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 29, 2014

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 1, 2014
Common shares	132,817,871 shares

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 29, 2014 and June 30, 2013	3
Condensed Consolidated Statement of Comprehensive Income for the second quarters and year-to-date periods ended June 29, 2014 and June 30, 2013	4
Condensed Consolidated Balance Sheet as at June 29, 2014 and December 29, 2013	5
Condensed Consolidated Statement of Cash Flows for the second quarters and year-to-date periods ended June 29, 2014 and June 30, 2013	6
Condensed Consolidated Statement of Equity for the year-to-date periods ended June 29, 2014 and December 29, 2013	7
Notes to the Condensed Consolidated Financial Statements	8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3. Quantitative and Qualitative Disclosures about Market Risk	29
Item 4. Controls and Procedures	29
PART II: Other Information
Item 1. Legal Proceedings	30
Item 1A. Risk Factors	30
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	31
Item 3. Defaults upon Senior Securities	31
Item 4. Mine Safety Disclosure	31
Item 5. Other Information	31
Item 6. Exhibits	31
Signature	32
Index to Exhibits	33

On August 1, 2014, 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$0.9159 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 websites 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 29, 2014			June 30, 2013			June 29, 2014			June 30, 2013
Revenues
Sales (note 13)	$	613,829		$	568,562		$	1,154,859		$	1,092,449
Franchise revenues
Rents and royalties	224,953			209,289			424,462			396,743
Franchise fees	35,565			22,288			61,428			42,484
	260,518			231,577			485,890			439,227
Total revenues	874,347			800,139			1,640,749			1,531,676
Costs and expenses
Cost of sales	527,132			489,092			1,000,715			950,446
Operating expenses	84,411			76,986			165,669			152,719
Franchise fee costs	34,906			23,326			62,589			45,878
General and administrative expenses	40,241			38,038			79,460			76,706
Equity (income)	(3,975		)	(3,916		)	(7,321		)	(7,265		)
Corporate reorganization expenses	—			604			—			10,079
Other (income) expense, net	(735		)	(570		)	1,983			(1,383		)
Total costs and expenses, net	681,980			623,560			1,303,095			1,227,180
Operating income	192,367			176,579			337,654			304,496
Interest (expense)	(18,648		)	(8,922		)	(35,324		)	(17,585		)
Interest income	1,138			791			2,115			1,719
Income before income taxes	174,857			168,448			304,445			288,630
Income taxes (note 2)	49,425			43,886			86,658			77,145
Net income	125,432			124,562			217,787			211,485
Net income attributable to noncontrolling interests (note 12)	1,682			826			3,128			1,578
Net income attributable to Tim Hortons Inc.	$	123,750		$	123,736		$	214,659		$	209,907
Basic earnings per common share attributable to Tim Hortons Inc. (note 3)	$	0.92		$	0.81		$	1.58		$	1.38
Diluted earnings per common share attributable to Tim Hortons Inc. (note 3)	$	0.92		$	0.81		$	1.57		$	1.37
Weighted average number of common shares outstanding (in thousands) – Basic (note 3)	133,899			152,083			136,007			152,597
Weighted average number of common shares outstanding (in thousands) – Diluted (note 3)	134,367			152,637			136,477			153,133
Dividends per common share	$	0.32		$	0.26		$	0.64		$	0.52

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 29, 2014			June 30, 2013			June 29, 2014			June 30, 2013
Net income	$	125,432		$	124,562		$	217,787		$	211,485
Other comprehensive income
Translation adjustments (loss) gain	(17,765		)	15,205			(2,830		)	23,382
Unrealized gains (losses) from cash flow hedges (note 9)
(Loss) gain from change in fair value of derivatives	(4,968		)	5,307			(5,910		)	8,079
Amount of net (gain) loss reclassified to earnings during the period	(999		)	378			(3,700		)	1,041
Tax recovery (expense) (note 9)	1,763			(1,333		)	1,476			(2,325		)
Other comprehensive (loss) income	(21,969		)	19,557			(10,964		)	30,177
Comprehensive income	103,463			144,119			206,823			241,662
Comprehensive income attributable to noncontrolling interests	1,682			826			3,128			1,578
Comprehensive income attributable to Tim Hortons Inc.	$	101,781		$	143,293		$	203,695		$	240,084

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 29, 2014			December 29, 2013
Assets
Current assets
Cash and cash equivalents	$	25,087		$	50,414
Restricted cash and cash equivalents (note 6)	85,926			155,006
Accounts receivable, net	220,157			210,664
Notes receivable, net (note 4)	7,619			4,631
Deferred income taxes	9,985			10,165
Inventories and other, net (note 5)	117,776			104,326
Advertising fund restricted assets (note 12)	39,078			39,783
Total current assets	505,628			574,989
Property and equipment, net	1,681,010			1,685,043
Notes receivable, net (note 4)	598			4,483
Deferred income taxes	11,693			11,018
Equity investments	40,372			40,738
Other assets	117,452			117,552
Total assets	$	2,356,753		$	2,433,823
Liabilities and equity
Current liabilities
Accounts payable (note 6)	$	171,118		$	204,514
Tim Card obligation (note 6)	128,517			184,443
Accrued liabilities (note 6)	65,835			89,565
Advertising fund liabilities (note 12)	38,782			59,912
Short-term borrowings	15,000			30,000
Current portion of long-term obligations	18,336			17,782
Total current liabilities	437,588			586,216
Long-term obligations
Long-term debt (note 7)	1,293,035			843,020
Capital leases	125,048			121,049
Deferred income taxes	8,123			9,929
Other long-term liabilities	108,557			112,090
Total long-term obligations	1,534,763			1,086,088
Commitments and contingencies (note 10)
Equity
Equity of Tim Hortons Inc.
Common shares ($2.84 stated value per share), Authorized: unlimited shares. Issued: 133,126,058 and 141,329,010 shares, respectively	377,442			400,738
Common shares held in Trust, at cost: 329,089 and 293,816 shares, respectively	(15,422		)	(12,924		)
Contributed surplus	11,914			11,033
Retained earnings	131,926			474,409
Accumulated other comprehensive loss	(123,066		)	(112,102		)
Total equity of Tim Hortons Inc.	382,794			761,154
Noncontrolling interests (note 12)	1,608			365
Total equity	384,402			761,519
Total liabilities and equity	$	2,356,753		$	2,433,823

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 29, 2014			June 30, 2013
Cash flows provided from (used in) operating activities
Net income	$	217,787		$	211,485
Adjustments to reconcile net income to net cash provided from operating activities
Depreciation and amortization	79,774			72,368
Stock-based compensation expense (note 11)	886			12,535
Deferred income taxes	2,149			(2,539		)
Changes in operating assets and liabilities
Restricted cash and cash equivalents	69,141			46,356
Accounts receivable	(16,667		)	(8,254		)
Inventories and other	(13,593		)	(5,218		)
Accounts payable and accrued liabilities	(81,678		)	(75,262		)
Taxes	(9,230		)	4,144
Settlement of interest rate forwards	(4,851		)	—
Deposit with tax authorities	(1,721		)	—
Other	(14,274		)	2,714
Net cash provided from operating activities	227,723			258,329
Cash flows (used in) provided from investing activities
Capital expenditures	(94,442		)	(88,272		)
Capital expenditures – Advertising fund	(4,438		)	(5,224		)
Other investing activities	3,038			6,125
Net cash (used in) investing activities	(95,842		)	(87,371		)
Cash flows (used in) provided from financing activities
Repurchase of common shares	(493,476		)	(113,803		)
Dividend payments to common shareholders	(86,910		)	(79,348		)
Net proceeds from issuance of debt	448,299			—
Short-term (repayments) borrowings, net	(15,000		)	—
Principal payments on long-term debt obligations	(8,280		)	(8,543		)
Other financing activities	(1,980		)	(5,001		)
Net cash (used in) financing activities	(157,347		)	(206,695		)
Effect of exchange rate changes on cash	139			2,201
(Decrease) in cash and cash equivalents	(25,327		)	(33,536		)
Cash and cash equivalents at beginning of period	50,414			120,139
Cash and cash equivalents at end of period	$	25,087		$	86,603
Supplemental disclosures of cash flow information:
Interest paid	$	30,712		$	17,131
Income taxes paid	$	102,946		$	77,540
Non-cash investing and financing activities:
Capital lease obligations incurred	$	14,173		$	19,219

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										AOCI(1)
											Contributed Surplus		Retained Earnings			Translation Adjustment			Cash Flow Hedges			Total Equity THI			NCI(2)			Total Equity
	Number		$			Number		$			$		$			$			$			$			$			$
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)	(12,076	)	(34,295		)	(43	)	(2,453		)	—		(686,243		)	—			—			(722,991		)	—			(722,991		)
Disbursed or sold from the Trust(4)	—		—			66		2,885			—		—			—			—			2,885			—			2,885
Stock-based compensation	—		—			—		—			63		(712		)	—			—			(649		)	—			(649		)
Other comprehensive income (loss) before reclassifications(5)	—		—			—		—			—		—			31,333			(2,407		)	28,926			—			28,926
Amounts reclassified from AOCI(5)	—		—			—		—			—		—			—			(2,000		)	(2,000		)	—			(2,000		)
NCI transactions	—		—			—		—			—		(483		)	—			—			(483		)	483			—
Net income	—		—			—		—			—		424,369			—			—			424,369			4,280			428,649
Dividends and distributions, net	—		—			—		—			—		(156,141		)	—			—			(156,141		)	(7,251		)	(163,392		)
Balance as at December 29, 2013	141,329		$	400,738		(294	)	$	(12,924	)	$	11,033	$	474,409		$	(104,105	)	$	(7,997	)	$	761,154		$	365		$	761,519
Repurchase of common shares(3)(6)	(8,203	)	(23,296		)	(59	)	(3,548		)	—		(470,178		)	—			—			(497,022		)	—			(497,022		)
Disbursed or sold from the Trust(4)	—		—			24		1,050			—		—			—			—			1,050			—			1,050
Stock-based compensation	—		—			—		—			881		215			—			—			1,096			—			1,096
Other comprehensive income (loss) before reclassifications(5)	—		—			—		—			—		—			(2,830		)	(5,705		)	(8,535		)	—			(8,535		)
Amounts reclassified from AOCI(5)	—		—			—		—			—		—			—			(2,429		)	(2,429		)	—			(2,429		)
NCI transactions	—		—			—		—			—		(269		)	—			—			(269		)	269			—
Net income	—		—			—		—			—		214,659			—			—			214,659			3,128			217,787
Dividends and distributions, net	—		—			—		—			—		(86,910		)	—			—			(86,910		)	(2,154		)	(89,064		)
Balance as at June 29, 2014	133,126		$	377,442		(329	)	$	(15,422	)	$	11,914	$	131,926		$	(106,935	)	$	(16,131	)	$	382,794		$	1,608		$	384,402

________________

⁽¹⁾  Accumulated other comprehensive income (“AOCI”).

