Repurchases may be made on the TSX, the New York Stock Exchange (“NYSE”), and/or other Canadian marketplaces, subject to compliance with applicable regulatory requirements, or by such other means as may be permitted by the TSX and/or NYSE, and under applicable laws, including private agreements under an issuer bid exemption order issued by a securities regulatory authority in Canada. Purchases made by way of private agreements under an issuer bid exemption order by a securities regulatory authority will be at a discount to the prevailing market price as provided in the exemption order. The 2013 Program commenced on February 26, 2013 and is due to expire on February 25, 2014, or earlier if the $250.0 million or 10% share maximum is reached. Common shares purchased pursuant to the 2013 Program will be cancelled. The 2013 Program may be terminated by us at any time, subject to compliance with regulatory requirements. As such, there can be no assurance regarding the total number of shares or the equivalent dollar value of shares that may be repurchased under the 2013 Program.

Share repurchase activity for fiscal 2013 and 2012 is reflected in the Condensed Consolidated Statement of Equity; all shares repurchased were cancelled.

The Company obtained regulatory approval from the TSX to amend its Normal Course Issuer Bid (“NCIB”) to remove the former maximum dollar cap of $250.0 million. The timing of the program and exact number of shares purchased under the NCIB will be at our discretion and subject to the negotiation and execution of a broker agreement. The Company’s common shares will be purchased under the program through a combination of a 10b5-1 automatic trading plan in accordance with pre-set trading instructions established at a time when the Corporation is not in possession of material, non-public information as well as at management’s discretion in compliance with regulatory requirements, and given market, cost and other considerations.

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Fair Value of Derivative Instruments on Condensed Consolidated Balance Sheet (Detail) (CAD) In Thousands, unless otherwise specified	Jun. 30, 2013		Dec. 30, 2012
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Notional value	225,548		236,484
Fair value asset (liability)	22,847	[1]	5,490	[1]
Level 2 | Forward Currency Contracts
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Notional value	151,645	[2]	195,081	[2]
Fair value asset (liability)	7,073	[1],[2]	(2,014)	[1],[2]
Level 2 | Interest Rate Swap | Canadian Ad Fund
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Notional value	32,500	[3]	0	[3]
Fair value asset (liability)	35	[1],[3]	0	[1],[3]
Level 2 | TRS
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Notional value	41,403	[4]	41,403	[4]
Fair value asset (liability)	15,739	[1],[4]	7,504	[1],[4]

[1] The Company values its derivatives using valuations that are calibrated to the initial trade prices. Subsequent valuations are based on observable inputs to the valuation model.

[2] The fair value of forward currency contracts is determined using prevailing exchange rates.

[3] In February 2013, the Tim Hortons Advertising and Promotion Fund (Canada) Inc. ("Ad Fund") entered into an amortizing interest rate swap to fix a portion of the interest expense on its term debt. The fair value is estimated using discounted cash flows and market-based observable inputs, including interest rate yield curves and discount rates.

[4] The fair value of the TRS is determined using the Company's closing common share price on the last business day of the fiscal period, as quoted on the Toronto Stock Exchange ("TSX").

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Stock-Based Compensation Expense Included In General And Administrative Expenses (Detail) (CAD) In Thousands, unless otherwise specified	3 Months Ended				6 Months Ended
	Jun. 30, 2013		Jul. 01, 2012		Jun. 30, 2013		Jul. 01, 2012
Share Based Compensation [Line Items]
RSUs	2,478		3,132		3,580		5,790
Stock options and tandem SARs	2,264		1,305		7,339		5,050
DSUs	406	[1]	251	[1]	1,616	[1]	1,029	[1]
Total stock-based compensation expense	5,148	[2]	4,688	[2]	12,535	[2]	11,869	[2]

[1] Deferred share units ("DSUs").

[2] Generally included in General and administrative expenses.

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Accrued Reorganization Expenses (Detail) (CAD) In Thousands, unless otherwise specified	3 Months Ended			6 Months Ended			12 Months Ended
	Jun. 30, 2013		Jul. 01, 2012	Jun. 30, 2013		Jul. 01, 2012	Dec. 30, 2012
Restructuring Cost and Reserve [Line Items]
Cost incurred during the period	604		1,277	10,079		1,277	18,874
Paid during the period				(17,706)			(5,644)
Accrued as at end of period	5,603	[1]		5,603	[1]		13,230
Termination Costs
Restructuring Cost and Reserve [Line Items]
Cost incurred during the period	0		0	6,632		0	9,016
Paid during the period				(12,177)			(1,458)
Accrued as at end of period	2,013	[1]		2,013	[1]		7,558
Professional Fees And Other
Restructuring Cost and Reserve [Line Items]
Cost incurred during the period	0		1,277	2,543		1,277	7,602
Paid during the period				(5,185)			(3,775)
Accrued as at end of period	1,185	[1]		1,185	[1]		3,827
CEO Transition Cost
Restructuring Cost and Reserve [Line Items]
Cost incurred during the period	604		0	904		0	2,256
Paid during the period				(344)			(411)
Accrued as at end of period	2,405	[1]		2,405	[1]		1,845

[1] Of the total accrual, $5.0 million is recognized in Accounts Payable (fiscal 2012: $12.4 million).

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Inventories and Other, Net (Tables)

6 Months Ended

Jun. 30, 2013

Inventories and Other, Net

	As at
	June 30, 2013			December 30, 2012
Raw materials	$	29,420		$	19,941
Finished goods		71,064			75,660
		100,484			95,601
Inventory obsolescence provision		(870	)		(1,015	)
Inventories, net		99,614			94,586
Prepaids and other		10,025			12,414
Total Inventories and other, net	$	109,639		$	107,000

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Notes Receivable, Net (Tables)

6 Months Ended

Jun. 30, 2013

Notes Receivable by Segment

	As at
	June 30, 2013								December 30, 2012
	Gross		VIEs(2)			Total			Gross		VIEs(2)			Total
Franchise Incentive Program (“FIP”) notes(1)	$	20,518	$	(15,333	)	$	5,185		$	20,235	$	(14,441	)	$	5,794
Other notes receivable(3)		8,249		0			8,249			4,773		0			4,773
Notes receivable	$	28,767	$	(15,333	)	$	13,434		$	25,008	$	(14,441	)	$	10,567
Allowance							(1,826	)							(1,790	)
Notes receivable, net						$	11,608							$	8,777
Current portion, net							(5,946	)							(7,531	)
Long-term portion, net						$	5,662							$	1,246

Notes Receivable by Class and Aging

	As at
	June 30, 2013								December 30, 2012
Class and Aging	Gross		VIEs(2)			Total			Gross		VIEs(2)			Total
Current status (FIP Notes and other)	$	9,979	$	(1,931	)	$	8,048		$	6,969	$	(1,269	)	$	5,700
Past-due status < 90 days (FIP Notes)		234		(0	)		234			407		(407	)		0
Past-due status > 90 days (FIP Notes)		18,554		(13,402	)		5,152			17,632		(12,765	)		4,867
Notes receivable	$	28,767	$	(15,333	)	$	13,434		$	25,008	$	(14,441	)	$	10,567
Allowance							(1,826	)							(1,790	)
Notes receivable, net						$	11,608							$	8,777

⁽¹⁾  The Company has outstanding FIP arrangements with certain U.S. restaurant owners, which generally provided interest-free financing for the purchase of certain restaurant equipment, furniture, trade fixtures and signage.

⁽²⁾  The notes payable to the Company by VIEs are eliminated on consolidation, which reduces the Notes receivable, net recognized on the Condensed Consolidated Balance Sheet (see note 13).

⁽³⁾  Relates primarily to notes issued to vendors in conjunction with the financing of certain property sales and on various equipment and other financing programs.

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Tim Card Obligation and Other (Detail) (CAD) In Thousands, unless otherwise specified	Jun. 30, 2013		Dec. 30, 2012
Accounts Payable And Accrued Liabilities Current And Noncurrent [Line Items]
Tim Card obligation	112,508		159,745
Contingent rent expense accrual	8,895		9,962
Maidstone Bakeries supply contract deferred liability	7,553		7,929
Other accrued liabilities	18,957	[1]	20,235	[1]
Total Accrued liabilities, Other	147,913		197,871

[1] Includes deferred revenues, deposits, and various equipment and other accruals.

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Franchised Locations and System Activity (Detail)							3 Months Ended	6 Months Ended	3 Months Ended	6 Months Ended
	Jun. 30, 2013 Store		Jul. 01, 2012 Period 1 Store		Jul. 01, 2012 Period 2 Store		Jun. 30, 2013 Franchised Store	Jun. 30, 2013 Franchised Store	Jul. 01, 2012 Franchised Period 1 Store	Jul. 01, 2012 Franchised Period 2 Store	Jun. 30, 2013 Company Operated Store	Jul. 01, 2012 Company Operated Period 1 Store	Jul. 01, 2012 Company Operated Period 2 Store
Franchisor Disclosure [Line Items]
Franchised restaurants in operation - beginning of period	4,304	[1]	4,071	[1]	4,071	[1]	4,271	4,242	4,019	3,996	20	21	21
Restaurants opened							27	60	38	68
Restaurants closed							(12)	(22)	(10)	(12)
Net transfers within the franchised system							(2)	4	3	(2)
Franchised restaurants in operation - end of period	4,304	[1]	4,071	[1]	4,071	[1]	4,284	4,284	4,050	4,050	20	21	21
% of restaurants franchised - end of period	99.50%		99.50%		99.50%

[1] Includes various types of standard and non-standard restaurant formats in Canada, the U.S. and the Gulf Cooperation Council ("GCC") with differing restaurant sizes and menu offerings as well as self-serve kiosks, which serve primarily coffee products and a limited product selection. Collectively, the Company refers to all of these restaurants and kiosks as "systemwide restaurants."

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Income Taxes - Additional Information (Detail) (CAD) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jul. 01, 2012	Jun. 30, 2013	Jul. 01, 2012
Income Taxes [Line Items]
Effective income tax rate	26.10%	27.60%	26.70%	27.60%
Proposed adjustments by Canada Revenue Agency, including tax, penalty and interest			60.0
Deposit required for the Proposed adjustments by Canada Revenue Agency			35.0

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Fair Value and Carrying Value of Other Financial Assets and Liabilities (Detail) (CAD) In Thousands, unless otherwise specified	Jun. 30, 2013		Dec. 30, 2012		Jul. 01, 2012	Jan. 01, 2012
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents, Carrying value	86,603		120,139		57,733	126,497
Restricted cash and cash equivalents, Carrying value	104,780		150,574
Bearer deposit notes, Carrying value	72,603		64,796
Notes receivable, net, Carrying value	13,434		10,567
Level 1
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents, Fair value asset (liability)	86,603	[1]	120,139	[1]
Restricted cash and cash equivalents, Fair value asset (liability)	104,780	[1]	150,574	[1]
Cash and cash equivalents, Carrying value	86,603	[1]	120,139	[1]
Restricted cash and cash equivalents, Carrying value	104,780	[1]	150,574	[1]
Level 2
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Bearer deposit notes, Fair value asset (liability)	41,403	[2]	41,403	[2]
Senior Notes, Fair value asset (liability)	(316,764)	[3]	(325,857)	[3]
Bearer deposit notes, Carrying value	41,403	[2]	41,403	[2]
Senior Notes, Carrying value	(301,370)	[3]	(301,544)	[3]
Level 3
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Notes receivable, net, Fair value asset (liability)	11,608	[4]	8,777	[4]
Advertising fund term debt	(52,464)	[5]	(56,500)	[5]
Other debt, Fair value asset (liability)	(113,623)	[6]	(125,000)	[6]
Notes receivable, net, Carrying value	11,608	[4]	8,777	[4]
Other debt, Carrying value	(65,668)	[6]	(60,223)	[6]

[1] The carrying values approximate fair values due to the short-term nature of these investments.

[2] The Company holds these notes as collateral to reduce the carrying costs of the TRS. The interest rate on these notes resets every 90 days; therefore, the fair value of these notes, using a market approach, approximates the carrying value.

[3] The fair value of the senior unsecured notes, using a market approach, is based on publicly disclosed trades between arm's length institutions as documented on Bloomberg LP.

[4] Management generally estimates the current value of notes receivable, using a cost approach, based primarily on the estimated depreciated replacement cost of the underlying equipment held as collateral.

[5] Management estimates the fair value of this variable rate debt using a market approach, based on prevailing interest rates plus an applicable margin.

[6] Management estimates the fair value of its Other debt, primarily consisting of contributions received related to the construction costs of certain restaurants, using an income approach, by discounting future cash flows using a Company risk-adjusted rate, over the remaining term of the debt.

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Stock-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2013

Stock Based Compensation Expenses Included in General and Administrative Expenses

	Second quarter ended				Year-to-date period ended
	June 30, 2013		July 1, 2012		June 30, 2013		July 1, 2012
RSUs	$	2,478	$	3,132	$	3,580	$	5,790
Stock options and tandem SARs		2,264		1,305		7,339		5,050
DSUs(1)		406		251		1,616		1,029
Total stock-based compensation expense(2)	$	5,148	$	4,688	$	12,535	$	11,869

⁽¹⁾  Deferred share units (“DSUs”).

⁽²⁾  Generally included in General and administrative expenses.

Summary of Restricted Stock Units Activity

The following table is a summary of activity for RSUs granted to employees under the Company’s 2006 and 2012 Stock Incentive Plans, for the periods set forth below:

	Restricted Stock Units			Weighted Average Grant Value per Unit
	(in thousands)			(in dollars)
Balance as at January 1, 2012		306		$	40.91
Granted		192			54.49
Dividend equivalent rights		6			50.30
Vested and settled(1)		(160	)		36.72
Forfeited		(32	)		46.35
Balance as at December 30, 2012		312		$	50.91
Granted		141			56.12
Dividend equivalent rights		4			53.49
Vested and settled(1)		(44	)		51.39
Forfeited		(15	)		51.23
Balance as at June 30, 2013		398		$	52.72

⁽¹⁾  Generally settled with common shares from the TDL RSU Employee Benefit Plan Trust (“Trust”).