⁽²⁾  Noncontrolling interests (“NCI”).

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

⁽⁴⁾  Amounts are net of tax.

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

⁽⁶⁾  The 2014 share repurchase program, as described in the Company’s Annual Report on Form 10-K for the year ended December 29, 2013 (“Annual Report”), filed with the SEC and the CSA on February 25, 2014, commenced on February 28, 2014.

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)

NOTE 1     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

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 29, 2014, and the results of operations, comprehensive income and cash flows for the second quarters ended June 29, 2014 and June 30, 2013. These Condensed Consolidated Financial Statements should be read in conjunction with the audited 2013 Consolidated Financial Statements which are contained in our most recent Annual Report. The December 29, 2013 Condensed Consolidated Balance Sheet included herein was derived from the audited 2013 Consolidated Financial Statements, but does not include all of the year-end disclosures required by U.S. GAAP.

Stock-based compensation - performance stock units

In May 2014, the Company granted performance stock units ("PSUs") to certain of its employees. PSU payout levels will be based on two forward looking performance measures: return on assets and total shareholder return. PSUs are expensed on a straight-line basis over the relevant vesting period.

NOTE 2    INCOME TAXES

The effective income tax rate was 28.3% for the second quarter ended June 29, 2014 (second quarter fiscal 2013: 26.1%) and 28.5% for the year-to-date period ended June 29, 2014 (year-to-date period fiscal 2013: 26.7%). The increase in the effective tax rate for the 2014 quarter-to-date and year-to-date periods as compared to the respective 2013 periods is primarily due to the favourable impact of a change in reserve balances in 2013 and an increase in costs in 2014 related to the Company’s new long-term debt, for which a full tax benefit cannot be recognized.

NOTE 3    EARNINGS PER COMMON SHARE ATTRIBUTABLE TO TIM HORTONS INC.

	Second quarter ended				Year-to-date period ended
	June 29, 2014		June 30, 2013		June 29, 2014		June 30, 2013
Net income attributable to Tim Hortons Inc.	$	123,750	$	123,736	$	214,659	$	209,907
Weighted average shares outstanding for computation of basic earnings per common share attributable to Tim Hortons Inc. (in thousands)	133,899		152,083		136,007		152,597
Dilutive impact of restricted stock units (“RSUs”) and PSUs (in thousands)	260		295		252		286
Dilutive impact of stock options with tandem stock appreciation rights (“SARs”) (in thousands)	208		259		218		250
Weighted average shares outstanding for computation of diluted earnings per common share attributable to Tim Hortons Inc. (in thousands)	134,367		152,637		136,477		153,133
Basic earnings per common share attributable to Tim Hortons Inc.	$	0.92	$	0.81	$	1.58	$	1.38
Diluted earnings per common share attributable to Tim Hortons Inc.	$	0.92	$	0.81	$	1.57	$	1.37

8

TIM HORTONS INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

(in thousands of Canadian dollars)

NOTE 4    NOTES RECEIVABLE, NET

	As at
	June 29, 2014								December 29, 2013
	Gross		VIEs(2)			Total			Gross		VIEs(2)			Total
Franchise Incentive Program (“FIP”) notes(1)	$	15,702	$	(12,824	)	$	2,878		$	16,677	$	(13,668	)	$	3,009
Other notes receivable(3)	7,465		(715		)	6,750			8,256		(649		)	7,607
Notes receivable	$	23,167	$	(13,539	)	9,628			$	24,933	$	(14,317	)	10,616
Allowance						(1,411		)						(1,502		)
Notes receivable, net						$	8,217							$	9,114
Current portion, net						$	7,619							$	4,631
Long-term portion, net						$	598							$	4,483

	As at
	June 29, 2014								December 29, 2013
Class and Aging	Gross		VIEs(2)			Total			Gross		VIEs(2)			Total
Current status (FIP notes and other)	$	8,222	$	(1,353	)	$	6,869		$	9,688	$	(2,081	)	$	7,607
Past-due status < 90 days (FIP notes)	329		(329		)	—			328		—			328
Past-due status > 90 days (FIP notes)	14,616		(11,857		)	2,759			14,917		(12,236		)	2,681
Notes receivable	$	23,167	$	(13,539	)	$	9,628		$	24,933	$	(14,317	)	$	10,616
Allowance						(1,411		)						(1,502		)
Notes receivable, net						$	8,217							$	9,114

________________ 

⁽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 12).

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

NOTE 5    INVENTORIES AND OTHER, NET

	As at
	June 29, 2014			December 29, 2013
Raw materials	$	25,061		$	22,789
Finished goods	78,332			69,348
	103,393			92,137
Inventory obsolescence provision	(1,418		)	(1,754		)
Inventories, net	101,975			90,383
Prepaids and other	15,801			13,943
Total Inventories and other, net	$	117,776		$	104,326

9

TIM HORTONS INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

(in thousands of Canadian dollars)

NOTE 6 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable

	As at
	June 29, 2014		December 29, 2013
Accounts payable	$	137,112	$	142,131
Construction holdbacks and accruals	33,065		57,527
Corporate reorganization accrual	941		4,856
Total Accounts payable	$	171,118	$	204,514

Tim Card obligation

The decrease in our Tim Card obligation, and resulting decrease in Restricted cash and cash equivalents, is primarily driven by Tim Card redemptions, which can be seasonal. In addition, Restricted cash and cash equivalents decreased due to additional borrowings by the Tim Hortons Advertising and Promotion Fund (Canada) Inc. (“Ad Fund”) (see note 12).

Accrued liabilities

	As at
	June 29, 2014		December 29, 2013
Salaries and wages	$	14,276	$	22,553
Taxes payable	5,316		14,542
De-branding accruals(1)	1,947		9,538
Other accrued liabilities(2)	44,296		42,932
Total Accrued liabilities	$	65,835	$	89,565

 ________________

⁽¹⁾  Accruals related to Cold Stone Creamery^® de-branding activity in Tim Hortons locations in Canada.

⁽²⁾  Includes accruals for contingent rent, current portion of the Maidstone Bakeries supply contract, deferred revenues, deposits, the current portion of deferred income taxes, and various equipment and other accruals.

NOTE 7 LONG TERM DEBT

The Company offered Senior Unsecured Notes, Series 3, due April 1, 2019 (“Series 3 Notes”) on a private placement basis in the first quarter of 2014 for total net proceeds of $449.9 million, which included a discount of $0.1 million. A portion of the proceeds from the Series 3 Notes were used to retire the balance of our 364-day $400.0 million revolving bank facility. Please refer to Note 7, Long term debt, in the interim financial statements for the quarter ended March 30, 2014, filed on Form 10-Q with the SEC and CSA on May 7, 2014, for further information.

10

TIM HORTONS INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

(in thousands of Canadian dollars)

NOTE 8    FAIR VALUES

Financial assets and liabilities measured at fair value

	As at
	June 29, 2014				December 29, 2013
	Fair value hierarchy	Fair value asset (liability)(1)			Fair value hierarchy	Fair value asset (liability)(1)
Derivatives
Forward currency contracts(2)	Level 2	$	(2,030	)	Level 2	$	4,181
Interest rate swap(3)	Level 2	(204		)	Level 2	(49		)
Interest rate forwards(4)	n/a	—			Level 2	285
Total return swaps (“TRS”)(5)	Level 2	17,147			Level 2	21,393
Total Derivatives		$	14,913			$	25,810

________________  

⁽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⁾  The fair value is estimated using discounted cash flows and market-based observable inputs, including interest rate yield curves and discount rates.

⁽⁴⁾  The interest rate forwards were settled as part of the issuance of the Series 3 Notes (see note 7).

⁽⁵⁾  The fair value of the TRS is determined using the Company’s common share closing price on the last business day of the fiscal period, as quoted on the Toronto Stock Exchange.

Other financial assets and liabilities not measured at fair value

As at June 29, 2014 and December 29, 2013, the carrying values of Cash and cash equivalents and Restricted cash and cash equivalents approximated their fair values due to the short-term nature of these investments. 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 29, 2014							December 29, 2013
	Fair value hierarchy	Fair value asset (liability)			Carrying value			Fair value hierarchy	Fair value asset (liability)			Carrying value
Bearer deposit notes(1)	Level 2	$	42,520		$	42,520		Level 2	$	41,403		$	41,403
Notes receivable, net(2)	Level 3	$	8,217		$	8,217		Level 3	$	9,114		$	9,114
Series 1 Notes(3)	Level 2	$	(317,877	)	$	(301,022	)	Level 2	$	(315,519	)	$	(301,196	)
Series 2 Notes(3)	Level 2	$	(474,687	)	$	(449,898	)	Level 2	$	(445,419	)	$	(449,892	)
Series 3 Notes(3)	Level 2	$	(453,614	)	$	(449,880	)	n/a	$	—		$	—
Advertising fund term debt(4)	Level 3	$	(27,673	)	$	(27,673	)	Level 3	$	(30,189	)	$	(30,189	)
Other debt(5)	Level 3	$	(138,650	)	$	(72,664	)	Level 3	$	(126,548	)	$	(69,794	)

________________

⁽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⁾  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.

⁽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 L.P.

⁽⁴⁾  Management estimates the fair value of this variable rate debt using a market approach, based on prevailing interest rates plus an applicable margin.

⁽⁵⁾  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.