RSUs that vested during the second quarter of fiscal 2013 and 2012 were settled with the participants in the following manner:

	RSU Gross Settlement		RSU Settlement, net of tax
	Units		Units		Amount
	(in thousands)
2012
Settled with common shares from the Trust		34		18	$	670
Settled by an open market purchase		7		5		250
Total restricted stock settlement		41		23	$	920
2013
Settled with common shares from the Trust		33		17	$	730
Settled by an open market purchase		6		4		210
Total restricted stock settlement		39		21	$	940

Stock Option with Tandem SAR Awards Granted to Officers

Stock options and tandem SARs

	Stock Options with SARs			Weighted Average Exercise Price
	(in thousands)			(in dollars)
Balance as at January 1, 2012		1,182		$	36.05
Granted		254			54.86
Exercised		(218	)		31.64
Forfeited		(46	)		41.66
Balance as at December 30, 2012		1,172		$	40.73
Granted		241			56.12
Exercised(1)		(181	)		35.64
Forfeited		(10	)		52.38
Balance as at June 30, 2013		1,222		$	44.42

⁽¹⁾  Total cash settlement, net of applicable withholding taxes of $2.5 million of SARs in the year-to-date period ended June 30, 2013 (year-to-date period fiscal 2012: 96,000 units for $1.5 million). The associated options were cancelled.

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Company Contributions to Canadian and U.S. Advertising Funds (Detail) (CAD) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jul. 01, 2012	Jun. 30, 2013	Jul. 01, 2012
Variable Interest Entity [Line Items]
Company contributions	6,297	5,885	12,237	11,385
Company Contribution
Variable Interest Entity [Line Items]
Company contributions	2,809	2,718	5,512	5,321
Non-owned Restaurants
Variable Interest Entity [Line Items]
Company contributions	3,488	3,167	6,725	6,064

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Variable Interest Entities - Additional Information (Detail)	3 Months Ended		6 Months Ended		12 Months Ended	6 Months Ended
	Jun. 30, 2013 CAD Store	Jul. 01, 2012 USD ($) Store	Jun. 30, 2013 CAD Store	Jul. 01, 2012 CAD Store	Dec. 30, 2012 CAD Store	Jun. 30, 2013 Expanded Menu Board Program Ad Fund CAD
Variable Interest Entity [Line Items]
Number of Consolidated Non-owned restaurants			350		365
Number of Non-owned restaurants consolidated, percentage			8.10%		8.60%
Average number of Non-owned restaurants consolidated	347	309	353	307
Capital expenditures			88,272,000	66,628,000		58,600,000
Advertising funds spent	59,700,000	47,900,000	129,200,000	121,800,000
Cost of the shares held by the Trust	14,969,000		14,969,000		13,356,000

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Notes Receivable By Class and Aging (Detail) (CAD) In Thousands, unless otherwise specified	Jun. 30, 2013		Dec. 30, 2012
Notes Receivable By Class And Aging [Line Items]
Notes receivable	13,434		10,567
Allowance	(1,826)		(1,790)
Notes receivable, net	11,608		8,777
Current Status (FIPs And Other)
Notes Receivable By Class And Aging [Line Items]
Notes receivable	8,048		5,700
Past Due Status Less Than 90 Days (FIPs)
Notes Receivable By Class And Aging [Line Items]
Notes receivable	234		0
Past Due Status Greater Than 90 Days (FIPs)
Notes Receivable By Class And Aging [Line Items]
Notes receivable	5,152		4,867
Gross
Notes Receivable By Class And Aging [Line Items]
Notes receivable	28,767		25,008
Gross | Current Status (FIPs And Other)
Notes Receivable By Class And Aging [Line Items]
Notes receivable	9,979		6,969
Gross | Past Due Status Less Than 90 Days (FIPs)
Notes Receivable By Class And Aging [Line Items]
Notes receivable	234		407
Gross | Past Due Status Greater Than 90 Days (FIPs)
Notes Receivable By Class And Aging [Line Items]
Notes receivable	18,554		17,632
VIEs
Notes Receivable By Class And Aging [Line Items]
Notes receivable	(15,333)	[1]	(14,441)	[1]
VIEs | Current Status (FIPs And Other)
Notes Receivable By Class And Aging [Line Items]
Notes receivable	(1,931)	[1]	(1,269)	[1]
VIEs | Past Due Status Less Than 90 Days (FIPs)
Notes Receivable By Class And Aging [Line Items]
Notes receivable	0	[1]	(407)	[1]
VIEs | Past Due Status Greater Than 90 Days (FIPs)
Notes Receivable By Class And Aging [Line Items]
Notes receivable	(13,402)	[1]	(12,765)	[1]

[1] The notes payable to the Company by VIEs are eliminated on consolidation, which reduces the Notes receivable, net recognized on the Condensed Consolidated Balance Sheet (see note 13).

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Reconciliation of Total Reportable Segment Property and Equipment and Total Assets (Detail) (CAD) In Thousands, unless otherwise specified	Jun. 30, 2013		Dec. 30, 2012
Segment Reporting Information [Line Items]
Property and equipment, net	1,588,991		1,553,308
Consolidated total assets	2,264,886		2,284,179
Operating Segments
Segment Reporting Information [Line Items]
Property and equipment, net	1,512,595		1,479,128
Consolidated total assets	1,923,782		1,856,826
Operating Segments | Canada
Segment Reporting Information [Line Items]
Property and equipment, net	934,006	[1]	915,733	[1]
Consolidated total assets	1,217,356		1,175,552
Operating Segments | U.S.
Segment Reporting Information [Line Items]
Property and equipment, net	403,294	[1]	378,457	[1]
Consolidated total assets	427,576		400,231
Operating Segments | Corporate Services
Segment Reporting Information [Line Items]
Property and equipment, net	175,295	[2]	184,938	[2]
Consolidated total assets	278,850		281,043
VIEs
Segment Reporting Information [Line Items]
Property and equipment, net	76,396		74,180
Consolidated total assets	130,976		139,462
Unallocated
Segment Reporting Information [Line Items]
Consolidated total assets	210,128	[3]	287,891	[3]

[1] Includes primarily restaurant-related assets such as land, building and leasehold improvements.

[2] Includes property and equipment related to distribution services, manufacturing activities, and other corporate assets.

[3] Includes Cash and cash equivalents, Restricted cash and cash equivalents, Deferred income taxes and Prepaids, except as related to VIEs.

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Earnings Per Common Share Attributable to Tim Hortons Inc. (Tables)

6 Months Ended

Jun. 30, 2013

Computations of Basic and Diluted Earnings Per Common Share

	Second quarter ended				Year-to-date period  ended
	June 30, 2013		July 1, 2012		June 30, 2013		July 1, 2012
Net income attributable to Tim Hortons Inc.	$	123,736	$	108,067	$	209,907	$	196,846
Weighted average shares outstanding for computation of basic earnings per common share attributable to Tim Hortons Inc. (in thousands)		152,083		155,351		152,597		155,589
Dilutive impact of RSUs(1)		295		317		286		311
Dilutive impact of stock options with tandem SARs(2)		259		327		250		307
Weighted average shares outstanding for computation of diluted earnings per common share attributable to Tim Hortons Inc. (in thousands)		152,637		155,995		153,133		156,207
Basic earnings per common share attributable to Tim Hortons Inc.	$	0.81	$	0.70	$	1.38	$	1.27
Diluted earnings per common share attributable to Tim Hortons Inc.	$	0.81	$	0.69	$	1.37	$	1.26

⁽¹⁾  Restricted stock units (“RSUs”).

⁽²⁾  Stock appreciation rights (“SARs”).

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Condensed Consolidated Statement Of Cash Flows (CAD) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2013		Jul. 01, 2012
Cash flows provided from (used in) operating activities
Net income	211,485		199,216
Adjustments to reconcile net income to net cash provided from operating activities
Depreciation and amortization	72,368		62,379
Stock-based compensation expense (note 12)	12,535	[1]	11,869	[1]
Deferred income taxes	(2,539)		(2,081)
Changes in operating assets and liabilities
Restricted cash and cash equivalents	46,356		43,290
Accounts receivable	(8,254)		(32,425)
Inventories and other	(5,218)		7,285
Accounts payable and accrued liabilities	(75,262)		(64,156)
Taxes	4,144		(8,674)
Other	2,714		(352)
Net cash provided from operating activities	258,329		216,351
Cash flows (used in) provided from investing activities
Capital expenditures	(88,272)		(66,628)
Capital expenditures - Advertising fund (note 13)	(5,224)		(30,830)
Other investing activities	6,125		(8,710)
Net cash (used in) investing activities	(87,371)		(106,168)
Cash flows (used in) provided from financing activities
Repurchase of common shares (note 11)	(113,803)		(136,509)
Dividend payments to common shareholders	(79,348)		(65,661)
Net proceeds from issue of debt - Advertising fund (note 13)	0		32,262
Principal payments on long-term debt obligations	(8,543)		(4,078)
Other financing activities	(5,001)		(4,739)
Net cash (used in) financing activities	(206,695)		(178,725)
Effect of exchange rate changes on cash	2,201		(222)
(Decrease) in cash and cash equivalents	(33,536)		(68,764)
Cash and cash equivalents at beginning of period	120,139		126,497
Cash and cash equivalents at end of period	86,603		57,733
Supplemental disclosures of cash flow information:
Interest paid	17,131		16,199
Income taxes paid	77,540		94,605
Non-cash investing and financing activities:
Capital lease obligations incurred	19,219		13,133

[1] Generally included in General and administrative expenses.

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Summary Of Significant Accounting Policies

6 Months Ended

Jun. 30, 2013

Summary Of Significant Accounting Policies

NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of business

Tim Hortons Inc. is a corporation governed by the Canada Business Corporations Act. References herein to “Tim Hortons”, or the “Company” refer to Tim Hortons Inc. and its subsidiaries. The Company’s principal business is the development and franchising of quick service restaurants primarily in Canada and the U.S., that serve premium coffee, espresso-based 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 the franchisor, we collect royalty revenue from franchised restaurant sales. The Company also controls the real estate underlying a substantial majority of the system restaurants, which generates another source of revenue. In addition, the Company has vertically integrated manufacturing, warehouse and distribution operations which supply a significant portion of our system restaurants with coffee and other beverages, non-perishable food, supplies, packaging and equipment.

The following table outlines the Company’s systemwide restaurant count and activity:

	Second quarter ended						Year-to-date period  ended
	June 30, 2013			July 1, 2012			June 30, 2013			July 1, 2012
Systemwide Restaurant Count
Franchised restaurants in operation – beginning of period		4,271			4,019			4,242			3,996
Restaurants opened		27			38			60			68
Restaurants closed		(12	)		(10	)		(22	)		(12	)
Net transfers within the franchised system		(2	)		3			4			(2	)
Franchised restaurants in operation – end of period		4,284			4,050			4,284			4,050
Company-operated restaurants		20			21			20			21
Total systemwide restaurants – end of period(1)		4,304			4,071			4,304			4,071
% of restaurants franchised – end of period		99.5	%		99.5	%		99.5	%		99.5	%

⁽¹⁾  Includes various types of standard and non-standard restaurant formats in Canada, the U.S. and the Gulf Cooperation Council (“GCC”) with differing restaurant sizes and menu offerings as well as self-serve kiosks, which serve primarily coffee products and a limited product selection. Collectively, the Company refers to all of these restaurants and kiosks as “systemwide restaurants.”

Excluded from the above table are 251 primarily licensed locations in the Republic of Ireland and the United Kingdom as at June 30, 2013 (second quarter fiscal 2012: 243 restaurants).

Basis of presentation and principles of consolidation

The Company prepares its financial statements in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). In the opinion of management, the accompanying Condensed Consolidated Financial Statements contain all adjustments (all of which are normal and recurring in nature) necessary to state fairly the Company’s financial position as at June 30, 2013, and the results of operations, comprehensive income and cash flows for the second quarters ended June 30, 2013 and July 1, 2012. These Condensed Consolidated Financial Statements should be read in conjunction with the 2012 Consolidated Financial Statements which are contained in the Company’s Annual Report on Form 10-K filed with the SEC and the CSA on February 21, 2013. The December 30, 2012 Condensed Consolidated Balance Sheet was derived from the audited 2012 Consolidated Financial Statements, but does not include all of the year-end disclosures required by U.S. GAAP.

The Condensed Consolidated Financial Statements include the results and balances of Tim Hortons Inc., its wholly-owned subsidiaries and certain entities which the Company consolidates as variable interest entities (“VIEs”) (see note 13). Intercompany accounts and transactions among consolidated entities have been eliminated upon consolidation. Investments in non-consolidated affiliates over which the Company exercises significant influence, but for which the Company is not the primary beneficiary and does not have control, are accounted for using the equity method. The Company’s share of the earnings or losses of these non-consolidated affiliates is included in Equity income, which is included as part of operating income because these investments are operating ventures closely integrated into the Company’s business operations.

Accounting changes – new accounting standards

In the first quarter of fiscal 2013, we prospectively adopted Accounting Standards Update No. 2013-02 – Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, which requires additional disclosure of significant reclassifications out of comprehensive income into net income, if the amount is required to be reclassified in its entirety (see Condensed Consolidated Statement of Equity and note 9).

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Earnings Per Common Share Attributable to Tim Hortons Inc.

6 Months Ended

Jun. 30, 2013

Earnings Per Common Share Attributable to Tim Hortons Inc.

NOTE 4 EARNINGS PER COMMON SHARE ATTRIBUTABLE TO TIM HORTONS INC.

	Second quarter ended				Year-to-date period  ended
	June 30, 2013		July 1, 2012		June 30, 2013		July 1, 2012
Net income attributable to Tim Hortons Inc.	$	123,736	$	108,067	$	209,907	$	196,846
Weighted average shares outstanding for computation of basic earnings per common share attributable to Tim Hortons Inc. (in thousands)		152,083		155,351		152,597		155,589
Dilutive impact of RSUs(1)		295		317		286		311
Dilutive impact of stock options with tandem SARs(2)		259		327		250		307
Weighted average shares outstanding for computation of diluted earnings per common share attributable to Tim Hortons Inc. (in thousands)		152,637		155,995		153,133		156,207
Basic earnings per common share attributable to Tim Hortons Inc.	$	0.81	$	0.70	$	1.38	$	1.27
Diluted earnings per common share attributable to Tim Hortons Inc.	$	0.81	$	0.69	$	1.37	$	1.26

⁽¹⁾  Restricted stock units (“RSUs”).

⁽²⁾  Stock appreciation rights (“SARs”).

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Corporate Reorganization Expenses

6 Months Ended

Jun. 30, 2013

Corporate Reorganization Expenses

NOTE 2 CORPORATE REORGANIZATION EXPENSES

The Company completed the realignment of roles and responsibilities under its new organizational structure at the end of the first quarter of fiscal 2013, and incurred the following expenses, as set forth in the table below:

	Second quarter ended				Year-to-date period  ended
	June 30, 2013		July 1, 2012		June 30, 2013		July 1, 2012
Termination costs	$	0	$	0	$	6,632	$	0
Professional fees and other		0		1,277		2,543		1,277
CEO transition costs		604		0		904		0
Total Corporate reorganization expenses	$	604	$	1,277	$	10,079	$	1,277

The CEO transition costs incurred in the second quarter of 2013 consist primarily of stock-based compensation expense. The Company expects to incur an additional approximate $1.0 million related to CEO transition through the remainder of fiscal 2013. CEO transition costs also include expenses related to an employment agreement with an executive officer and retention agreements with certain senior executives. The retention agreements provide bonuses to certain senior executives if they remain employed for a specified time period subsequent to the transition to a new CEO. The expense is being recognized over the estimated service period of these agreements. The Company has accrued $1.1 million as at June 30, 2013 relating to the retention agreements, for which the total expense may be up to $2.8 million.

	Termination costs			Professional fees and other			CEO transition charges			Total
Cost incurred during fiscal 2012	$	9,016		$	7,602		$	2,256		$	18,874
Paid during fiscal 2012		(1,458	)		(3,775	)		(411	)		(5,644	)
Accrued as at December 30, 2012		7,558			3,827			1,845			13,230
Cost incurred during fiscal 2013 to-date		6,632			2,543			904			10,079
Paid during fiscal 2013 to-date		(12,177	)		(5,185	)		(344	)		(17,706	)
Accrued as at June 30, 2013(1)	$	2,013		$	1,185		$	2,405		$	5,603

⁽¹⁾  Of the total accrual, $5.0 million is recognized in Accounts Payable (fiscal 2012: $12.4 million).

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Computations of Basic and Diluted Earnings Per Common Share (Detail) (CAD) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended				6 Months Ended				12 Months Ended
	Jun. 30, 2013		Jul. 01, 2012		Jun. 30, 2013		Jul. 01, 2012		Dec. 30, 2012
Schedule of Earnings Per Share, Basic and Diluted, by Common Class [Line Items]
Net income attributable to Tim Hortons Inc.	123,736		108,067		209,907		196,846		402,885
Weighted average shares outstanding for computation of basic earnings per common share attributable to Tim Hortons Inc. (in thousands)	152,083		155,351		152,597		155,589
Dilutive impact of RSUs	295	[1]	317	[1]	286	[1]	311	[1]
Dilutive impact of stock options with tandem SARs	259	[2]	327	[2]	250	[2]	307	[2]
Weighted average shares outstanding for computation of diluted earnings per common share attributable to Tim Hortons Inc. (in thousands)	152,637		155,995		153,133		156,207
Basic earnings per common share attributable to Tim Hortons Inc.	0.81		0.70		1.38		1.27
Diluted earnings per common share attributable to Tim Hortons Inc.	0.81		0.69		1.37		1.26

[1] Restricted stock units ("RSUs").

[2] Stock appreciation rights ("SARs").

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Accounts Payable, Tim Card Obligation and Other, and Other Long-Term Liabilities (Tables)

6 Months Ended

Jun. 30, 2013

Accounts Payable

Accounts payable

	As at
	June 30, 2013		December 30, 2012
Accounts payable	$	114,881	$	126,312
Construction holdbacks and accruals		20,812		31,008
Corporate reorganization accrual (note 2)		4,955		12,442
Total Accounts payable	$	140,648	$	169,762

Tim Card Obligation and Other

Tim Card obligation and other

	As at
	June 30, 2013		December 30, 2012
Tim Card obligation	$	112,508	$	159,745
Contingent rent expense accrual		8,895		9,962
Maidstone Bakeries supply contract deferred liability		7,553		7,929
Other accrued liabilities(1)		18,957		20,235
Total Accrued liabilities, Other	$	147,913	$	197,871

⁽¹⁾  Includes deferred revenues, deposits, and various equipment and other accruals.

Other Long-Term Liabilities

Other long-term liabilities

	As at
	June 30, 2013		December 30, 2012
Accrued rent leveling liability	$	30,149	$	29,244
Uncertain tax position liability(1)		32,724		28,610
Stock-based compensation liabilities (note 12)		23,112		17,479
Maidstone Bakeries supply contract deferred liability		11,763		15,352
Other accrued long-term liabilities(2)		18,853		18,929
Total Other long-term liabilities	$	116,601	$	109,614

⁽¹⁾  Includes accrued interest.

⁽²⁾  Includes deferred revenues and various other accruals.

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Variable Interest Entities (Tables)

6 Months Ended

Jun. 30, 2013

Summary of Contributions to the Canadian and U.S. Advertising Funds

Company contributions to the Canadian and U.S. advertising funds consisted of the following:

	Second quarter ended				Year-to-date period ended
	June 30, 2013		July 1, 2012		June 30, 2013		July 1, 2012
Company contributions	$	2,809	$	2,718	$	5,512	$	5,321
Contributions from consolidated non-owned restaurants		3,488		3,167		6,725		6,064
Total Company contributions	$	6,297	$	5,885	$	12,237	$	11,385

Schedule of Revenues and Expenses of Variable Interest Entities

The revenues and expenses associated with the Company’s consolidated Non-owned restaurants and advertising funds presented on a gross basis, prior to consolidation adjustments, are as follows:

	Second quarter ended
	June 30, 2013						July 1, 2012
	Restaurant VIEs		Advertising fund VIEs		Total VIEs		Restaurant VIEs		Advertising fund VIEs		Total VIEs
Sales	$	93,464	$	0	$	93,464	$	85,459	$	0	$	85,459
Advertising levies(1)		0		2,569		2,569		0		1,056		1,056
Total revenues		93,464		2,569		96,033		85,459		1,056		86,515
Cost of sales(2)		92,480		0		92,480		84,066		0		84,066
Operating expenses(1)		0		2,293		2,293		0		677		677
Operating income		984		276		1,260		1,393		379		1,772
Interest expense		0		276		276		0		379		379
Income before taxes		984		0		984		1,393		0		1,393
Income taxes		158		0		158		223		0		223
Net income attributable to noncontrolling interests	$	826	$	0	$	826	$	1,170	$	0	$	1,170

	Year-to-date period ended
	June 30, 2013						July 1, 2012
	Restaurant VIEs		Advertising fund VIEs		Total VIEs		Restaurant VIEs		Advertising fund VIEs		Total VIEs
Sales	$	180,224	$	0	$	180,224	$	163,473	$	0	$	163,473
Advertising levies(1)		0		5,100		5,100		0		1,543		1,543
Total revenues		180,224		5,100		185,324		163,473		1,543		165,016
Cost of sales(2)		178,346		0		178,346		160,654		0		160,654
Operating expenses(1)		0		4,392		4,392		0		1,062		1,062
Operating income		1,878		708		2,586		2,819		481		3,300
Interest expense		0		708		708		0		481		481
Income before taxes		1,878		0		1,878		2,819		0		2,819
Income taxes		300		0		300		449		0		449
Net income attributable to noncontrolling interests	$	1,578	$	0	$	1,578	$	2,370	$	0	$	2,370

⁽¹⁾  Generally, the advertising levies that are not related to the Expanded Menu Board Program are netted with advertising and marketing expenses incurred by the advertising funds in operating expenses, as these contributions are designated for specific purposes. The Company acts as an agent with regard to these contributions.

⁽²⁾  Includes rents, royalties, advertising expenses and product purchases from the Company which are eliminated upon the consolidation of these VIEs.

Schedule of Assets and Liabilities of Variable Interest Entities

The assets and liabilities associated with the Company’s consolidated Non-owned restaurants and advertising funds presented on a gross basis, prior to consolidation adjustments, are as follows:

	As at
	June 30, 2013				December 30, 2012
	Restaurant VIEs		Advertising fund VIEs		Restaurant VIEs		Advertising fund VIEs
Cash and cash equivalents	$	7,867	$	0	$	10,851	$	0
Advertising fund restricted assets – current		0		38,264		0		45,337
Other current assets		6,678		0		6,770		0
Property and equipment, net		22,162		57,769		19,536		57,925
Other long-term assets		176		1,633		572		2,095
Total assets	$	36,883	$	97,666	$	37,729	$	105,357
Notes payable to Tim Hortons Inc. – current(1)	$	14,453	$	0	$	13,637	$	0
Advertising fund liabilities – current		0		42,624		0		44,893
Other current liabilities		11,512		8,369		14,548		9,919
Notes payable to Tim Hortons Inc. – long-term (1)		880		0		804		0
Long-term debt(2)		0		44,393		0		46,849
Other long-term liabilities		9,271		2,280		5,887		3,696
Total liabilities		36,116		97,666		34,876		105,357
Equity of VIEs		767		0		2,853		0
Total liabilities and equity	$	36,883	$	97,666	$	37,729	$	105,357

⁽¹⁾  Various assets and liabilities are eliminated upon the consolidation of these VIEs, the most significant of which are the FIP Notes payable to the Company, which reduces the Notes receivable, net reported on the Condensed Consolidated Balance Sheet (see note 5).

⁽²⁾  Balance as at June 30, 2013 includes $52.5 million of debt relating to the Expanded Menu Board Program (fiscal 2012: $56.5 million), of which $8.1 million is recognized in Other current liabilities (fiscal 2012: $9.7 million) with the remainder recognized as Long-term debt.

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Corporate Reorganization Expenses - Additional Information (Detail) (CAD) In Thousands, unless otherwise specified	3 Months Ended			6 Months Ended			12 Months Ended
	Jun. 30, 2013		Jul. 01, 2012	Jun. 30, 2013		Jul. 01, 2012	Dec. 30, 2012
Corporate Reorganization Costs And Reserve [Line Items]
Restructuring accruals	5,603	[1]		5,603	[1]		13,230
Corporate reorganization expenses	604		1,277	10,079		1,277	18,874
Retention Agreement
Corporate Reorganization Costs And Reserve [Line Items]
Restructuring accruals	1,100			1,100
Retention Agreement | Maximum
Corporate Reorganization Costs And Reserve [Line Items]
Corporate reorganization expenses				2,800
CEO Transition Cost
Corporate Reorganization Costs And Reserve [Line Items]
Restructuring accruals	2,405	[1]		2,405	[1]		1,845
Corporate reorganization expenses	604		0	904		0	2,256
CEO Transition Cost | Maximum
Corporate Reorganization Costs And Reserve [Line Items]
Corporate reorganization expenses				1,000

[1] Of the total accrual, $5.0 million is recognized in Accounts Payable (fiscal 2012: $12.4 million).

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Consolidated Sales and Cost of Sales Information (Detail) (CAD) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jul. 01, 2012	Jun. 30, 2013	Jul. 01, 2012
Segment Reporting Information [Line Items]
Distribution sales	468,597	471,274	899,748	911,002
Company-operated restaurant sales	6,501	7,039	12,477	12,599
Sales from VIEs	93,464	85,459	180,224	163,473
Total Sales	568,562	563,772	1,092,449	1,087,074
Distribution cost of sales	399,019	410,224	774,572	800,172
Company-operated restaurant cost of sales	6,613	7,697	13,623	13,777
Cost of sales from VIEs	83,460	74,979	162,251	143,871
Total Cost of sales	489,092	492,900	950,446	957,820

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Commitments And Contingencies - Additional Information (Detail) (CAD) In Billions, unless otherwise specified	Jun. 12, 2008
Commitments and Contingencies Disclosure [Line Items]
Asserted damages	1.95

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Fair Value and Carrying Value of Other Financial Assets and Liabilities (Parenthetical) (Detail)	6 Months Ended
	Jun. 30, 2013 D
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Interest rate reset period, in days	90

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Accounts Payable (Detail) (CAD) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 30, 2012
Accounts Payable And Accrued Liabilities Current And Noncurrent [Line Items]
Accounts payable	114,881	126,312
Construction holdbacks and accruals	20,812	31,008
Corporate reorganization accrual (note 2)	4,955	12,442
Accounts payable	140,648	169,762

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Condensed Consolidated Statement Of Comprehensive Income (CAD) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jul. 01, 2012	Jun. 30, 2013	Jul. 01, 2012
Net income	124,562	109,237	211,485	199,216
Other comprehensive income (loss)
Translation adjustments gain (loss)	15,205	8,342	23,382	506
Unrealized gains (losses) from cash flow hedges (note 9)
Gain (loss) from change in fair value of derivatives	5,307	2,114	8,079	(1,389)
Amount of net gain (loss) reclassified to earnings during the period	378	(800)	1,041	(1,948)
Tax (expense) recovery (note 9)	(1,333)	(334)	(2,325)	951
Other comprehensive income (loss)	19,557	9,322	30,177	(1,880)
Comprehensive income	144,119	118,559	241,662	197,336
Comprehensive income attributable to noncontrolling interests	826	1,170	1,578	2,370
Comprehensive income attributable to Tim Hortons Inc.	143,293	117,389	240,084	194,966

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Accounts Payable, Tim Card Obligation and Other, and Other Long-Term Liabilities

6 Months Ended

Jun. 30, 2013

Accounts Payable, Tim Card Obligation and Other, and Other Long-Term Liabilities

NOTE 7 ACCOUNTS PAYABLE, TIM CARD OBLIGATION AND OTHER, AND OTHER LONG–TERM LIABILITIES

Accounts payable

	As at
	June 30, 2013		December 30, 2012
Accounts payable	$	114,881	$	126,312
Construction holdbacks and accruals		20,812		31,008
Corporate reorganization accrual (note 2)		4,955		12,442
Total Accounts payable	$	140,648	$	169,762

Tim Card obligation and other

	As at
	June 30, 2013		December 30, 2012
Tim Card obligation	$	112,508	$	159,745
Contingent rent expense accrual		8,895		9,962
Maidstone Bakeries supply contract deferred liability		7,553		7,929
Other accrued liabilities(1)		18,957		20,235
Total Accrued liabilities, Other	$	147,913	$	197,871

⁽¹⁾  Includes deferred revenues, deposits, and various equipment and other accruals.

Other long-term liabilities

	As at
	June 30, 2013		December 30, 2012
Accrued rent leveling liability	$	30,149	$	29,244
Uncertain tax position liability(1)		32,724		28,610
Stock-based compensation liabilities (note 12)		23,112		17,479
Maidstone Bakeries supply contract deferred liability		11,763		15,352
Other accrued long-term liabilities(2)		18,853		18,929
Total Other long-term liabilities	$	116,601	$	109,614

⁽¹⁾  Includes accrued interest.

⁽²⁾  Includes deferred revenues and various other accruals.