11

TIM HORTONS INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

(in thousands of Canadian dollars)

NOTE 9    DERIVATIVES

	As at
	June 29, 2014									December 29, 2013
	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)	$	919	$	(2,142	)	$	(1,223	)	Accounts payable, net	$	4,181	$	—		$	4,181		Accounts receivable, net
Interest rate swap(2)	$	—	$	(204	)	$	(204	)	Other long-term liabilities	$	—	$	(49	)	$	(49	)	Other long-term liabilities
Interest rate forwards(3)	$	—	$	—		$	—		n/a	$	285	$	—		$	285		Accounts receivable, net
Derivatives not designated as hedging instruments
TRS(4)	$	17,160	$	(13	)	$	17,147		Other assets	$	21,393	$	—		$	21,393		Other assets
Forward currency contracts(1)	$	15	$	(822	)	$	(807	)	Accounts payable, net	$	—	$	—		$	—		n/a

________________ 

⁽¹⁾  Notional value as at June 29, 2014 of $167.8 million (December 29, 2013: $154.0 million), with maturities ranging between June 2014 and April 2015; no associated cash collateral.

⁽²⁾  Notional value as at June 29, 2014 of $27.5 million (December 29, 2013: $30.0 million), with maturities through fiscal 2019; no associated cash collateral.

⁽³⁾  The interest rate forwards were settled in the first quarter of 2014 (notional amount at December 29, 2013: $90.0 million).

⁽⁴⁾  The notional value and associated cash collateral, in the form of bearer deposit notes (see note 8), was $42.5 million as at June 29, 2014 (December 29, 2013: $41.4 million). The TRS have maturities annually, in May, between fiscal 2015 and fiscal 2021.

		Second quarter ended June 29, 2014									Second quarter ended June 30, 2013
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	$	(4,921	)	$	(1,716	)	$	(6,637	)	$	4,851		$	144		$	4,995
Interest rate swap(3)	Interest (expense)	(47		)	50			3			456			61			517
Interest rate forwards(4)	Interest (expense)	—			667			667			—			173			173
Total		(4,968		)	(999		)	(5,967		)	5,307			378			5,685
Income tax effect	Income taxes	1,321			442			1,763			(1,279		)	(54		)	(1,333		)
Net of income taxes		$	(3,647	)	$	(557	)	$	(4,204	)	$	4,028		$	324		$	4,352

12

TIM HORTONS INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

(in thousands of Canadian dollars)

		Year-to-date period ended June 29, 2014									Year-to-date period ended June 30, 2013
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	$	(516	)	$	(4,888	)	$	(5,404	)	$	8,124		$	615		$	8,739
Interest rate swap(3)	Interest (expense)	(258		)	103			(155		)	(45		)	80			35
Interest rate forwards(4)	Interest (expense)	(5,136		)	1,085			(4,051		)	—			346			346
Total		(5,910		)	(3,700		)	(9,610		)	8,079			1,041			9,120
Income tax effect	Income taxes	205			1,271			1,476			(2,141		)	(184		)	(2,325		)
Net of income taxes		$	(5,705	)	$	(2,429	)	$	(8,134	)	$	5,938		$	857		$	6,795

_______________ 

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

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

⁽³⁾  The Ad Fund entered into an amortizing interest rate swap to fix a portion of the interest expense on its term debt.

⁽⁴⁾  The Company entered into and settled interest rate forwards relating to the issuance of its long-term debt.

Derivatives not designated as cash flow hedging instruments	Classification on Condensed Consolidated Statement of Operations	Second quarter ended					Year-to-date period ended
		June 29, 2014		June 30, 2013			June 29, 2014		June 30, 2013
TRS	General and administrative expenses	$	1,998	$	(1,482	)	$	4,246	$	(8,235	)
Forward currency contracts	Cost of sales	167		(69		)	167		(349		)
Forward currency contracts	Other (income) expense	640		—			640		—
Total loss (gain), net		$	2,805	$	(1,551	)	$	5,053	$	(8,584	)

NOTE 10    COMMITMENTS AND CONTINGENCIES

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    STOCK-BASED COMPENSATION

	Second quarter ended						Year-to-date period ended
	June 29, 2014			June 30, 2013			June 29, 2014			June 30, 2013
RSUs and PSUs	$	1,386		$	2,478		$	2,656		$	3,580
Stock options and tandem SARs	(362		)	2,264			(1,864		)	7,339
Deferred share units (“DSUs”)	108			406			94			1,616
Total stock-based compensation expense	$	1,132		$	5,148		$	886		$	12,535
TRS loss (gain)(1)	$	1,998		$	(1,482	)	$	4,246		$	(8,235	)

________________

⁽¹⁾  The Company has entered into TRS contracts as economic hedges, covering 1,027,000 of the Company’s underlying common shares (June 30, 2013: 1,008,000), which represents a portion of its outstanding stock options with tandem SARs, and substantially all of its cash obligation related to DSUs. See note 9 for the revaluation of the TRS contracts.

During the second quarter of 2014, the Company granted a total of 62,000 RSUs and 72,000 PSUs (2013: total of 80,000 RSUs and 61,000 performance-conditioned restricted stock units), with a weighted average grant day fair value per unit of $60.09 (2013: $56.12). Also during the second quarter of 2014, the Company granted 578,000 stock options and tandem SARs (2013: 241,000), with a weighted average exercise per unit of $60.09 (2013: $56.12).

13

TIM HORTONS INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

(in thousands of Canadian dollars)

NOTE 12    VARIABLE INTEREST ENTITIES

VIEs for which the Company is the primary beneficiary

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 29, 2014						June 30, 2013
	Restaurant VIEs(1)		Advertising fund VIEs(2)		Total VIEs		Restaurant VIEs(1)		Advertising fund VIEs(2)		Total VIEs
Sales	$	94,328	$	—	$	94,328	$	93,464	$	—	$	93,464
Advertising levies	—		2,906		2,906		—		2,569		2,569
Total revenues	94,328		2,906		97,234		93,464		2,569		96,033
Cost of sales	92,242		—		92,242		92,480		—		92,480
Operating expenses	—		2,704		2,704		—		2,293		2,293
Operating income	2,086		202		2,288		984		276		1,260
Interest expense	33		202		235		—		276		276
Income before taxes	2,053		—		2,053		984		—		984
Income taxes	371		—		371		158		—		158
Net income attributable to noncontrolling interests	$	1,682	$	—	$	1,682	$	826	$	—	$	826

	Year-to-date period ended
	June 29, 2014						June 30, 2013
	Restaurant VIEs(1)		Advertising fund VIEs(2)		Total VIEs		Restaurant VIEs(1)		Advertising fund VIEs(2)		Total VIEs
Sales	$	177,709	$	—	$	177,709	$	180,224	$	—	$	180,224
Advertising levies	—		5,898		5,898		—		5,100		5,100
Total revenues	177,709		5,898		183,607		180,224		5,100		185,324
Cost of sales	173,855		—		173,855		178,346		—		178,346
Operating expenses	—		5,466		5,466		—		4,392		4,392
Operating income	3,854		432		4,286		1,878		708		2,586
Interest expense	33		432		465		—		708		708
Income before taxes	3,821		—		3,821		1,878		—		1,878
Income taxes	693		—		693		300		—		300
Net income attributable to noncontrolling interests	$	3,128	$	—	$	3,128	$	1,578	$	—	$	1,578

______________

⁽¹⁾  Includes rents, royalties, advertising expenses and product purchases from the Company which are eliminated upon the consolidation of these VIEs.

⁽²⁾  The advertising levies, depreciation, interest costs, capital expenditures and financing associated with the Ad Fund’s program to acquire and install LCD screens, media engines, drive-thru menu boards and ancillary equipment for our restaurants (the “Expanded Menu Board Program”) are presented on a gross basis. 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.

14

TIM HORTONS INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

(in thousands of Canadian dollars)

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 29, 2014				December 29, 2013
	Restaurant VIEs(1)		Advertising fund VIEs		Restaurant VIEs(1)		Advertising fund VIEs
Cash and cash equivalents	$	7,733	$	—	$	7,773	$	—
Advertising fund restricted assets – current	—		39,078		—		39,783
Other current assets	7,060		—		7,155		—
Property and equipment, net	19,638		65,661		20,471		70,485
Other long-term assets	119		960		370		1,271
Total assets	$	34,550	$	105,699	$	35,769	$	111,539
Notes payable to Tim Hortons Inc. – current(2)(3)	$	12,996	$	23,040	$	13,689	$	3,040
Advertising fund liabilities – current	—		38,782		—		59,913
Other current liabilities(4)	11,313		5,268		11,706		5,253
Notes payable to Tim Hortons Inc. – long-term(2)(3)	543		13,680		628		15,200
Long-term debt(4)	—		22,641		—		25,157
Other long-term liabilities	8,090		2,288		9,381		2,976
Total liabilities	32,942		105,699		35,404		111,539
Equity of VIEs	1,608		—		365		—
Total liabilities and equity	$	34,550	$	105,699	$	35,769	$	111,539

______________

⁽¹⁾  The Company consolidated 328 Non-owned restaurants as at June 29, 2014 (December 29, 2013: 331).

⁽²⁾  Various assets and liabilities are eliminated upon the consolidation of the Restaurant 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 4).

⁽³⁾  The Notes payable to the Company by the Advertising Fund VIEs, which are funded by the Restricted cash and cash equivalents related to our Tim Card program, are eliminated upon consolidation of the Ad Fund. The Ad Fund drew $20.0 million in the year-to-date period ended June 29, 2014 (year-to-date period ended June 30, 2013: $nil) for purposes of the Expanded Menu Board Program.

⁽⁴⁾  Includes $27.7 million of Advertising fund VIEs debt with a Canadian financial institution relating to the Expanded Menu Board Program (December 29, 2013: $30.2 million), of which $5.0 million is recognized in Other current liabilities (December 29, 2013: $5.0 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.

NOTE 13    SEGMENT REPORTING

The Company operates exclusively in the quick service restaurant industry. The chief decision maker views and evaluates the Company’s reportable segments as follows:

Canadian and U.S. business units.The results of each of the Canadian and U.S. business units includes 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, driven primarily by the business units’ respective systemwide sales; (iii) franchise fees; (iv) corporate restaurants; (v) equity income related to restaurant operating ventures; and (vi) 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.