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Condensed Consolidated Balance Sheet (Parenthetical) (CAD)	Jun. 30, 2013	Dec. 30, 2012
Common shares, stated value per share	2.84	2.84
Common shares, shares authorized	unlimited	unlimited
Common shares, issued	151,319,384	153,404,839
Common shares held in Trust, shares	340,314	316,923

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Stock-Based Compensation - Additional Information (Detail) (CAD)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jul. 01, 2012	Jun. 30, 2013	Jul. 01, 2012
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Net (gain) loss from derivatives not designated as hedging instruments	(1,551,000)	31,000	(8,584,000)	(2,453,000)
Number of underlying common stock covered under contracts			1,000,000
DSUs settled, shares		41,000	39,000
TDL RSU Employee Benefit Plan Trust
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Purchase of common shares, shares	43,000	112,000
Purchase of common shares, value	2,500,000	6,200,000
TRS | General and Administrative Expense
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Net (gain) loss from derivatives not designated as hedging instruments	(1,482,000)	(180,000)	(8,235,000)	(3,412,000)
Deferred Share Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
DSUs granted, shares			7,600	8,100
DSUs granted, value			52.54	53.78
DSUs settled, shares	0	9,400	0	9,400

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Condensed Consolidated Statement Of Operations (CAD) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended				6 Months Ended
	Jun. 30, 2013		Jul. 01, 2012		Jun. 30, 2013		Jul. 01, 2012
Revenues
Sales (note 14)	568,562		563,772		1,092,449		1,087,074
Franchise revenues
Rents and royalties	209,289		198,973		396,743		379,159
Franchise fees	22,288		22,836		42,484		40,632
Franchise Revenue, Total	231,577		221,809		439,227		419,791
Total revenues	800,139	[1]	785,581	[1]	1,531,676	[1]	1,506,865	[1]
Costs and expenses
Cost of sales (note 14)	489,092		492,900		950,446		957,820
Operating expenses	76,986		72,314		152,719		138,239
Franchise fee costs	23,326		24,794		45,878		45,076
General and administrative expenses	38,038		40,272		76,706		81,695
Equity (income)	(3,916)		(3,859)		(7,265)		(7,105)
Corporate reorganization expenses (note 2)	604		1,277		10,079		1,277
Other (income) expense, net	(570)		(956)		(1,383)		(599)
Total costs and expenses, net	623,560		626,742		1,227,180		1,216,403
Operating income	176,579		158,839		304,496		290,462
Interest (expense)	(8,922)		(8,650)		(17,585)		(16,548)
Interest income	791		723		1,719		1,434
Income before income taxes	168,448		150,912		288,630		275,348
Income taxes (note 3)	43,886		41,675		77,145		76,132
Net income	124,562		109,237		211,485		199,216
Net income attributable to noncontrolling interests (note 13)	826		1,170		1,578		2,370
Net income attributable to Tim Hortons Inc.	123,736		108,067		209,907		196,846
Basic earnings per common share attributable to Tim Hortons Inc. (note 4)	0.81		0.70		1.38		1.27
Diluted earnings per common share attributable to Tim Hortons Inc. (note 4)	0.81		0.69		1.37		1.26
Weighted average number of common shares outstanding (in thousands) - Basic (note 4)	152,083		155,351		152,597		155,589
Weighted average number of common shares outstanding (in thousands) - Diluted (note 4)	152,637		155,995		153,133		156,207
Dividends per common share	0.26		0.21		0.52		0.42

[1] There are no inter-segment revenues included in the above table.

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Summary Of Fair Value Of Derivative Instruments On Consolidated Balance Sheet (Detail) (CAD) In Thousands, unless otherwise specified	Jun. 30, 2013		Dec. 30, 2012
Derivatives Designated As Cash Flow Hedging Instruments | Forward Currency Contracts
Derivatives, Fair Value [Line Items]
Fair Value Assets	6,931	[1]	494	[1]
Fair value liability	(14)	[1]	(2,315)	[1]
Derivatives Designated As Cash Flow Hedging Instruments | Forward Currency Contracts | Accounts Receivable
Derivatives, Fair Value [Line Items]
Fair value asset (liability)	6,917	[1]
Derivatives Designated As Cash Flow Hedging Instruments | Forward Currency Contracts | Accounts Payable
Derivatives, Fair Value [Line Items]
Fair value asset (liability)			(1,821)	[1]
Derivatives Designated As Cash Flow Hedging Instruments | Interest Rate Swap | Ad Fund
Derivatives, Fair Value [Line Items]
Fair Value Assets	35	[2]	0	[2]
Fair value liability	0	[2]	0	[2]
Fair value asset (liability)			0	[2]
Derivatives Designated As Cash Flow Hedging Instruments | Interest Rate Swap | Other Long-Term Assets | Ad Fund
Derivatives, Fair Value [Line Items]
Fair value asset (liability)	35	[2]
Derivatives Not Designated As Hedging Instruments | Forward Currency Contracts
Derivatives, Fair Value [Line Items]
Fair Value Assets	156	[1]	5	[1]
Fair value liability	0	[1]	(198)	[1]
Derivatives Not Designated As Hedging Instruments | Forward Currency Contracts | Accounts Receivable
Derivatives, Fair Value [Line Items]
Fair value asset	156	[1]
Derivatives Not Designated As Hedging Instruments | Forward Currency Contracts | Accounts Payable
Derivatives, Fair Value [Line Items]
Fair value asset			(193)	[1]
Derivatives Not Designated As Hedging Instruments | TRS
Derivatives, Fair Value [Line Items]
Fair Value Assets	15,739	[3]	8,614	[3]
Fair value liability	0	[3]	(1,110)	[3]
Derivatives Not Designated As Hedging Instruments | TRS | Other Long-Term Assets
Derivatives, Fair Value [Line Items]
Fair value asset	15,739	[3]	7,504	[3]

[1] Notional value as at June 30, 2013 of $151.6 million (fiscal 2012: $195.1 million), with maturities ranging between July 2013 and May 2014; no associated cash collateral.

[2] Notional value as at June 30, 2013 of $32.5 million (fiscal 2012: $nil), with maturities through fiscal 2019; no associated cash collateral.

[3] The notional value and associated cash collateral, in the form of bearer deposit notes (see note 8), was $41.4 million as at June 30, 2013 (fiscal 2012: $41.4 million). The TRS have maturities annually, in May, between fiscal 2015 and fiscal 2019.

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Fair Values (Tables)

6 Months Ended

Jun. 30, 2013

Fair Value of Derivative Instruments on Condensed Consolidated Balance Sheet

Financial assets and liabilities measured at fair value

	As at
	June 30, 2013					December 30, 2012
	Notional value		Fair value hierarchy	Fair  value asset (liability)(1)		Notional value		Fair value hierarchy	Fair  value asset (liability)(1)
Derivatives:
Forward currency contracts(2)	$	151,645	Level 2	$	7,073	$	195,081	Level 2	$	(2,014	)
Interest rate swap(3)		32,500	Level 2		35		0	Level 2		0
Total return swaps (“TRS”)(4)		41,403	Level 2		15,739		41,403	Level 2		7,504
Total Derivatives	$	225,548		$	22,847	$	236,484		$	5,490

⁽¹⁾  The Company values its derivatives using valuations that are calibrated to the initial trade prices. Subsequent valuations are based on observable inputs to the valuation model.

⁽²⁾  The fair value of forward currency contracts is determined using prevailing exchange rates.

⁽³⁾  In February 2013, the Tim Hortons Advertising and Promotion Fund (Canada) Inc. (“Ad Fund”) entered into an amortizing interest rate swap to fix a portion of the interest expense on its term debt. The fair value is estimated using discounted cash flows and market-based observable inputs, including interest rate yield curves and discount rates.

⁽⁴⁾  The fair value of the TRS is determined using the Company’s closing common share price on the last business day of the fiscal period, as quoted on the Toronto Stock Exchange (“TSX”).

Fair Value and Carrying Value of Other Financial Assets and Liabilities

The following table summarizes the fair value and carrying value of other financial assets and liabilities that are not recognized at fair value on a recurring basis on the Condensed Consolidated Balance Sheet:

	As at
	June 30, 2013							December 30, 2012
	Fair value hierarchy	Fair value asset (liability)			Carrying value			Fair value hierarchy	Fair value asset (liability)			Carrying value
Cash and cash equivalents(1)	Level 1	$	86,603		$	86,603		Level 1	$	120,139		$	120,139
Restricted cash and cash equivalents(1)	Level 1		104,780			104,780		Level 1		150,574			150,574
Bearer deposit notes(2)	Level 2		41,403			41,403		Level 2		41,403			41,403
Notes receivable, net(3)	Level 3		11,608			11,608		Level 3		8,777			8,777
Senior unsecured notes, series 1(4)	Level 2		(316,764	)		(301,370	)	Level 2		(325,857	)		(301,544	)
Advertising fund term debt(5)	Level 3		(52,464	)		(52,464	)	Level 3		(56,500	)		(56,500	)
Other debt(6)	Level 3		(113,623	)		(65,668	)	Level 3		(125,000	)		(60,223	)

⁽¹⁾  The carrying values approximate fair values due to the short-term nature of these investments.

⁽²⁾  The Company holds these notes as collateral to reduce the carrying costs of the TRS. The interest rate on these notes resets every 90 days; therefore, the fair value of these notes, using a market approach, approximates the carrying value.

⁽³⁾  Management generally estimates the current value of notes receivable, using a cost approach, based primarily on the estimated depreciated replacement cost of the underlying equipment held as collateral.

⁽⁴⁾  The fair value of the senior unsecured notes, using a market approach, is based on publicly disclosed trades between arm’s length institutions as documented on Bloomberg LP.

⁽⁵⁾  Management estimates the fair value of this variable rate debt using a market approach, based on prevailing interest rates plus an applicable margin.

⁽⁶⁾  Management estimates the fair value of its Other debt, primarily consisting of contributions received related to the construction costs of certain restaurants, using an income approach, by discounting future cash flows using a Company risk-adjusted rate, over the remaining term of the debt.

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Summary Of Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2013

Franchised Locations and System Activity

The following table outlines the Company’s systemwide restaurant count and activity:

	Second quarter ended						Year-to-date period  ended
	June 30, 2013			July 1, 2012			June 30, 2013			July 1, 2012
Systemwide Restaurant Count
Franchised restaurants in operation – beginning of period		4,271			4,019			4,242			3,996
Restaurants opened		27			38			60			68
Restaurants closed		(12	)		(10	)		(22	)		(12	)
Net transfers within the franchised system		(2	)		3			4			(2	)
Franchised restaurants in operation – end of period		4,284			4,050			4,284			4,050
Company-operated restaurants		20			21			20			21
Total systemwide restaurants – end of period(1)		4,304			4,071			4,304			4,071
% of restaurants franchised – end of period		99.5	%		99.5	%		99.5	%		99.5	%

⁽¹⁾  Includes various types of standard and non-standard restaurant formats in Canada, the U.S. and the Gulf Cooperation Council (“GCC”) with differing restaurant sizes and menu offerings as well as self-serve kiosks, which serve primarily coffee products and a limited product selection. Collectively, the Company refers to all of these restaurants and kiosks as “systemwide restaurants.”

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Inventories and Other Net (Detail) (CAD) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 30, 2012
Inventory [Line Items]
Raw materials	29,420	19,941
Finished goods	71,064	75,660
Inventories, gross	100,484	95,601
Inventory obsolescence provision	(870)	(1,015)
Inventories, net	99,614	94,586
Prepaids and other	10,025	12,414
Total Inventories and other, net	109,639	107,000

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Summary of (Gain) Loss on Derivatives Not Designated as Hedging Instruments (Detail) (CAD) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jul. 01, 2012	Jun. 30, 2013	Jul. 01, 2012
Effect of derivatives on statements of operations [Line Items]
Net (gain) loss from derivatives not designated as hedging instruments	(1,551)	31	(8,584)	(2,453)
TRS | General and Administrative Expense
Effect of derivatives on statements of operations [Line Items]
Net (gain) loss from derivatives not designated as hedging instruments	(1,482)	(180)	(8,235)	(3,412)
Forward Currency Contracts | Cost Of Sales
Effect of derivatives on statements of operations [Line Items]
Net (gain) loss from derivatives not designated as hedging instruments	(69)	211	(349)	959

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Revenues and Expenses of Variable Interest Entities (Detail) (CAD) In Thousands, unless otherwise specified	3 Months Ended				6 Months Ended				12 Months Ended
	Jun. 30, 2013		Jul. 01, 2012		Jun. 30, 2013		Jul. 01, 2012		Dec. 30, 2012
Variable Interest Entity [Line Items]
Sales	568,562		563,772		1,092,449		1,087,074
Total revenues	800,139	[1]	785,581	[1]	1,531,676	[1]	1,506,865	[1]
Cost of sales	489,092		492,900		950,446		957,820
Operating expenses	76,986		72,314		152,719		138,239
Operating income	(176,579)		(158,839)		(304,496)		(290,462)
Interest expense	(8,922)		(8,650)		(17,585)		(16,548)
Income before taxes	(168,448)		(150,912)		(288,630)		(275,348)
Income taxes	(43,886)		(41,675)		(77,145)		(76,132)
Net income attributable to noncontrolling interests	826		1,170		1,578		2,370		4,881
Restaurant VIEs
Variable Interest Entity [Line Items]
Sales	93,464		85,459		180,224		163,473
Advertising levies	0	[2]	0	[2]	0	[2]	0	[2]
Total revenues	93,464		85,459		180,224		163,473
Cost of sales	92,480	[3]	84,066	[3]	178,346	[3]	160,654	[3]
Operating expenses	0	[2]	0	[2]	0	[2]	0	[2]
Operating income	984		1,393		1,878		2,819
Interest expense	0		0		0		0
Income before taxes	984		1,393		1,878		2,819
Income taxes	158		223		300		449
Net income attributable to noncontrolling interests	826		1,170		1,578		2,370
Ad Fund VIEs
Variable Interest Entity [Line Items]
Sales	0		0		0		0
Advertising levies	2,569	[2]	1,056	[2]	5,100	[2]	1,543	[2]
Total revenues	2,569		1,056		5,100		1,543
Cost of sales	0	[3]	0	[3]	0	[3]	0	[3]
Operating expenses	2,293	[2]	677	[2]	4,392	[2]	1,062	[2]
Operating income	276		379		708		481
Interest expense	276		379		708		481
Income before taxes	0		0		0		0
Income taxes	0		0		0		0
Net income attributable to noncontrolling interests	0		0		0		0
VIEs
Variable Interest Entity [Line Items]
Sales	93,464		85,459		180,224		163,473
Advertising levies	2,569	[2]	1,056	[2]	5,100	[2]	1,543	[2]
Total revenues	96,033		86,515		185,324		165,016
Cost of sales	92,480	[3]	84,066	[3]	178,346	[3]	160,654	[3]
Operating expenses	2,293	[2]	677	[2]	4,392	[2]	1,062	[2]
Operating income	1,260		1,772		2,586		3,300
Interest expense	276		379		708		481
Income before taxes	984		1,393		1,878		2,819
Income taxes	158		223		300		449
Net income attributable to noncontrolling interests	826		1,170		1,578		2,370

[1] There are no inter-segment revenues included in the above table.

[2] Generally, the advertising levies that are not related to the Expanded Menu Board Program are netted with advertising and marketing expenses incurred by the advertising funds in operating expenses, as these contributions are designated for specific purposes. The Company acts as an agent with regard to these contributions.

[3] Includes rents, royalties, advertising expenses and product purchases from the Company which are eliminated upon the consolidation of these VIEs.

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Accrued Reorganization Expenses (Parenthetical) (Detail) (CAD) In Thousands, unless otherwise specified	Jun. 30, 2013		Dec. 30, 2012
Restructuring Cost and Reserve [Line Items]
Restructuring accruals	5,603	[1]	13,230
Accounts Payable
Restructuring Cost and Reserve [Line Items]
Restructuring accruals	5,000		12,400

[1] Of the total accrual, $5.0 million is recognized in Accounts Payable (fiscal 2012: $12.4 million).

XML

Summary of Significant Accounting Policies - Additional Information (Detail) (Republic Of Ireland And United Kingdom)	Jun. 30, 2013 Store	Jul. 01, 2012 Store
Republic Of Ireland And United Kingdom
Summary Of Significant Accounting Policies [Line Items]
Excluded licensed locations from systemwide restaurant progression	251	243

XML

Corporate Reorganization Expenses (Detail) (CAD) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2013	Jul. 01, 2012	Jun. 30, 2013	Jul. 01, 2012	Dec. 30, 2012
Corporate Reorganization Costs And Reserve [Line Items]
Corporate reorganization expenses	604	1,277	10,079	1,277	18,874
Termination Costs
Corporate Reorganization Costs And Reserve [Line Items]
Corporate reorganization expenses	0	0	6,632	0	9,016
Professional Fees And Other
Corporate Reorganization Costs And Reserve [Line Items]
Corporate reorganization expenses	0	1,277	2,543	1,277	7,602
CEO Transition Cost
Corporate Reorganization Costs And Reserve [Line Items]
Corporate reorganization expenses	604	0	904	0	2,256

XML

Inventories and Other, Net

6 Months Ended

Jun. 30, 2013

Inventories and Other, Net

NOTE 6 INVENTORIES AND OTHER, NET

	As at
	June 30, 2013			December 30, 2012
Raw materials	$	29,420		$	19,941
Finished goods		71,064			75,660
		100,484			95,601
Inventory obsolescence provision		(870	)		(1,015	)
Inventories, net		99,614			94,586
Prepaids and other		10,025			12,414
Total Inventories and other, net	$	109,639		$	107,000

XML

Stock Option With Tandem SAR Awards Granted To Officers (Parenthetical) (Detail) (Stock Options And Tandem Stock Appreciation Rights, CAD) In Millions, except Share data, unless otherwise specified	6 Months Ended			12 Months Ended
	Jun. 30, 2013		Jul. 01, 2012	Dec. 30, 2012
Stock Options And Tandem Stock Appreciation Rights
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Cash settlement exercised	2.5		1.5
Vested SARs exercised and cash-settled,shares	181,000	[1]	96,000	218,000

[1] Total cash settlement, net of applicable withholding taxes of $2.5 million of SARs in the year-to-date period ended June 30, 2013 (year-to-date period fiscal 2012: 96,000 units for $1.5 million). The associated options were cancelled.

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Derivatives (Tables)

6 Months Ended

Jun. 30, 2013

Summary of Fair Value of Derivative Instruments on Consolidated Balance Sheet

	As at
	June 30, 2013								December 30, 2012
	Asset		Liability			Net asset (liability)		Classification on Condensed Consolidated Balance Sheet	Asset		Liability			Net asset (liability)			Classification on Condensed Consolidated Balance Sheet
Derivatives designated as cash flow hedging instruments
Forward currency contracts(1)	$	6,931	$	(14	)	$	6,917	Accounts receivable, net	$	494	$	(2,315	)	$	(1,821	)	Accounts payable
Interest rate swap(2)	$	35	$	0		$	35	Other assets	$	0	$	0		$	0		n/a
Derivatives not designated as hedging instruments
TRS(3)	$	15,739	$	0		$	15,739	Other assets	$	8,614	$	(1,110	)	$	7,504		Other assets
Forward currency contracts(1)	$	156	$	0		$	156	Accounts receivable, net	$	5	$	(198	)	$	(193	)	Accounts payable

⁽¹⁾  Notional value as at June 30, 2013 of $151.6 million (fiscal 2012: $195.1 million), with maturities ranging between July 2013 and May 2014; no associated cash collateral.

⁽²⁾  Notional value as at June 30, 2013 of $32.5 million (fiscal 2012: $nil), with maturities through fiscal 2019; no associated cash collateral.

⁽³⁾  The notional value and associated cash collateral, in the form of bearer deposit notes (see note 8), was $41.4 million as at June 30, 2013 (fiscal 2012: $41.4 million). The TRS have maturities annually, in May, between fiscal 2015 and fiscal 2019.

Summary of Effect of Derivative Instruments on Consolidated Statement of Comprehensive Income

		Second quarter ended June 30, 2013									Second quarter ended July 1, 2012
Derivatives designated as cash flow hedging instruments(1)	Classification on Condensed Consolidated Statement of Operations	Amount of gain (loss) recognized in OCI(2)			Amount of net (gain)  loss reclassified to earnings			Total effect on OCI(2)			Amount of gain (loss) recognized in OCI(2)			Amount of net (gain)  loss reclassified to earnings			Total effect on OCI(2)
Forward currency contracts	Cost of sales	$	4,851		$	144		$	4,995		$	2,114		$	(973	)	$	1,141
Interest rate swap	Interest (expense)		456			61			517			0			0			0
Interest rate forwards(3)	Interest (expense)		0			173			173			0			173			173
Total			5,307			378			5,685			2,114			(800	)		1,314
Income tax effect	Income taxes		(1,279	)		(54	)		(1,333	)		(545	)		211			(334	)
Net of income taxes		$	4,028		$	324		$	4,352		$	1,569		$	(589	)	$	980

		Year-to-date period ended June 30, 2013									Year-to-date period ended July 1, 2012
Derivatives designated as cash flow hedging instruments(1)	Classification on Condensed Consolidated Statement of Operations	Amount of gain (loss) recognized in OCI(2)			Amount of net (gain)  loss reclassified to earnings			Total effect on OCI(2)			Amount of gain (loss) recognized in OCI(2)			Amount of net (gain)  loss reclassified to earnings			Total effect on OCI(2)
Forward currency contracts	Cost of sales	$	8,124		$	615		$	8,739		$	(1,389	)	$	(2,294	)	$	(3,683	)
Interest rate swap	Interest (expense)		(45	)		80			35			0			0			0
Interest rate forwards(3)	Interest (expense)		0			346			346			0			346			346
Total			8,079			1,041			9,120			(1,389	)		(1,948	)		(3,337	)
Income tax effect	Income taxes		(2,141	)		(184	)		(2,325	)		441			510			951
Net of income taxes		$	5,938		$	857		$	6,795		$	(948	)	$	(1,438	)	$	(2,386	)

⁽¹⁾  Excludes amounts related to ineffectiveness, as they were not significant.

⁽²⁾  Other comprehensive income (“OCI”).

⁽³⁾  The Company entered into and settled interest rate forwards in fiscal 2010 relating to the Company’s outstanding term debt.

Summary of (Gain) Loss on Derivatives Not Designated as Hedging Instruments

The following table summarizes the (gain) loss on derivatives not designated as hedging instruments:

	Classification on Condensed Consolidated Statement of Operations	Second quarter ended						Year-to-date ended
		June 30, 2013			July 1, 2012			June 30, 2013			July 1, 2012
TRS	General and administrative expenses	$	(1,482	)	$	(180	)	$	(8,235	)	$	(3,412	)
Forward currency contracts	Cost of sales		(69	)		211			(349	)		959
Total (gain) loss, net		$	(1,551	)	$	31		$	(8,584	)	$	(2,453	)

XML

Notes Receivable By Segment (Detail) (CAD) In Thousands, unless otherwise specified	Jun. 30, 2013		Dec. 30, 2012
Notes Receivable By Segment [Line Items]
Notes receivable	13,434		10,567
Allowance	(1,826)		(1,790)
Notes receivable, net	11,608		8,777
Current portion, net	(5,946)		(7,531)
Long-term portion, net	5,662		1,246
Gross
Notes Receivable By Segment [Line Items]
Notes receivable	28,767		25,008
VIEs
Notes Receivable By Segment [Line Items]
Notes receivable	(15,333)	[1]	(14,441)	[1]
Franchise Incentive Program ("FIP") notes
Notes Receivable By Segment [Line Items]
Notes receivable	5,185	[2]	5,794	[2]
Franchise Incentive Program ("FIP") notes | Gross
Notes Receivable By Segment [Line Items]
Notes receivable	20,518	[2]	20,235	[2]
Franchise Incentive Program ("FIP") notes | VIEs
Notes Receivable By Segment [Line Items]
Notes receivable	(15,333)	[1],[2]	(14,441)	[1],[2]
Other
Notes Receivable By Segment [Line Items]
Notes receivable	8,249	[3]	4,773	[3]
Other | Gross
Notes Receivable By Segment [Line Items]
Notes receivable	8,249	[3]	4,773	[3]
Other | VIEs
Notes Receivable By Segment [Line Items]
Notes receivable	0	[1],[3]	0	[1],[3]

[1] The notes payable to the Company by VIEs are eliminated on consolidation, which reduces the Notes receivable, net recognized on the Condensed Consolidated Balance Sheet (see note 13).

[2] The Company has outstanding FIP arrangements with certain U.S. restaurant owners, which generally provided interest-free financing for the purchase of certain restaurant equipment, furniture, trade fixtures and signage.

[3] Relates primarily to notes issued to vendors in conjunction with the financing of certain property sales and on various equipment and other financing programs.

XML

Derivatives

6 Months Ended

Jun. 30, 2013

Derivatives

NOTE 9 DERIVATIVES

	As at
	June 30, 2013								December 30, 2012
	Asset		Liability			Net asset (liability)		Classification on Condensed Consolidated Balance Sheet	Asset		Liability			Net asset (liability)			Classification on Condensed Consolidated Balance Sheet
Derivatives designated as cash flow hedging instruments
Forward currency contracts(1)	$	6,931	$	(14	)	$	6,917	Accounts receivable, net	$	494	$	(2,315	)	$	(1,821	)	Accounts payable
Interest rate swap(2)	$	35	$	0		$	35	Other assets	$	0	$	0		$	0		n/a
Derivatives not designated as hedging instruments
TRS(3)	$	15,739	$	0		$	15,739	Other assets	$	8,614	$	(1,110	)	$	7,504		Other assets
Forward currency contracts(1)	$	156	$	0		$	156	Accounts receivable, net	$	5	$	(198	)	$	(193	)	Accounts payable

⁽¹⁾  Notional value as at June 30, 2013 of $151.6 million (fiscal 2012: $195.1 million), with maturities ranging between July 2013 and May 2014; no associated cash collateral.

⁽²⁾  Notional value as at June 30, 2013 of $32.5 million (fiscal 2012: $nil), with maturities through fiscal 2019; no associated cash collateral.

⁽³⁾  The notional value and associated cash collateral, in the form of bearer deposit notes (see note 8), was $41.4 million as at June 30, 2013 (fiscal 2012: $41.4 million). The TRS have maturities annually, in May, between fiscal 2015 and fiscal 2019.

		Second quarter ended June 30, 2013									Second quarter ended July 1, 2012
Derivatives designated as cash flow hedging instruments(1)	Classification on Condensed Consolidated Statement of Operations	Amount of gain (loss) recognized in OCI(2)			Amount of net (gain)  loss reclassified to earnings			Total effect on OCI(2)			Amount of gain (loss) recognized in OCI(2)			Amount of net (gain)  loss reclassified to earnings			Total effect on OCI(2)
Forward currency contracts	Cost of sales	$	4,851		$	144		$	4,995		$	2,114		$	(973	)	$	1,141
Interest rate swap	Interest (expense)		456			61			517			0			0			0
Interest rate forwards(3)	Interest (expense)		0			173			173			0			173			173
Total			5,307			378			5,685			2,114			(800	)		1,314
Income tax effect	Income taxes		(1,279	)		(54	)		(1,333	)		(545	)		211			(334	)
Net of income taxes		$	4,028		$	324		$	4,352		$	1,569		$	(589	)	$	980

		Year-to-date period ended June 30, 2013									Year-to-date period ended July 1, 2012
Derivatives designated as cash flow hedging instruments(1)	Classification on Condensed Consolidated Statement of Operations	Amount of gain (loss) recognized in OCI(2)			Amount of net (gain)  loss reclassified to earnings			Total effect on OCI(2)			Amount of gain (loss) recognized in OCI(2)			Amount of net (gain)  loss reclassified to earnings			Total effect on OCI(2)
Forward currency contracts	Cost of sales	$	8,124		$	615		$	8,739		$	(1,389	)	$	(2,294	)	$	(3,683	)
Interest rate swap	Interest (expense)		(45	)		80			35			0			0			0
Interest rate forwards(3)	Interest (expense)		0			346			346			0			346			346
Total			8,079			1,041			9,120			(1,389	)		(1,948	)		(3,337	)
Income tax effect	Income taxes		(2,141	)		(184	)		(2,325	)		441			510			951
Net of income taxes		$	5,938		$	857		$	6,795		$	(948	)	$	(1,438	)	$	(2,386	)

⁽¹⁾  Excludes amounts related to ineffectiveness, as they were not significant.

⁽²⁾  Other comprehensive income (“OCI”).

⁽³⁾  The Company entered into and settled interest rate forwards in fiscal 2010 relating to the Company’s outstanding term debt.