15

TIM HORTONS INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

(in thousands of Canadian dollars)

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 to a much lesser extent, 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 and predictable pricing. 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. Corporate services also includes the results of our international operations, which are currently not significant.

	Second quarter ended						Year-to-date period ended
	June 29, 2014			June 30, 2013			June 29, 2014			June 30, 2013
Revenues(1)
Canada	$	721,599		$	657,682		$	1,344,784		$	1,251,355
U.S.	51,878			41,220			103,053			85,668
Corporate services	3,636			5,204			9,305			9,329
Total reportable segments	777,113			704,106			1,457,142			1,346,352
VIEs	97,234			96,033			183,607			185,324
Total	$	874,347		$	800,139		$	1,640,749		$	1,531,676
Operating Income (Loss)
Canada	$	188,866		$	174,760		$	342,332		$	320,581
U.S.	9,254			2,587			13,611			3,497
Corporate services	(8,041		)	(1,424		)	(22,575		)	(12,089		)
Total reportable segments	190,079			175,923			333,368			311,989
VIEs	2,288			1,260			4,286			2,586
Corporate reorganization expenses	—			(604		)	—			(10,079		)
Consolidated Operating Income	192,367			176,579			337,654			304,496
Interest, Net	(17,510		)	(8,131		)	(33,209		)	(15,866		)
Income before income taxes	$	174,857		$	168,448		$	304,445		$	288,630

________________ 

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

Consolidated Sales comprise the following:

	Second quarter ended				Year-to-date period ended
	June 29, 2014		June 30, 2013		June 29, 2014		June 30, 2013
Sales
Distribution sales	$	511,762	$	468,597	$	964,115	$	899,748
Company-operated restaurant sales	7,739		6,501		13,035		12,477
Sales from VIEs	94,328		93,464		177,709		180,224
Total Sales	$	613,829	$	568,562	$	1,154,859	$	1,092,449

16

TIM HORTONS INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

(in thousands of Canadian dollars)

NOTE 14    RECENT ACCOUNTING PRONOUNCEMENTS

In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09 Revenue from Contracts with Customers. The amendments in this ASU are intended to provide a more robust framework for addressing revenue issues; improve comparability of revenue recognition practices across entities, industries, jurisdictions and markets; and provide more useful information to financial statement users through improved disclosure requirements. The amendments in this ASU are effective for fiscal years and interim periods beginning on or after December 15, 2016, and should be applied retrospectively using one of two acceptable application methods as noted in the ASU. The Company is currently assessing the potential impact that the adoption and transition to this ASU may have on its Consolidated Financial Statements and related disclosures.

17

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 2013 Consolidated Financial Statements and accompanying Notes included in our Annual Report on Form 10-K for the year ended December 29, 2013 (“Annual Report”) filed with the U.S. Securities and Exchange Commission (“SEC”) and the Canadian Securities Administrators (“CSA”) on February 25, 2014, and the Condensed Consolidated Financial Statements and accompanying Notes included in our Interim Report on Form 10-Q for the quarter ended June 29, 2014 filed with the SEC and the CSA on August 6, 2014. 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, strategic plan, results and outlook based on current expectations, assumptions and information, including information about our restaurant development plans, same-store sales expectations, earnings performance, capitalization alternatives, targets and operational 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 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 Company-operated restaurants, and franchisee-owned restaurants and restaurants run by independent operators (collectively, we hereunder refer to both franchisee-owned and franchisee-operated restaurants as “franchised restaurants”). 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 our system, and the strength of our brand and restaurant owner base, which ultimately impacts our consolidated and segmented financial performance. Please refer to “Executive Overview” and “Selected Operating and Financial Highlights” 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. As the franchisor, Tim Hortons collects royalty revenue from franchised restaurant sales. Our business generates additional revenues by controlling the underlying real estate of our franchised restaurants; real estate that is not controlled by us is generally for our non-standard restaurants. We warehouse and distribute coffee and other beverages, non-perishable food, supplies, packaging and equipment to most system restaurants in Canada, and frozen, refrigerated and shelf-stable products to certain markets in Canada. 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. In addition, the Company has vertically integrated manufacturing operations which include two coffee roasting plants and a fondant and fills manufacturing facility.

Executive Overview

Both the Canadian and U.S. economies remain challenged and, in turn, the quick service industry’s operating environment remains highly competitive. In the second quarter of 2014, we were pleased to achieve improved sales progression owing to both product innovation and operational initiatives during the early stages of our strategic plan, and build sales momentum into the second half of 2014. Our systemwide sales grew by 6.5% in the second quarter of 2014, on a constant currency basis, driven by new restaurant development and same-store sales growth.

In the second quarter of 2014, same-store sales growth of 2.6% in Canada and 5.9% in the U.S. was driven by increases in average cheque. In the year-to-date period of 2014, same-store sales growth in Canada was 2.1%, and in the U.S. was 3.9%.

18

Given our significant sales progression in the U.S., we believe that same-store sales growth in the U.S. will be at the high end, or slightly above, our targeted range for 2014 of 2.0 - 4.0%.

Operating income increased8.9% in the second quarter of 2014 compared to the second quarter of 2013. Growth in operating income was primarily driven by systemwide sales growth, resulting in an increase in rents and royalties and supply chain income, partially offset by increased general and administrative expenses.

Year-to-date in 2014, operating income increased10.9%, and adjusted operating income (refer to non-GAAP table) increased7.3%, compared to the respective 2013 periods. Similar to the quarter, systemwide sales growth drove an increase in both rents and royalties and supply chain income, partially offset by the timing of expenses related to our CIBC Visa co-branded loyalty rewards credit card (the “Double Double^TM Card”), and increased general and administrative expenses. The launch of our Double Double Card is expected to be cost-neutral on operating income over fiscal 2014.

Net income attributable to Tim Hortons Inc. was approximately flat in the second quarter of 2014 compared to the second quarter of 2013, and increased2.3% in the year-to-date period of 2014 compared to the year-to-date period of 2013. The change in both periods was due primarily to higher operating income, as discussed above, partially offset by the effect of our recapitalization, resulting in higher interest expense and a higher effective tax rate. The effective tax rates in 2013 were also favourably impacted by a change in reserve balances in the respective 2013 periods.

Diluted earnings per share attributable to Tim Hortons Inc. (“EPS”) increased$0.11, or 13.6%, in the second quarter of 2014 compared to the second quarter of 2013. Year-to-date in 2014, EPS increased$0.20, or 14.7%, compared to the year-to-date period of 2013, which was negatively impacted by approximately $0.05 due to corporate reorganization expenses. EPS growth in both periods was driven by strong operating performance, as well as the impact of our recapitalization, primarily used for our expanded share repurchase program, which resulted in a lower number of shares outstanding. Given our strong sales progression to date in fiscal 2014 and momentum into the second half of 2014, we expect our EPS in 2014 to be at the high end, or slightly above, our targeted range of $3.17 to $3.27.

Selected Operating and Financial Highlights

	Second quarter ended						Year-to-date ended
($ in millions, except per share data)	June 29, 2014			June 30, 2013			June 29, 2014			June 30, 2013
Systemwide sales growth(1)	6.5		%	5.0		%	5.8		%	4.1		%
Same-store sales growth(2)
Canada	2.6		%	1.5		%	2.1		%	0.6		%
U.S.	5.9		%	1.4		%	3.9		%	0.5		%
Systemwide restaurants	4,546			4,304			4,546			4,304
Revenues	$	874.3		$	800.1		$	1,640.7		$	1,531.7
Operating income	$	192.4		$	176.6		$	337.7		$	304.5
Adjusted operating income(3)	$	192.4		$	177.2		$	337.7		$	314.6
Net income attributable to Tim Hortons Inc.	$	123.8		$	123.7		$	214.7		$	209.9
Diluted EPS	$	0.92		$	0.81		$	1.57		$	1.37
Weighted average number of common shares outstanding – Diluted (in millions)	134.4			152.6			136.5			153.1

________________  

⁽¹⁾  Total 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 excludes sales from our Republic of Ireland and United Kingdom licensed locations. Systemwide sales growth in Canadian dollars, including the effects of foreign currency translation, was 7.2% and 5.1% for the second quarters of 2014 and 2013, respectively, and 6.6% and 4.2% for the year-to-date periods of 2014 and 2013, respectively.

⁽²⁾  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.

⁽³⁾  Adjusted operating income is a non-GAAP measure. See below for reconciliation 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 to better evaluate 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. Adjusted operating income should not be considered a measure of income generated by our business. The reconciliation of operating income, a GAAP measure, to adjusted operating income, a non-GAAP measure, is set forth in the table below:

19

	Second quarter ended									Year-to-date periods ended
	June 29, 2014		June 30, 2013		Change					June 29, 2014		June 30, 2013		Change
					$			%						$			%
	($ in millions)
Operating income	$	192.4	$	176.6	$	15.8		8.9	%	$	337.7	$	304.5	$	33.2		10.9	%
Add: Corporate reorganization expenses	—		0.6		(0.6		)	n/m		—		10.1		(10.1		)	n/m
Adjusted operating income	$	192.4	$	177.2	$	15.2		8.6	%	$	337.7	$	314.6	$	23.1		7.3	%

________________ 

All numbers rounded

^n/m    Not meaningful

Operational Highlights

Single-serve products. In line with our objective to increase consumer access to our products and further expand our single-serve platform, we began shipments of our single-serve products through to the grocery channel towards the end of the second quarter of 2014. We expect the Company and our restaurant owners to benefit from sales through this channel.

Technological innovation.In line with our strategy to increase guest convenience through the use of technology, we introduced scan-to-pay and tap-to-pay mobile payments using our TimmyMe^TM application at all of our integrated Canadian and U.S. restaurants in the second quarter of 2014.

In July 2014, we launched our Double Double Card in conjunction with CIBC, which leverages unique two-button technology to combine two cards into one: a CIBC Visa Credit card and our popular Tim Card program. The Double Double Card allows cardholders to earn Tim Cash rewards on everyday purchases, which can be redeemed instantly at any of our restaurants in Canada or the U.S. where the Tim Card is currently accepted, and also supports tap-to-pay technology, as discussed above.