The following table summarizes the (gain) loss on derivatives not designated as hedging instruments:

	Classification on Condensed Consolidated Statement of Operations	Second quarter ended						Year-to-date ended
		June 30, 2013			July 1, 2012			June 30, 2013			July 1, 2012
TRS	General and administrative expenses	$	(1,482	)	$	(180	)	$	(8,235	)	$	(3,412	)
Forward currency contracts	Cost of sales		(69	)		211			(349	)		959
Total (gain) loss, net		$	(1,551	)	$	31		$	(8,584	)	$	(2,453	)

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Notes Receivable, Net

6 Months Ended

Jun. 30, 2013

Notes Receivable, Net

NOTE 5 NOTES RECEIVABLE, NET

	As at
	June 30, 2013								December 30, 2012
	Gross		VIEs(2)			Total			Gross		VIEs(2)			Total
Franchise Incentive Program (“FIP”) notes(1)	$	20,518	$	(15,333	)	$	5,185		$	20,235	$	(14,441	)	$	5,794
Other notes receivable(3)		8,249		0			8,249			4,773		0			4,773
Notes receivable	$	28,767	$	(15,333	)	$	13,434		$	25,008	$	(14,441	)	$	10,567
Allowance							(1,826	)							(1,790	)
Notes receivable, net						$	11,608							$	8,777
Current portion, net							(5,946	)							(7,531	)
Long-term portion, net						$	5,662							$	1,246

	As at
	June 30, 2013								December 30, 2012
Class and Aging	Gross		VIEs(2)			Total			Gross		VIEs(2)			Total
Current status (FIP Notes and other)	$	9,979	$	(1,931	)	$	8,048		$	6,969	$	(1,269	)	$	5,700
Past-due status < 90 days (FIP Notes)		234		(0	)		234			407		(407	)		0
Past-due status > 90 days (FIP Notes)		18,554		(13,402	)		5,152			17,632		(12,765	)		4,867
Notes receivable	$	28,767	$	(15,333	)	$	13,434		$	25,008	$	(14,441	)	$	10,567
Allowance							(1,826	)							(1,790	)
Notes receivable, net						$	11,608							$	8,777

⁽¹⁾  The Company has outstanding FIP arrangements with certain U.S. restaurant owners, which generally provided interest-free financing for the purchase of certain restaurant equipment, furniture, trade fixtures and signage.

⁽²⁾  The notes payable to the Company by VIEs are eliminated on consolidation, which reduces the Notes receivable, net recognized on the Condensed Consolidated Balance Sheet (see note 13).

⁽³⁾  Relates primarily to notes issued to vendors in conjunction with the financing of certain property sales and on various equipment and other financing programs.

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Condensed Consolidated Statement Of Equity In Thousands		Total CAD	Common Shares USD ($)	Common Shares Held In Trust USD ($)	Contributed Surplus CAD	Retained Earnings CAD	AOCI, Translation Adjustment CAD		AOCI, Cash Flow Hedges CAD		Total Equity Of Tim Hortons Inc. CAD	Noncontrolling Interest CAD
Balance as at Jan. 01, 2012		1,154,433	$ 447,558	$ (10,136)	6,375	836,968	(128,170)	[1]	(47)	[1]	1,152,548	1,885	[2]
Balance as (in shares) at Jan. 01, 2012			157,815	(277)
Repurchase of common shares (in shares)	[3]		(4,410)	(112)
Repurchase of common shares	[3]	(231,354)	(12,525)	(6,154)	0	(212,675)	0	[1]	0	[1]	(231,354)	0	[2]
Disbursed or sold from the Trust, shares	[4]		0	72
Disbursed or sold from the Trust	[4]	2,934	0	2,934	0	0	0	[1]	0	[1]	2,934	0	[2]
Stock based compensation		2,452	0	0	4,595	(2,143)	0	[1]	0	[1]	2,452	0	[2]
Other comprehensive loss		(10,811)	0	0	0	0	(7,268)	[1]	(3,543)	[1]	(10,811)	0	[2]
NCI transactions		0	0	0	0	(907)	0	[1]	0	[1]	(907)	907	[2]
Net income attributable to NCI		4,881	0	0	0	0	0	[1]	0	[1]	0	4,881	[2]
Net income attributable to THI		402,885	0	0	0	402,885	0	[1]	0	[1]	402,885	0	[2]
Dividends and distributions, net		(135,329)	0	0	0	(130,509)	0	[1]	0	[1]	(130,509)	(4,820)	[2]
Balance as at Dec. 30, 2012		1,190,091	435,033	(13,356)	10,970	893,619	(135,438)	[1]	(3,590)	[1]	1,187,238	2,853	[2]
Balance as (in shares) at Dec. 30, 2012			153,405	(317)
Repurchase of common shares (in shares)	[3]		(2,086)	(43)
Repurchase of common shares	[3]	(116,256)	(5,928)	(2,453)	0	(107,875)	0	[1]	0	[1]	(116,256)	0	[2]
Disbursed or sold from the Trust, shares	[4]		0	20
Disbursed or sold from the Trust	[4]	840	0	840	0	0	0	[1]	0	[1]	840	0	[2]
Stock based compensation		2,589	0	0	2,418	171	0	[1]	0	[1]	2,589	0	[2]
Other comprehensive loss		30,177
Other comprehensive income, before reclassifications	[5]	29,320	0	0	0	0	23,382	[1]	5,938	[1]	29,320	0	[2]
Amounts reclassified from AOCI	[5]	857	0	0	0	0	0	[1]	857	[1]	857	0	[2]
NCI transactions		0	0	0	0	(53)	0	[1]	0	[1]	(53)	53	[2]
Net income attributable to NCI		1,578	0	0	0	0	0	[1]	0	[1]	0	1,578	[2]
Net income attributable to THI		209,907	0	0	0	209,907	0	[1]	0	[1]	209,907	0	[2]
Dividends and distributions, net		(83,065)	0	0	0	(79,348)	0	[1]	0	[1]	(79,348)	(3,717)	[2]
Balance as at Jun. 30, 2013		1,235,861	$ 429,105	$ (14,969)	13,388	916,421	(112,056)	[1]	3,205	[1]	1,235,094	767	[2]
Balance as (in shares) at Jun. 30, 2013			151,319	(340)

[1] Accumulated other comprehensive income.

[2] Noncontrolling interests.

[3] Amounts reflected in Retained earnings represent consideration in excess of the stated value.

[4] Amounts are net of tax (see note 12).

[5] Amounts are net of tax (see note 9).

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Summary Of Fair Value Of Derivative Instruments On Consolidated Balance Sheet (Parenthetical) (Detail) (CAD) In Thousands, unless otherwise specified	Jun. 30, 2013		Dec. 30, 2012
Derivatives, Fair Value [Line Items]
Notional value	225,548		236,484
Level 2
Derivatives, Fair Value [Line Items]
Bearer deposit notes, Fair value asset (liability)	41,403	[1]	41,403	[1]
Forward Currency Contracts | Level 2
Derivatives, Fair Value [Line Items]
Notional value	151,645	[2]	195,081	[2]
TRS | Level 2
Derivatives, Fair Value [Line Items]
Notional value	41,403	[3]	41,403	[3]
Ad Fund | Interest Rate Swap | Level 2
Derivatives, Fair Value [Line Items]
Notional value	32,500		0

[1] The Company holds these notes as collateral to reduce the carrying costs of the TRS. The interest rate on these notes resets every 90 days; therefore, the fair value of these notes, using a market approach, approximates the carrying value.

[2] The fair value of forward currency contracts is determined using prevailing exchange rates.

[3] The fair value of the TRS is determined using the Company's closing common share price on the last business day of the fiscal period, as quoted on the Toronto Stock Exchange ("TSX").

XML

Other Long-Term Liabilities (Detail) (CAD) In Thousands, unless otherwise specified	Jun. 30, 2013		Dec. 30, 2012
Accounts Payable And Accrued Liabilities Current And Noncurrent [Line Items]
Accrued rent leveling liability	30,149		29,244
Uncertain tax position liability	32,724	[1]	28,610	[1]
Stock-based compensation liabilities (note 12)	23,112		17,479
Maidstone Bakeries supply contract deferred liability	11,763		15,352
Other accrued long-term liabilities	18,853	[2]	18,929	[2]
Other long-term liabilities	116,601		109,614

[1] Includes accrued interest.

[2] Includes deferred revenues and various other accruals.

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Segment Reporting (Tables)

6 Months Ended

Jun. 30, 2013

Information on Reportable Segments

	Second quarter ended						Year-to-date period ended
	June 30, 2013			July 1, 2012			June 30, 2013			July 1, 2012
Revenues(1)
Canada	$	657,682		$	651,361		$	1,251,355		$	1,251,244
U.S.		41,220			43,154			85,668			81,583
Corporate services		5,204			4,551			9,329			9,022
Total reportable segments		704,106			699,066			1,346,352			1,341,849
VIEs		96,033			86,515			185,324			165,016
Total	$	800,139		$	785,581		$	1,531,676		$	1,506,865
Operating Income (Loss)
Canada	$	174,760		$	165,360		$	320,581		$	312,586
U.S.		2,587			4,101			3,497			5,755
Corporate services		(1,424	)		(11,117	)		(12,089	)		(29,902	)
Total reportable segments		175,923			158,344			311,989			288,439
VIEs		1,260			1,772			2,586			3,300
Corporate reorganization expenses		(604	)		(1,277	)		(10,079	)		(1,277	)
Consolidated Operating Income		176,579			158,839			304,496			290,462
Interest, Net		(8,131	)		(7,927	)		(15,866	)		(15,114	)
Income before income taxes	$	168,448		$	150,912		$	288,630		$	275,348

⁽¹⁾  There are no inter-segment revenues included in the above table.

	Second quarter ended				Year-to-date period  ended
	June 30, 2013		July 1, 2012		June 30, 2013		July 1, 2012
Capital expenditures
Canada	$	30,145	$	19,364	$	60,421	$	43,146
U.S.		7,785		10,697		23,146		18,689
Corporate services		2,863		2,298		4,705		4,793
Total reportable segments	$	40,793	$	32,359	$	88,272	$	66,628

Reconciliation of Total Reportable Segment Property and Equipment and Total Assets

The following table provides a reconciliation of reportable segment Property and equipment, net and Total assets to consolidated Property and equipment, net and consolidated Total assets, respectively:

	As at
	June 30, 2013		December 30, 2012
Total Property and equipment, net
Canada(1)	$	934,006	$	915,733
U.S.(1)		403,294		378,457
Corporate services(2)		175,295		184,938
Total reportable segments		1,512,595		1,479,128
VIEs		76,396		74,180
Consolidated Property and equipment, net	$	1,588,991	$	1,553,308
Total Assets
Canada	$	1,217,356	$	1,175,552
U.S.		427,576		400,231
Corporate services		278,850		281,043
Total reportable segments		1,923,782		1,856,826
VIEs		130,976		139,462
Unallocated assets(3)		210,128		287,891
Consolidated Total assets	$	2,264,886	$	2,284,179

⁽¹⁾  Includes primarily restaurant-related assets such as land, building and leasehold improvements.

⁽²⁾  Includes property and equipment related to distribution services, manufacturing activities, and other corporate assets.

⁽³⁾  Includes Cash and cash equivalents, Restricted cash and cash equivalents, Deferred income taxes and Prepaids, except as related to VIEs.

Consolidated Sales and Cost of Sales Information

Consolidated Sales and Cost of sales comprise the following:

	Second quarter ended				Year-to-date period ended
	June 30, 2013		July 1, 2012		June 30, 2013		July 1, 2012
Sales
Distribution sales	$	468,597	$	471,274	$	899,748	$	911,002
Company-operated restaurant sales		6,501		7,039		12,477		12,599
Sales from VIEs		93,464		85,459		180,224		163,473
Total Sales	$	568,562	$	563,772	$	1,092,449	$	1,087,074

	Second quarter ended				Year-to-date period  ended
	June 30, 2013		July 1, 2012		June 30, 2013		July 1, 2012
Cost of sales
Distribution cost of sales	$	399,019	$	410,224	$	774,572	$	800,172
Company-operated restaurant cost of sales		6,613		7,697		13,623		13,777
Cost of sales from VIEs		83,460		74,979		162,251		143,871
Total Cost of sales	$	489,092	$	492,900	$	950,446	$	957,820

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Assets and Liabilities of Variable Interest Entities (Detail) (CAD) In Thousands, unless otherwise specified	Jun. 30, 2013		Dec. 30, 2012		Jul. 01, 2012	Jan. 01, 2012
Variable Interest Entity [Line Items]
Cash and cash equivalents	86,603		120,139		57,733	126,497
Advertising fund restricted assets - current	38,264		45,337
Property and equipment, net	1,588,991		1,553,308
Other long-term assets	72,603		64,796
Total assets	2,264,886		2,284,179
Other current liabilities	147,913		197,871
Other long-term liabilities	116,601		109,614
Equity of VIEs	767		2,853
Total liabilities and equity	2,264,886		2,284,179
Restaurant VIEs
Variable Interest Entity [Line Items]
Cash and cash equivalents	7,867		10,851
Advertising fund restricted assets - current	0		0
Other current assets	6,678		6,770
Property and equipment, net	22,162		19,536
Other long-term assets	176		572
Total assets	36,883		37,729
Notes payable to Tim Hortons Inc. - current	14,453	[1]	13,637	[1]
Advertising fund liabilities - current	0		0
Other current liabilities	11,512		14,548
Notes payable to Tim Hortons Inc. - long-term	880	[1]	804	[1]
Long-term debt	0	[2]	0	[2]
Other long-term liabilities	9,271		5,887
Total liabilities	36,116		34,876
Equity of VIEs	767		2,853
Total liabilities and equity	36,883		37,729
Ad Fund VIEs
Variable Interest Entity [Line Items]
Cash and cash equivalents	0		0
Advertising fund restricted assets - current	38,264		45,337
Other current assets	0		0
Property and equipment, net	57,769		57,925
Other long-term assets	1,633		2,095
Total assets	97,666		105,357
Notes payable to Tim Hortons Inc. - current	0	[1]	0	[1]
Advertising fund liabilities - current	42,624		44,893
Other current liabilities	8,369		9,919
Notes payable to Tim Hortons Inc. - long-term	0	[1]	0	[1]
Long-term debt	44,393	[2]	46,849	[2]
Other long-term liabilities	2,280		3,696
Total liabilities	97,666		105,357
Equity of VIEs	0		0
Total liabilities and equity	97,666		105,357

[1] Various assets and liabilities are eliminated upon the consolidation of these VIEs, the most significant of which are the FIP Notes payable to the Company, which reduces the Notes receivable, net reported on the Condensed Consolidated Balance Sheet (see note 5).

[2] Balance as at June 30, 2013 includes $52.5 million of debt relating to the Expanded Menu Board Program (fiscal 2012: $56.5 million), of which $8.1 million is recognized in Other current liabilities (fiscal 2012: $9.7 million) with the remainder recognized as Long-term debt.

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Summary Of Restricted Stock Units Activity (Detail) (CAD)	3 Months Ended	6 Months Ended			12 Months Ended
	Jul. 01, 2012	Jun. 30, 2013	Jun. 30, 2013 Restricted Stock Units (RSUs)		Dec. 30, 2012 Restricted Stock Units (RSUs)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Beginning balance, share units			312,000		306,000
Granted, share units			141,000		192,000
Dividend equivalent rights, share units			4,000		6,000
Vested and settled, share units	(41,000)	(39,000)	(44,000)	[1]	(160,000)	[1]
Forfeited, share units			(15,000)		(32,000)
Ending balance, share units			398,000		312,000
Beginning balance, value			50.91		40.91
Granted			56.12		54.49
Dividend equivalent rights			53.49		50.30
Vested and settled			51.39	[1]	36.72	[1]
Forfeited			51.23		46.35
Ending balance, value			52.72		50.91

[1] Generally settled with common shares from the TDL RSU Employee Benefit Plan Trust ("Trust").