Temporary Foreign Worker Program

A substantial portion of our earnings come from royalties, rents, and other amounts paid by restaurant owners, who operate substantially all of our restaurants. In April 2014, the Federal Government of Canada imposed a moratorium on the food service sector’s access to the Temporary Foreign Workers Program (“TFWP”). On June 20, 2014, the Federal Government of Canada lifted the moratorium but announced reforms that are expected to have the net effect of restricting or reducing access to the TFWP in most markets where it existed previously. Access to labour through use of the TFWP, in some markets, particularly in parts of western Canada, has been an important tool to help our restaurant owners fill labour shortages where Canadian citizen and permanent resident employees are not sufficient. While the Company and our restaurant owners are pursuing strategies to address the government’s TFWP policy changes, the reforms may result in less restaurant development and reduced hours of operation in certain markets, and increases in labour or other costs to our owners. For further information, please refer to Item 1A. Risk Factors of our Annual Report.

20

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 29, 2014					Second quarter ended June 30, 2013
	Full-serve Standard and Non-standard		Self-serve Kiosks	Total		Full-serve Standard and Non-standard		Self-serve Kiosks		Total
Canada
Restaurants opened	26		3	29		19		2		21
Restaurants closed	(9	)	—	(9	)	(5	)	(1	)	(6	)
Net change	17		3	20		14		1		15
U.S.
Restaurants opened	1		—	1		5		—		5
Restaurants closed	(5	)	—	(5	)	(3	)	(3	)	(6	)
Net change	(4	)	—	(4	)	2		(3	)	(1	)
International (GCC)
Restaurants opened	6		—	6		2		—		2
Total Company
Restaurants opened	33		3	36		26		2		28
Restaurants closed	(14	)	—	(14	)	(8	)	(4	)	(12	)
Net change	19		3	22		18		(2	)	16

	Year-to-date period ended June 29, 2014					Year-to-date period ended June 30, 2013
	Full-serve Standard and Non-standard		Self-serve Kiosks	Total		Full-serve Standard and Non-standard		Self-serve Kiosks		Total
Canada
Restaurants opened	45		7	52		41		4		45
Restaurants closed	(10	)	—	(10	)	(12	)	(1	)	(13	)
Net change	35		7	42		29		3		32
U.S.
Restaurants opened	12		—	12		12		1		13
Restaurants closed	(5	)	—	(5	)	(7	)	(3	)	(10	)
Net change	7		—	7		5		(2	)	3
International (GCC)
Restaurants opened	12		—	12		5		—		5
Total Company
Restaurants opened	69		7	76		58		5		63
Restaurants closed	(15	)	—	(15	)	(19	)	(4	)	(23	)
Net change	54		7	61		39		1		40

21

Systemwide Restaurant Count

	As at
	June 29, 2014		December 29, 2013		June 30, 2013
Canada
Company-operated	15		14		17
Franchised – standard and non-standard	3,473		3,440		3,324
Franchised – self-serve kiosk	142		134		127
Total	3,630		3,588		3,468
% Franchised	99.6	%	99.6	%	99.5	%
U.S.
Company-operated	3		2		3
Franchised – standard and non-standard	682		676		627
Franchised – self-serve kiosks	181		181		177
Total	866		859		807
% Franchised	99.7	%	99.8	%	99.6	%
International (GCC)
Franchised – standard and non-standard	50		38		29
% Franchised	100.0	%	100.0	%	100.0	%
Total system
Company-operated	18		16		20
Franchised – standard and non-standard	4,205		4,154		3,980
Franchised – self-serve kiosks	323		315		304
Total	4,546		4,485		4,304
% Franchised	99.6	%	99.6	%	99.5	%

Segment Operating Income

Our segments consist of the Canadian and U.S. business units, and Corporate Services (see Item 1. Financial Statements—Note 13 Segment Reporting for further information). Set forth in the table below is the operating income (loss) of our reportable segments:

	Second quarter ended											Year-to-date period ended
	June 29, 2014			June 30, 2013			Change					June 29, 2014			June 30, 2013			Change
							$			%								$			%
	($ in millions)
Canada	$	188.9		$	174.8		$	14.1		8.1	%	$	342.3		$	320.6		$	21.8		6.8	%
U.S.	$	9.3		$	2.6		$	6.7		n/m		$	13.6		$	3.5		$	10.1		n/m
Corporate services	$	(8.0	)	$	(1.4	)	$	(6.6	)	n/m		$	(22.6	)	$	(12.1	)	$	(10.5	)	n/m

________________

All numbers rounded

^n/m    Not meaningful

Canada

Operating income increased 8.1% in the second quarter of 2014 compared to the second quarter of 2013. Systemwide sales growth of 5.8%, driven by the incremental sales of new restaurants year-over-year and same-store sales growth of 2.6%, resulted in higher rents and royalties income and a higher allocation of supply chain income. Canada also benefited from higher franchise fee income due to increased restaurant development (see Selected Operating and Financial Highlights—New Restaurant Development)and increased renovation activity year-over-year.

Same-store sales growth in the second quarter of 2014 was driven by an increase in average cheque, resulting from favourable product mix and pricing, partially offset by same-store transaction declines. We continued to grow total systemwide transactions. In Canada, the increase in average cheque was aided by increased sales in the lunch daypart, led by the recent

22

introduction of our Crispy Chicken Sandwich, as well as increased sales in the breakfast daypart, aided by new product introductions such as the Turkey Sausage Hot Breakfast Sandwich and the new Hash Brown.

For the year-to-date period of 2014, operating income increased6.8% compared to the year-to-date period of 2013. Operating income growth was driven primarily by systemwide sales growth of 5.2% in the year-to-date period of 2014, resulting from the net addition of new restaurants and same-store sales growth of 2.1%. Similar to the quarter, same-store sales growth in the year-to-date period of 2014 was driven by an increase in average cheque, resulting from favourable product mix and pricing, partially offset by a decline in same-store transactions. Systemwide sales growth resulted in higher rents and royalties income and a higher allocation of supply chain income. For the year-to-date period of 2014, we have recognized a net expense of $2.4 million related to the launch of the Double Double Card, which we expect to be cost-neutral on Canada’s operating income over fiscal 2014.

U.S.

Operating income was $9.3 million in the second quarter of 2014, a significant increase of $6.7 million compared to the second quarter of 2013. Systemwide sales growth of 12.3% was driven by incremental sales from the addition of new restaurants, and same-store sales growth of 5.9%. Systemwide sales growth led to growth in rents and royalties revenues, and same-store sales growth led to a significant reduction in relief from restaurants open 13 months or more. We also noted lower relief due to specific relief reduction measures, which began in the second half of 2013, and the closure of underperforming restaurants in the fourth quarter of 2013. Rents and royalties income benefited slightly from favourable lease termination settlements. A higher supply chain allocation, due primarily to systemwide sales growth and favourable product margin variability, also contributed to U.S. operating income growth, while general and administrative expenses were flat year-over-year. Foreign currency translation increased U.S. operating income by approximately $0.6 million year-over-year.

In the second quarter of 2014, same-store sales growth was driven by gains in average cheque resulting from favourable product mix and pricing. Our same-store transactions were essentially flat, and we continued to grow total systemwide transactions, as evidenced by systemwide sales growth of 12.3%. Our same-store sales growth in the second quarter of 2014 benefited from sales of cold beverages, aided by the introduction of Frozen Hot Chocolate and ongoing innovation around our Iced Capp platform, and similar to Canada, growth in the breakfast daypart.

For the year-to-date period of 2014, operating income was $13.6 million, an increase of $10.1 million compared to the year-to-date period of 2013. Systemwide sales growth of 10.2% was driven by the net addition of new restaurants and same-store sales growth of 3.9%, due to an increase in average cheque resulting from favourable product mix and pricing, partially offset by a decrease in same-store transactions. Similar to the second quarter of 2014, systemwide sales growth led to growth in rents and royalties revenues, and same-store sales growth led to a significant reduction in relief from restaurants open 13 months or more. We also noted lower relief due to specific relief reduction measures and restaurant closures. This growth was partially offset by higher operating expenses, due to an overall increase in the number of properties owned or leased. U.S. operating income growth also benefited from a higher supply chain allocation, due to the same factors impacting the second quarter of 2014, and the favourable timing of general and administrative expenses. Foreign currency translation increased U.S. operating income by approximately $1.0 million year-over-year.

We continue to focus on increasing our returns in the U.S. segment.In the second quarter of 2014, consistent with our strategic plan, we signed a multi-unit development agreement to develop approximately 20 standard and non-standard restaurants affiliated with a chain of convenience stores and gas stations located in southwestern Pennsylvania and northern West Virginia over a five-year term. In July 2014, we signed an area development agreement to develop approximately 25 restaurants in Richmond County, New York, and Middlesex County, New Jersey over a 10-year term. Since the fourth quarter of 2013, we have entered into a total of six agreements to develop approximately 135 standard and non-standard restaurants over the next 10 years in different U.S. markets.

Corporate services

Our Corporate services segment had an operating loss of $8.0 million in the second quarter of 2014, compared to an operating loss of $1.4 million in the second quarter of 2013. The increased operating loss in our Corporate services segment was driven by increased corporate costs, due in part to higher salaries and benefits and higher professional fees in the second quarter of 2014 compared to the second quarter of 2013 (see Results of Operations— General and Administrative Expenses for further information). Additionally, unfavourable product margins in our supply chain recognized in the second quarter of 2014 compared to favourable product margins recognized in the second quarter of 2013 contributed to the increased operating loss. We expect product margin variability to generally reverse within the fiscal year, although timing differences can result in fluctuations quarter-over-quarter.

Year-to-date in 2014, our Corporate services segment had an operating loss of $22.6 million, compared to an operating loss of $12.1 million in the year-to-date period of 2013. The increased operating loss was primarily driven by unfavourable

23

product margins recognized in the year-to-date period of 2014, compared to favourable product margins recognized in the year-to-date period of 2013, as well as higher salaries and benefits and professional fees.

Results of Operations

	Second quarter ended											Year-to-date period ended
	June 29, 2014			June 30, 2013			Change(1)					June 29, 2014			June 30, 2013			Change(1)
							$			%								$			%
	($ in millions)
Revenues
Sales	$	613.8		$	568.6		$	45.3		8.0	%	$	1,154.9		$	1,092.4		$	62.4		5.7	%
Franchise revenues:
Rents and royalties(2)	225.0			209.3			15.7			7.5	%	424.5			396.7			27.7			7.0	%
Franchise fees	35.6			22.3			13.3			59.6	%	61.4			42.5			18.9			44.6	%
Total revenues	874.3			800.1			74.2			9.3	%	1,640.7			1,531.7			109.1			7.1	%
Costs and expenses
Cost of sales	527.1			489.1			38.0			7.8	%	1,000.7			950.4			50.3			5.3	%
Operating expenses	84.4			77.0			7.4			9.6	%	165.7			152.7			13.0			8.5	%
Franchise fee costs	34.9			23.3			11.6			49.6	%	62.6			45.9			16.7			36.4	%
General and administrative expenses	40.2			38.0			2.2			5.8	%	79.5			76.7			2.8			3.6	%
Equity (income)	(4.0		)	(3.9		)	(0.1		)	1.5	%	(7.3		)	(7.3		)	(0.1		)	0.8	%
Corporate reorganization expenses	—			0.6			(0.6		)	n/m		—			10.1			(10.1		)	n/m
Other expense (income), net	(0.7		)	(0.6		)	(0.2		)	28.9	%	2.0			(1.4		)	3.4			n/m
Total costs and expenses	682.0			623.6			58.4			9.4	%	1,303.1			1,227.2			75.9			6.2	%
Operating income	$	192.4		$	176.6		$	15.8		8.9	%	$	337.7		$	304.5		$	33.2		10.9	%
Operating income %	22.0		%	22.1		%						20.6		%	19.9		%
Interest (expense)	(18.6		)	(8.9		)	(9.7		)	n/m		(35.3		)	(17.6		)	(17.7		)	n/m
Income tax rate	28.3		%	26.1		%						28.5		%	26.7		%

_____________

All numbers rounded

^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. While foreign currency translation, primarily related to the Canadian dollar relative to the U.S. dollar, impacted individual revenue and expense items in the second quarter of 2014 and the year-to-date period of 2014, it did not have a significant impact on operating income.

⁽²⁾  Rents and royalties revenues includes rents and royalties derived from our franchised restaurant sales, and certain advertising levies primarily associated with the Tim Hortons Advertising and Promotion Fund (Canada) Inc.’s (“Ad Fund”) program to acquire LCD screens, media engines, drive-thru menu boards and ancillary equipment for our restaurants (“Expanded Menu Board Program”) (see Item 1. Financial Statements—Note 12 Variable Interest Entities). 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 period ended
	June 29, 2014		June 30, 2013		June 29, 2014		June 30, 2013
Franchised restaurant sales	(in millions)
Canada (Canadian dollars)	$	1,660.4	$	1,570.8	$	3,134.2	$	2,979.3
U.S. (U.S. dollars)	$	163.8	$	145.5	$	312.1	$	282.7

Revenues

Sales

In the second quarter of 2014, the growth in sales compared to the second quarter of 2013 was driven primarily by increased distribution sales. In the year-to-date period of 2014, the growth in sales compared to the year-to-date period of 2013

24

was again driven primarily by increased distribution sales, partially offset by a decrease in sales from variable interest entities (“VIEs”).

Distribution sales. Distribution sales were $511.8 million in the second quarter of 2014, compared to $468.6 million in the second quarter of 2013. The increase of $43.2 million, or 9.2%, was driven primarily by systemwide sales growth, which contributed approximately 6.5% of the increase, and to a lesser extent, commodity-related pricing, reflective of their underlying costs. For the year-to-date period of 2014, distribution sales were $964.1 million, an increase of $64.4 million, or 7.2%, compared to the year-to-date period of 2013, driven primarily by systemwide sales growth, which contributed approximately 5.3% of the growth. Foreign currency translation increased distribution sales by approximately 0.5% in both periods.

Our distribution sales are subject to changes related to underlying costs of key commodities, such as coffee, wheat, edible oils and 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 six-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.

The current market price of coffee, a key commodity for the Company, has recently experienced an increase. Our purchase commitments to the end of fiscal 2014 reflect previous lower market coffee pricing, however, beginning in fiscal 2015, our purchase commitments are reflective of the elevated market price of coffee. As noted above, changes in underlying costs are largely passed through to restaurant owners, and we and our restaurant owners have some ability to increase product pricing to offset any rises in commodity prices, subject to restaurant owner and guest acceptance. Notwithstanding the foregoing, while it is not our current practice, we may choose not to pass along all price increases to our restaurant owners, which could have a more significant effect on our business and results of operations than if we pass along all increases to our restaurant owners. For a full description of the related risk factors, please refer to Item 1A. Risk Factors of our Annual Report.

Variable interest entities’ sales. VIEs’ sales were $94.3 million in the second quarter of 2014, an increase of 0.9% compared to the second quarter of 2013. The increase was primarily due to foreign currency translation, which increased VIEs’ sales by 3.5%, and mix of consolidated restaurants, partially offset by a decrease, on average, of 16 fewer VIEs.

In the year-to-date period of 2014, VIEs’ sales were $177.7 million, a decrease of 1.4% compared to the year-to-date period of 2013, driven primarily by the decrease, on average, of 23 fewer VIEs. The decrease was partially offset by foreign currency translation, which increased VIEs’ sales by 3.8%, and mix of consolidated restaurants.

The number of consolidated Non-owned restaurants has decreased slightly since the end of fiscal 2013. The following table outlines the number of consolidated Non-owned restaurants, on average, and in each respective period:

	Second quarter ended		Year-to-date period ended		As at
	June 29, 2014	June 30, 2013	June 29, 2014	June 30, 2013	June 29, 2014	December 29, 2013
	Average		Average
Canada	106	114	106	118	105	106
U.S.	225	233	224	235	223	225
Total	331	347	330	353	328	331

Franchise Revenues

Rents and Royalties. Revenue from rents and royalties increased7.5% in the second quarter of 2014 compared to the second quarter of 2013. The increase was driven by systemwide sales growth, which contributed approximately 7.1% of the increase, and foreign currency translation, which increased rents and royalties revenues by approximately 0.5%.

In the year-to-date period of 2014, revenue from rents and royalties increased7.0% compared to the year-to-date period of 2013. Similar to the quarter, the increase was driven primarily by systemwide sales growth, contributing approximately 6.1% of the growth, and foreign currency translation, which increased rents and royalties revenues by approximately 0.6%.

Franchise Fees. Franchise fees increased$13.3 million in the second quarter of 2014 compared to the second quarter of 2013. The increase was driven by an increase in renovations, as well as increased restaurant resales and development, primarily in Canada. In the year-to-date period of 2014, franchise fees increased$18.9 million compared to the year-to-date period of

25

2013, again due to an increase in renovations primarily in Canada, and increased restaurant development across all of our markets.

Total Costs and Expenses

Cost of Sales

In both the second quarter and year-to-date period of 2014, the growth in cost of sales compared to the respective 2013 periods was driven primarily by growth in distribution cost of sales, partially offset by a decrease in VIEs’ cost of sales.

Distribution cost of sales. Distribution cost of sales was $438.4 million in the second quarter of 2014, compared to $399.0 million in the second quarter of 2013. The increase of $39.4 million, or 9.9%, was primarily driven by systemwide sales growth, which contributed approximately 6.8% of the increase and, to a lesser extent, commodity-related pricing. Foreign currency translation increased distribution cost of sales by approximately 0.5%.

In the year-to-date period of 2014, distribution cost of sales was $832.4 million compared to $774.6 million in the year-to-date period of 2013. The increase of $57.8 million, or 7.5%, was driven primarily by systemwide sales growth, which contributed approximately 5.4% of the increase. Foreign currency translation increased distribution cost of sales by approximately 0.5%.

Our distribution costs are subject to changes related to the underlying costs of key commodities, such as coffee, wheat, edible oils, sugar, and other product costs (see Revenues—Sales—Distribution Sales above for further information).

Variable interest entities’ cost of sales. VIEs’ cost of sales was $81.4 million in the second quarter of 2014, a decrease of $2.1 million, or 2.5%, compared to the second quarter of 2013. In the year-to-date period of 2014, VIEs’ cost of sales was $155.4 million, a decrease of $6.8 million, or 4.2%, compared to the year-to-date period of 2013. The decrease in both periods was primarily due to the decrease in average number of VIEs, partially offset by foreign currency translation. Foreign currency translation increased VIEs’ cost of sales by approximately 3.6% in the second quarter of 2014, and 3.9% in the year-to-date period of 2014.

Operating Expenses

Total operating expenses increased$7.4 million, or 9.6% in the second quarter of 2014 compared to the second quarter of 2013. Property-related depreciation expense increased by $3.6 million, including foreign currency translation, due to both an increase in the number of properties either owned or leased, and then subleased to restaurant owners, and renovations to existing restaurants. Rent expense increased by $3.1 million year-over-year, primarily due to 161 additional properties that were leased and then subleased to restaurant owners. Foreign currency translation increased operating expenses by approximately 0.9%.

In the year-to-date period of 2014, operating expenses increased$13.0 million, or 8.5%, compared to the year-to-date period of 2013. Property-related depreciation increased by $7.0 million, including foreign currency translation, due to both new and existing restaurants, and rent expense increased by $6.5 million year-over-year. Operating expenses related to the Expanded Menu Board Program also increased by $1.1 million year-over-year. These increases were partially offset by favourable lease termination settlements. Foreign currency translation increased operating expenses by approximately 1.0%.

We anticipate the growth in operating expenses to increase over the course of fiscal 2014, due to increased rent and depreciation related to new restaurant openings, and increased depreciation related to renovations.

Franchise Fee Costs

Franchise fee costs increased$11.6 million in the second quarter of 2014 compared to the second quarter of 2013, due primarily to an increase in renovations, as well as increased restaurant resales and restaurant development, primarily in Canada. In the year-to-date period of 2014, franchise fee costs increased$16.7 million compared to the year-to-date period of 2013, again due to an increase in renovations primarily in Canada, and increased restaurant development across all of our markets.