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Stock-Based Compensation

6 Months Ended

Jun. 30, 2013

Stock-Based Compensation

NOTE 12 STOCK-BASED COMPENSATION

	Second quarter ended				Year-to-date period ended
	June 30, 2013		July 1, 2012		June 30, 2013		July 1, 2012
RSUs	$	2,478	$	3,132	$	3,580	$	5,790
Stock options and tandem SARs		2,264		1,305		7,339		5,050
DSUs(1)		406		251		1,616		1,029
Total stock-based compensation expense(2)	$	5,148	$	4,688	$	12,535	$	11,869

⁽¹⁾  Deferred share units (“DSUs”).

⁽²⁾  Generally included in General and administrative expenses.

The Company has entered into TRS contracts as economic hedges, covering 1.0 million of the Company’s underlying common shares, which represents a portion of its outstanding stock options with tandem SARs, and substantially all of its DSUs. The Company recognized a gain of $1.5 million in the second quarter ended June 30, 2013 (second quarter fiscal 2012: gain of $0.2 million) and a gain of $8.2 million in the year-to-date period ended June 30, 2013 (year-to-date period fiscal 2012: gain of $3.4 million) in General and administrative expenses (see note 9) related to the revaluation of the TRS.

The Company’s Human Resource and Compensation Committee (“HRCC”) approves all stock-based compensation awards. All awards granted in May 2013 were granted under the Company’s 2012 Stock Incentive Plan (the “2012 Plan”). Details of stock-based compensation grants and settlements are set forth below.

Restricted stock units

The following table is a summary of activity for RSUs granted to employees under the Company’s 2006 and 2012 Stock Incentive Plans, for the periods set forth below:

	Restricted  Stock Units			Weighted Average  Grant Value per Unit
	(in thousands)			(in dollars)
Balance as at January 1, 2012		306		$	40.91
Granted		192			54.49
Dividend equivalent rights		6			50.30
Vested and settled(1)		(160	)		36.72
Forfeited		(32	)		46.35
Balance as at December 30, 2012		312		$	50.91
Granted		141			56.12
Dividend equivalent rights		4			53.49
Vested and settled(1)		(44	)		51.39
Forfeited		(15	)		51.23
Balance as at June 30, 2013		398		$	52.72

⁽¹⁾  Generally settled with common shares from the TDL RSU Employee Benefit Plan Trust (“Trust”).

In the second quarter ended June 30, 2013, the Company funded the Trust, which, in turn, purchased approximately 43,000 common shares for $2.5 million (second quarter fiscal 2012: 112,000 common shares for $6.2 million).

RSUs that vested during the second quarter of fiscal 2013 and 2012 were settled with the participants in the following manner:

	RSU Gross  Settlement		RSU Settlement, net of  tax
	Units		Units		Amount
	(in thousands)
2012
Settled with common shares from the Trust		34		18	$	670
Settled by an open market purchase		7		5		250
Total restricted stock settlement		41		23	$	920
2013
Settled with common shares from the Trust		33		17	$	730
Settled by an open market purchase		6		4		210
Total restricted stock settlement		39		21	$	940

Stock options and tandem SARs

	Stock Options  with SARs			Weighted Average Exercise Price
	(in thousands)			(in dollars)
Balance as at January 1, 2012		1,182		$	36.05
Granted		254			54.86
Exercised		(218	)		31.64
Forfeited		(46	)		41.66
Balance as at December 30, 2012		1,172		$	40.73
Granted		241			56.12
Exercised(1)		(181	)		35.64
Forfeited		(10	)		52.38
Balance as at June 30, 2013		1,222		$	44.42

⁽¹⁾  Total cash settlement, net of applicable withholding taxes of $2.5 million of SARs in the year-to-date period ended June 30, 2013 (year-to-date period fiscal 2012: 96,000 units for $1.5 million). The associated options were cancelled.

Deferred share units

Approximately 7,600 DSUs were granted during the year-to-date period of fiscal 2013 (year-to-date period fiscal 2012: 8,100) at a fair market value of $52.54 (year-to-date period fiscal 2012: $53.78). There were no DSU settlements during the second quarter and year-to-date periods of fiscal 2013 (second quarter and year-to-date periods of fiscal 2012: 9,400).

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Fair Values

6 Months Ended

Jun. 30, 2013

Fair Values

NOTE 8 FAIR VALUES

Financial assets and liabilities measured at fair value

	As at
	June 30, 2013					December 30, 2012
	Notional value		Fair value hierarchy	Fair  value asset (liability)(1)		Notional value		Fair value hierarchy	Fair  value asset (liability)(1)
Derivatives:
Forward currency contracts(2)	$	151,645	Level 2	$	7,073	$	195,081	Level 2	$	(2,014	)
Interest rate swap(3)		32,500	Level 2		35		0	Level 2		0
Total return swaps (“TRS”)(4)		41,403	Level 2		15,739		41,403	Level 2		7,504
Total Derivatives	$	225,548		$	22,847	$	236,484		$	5,490

⁽¹⁾  The Company values its derivatives using valuations that are calibrated to the initial trade prices. Subsequent valuations are based on observable inputs to the valuation model.

⁽²⁾  The fair value of forward currency contracts is determined using prevailing exchange rates.

⁽³⁾  In February 2013, the Tim Hortons Advertising and Promotion Fund (Canada) Inc. (“Ad Fund”) entered into an amortizing interest rate swap to fix a portion of the interest expense on its term debt. The fair value is estimated using discounted cash flows and market-based observable inputs, including interest rate yield curves and discount rates.

⁽⁴⁾  The fair value of the TRS is determined using the Company’s closing common share price on the last business day of the fiscal period, as quoted on the Toronto Stock Exchange (“TSX”).

Other financial assets and liabilities not measured at fair value

The following table summarizes the fair value and carrying value of other financial assets and liabilities that are not recognized at fair value on a recurring basis on the Condensed Consolidated Balance Sheet:

	As at
	June 30, 2013							December 30, 2012
	Fair value hierarchy	Fair value asset (liability)			Carrying value			Fair value hierarchy	Fair value asset (liability)			Carrying value
Cash and cash equivalents(1)	Level 1	$	86,603		$	86,603		Level 1	$	120,139		$	120,139
Restricted cash and cash equivalents(1)	Level 1		104,780			104,780		Level 1		150,574			150,574
Bearer deposit notes(2)	Level 2		41,403			41,403		Level 2		41,403			41,403
Notes receivable, net(3)	Level 3		11,608			11,608		Level 3		8,777			8,777
Senior unsecured notes, series 1(4)	Level 2		(316,764	)		(301,370	)	Level 2		(325,857	)		(301,544	)
Advertising fund term debt(5)	Level 3		(52,464	)		(52,464	)	Level 3		(56,500	)		(56,500	)
Other debt(6)	Level 3		(113,623	)		(65,668	)	Level 3		(125,000	)		(60,223	)

⁽¹⁾  The carrying values approximate fair values due to the short-term nature of these investments.

⁽²⁾  The Company holds these notes as collateral to reduce the carrying costs of the TRS. The interest rate on these notes resets every 90 days; therefore, the fair value of these notes, using a market approach, approximates the carrying value.

⁽³⁾  Management generally estimates the current value of notes receivable, using a cost approach, based primarily on the estimated depreciated replacement cost of the underlying equipment held as collateral.

⁽⁴⁾  The fair value of the senior unsecured notes, using a market approach, is based on publicly disclosed trades between arm’s length institutions as documented on Bloomberg LP.

⁽⁵⁾  Management estimates the fair value of this variable rate debt using a market approach, based on prevailing interest rates plus an applicable margin.

⁽⁶⁾  Management estimates the fair value of its Other debt, primarily consisting of contributions received related to the construction costs of certain restaurants, using an income approach, by discounting future cash flows using a Company risk-adjusted rate, over the remaining term of the debt.

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Information on Reportable Segments (Detail) (CAD) In Thousands, unless otherwise specified	3 Months Ended				6 Months Ended
	Jun. 30, 2013		Jul. 01, 2012		Jun. 30, 2013		Jul. 01, 2012
Segment Reporting Information [Line Items]
Revenues	800,139	[1]	785,581	[1]	1,531,676	[1]	1,506,865	[1]
Operating Income (Loss)	176,579		158,839		304,496		290,462
Interest, Net	(8,131)		(7,927)		(15,866)		(15,114)
Capital expenditures					88,272		66,628
Income before income taxes	168,448		150,912		288,630		275,348
Operating Segments
Segment Reporting Information [Line Items]
Revenues	704,106	[1]	699,066	[1]	1,346,352	[1]	1,341,849	[1]
Operating Income (Loss)	175,923		158,344		311,989		288,439
Capital expenditures	40,793		32,359		88,272		66,628
Operating Segments | Canada
Segment Reporting Information [Line Items]
Revenues	657,682	[1]	651,361	[1]	1,251,355	[1]	1,251,244	[1]
Operating Income (Loss)	174,760		165,360		320,581		312,586
Capital expenditures	30,145		19,364		60,421		43,146
Operating Segments | U.S.
Segment Reporting Information [Line Items]
Revenues	41,220	[1]	43,154	[1]	85,668	[1]	81,583	[1]
Operating Income (Loss)	2,587		4,101		3,497		5,755
Capital expenditures	7,785		10,697		23,146		18,689
Operating Segments | Corporate Services
Segment Reporting Information [Line Items]
Revenues	5,204	[1]	4,551	[1]	9,329	[1]	9,022	[1]
Operating Income (Loss)	(1,424)		(11,117)		(12,089)		(29,902)
Capital expenditures	2,863		2,298		4,705		4,793
VIEs
Segment Reporting Information [Line Items]
Revenues	96,033	[1]	86,515	[1]	185,324	[1]	165,016	[1]
Operating Income (Loss)	1,260		1,772		2,586		3,300
Corporate Reorganization Expenses
Segment Reporting Information [Line Items]
Operating Income (Loss)	(604)		(1,277)		(10,079)		(1,277)

[1] There are no inter-segment revenues included in the above table.

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Summary Of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2013

Description of Business

Description of business

Tim Hortons Inc. is a corporation governed by the Canada Business Corporations Act. References herein to “Tim Hortons”, or the “Company” refer to Tim Hortons Inc. and its subsidiaries. The Company’s principal business is the development and franchising of quick service restaurants primarily in Canada and the U.S., that serve premium coffee, espresso-based 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 the franchisor, we collect royalty revenue from franchised restaurant sales. The Company also controls the real estate underlying a substantial majority of the system restaurants, which generates another source of revenue. In addition, the Company has vertically integrated manufacturing, warehouse and distribution operations which supply a significant portion of our system restaurants with coffee and other beverages, non-perishable food, supplies, packaging and equipment.

The following table outlines the Company’s systemwide restaurant count and activity:

	Second quarter ended						Year-to-date period  ended
	June 30, 2013			July 1, 2012			June 30, 2013			July 1, 2012
Systemwide Restaurant Count
Franchised restaurants in operation – beginning of period		4,271			4,019			4,242			3,996
Restaurants opened		27			38			60			68
Restaurants closed		(12	)		(10	)		(22	)		(12	)
Net transfers within the franchised system		(2	)		3			4			(2	)
Franchised restaurants in operation – end of period		4,284			4,050			4,284			4,050
Company-operated restaurants		20			21			20			21
Total systemwide restaurants – end of period(1)		4,304			4,071			4,304			4,071
% of restaurants franchised – end of period		99.5	%		99.5	%		99.5	%		99.5	%

⁽¹⁾  Includes various types of standard and non-standard restaurant formats in Canada, the U.S. and the Gulf Cooperation Council (“GCC”) with differing restaurant sizes and menu offerings as well as self-serve kiosks, which serve primarily coffee products and a limited product selection. Collectively, the Company refers to all of these restaurants and kiosks as “systemwide restaurants.”

Excluded from the above table are 251 primarily licensed locations in the Republic of Ireland and the United Kingdom as at June 30, 2013 (second quarter fiscal 2012: 243 restaurants).

Basis of Presentation and Principles of Consolidation

Basis of presentation and principles of consolidation

The Company prepares its financial statements in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). In the opinion of management, the accompanying Condensed Consolidated Financial Statements contain all adjustments (all of which are normal and recurring in nature) necessary to state fairly the Company’s financial position as at June 30, 2013, and the results of operations, comprehensive income and cash flows for the second quarters ended June 30, 2013 and July 1, 2012. These Condensed Consolidated Financial Statements should be read in conjunction with the 2012 Consolidated Financial Statements which are contained in the Company’s Annual Report on Form 10-K filed with the SEC and the CSA on February 21, 2013. The December 30, 2012 Condensed Consolidated Balance Sheet was derived from the audited 2012 Consolidated Financial Statements, but does not include all of the year-end disclosures required by U.S. GAAP.

The Condensed Consolidated Financial Statements include the results and balances of Tim Hortons Inc., its wholly-owned subsidiaries and certain entities which the Company consolidates as variable interest entities (“VIEs”) (see note 13). Intercompany accounts and transactions among consolidated entities have been eliminated upon consolidation. Investments in non-consolidated affiliates over which the Company exercises significant influence, but for which the Company is not the primary beneficiary and does not have control, are accounted for using the equity method. The Company’s share of the earnings or losses of these non-consolidated affiliates is included in Equity income, which is included as part of operating income because these investments are operating ventures closely integrated into the Company’s business operations.

Accounting Changes - New Accounting Standards

Accounting changes – new accounting standards

In the first quarter of fiscal 2013, we prospectively adopted Accounting Standards Update No. 2013-02– Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, which requires additional disclosure of significant reclassifications out of comprehensive income into net income, if the amount is required to be reclassified in its entirety (see Condensed Consolidated Statement of Equity and note 9).

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Variable Interest Entities

6 Months Ended

Jun. 30, 2013

Variable Interest Entities

NOTE 13 VARIABLE INTEREST ENTITIES

VIEs for which the Company is the primary beneficiary

Non-owned restaurants

The Company has consolidated 350 Non-owned restaurants as at June 30, 2013 (fiscal 2012: 365 restaurants), or approximately 8.1% of the Company’s total systemwide restaurants (fiscal 2012: 8.6%). On average, a total of 347 Non-owned restaurants were consolidated during the second quarter of fiscal 2013 (second quarter fiscal 2012: average of 309 restaurants) and 353 were consolidated during the year-to-date period of fiscal 2013 (year-to-date-period of fiscal 2012: 307).