General and Administrative Expenses

General and administrative expenses increased5.8% in the second quarter of 2014 compared to the second quarter of 2013, and in the year-to-date period of 2014, increased3.6% compared to the year-to-date period of 2013. The increase in both periods was due to increased salaries and benefits resulting primarily from fewer vacancies in the organization, and higher professional fees related to strategic initiatives. Partially offsetting the increase were lower promotional expenses, related primarily to Cold Stone Creamery in Canada. Foreign currency translation increased general and administrative expenses by approximately 1.3% in both periods.

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We anticipate that general and administrative expenses will continue to increase over fiscal 2014, primarily as vacancies resulting from the corporate reorganization (see below) were filled over the course of fiscal 2013.

Corporate Reorganization Expenses

We completed the realignment of roles and responsibilities into our corporate centre and business unit design at the end of the first quarter of 2013, and incurred additional Chief Executive Officer transition costs to the end of fiscal 2013 (please refer to Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report for a full description).

Other Expense (Income), net

Other income recognized in the second quarter of 2014 and other expense recognized in the year-to-date period of 2014 primarily related to the launch of our Double Double Card, which occurred in July 2014. We continue to expect the launch of the Double Double Card to be cost-neutral over fiscal 2014.

In comparison, other income recognized in the second quarter of 2013 was due primarily to foreign exchange gains. Other income recognized in the year-to-date period of 2013 was primarily due to the gain on a corporate property sale, as well as foreign exchange gains.

Interest Expense

The increase in interest expense in both the second quarter of 2014 and year-to-date period of 2014, compared to the respective 2013 periods, was due to the increase in our long-term debt. Our interest expense in the second quarter of 2014 is indicative of future interest expense related to the increase in our long-term debt (seeLiquidity and Capital Resourcesfor further information).

Income Taxes

The increase in the effective income tax rate for the 2014 quarter-to-date and year-to-date periods as compared to the respective 2013 periods is primarily due to the favourable impact of a change in reserve balances in 2013 and an increase in costs in 2014 related to our new long-term debt, for which a full tax benefit cannot be recognized.

During the quarter, there have been no significant developments related to the Canada Revenue Agency matters discussed in our Annual Report.

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. In fiscal 2014, our U.S. operations have, and are expected to continue to, contribute positively to our cash flow. Our $250.0 million revolving bank facility provides an additional source of liquidity (see Credit Facilities below for additional information). During the second quarter of 2014, we borrowed $15.0 million on this facility for general corporate purposes, which was fully repaid in July 2014. We believe that we will continue to generate adequate operating cash flows over the next 12 months.

In March 2014, Tim Hortons Inc. raised $450.0 million in long-term debt through the issuance of Senior Unsecured Notes, Series 3, due April 1, 2019 (“Series 3 Notes”), a portion of which was utilized to settle our $400.0 million revolving bank facility, which is now fully retired. Please refer to Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company’s First Quarter Report for the quarter ended March 30, 2014, filed on Form 10-Q with the SEC and CSA on May 7, 2014 for a full description.

We regularly assess capital structure, and seek to identify opportunities to generate value for shareholders. Since the third quarter of 2013, our outstanding long-term debt increased by $900.0 million, which was used for the retirement of the 2013 Revolving Bank Facility, and general corporate purposes, including share repurchases. The accretive benefits to EPS of our expanded share repurchase program more than offset the after-tax cost of our interest expense that resulted from increasing the amount of our debt to fund those repurchases. Under our current structure, increasing our debt levels substantially beyond $900.0 million to repurchase shares could result in further increases in the effective tax rate resulting from incurring additional interest expense for which we may not receive a tax benefit, and/or increases in income or withholding taxes on distributions from our Canadian operating company to our parent corporation. Addressing constraints in our capital structure is an important consideration to maintaining our effective tax rate over the longer term, although there can be no assurance that we will be able to address these constraints in a timely or tax efficient manner. Our inability to address these constraints in a timely or efficient manner could negatively affect our projected results, future operations, and financial condition. For a full description of this related risk factor, please refer to Item 1A. Risk Factors of our Annual Report.

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If additional funds are needed for strategic initiatives or other corporate purposes beyond those currently available, 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 also be limited by our financial and other covenants under our $250.0 million revolving bank facility (see Credit Facilities below for additional information). Our Senior Unsecured Notes, Series 1, due June 1, 2017, Senior Unsecured Notes, Series 2, due December 1, 2023, and Series 3 Notes are not subject to any financial covenants; however, certain other covenants apply. Any additional 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 29, 2014, we had approximately $1.4 billion in long-term debt and capital leases (excluding current portion) on our balance sheet, excluding Ad Fund debt related to the Expanded Menu Board Program.

Credit Facilities

We have a $250.0 million unsecured senior revolving facility credit agreement (the “Revolving Bank Facility”), which we expect to be used for general corporate purposes, including potential acquisitions and other business purposes. The Revolving Bank Facility includes a $25.0 million overdraft availability and a $25.0 million letter of credit facility. At June 29, 2014, we had drawn $15.0 million for general corporate purposes, which was fully repaid in July 2014, and had utilized $5.7 million of the Revolving Bank Facility to support standby letters of credit. The Revolving Bank Facility requires the maintenance of two 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 29, 2014.

Common Shares

Our outstanding share capital is comprised solely of common shares. An unlimited number of common shares, without par value, is authorized, and as at June 29, 2014, we had 133,126,058 common shares outstanding, and outstanding stock options with tandem stock appreciation rights held by current and former officers and employees to acquire 1,667,495of our common shares pursuant to our 2006 Stock Incentive Plan and 2012 Stock Incentive Plan, of which 769,495 were exercisable.

Comparative Cash Flows

Operating Activities.Net cash provided from operating activities in the year-to-date period of 2014 was $227.7 million compared to $258.3 million in the year-to-date period of 2013, a decrease of $30.6 million in the year-to-date period of 2014 compared to the year-to-date period of 2013. The decrease was primarily due to the timing of taxes payable. The settlement of interest rate forwards and cash deposits with tax authorities in the year-to-date period of 2014 also resulted in a decrease in cash flow from operating activities.

Investing Activities. Net cash used in investing activities was $95.8 million in the year-to-date period of 2014 compared to $87.4 million in the year-to-date period of 2013, an increase of $8.5 million. The increase year-over-year is primarily due to increased capital expenditures at existing restaurants, due to both an increase in the number of renovations year-over-year and timing of renovations completed in the fourth quarter of 2013, and new restaurant development. Below is a summary of our capital expenditures:

	Year-to-date periods ended
	June 29, 2014		June 30, 2013
	(in millions)
Capital expenditures(1)
New restaurants	$	34.6	$	38.9
Existing restaurants(2)	51.3		36.6
Other capital expenditures(3)	8.6		12.7
Total capital expenditures	$	94.4	$	88.3

________________

All numbers rounded.

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

⁽²⁾  The increase in capital expenditures related to existing restaurants was primarily driven by an increase in renovations completed in the fourth quarter of 2013, but paid in the first quarter of 2014.

⁽³⁾  Related primarily to our distribution facilities, and other corporate needs.

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Capital expenditures for each of our reportable segments was as follows:

	Year-to-date periods ended
	June 29, 2014		June 30, 2013
	(in millions)
Canada	$	75.6	$	60.4
U.S.	12.2		23.1
Corporate Services	6.6		4.7
Total capital expenditures	$	94.4	$	88.3

Financing Activities. Financing activities used cash of $157.3 million in the year-to-date period of 2014 compared to using cash of $206.7 million in the year-to-date period of 2013, a decrease of $49.3 million. Net proceeds from the issuance of our Series 3 Notes were offset by an additional $387.2 million returned to shareholders in the form of common share repurchases and dividends paid in the year-to-date period of 2014 compared to the year-to-date period of 2013.

Off-Balance Sheet Arrangements

We did not have “off-balance sheet” arrangements as at June 29, 2014 or December 29, 2013.

Contractual Obligations

In the first quarter of 2014, we issued Series 3 Notes of $450.0 million, and also entered into an agreement with one of our suppliers requiring minimum purchase obligations, within the normal course of operations, of U.S. $115.8 million over the six-year term of the agreement. Other than these developments, our contractual obligations have not changed materially since December 29, 2013.

Recent Accounting Pronouncements

See Item 1. Financial Statements—Note 14 Recent Accounting Pronouncements.

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Other than as noted above, there are no material changes to our exposure to various foreign exchange, commodity, interest rate, and inflationary risks as reported in our Annual Report.

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 has been no change in our internal control over financial reporting during the last fiscal quarter which has been identified in connection with Management’s evaluation required by Rules 13a-15(d) or 15d-15(d) under the Exchange Act, as amended, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II: OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

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.

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 Annual Report, 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 2013 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 believe to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

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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 2014 Program (Cdn) (3)
Monthly Period #4 (March 31, 2014 – May 4, 2014)	2,010,350	60.95	2,010,350	$	206,167,975
Monthly Period #5 (May 5, 2014 – June 1, 2014)	816,857	59.67	753,500	161,262,622
Monthly Period #6 (June 2, 2014 – June 29, 2014)	383,800	59.10	383,800	138,581,690
Total	3,211,007	60.40	3,147,650	$	138,581,690

________________

⁽¹⁾  Based on settlement date.

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

⁽³⁾  On February 20, 2014, we announced we obtained regulatory approval from the Toronto Stock Exchange (“TSX”) to commence a new share repurchase program (“2014 Program”), authorizing the repurchase of $440.0 million in common shares, not to exceed the regulatory maximum of 13,726,219 shares, representing 10% of our public float as defined under the TSX rules. The 2014 Program commenced February 28, 2014 and is due to terminate on February 27, 2015, or earlier if the $440.0 million or 10% share maximum is reached. Common shares purchased pursuant to the 2014 Program will be cancelled. The 2014 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 2014 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 3.    DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.    MINE SAFETY DISCLOSURE

None.

ITEM 5.    OTHER INFORMATION

None.