Advertising Funds

The Ad Fund has rolled out a program to acquire and install LCD screens, media engines, drive-thru menu boards and ancillary equipment for our restaurants (“Expanded Menu Board Program”). The advertising levies, depreciation, interest costs, capital expenditures and financing associated with the Expanded Menu Board Program are presented on a gross basis on the Condensed Consolidated Statement of Operations and Cash Flows. The Ad Fund has purchased $58.6 million of equipment cumulatively since fiscal 2011 for the Expanded Menu Board Program. In February 2013, the Ad Fund entered into an amortizing interest rate swap to fix a portion of the interest expense on its term debt related to the Expanded Menu Board Program.

The advertising funds spent approximately $59.7 million in the second quarter of fiscal 2013 (second quarter fiscal 2012: $47.9 million) and $129.2 million in the year-to-date period of fiscal 2013 (year-to-date period fiscal 2012: $121.8 million). Company contributions to the Canadian and U.S. advertising funds consisted of the following:

	Second quarter ended				Year-to-date period ended
	June 30, 2013		July 1, 2012		June 30, 2013		July 1, 2012
Company contributions	$	2,809	$	2,718	$	5,512	$	5,321
Contributions from consolidated non-owned restaurants		3,488		3,167		6,725		6,064
Total Company contributions	$	6,297	$	5,885	$	12,237	$	11,385

The revenues and expenses associated with the Company’s consolidated Non-owned restaurants and advertising funds presented on a gross basis, prior to consolidation adjustments, are as follows:

	Second quarter ended
	June 30, 2013						July 1, 2012
	Restaurant VIEs		Advertising fund VIEs		Total VIEs		Restaurant VIEs		Advertising fund VIEs		Total VIEs
Sales	$	93,464	$	0	$	93,464	$	85,459	$	0	$	85,459
Advertising levies(1)		0		2,569		2,569		0		1,056		1,056
Total revenues		93,464		2,569		96,033		85,459		1,056		86,515
Cost of sales(2)		92,480		0		92,480		84,066		0		84,066
Operating expenses(1)		0		2,293		2,293		0		677		677
Operating income		984		276		1,260		1,393		379		1,772
Interest expense		0		276		276		0		379		379
Income before taxes		984		0		984		1,393		0		1,393
Income taxes		158		0		158		223		0		223
Net income attributable to noncontrolling interests	$	826	$	0	$	826	$	1,170	$	0	$	1,170

	Year-to-date period ended
	June 30, 2013						July 1, 2012
	Restaurant VIEs		Advertising fund VIEs		Total VIEs		Restaurant VIEs		Advertising fund VIEs		Total VIEs
Sales	$	180,224	$	0	$	180,224	$	163,473	$	0	$	163,473
Advertising levies(1)		0		5,100		5,100		0		1,543		1,543
Total revenues		180,224		5,100		185,324		163,473		1,543		165,016
Cost of sales(2)		178,346		0		178,346		160,654		0		160,654
Operating expenses(1)		0		4,392		4,392		0		1,062		1,062
Operating income		1,878		708		2,586		2,819		481		3,300
Interest expense		0		708		708		0		481		481
Income before taxes		1,878		0		1,878		2,819		0		2,819
Income taxes		300		0		300		449		0		449
Net income attributable to noncontrolling interests	$	1,578	$	0	$	1,578	$	2,370	$	0	$	2,370

⁽¹⁾  Generally, the advertising levies that are not related to the Expanded Menu Board Program are netted with advertising and marketing expenses incurred by the advertising funds in operating expenses, as these contributions are designated for specific purposes. The Company acts as an agent with regard to these contributions.

⁽²⁾  Includes rents, royalties, advertising expenses and product purchases from the Company which are eliminated upon the consolidation of these VIEs.

The assets and liabilities associated with the Company’s consolidated Non-owned restaurants and advertising funds presented on a gross basis, prior to consolidation adjustments, are as follows:

	As at
	June 30, 2013				December 30, 2012
	Restaurant VIEs		Advertising fund VIEs		Restaurant VIEs		Advertising fund VIEs
Cash and cash equivalents	$	7,867	$	0	$	10,851	$	0
Advertising fund restricted assets – current		0		38,264		0		45,337
Other current assets		6,678		0		6,770		0
Property and equipment, net		22,162		57,769		19,536		57,925
Other long-term assets		176		1,633		572		2,095
Total assets	$	36,883	$	97,666	$	37,729	$	105,357
Notes payable to Tim Hortons Inc. – current(1)	$	14,453	$	0	$	13,637	$	0
Advertising fund liabilities – current		0		42,624		0		44,893
Other current liabilities		11,512		8,369		14,548		9,919
Notes payable to Tim Hortons Inc. – long-term(1)		880		0		804		0
Long-term debt(2)		0		44,393		0		46,849
Other long-term liabilities		9,271		2,280		5,887		3,696
Total liabilities		36,116		97,666		34,876		105,357
Equity of VIEs		767		0		2,853		0
Total liabilities and equity	$	36,883	$	97,666	$	37,729	$	105,357

⁽¹⁾  Various assets and liabilities are eliminated upon the consolidation of these VIEs, the most significant of which are the FIP Notes payable to the Company, which reduces the Notes receivable, net reported on the Condensed Consolidated Balance Sheet (see note 5).

⁽²⁾  Balance as at June 30, 2013 includes $52.5 million of debt relating to the Expanded Menu Board Program (fiscal 2012: $56.5 million), of which $8.1 million is recognized in Other current liabilities (fiscal 2012: $9.7 million) with the remainder recognized as Long-term debt.

The liabilities recognized as a result of consolidating these VIEs do not necessarily represent additional claims on the Company’s general assets; rather, they represent claims against the specific assets of the consolidated VIEs. Conversely, assets recognized as a result of consolidating these VIEs do not represent additional assets that could be used to satisfy claims by the Company’s creditors as they are not legally included within the Company’s general assets.

Trust

In connection with RSUs granted to certain employees, the Company established the Trust, which purchases and retains common shares of the Company to satisfy the Company’s contractual obligation to deliver shares to settle the awards for most participating Canadian employees. The cost of the shares held by the Trust of $15.0 million as at June 30, 2013 (fiscal 2012: $13.4 million), is presented as a reduction in outstanding common shares on the Condensed Consolidated Balance Sheet.

VIEs for which the Company is not the primary beneficiary

These VIEs are primarily real estate ventures, the most significant being the TIMWEN Partnership. The Company does not consolidate these entities as control is considered to be shared by both the Company and the other joint owner(s).

XML

Document and Entity Information	6 Months Ended
	Jun. 30, 2013	Aug. 05, 2013
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2013
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q2
Trading Symbol	THI
Entity Registrant Name	TIM HORTONS INC.
Entity Central Index Key	0001345111
Current Fiscal Year End Date	--01-03
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		150,986,208

XML

Segment Reporting

6 Months Ended

Jun. 30, 2013

Segment Reporting

NOTE 14 SEGMENT REPORTING

The Company operates exclusively in the quick service restaurant industry. Effective the first quarter of fiscal 2013, the chief decision maker views and evaluates the Company’s reportable segments as follows:

Canadian and U.S. business units. Each of the Canadian and U.S. business units includes the results of substantially all restaurant-facing activities, such as: (i) rents and royalties; (ii) product sales through our supply chain as well as an allocation of supply chain income based on the unit’s respective systemwide sales; (iii) franchise fees; (iv) corporate restaurants; and (v) business-unit-related general and administrative expenses. The business units exclude the effect of consolidating VIEs, consistent with how the chief decision maker views and evaluates the respective business unit’s results.

Corporate services. Corporate services comprises services to support the Canadian and U.S. business units, including: (i) general and administrative expenses; (ii) manufacturing income, and manufacturing sales to third parties; and (iii) income related to our distribution services, including the timing of variances arising primarily from commodity costs and the related effect on pricing, which generally reverse within a year, associated with our supply chain management. Our supply chain management involves securing a stable source of supply, which is intended to provide our restaurant owners with consistent, predictable pricing, and may extend beyond a quarter. Corporate services also includes the results of our International operations, which are currently not significant.

Previously, the results of manufacturing activities and distribution services were included within the respective geographic segment where the facility was located. Additionally, we have revised the allocation of shared restaurant services, such as restaurant technology and operations standards, between the Canadian and U.S. business units.

The Company has reclassified the segment data for the prior period to conform to the current period’s presentation.

	Second quarter ended						Year-to-date period ended
	June 30, 2013			July 1, 2012			June 30, 2013			July 1, 2012
Revenues(1)
Canada	$	657,682		$	651,361		$	1,251,355		$	1,251,244
U.S.		41,220			43,154			85,668			81,583
Corporate services		5,204			4,551			9,329			9,022
Total reportable segments		704,106			699,066			1,346,352			1,341,849
VIEs		96,033			86,515			185,324			165,016
Total	$	800,139		$	785,581		$	1,531,676		$	1,506,865
Operating Income (Loss)
Canada	$	174,760		$	165,360		$	320,581		$	312,586
U.S.		2,587			4,101			3,497			5,755
Corporate services		(1,424	)		(11,117	)		(12,089	)		(29,902	)
Total reportable segments		175,923			158,344			311,989			288,439
VIEs		1,260			1,772			2,586			3,300
Corporate reorganization expenses		(604	)		(1,277	)		(10,079	)		(1,277	)
Consolidated Operating Income		176,579			158,839			304,496			290,462
Interest, Net		(8,131	)		(7,927	)		(15,866	)		(15,114	)
Income before income taxes	$	168,448		$	150,912		$	288,630		$	275,348

⁽¹⁾  There are no inter-segment revenues included in the above table.

	Second quarter ended				Year-to-date period  ended
	June 30, 2013		July 1, 2012		June 30, 2013		July 1, 2012
Capital expenditures
Canada	$	30,145	$	19,364	$	60,421	$	43,146
U.S.		7,785		10,697		23,146		18,689
Corporate services		2,863		2,298		4,705		4,793
Total reportable segments	$	40,793	$	32,359	$	88,272	$	66,628

The following table provides a reconciliation of reportable segment Property and equipment, net and Total assets to consolidated Property and equipment, net and consolidated Total assets, respectively:

	As at
	June 30, 2013		December 30, 2012
Total Property and equipment, net
Canada(1)	$	934,006	$	915,733
U.S.(1)		403,294		378,457
Corporate services(2)		175,295		184,938
Total reportable segments		1,512,595		1,479,128
VIEs		76,396		74,180
Consolidated Property and equipment, net	$	1,588,991	$	1,553,308
Total Assets
Canada	$	1,217,356	$	1,175,552
U.S.		427,576		400,231
Corporate services		278,850		281,043
Total reportable segments		1,923,782		1,856,826
VIEs		130,976		139,462
Unallocated assets(3)		210,128		287,891
Consolidated Total assets	$	2,264,886	$	2,284,179

⁽¹⁾  Includes primarily restaurant-related assets such as land, building and leasehold improvements.

⁽²⁾  Includes property and equipment related to distribution services, manufacturing activities, and other corporate assets.

⁽³⁾  Includes Cash and cash equivalents, Restricted cash and cash equivalents, Deferred income taxes and Prepaids, except as related to VIEs.

Consolidated Sales and Cost of sales comprise the following:

	Second quarter ended				Year-to-date period ended
	June 30, 2013		July 1, 2012		June 30, 2013		July 1, 2012
Sales
Distribution sales	$	468,597	$	471,274	$	899,748	$	911,002
Company-operated restaurant sales		6,501		7,039		12,477		12,599
Sales from VIEs		93,464		85,459		180,224		163,473
Total Sales	$	568,562	$	563,772	$	1,092,449	$	1,087,074

	Second quarter ended				Year-to-date period  ended
	June 30, 2013		July 1, 2012		June 30, 2013		July 1, 2012
Cost of sales
Distribution cost of sales	$	399,019	$	410,224	$	774,572	$	800,172
Company-operated restaurant cost of sales		6,613		7,697		13,623		13,777
Cost of sales from VIEs		83,460		74,979		162,251		143,871
Total Cost of sales	$	489,092	$	492,900	$	950,446	$	957,820

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Stock Option With Tandem SAR Awards Granted To Officers (Detail) (Stock Options And Tandem Stock Appreciation Rights, CAD)	6 Months Ended			12 Months Ended
	Jun. 30, 2013		Jul. 01, 2012	Dec. 30, 2012
Stock Options And Tandem Stock Appreciation Rights
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock options with SARs outstanding at beginning of year	1,172,000		1,182,000	1,182,000
Granted, Stock Options with SARs	241,000			254,000
Exercised, Stock Options with SARs	(181,000)	[1]	(96,000)	(218,000)
Forfeited, Stock Options with SARs	(10,000)			(46,000)
Stock options with SARs outstanding at end of year	1,222,000			1,172,000
Stock options with SARs outstanding at beginning of year, Weighted Average Exercise Price	40.73		36.05	36.05
Granted, Weighted Average Grant Price	56.12			54.86
Exercised, Weighted Average Grant Price	35.64	[1]		31.64
Forfeited, Weighted Average Grant Price	52.38			41.66
Stock options with SARs outstanding at end of year, Weighted Average Grant Price	44.42			40.73

[1] Total cash settlement, net of applicable withholding taxes of $2.5 million of SARs in the year-to-date period ended June 30, 2013 (year-to-date period fiscal 2012: 96,000 units for $1.5 million). The associated options were cancelled.

XML

Schedule of Manner For Settlement of Restricted Stock Units (Detail) (CAD) In Thousands, except Share data, unless otherwise specified	3 Months Ended	6 Months Ended
	Jul. 01, 2012	Jun. 30, 2013
Schedule Of Activity Related To Restricted Shares And Restricted Share [Line Items]
Restricted Stock Unit (gross settlement)	41,000	39,000
Restricted Stock Unit Settlement, net of tax	23,000	21,000
Restricted Stock Unit Settlement, net of tax	920	940
Common Shares Held In Trust
Schedule Of Activity Related To Restricted Shares And Restricted Share [Line Items]
Restricted Stock Unit (gross settlement)	34,000	33,000
Restricted Stock Unit Settlement, net of tax	18,000	17,000
Restricted Stock Unit Settlement, net of tax	670	730
Open Market Share Purchases
Schedule Of Activity Related To Restricted Shares And Restricted Share [Line Items]
Restricted Stock Unit (gross settlement)	7,000	6,000
Restricted Stock Unit Settlement, net of tax	5,000	4,000
Restricted Stock Unit Settlement, net of tax	250	210