ITEM 6.    EXHIBITS

See Index to Exhibits following the signature page to this Form 10-Q, which is incorporated by reference herein.

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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 6, 2014	/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)	Form of Restricted Stock Unit Award Agreement (2014 Award)	Filed herewith.
*10(b)	Form of Performance Stock Unit Award Agreement (2014 Award)	Filed herewith.
*10(c)	Form of Nonqualified Stock Option Award Agreement (2014 Award)	Filed herewith.
*10(d)	Form of Amended and Restated Deferred Stock Unit Award Agreement (Canadian)	Filed herewith.
*10(e)	Form of Amended and Restated Deferred Stock Unit Award Agreement (U.S.)	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.(A)

Exhibit 10(a)

[Note: Text in [ ] is only included in agreements with individuals employed by U.S. subsidiaries of Tim Hortons Inc. Text in { } is only included in agreements with individuals employed by Tim Hortons Inc.]

Participant Name (“Grantee”):    

Employee Number:    

Grant Name:

Date of Grant:    May 15, 2014

Total Award:    

Vest Schedule – RSUs
Vest Date	Vest Quantity
March 1, 2015	1/3
March 1, 2016	1/3
March 1, 2017	1/3

RESTRICTED STOCK UNIT AWARD AGREEMENT

(with related Dividend Equivalent Rights)

Tim Hortons Inc.

Grant Year: 2014

May 15, 2014

THIS RESTRICTED STOCK UNIT AWARD AGREEMENT (this “Agreement”) is made effective as of the 15^th day of May, 2014 (the “Date of Grant”), {between} [by and among] Tim Hortons Inc., a corporation incorporated under the Canada Business Corporations Act (the “Company”), [the below noted Employer,] and the above-noted Grantee (collectively, the “Parties”).

WHEREAS, the Company has adopted the Tim Hortons Inc. 2012 Stock Incentive Plan, as amended from time to time (the “Plan”), in order to provide additional incentive compensation to certain employees and directors of the Company and its Subsidiaries; and

WHEREAS, pursuant to Section 4.2 of the Plan, the Human Resource and Compensation Committee (“Committee”) of the Board of Directors of the Company (“Board”) has determined to grant to the Grantee on the Date of Grant an award of the above-noted number of Restricted Stock Units (the “Award”) with related Dividend Equivalent Rights to

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encourage the Grantee’s efforts toward the continuing success of the Company and its Subsidiaries; and

WHEREAS, the Award is evidenced by this Agreement, which (together with the Plan and the Equity Grant and Settlement Policy), describes all the terms and conditions of the Award.

NOW, THEREFORE, the Parties agree as follows:

1. Award.

1.1 The Company (or in the case of a Grantee employed by a Subsidiary {(the “Employer”)}, the Employer) hereby grants to the Grantee in respect of employment services provided by the Grantee the Award with an equal number of related Dividend Equivalent Rights. For greater certainty, the Award granted hereunder is in respect of services rendered by the Grantee in the calendar year in which the Date of Grant occurs. In no event may the Award be allocated to the Grantee for or in respect of services rendered in any period prior to the commencement of the calendar year in which the Award is granted. Subject to Section 6 hereof, each Restricted Stock Unit represents the right to receive, at the absolute discretion of the Company, (i) one (1) Share from the Company, (ii) cash delivered to a broker to acquire one (1) Share on the Grantee’s behalf, or (iii) one (1) Share delivered by the Trustee (as defined in Section 7), in any case at the time and in the manner set forth in Section 7 hereof.

1.2 Each Dividend Equivalent Right represents the right to receive the equivalent of all of the cash dividends that would be payable with respect to the Share represented by the Restricted Stock Unit to which the Dividend Equivalent Right relates. With respect to each Dividend Equivalent Right, any amount related to cash dividends shall be converted into additional Restricted Stock Units based on the Fair Market Value of a Share on the date such dividend is made. Any additional Restricted Stock Units granted pursuant to this Section shall be subject to the same terms and conditions applicable to the Restricted Stock Unit to which the Dividend Equivalent Right relates, including, without limitation, the restrictions on transfer, forfeiture, vesting and payment provisions contained in Sections 2 through 7, inclusive, of this Agreement. In the event that a Restricted Stock Unit is forfeited pursuant to Section 6 hereof, the related Dividend Equivalent Right shall also be forfeited. Fractional Restricted Stock Units may be generated upon the automatic settlement of Dividend Equivalent Rights into additional Restricted Stock Units and upon the vesting of a portion of a Restricted Stock Unit award (see Section 3). These fractional Restricted Stock Units continue to accrue additional Dividend Equivalent Rights and accumulate until the fractional interest is of sufficient value to acquire an additional Restricted Stock Unit as a result of the settlement of future Dividend Equivalent Rights, subject to adjustment upon the vesting of a portion of the underlying Restricted Stock Unit award (see Section 3). The Committee shall determine appropriate administration for the tracking and settlement of Dividend Equivalent Rights, including with respect to fractional interests,

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and the Committee’s determination in this regard shall be final and binding upon all Parties.

1.3 This Agreement shall be construed in accordance and consistent with, and is subject to, the provisions of the Plan (the provisions of which are hereby incorporated by reference), as well as any and all determinations, policies, instructions, interpretations, rules, etc., of the Committee in connection with the Plan. Except as otherwise expressly set forth herein, the capitalized terms used in this Agreement shall have the same definitions as set forth in the Plan.

2. Restrictions on Transfer.

The Restricted Stock Units and Dividend Equivalent Rights granted pursuant to this Agreement may not be sold, transferred or otherwise disposed of and may not be pledged or otherwise hypothecated.

3. Vesting.

Except as otherwise provided in this Agreement, Restricted Stock Units granted hereunder shall vest as follows:

(a)One-third (1/3) of the total Shares covered by the Award shall vest on March 1, 2015, subject to rounding down the Award to the nearest whole Share as of the vesting date;

(b)One-half (1/2) of the remaining Shares covered by the Award shall vest on March 1, 2016, subject to rounding down the Award to the nearest whole Share as of the vesting date; and

(c)All of remaining Shares covered by the Award shall vest on March 1, 2017, subject to rounding down the Award to the nearest whole Share as of the vesting date.

Fractional Restricted Stock Units may be generated and/or adjusted upon the vesting of the Restricted Stock Units awarded under this Agreement. See Section 7 regarding settlement of fractional Restricted Stock Units.

4.Effect of Terminations of Employment.

4.1 Death, Disability or Termination in Connection with Certain Dispositions. If Grantee’s employment terminates as a result of Grantee’s death or becoming Disabled, or if the Grantee is terminated without Cause in connection with the sale or disposition of a Subsidiary, in each case if such termination occurs on or after the Date of Grant, all Restricted Stock Units which have not become vested in accordance with Section 3 or 5 hereof shall vest as of the Termination Date.

4.2 Retirement. If Grantee’s employment terminates as a result of the Grantee’s Retirement, and if such termination occurs on or after the Date of Grant, any unvested Restricted Stock Units will remain outstanding and will continue to vest in accordance

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with the vesting schedule described in Section 3 of this Agreement. For the purposes of this Agreement, “Retirement” means a termination of employment after attaining age 60 with at least ten (10) years of service (as defined in the Company’s qualified retirement plans) and other than by (A) death; (B) Disability; (C) for Cause; or (D) a voluntary termination by the Grantee or without Cause termination by the Company, unless the Company and Grantee mutually agree that such termination shall be considered a “Retirement;” provided that if an Award is subject to Section 409A of the Code, a termination of employment must also constitute a “separation from service” within the meaning of Section 409A of the Code in order for the foregoing to apply.

4.3 Trading Policies and Transfer of Shares. For a period of six (6) months following a termination of employment, whether under Section 4, 5, or 6 of this Agreement, Grantee shall continue to be subject to the Company’s insider trading and window trading policies and must follow all pre-clearance procedures, and all other requirements, included in those policies. In the case of Retirement, a termination due to Disability, or death, Grantee or Grantee’s estate or legal representative, as the case may be, shall take all reasonable steps to transfer all Shares received under this Agreement (and all other Shares that have vested and are maintained by the Plan Administrator (as defined in Section 7) in a brokerage account for the benefit of Grantee) from the Plan Administrator within five (5) years following the Grantee’s termination of employment. For terminations arising for any reason other than death, Disability or Retirement, Grantee shall transfer all Shares received under this Agreement (and all other Shares that have vested and are maintained by the Plan Administrator in a brokerage account for the benefit of Grantee) from the Plan Administrator within one (1) year following the Grantee’s termination of employment.

4.4 Termination. For purposes of this Agreement, the word “terminate” or “termination” in connection with the Grantee’s employment shall mean the Grantee ceasing to perform services for the Company or such Subsidiary, as the case may be, without regard to: (i) whether such Grantee continues thereafter to receive any payment from the Company or such Subsidiary, as the case may be, in respect of the termination of such Grantee’s employment, including, without limitation, any continuation of salary or other compensation in lieu of notice of such termination, or (ii) whether or not Grantee is entitled or claims to be entitled at law to greater notice of such termination or greater compensation in lieu thereof than has been received by such Grantee. In addition, to the extent necessary to comply with the requirements of Section 409A of the Code, any reference to the Grantee’s Termination shall mean the Grantee’s “separation from service” as defined by Section 409A of the Code.

5. Effect of Change in Control.

Subject to Section 6 hereof, in the event of a Change in Control, Section 10.6 of the Plan will apply to the unvested portion of the Award.

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6. Forfeiture of Award.

Except as otherwise provided in this Agreement, any and all Restricted Stock Units which have not become vested in accordance with Section 3, 4 or 5 hereof shall be forfeited upon:

(a)    the termination of the Grantee’s employment with the Company or any Subsidiary for any reason other than those set forth in Section 4 hereof prior to such vesting; or

(b)    the commission by the Grantee of an Act of Misconduct prior to such vesting.

For purposes of this Agreement, an “Act of Misconduct” shall mean the occurrence of one or more of the following events: (x) the Grantee uses for profit or discloses to unauthorized persons, confidential information or trade secrets of the Company or any of its Subsidiaries, (y) the Grantee breaches any contract with or violates any fiduciary obligation to the Company or any of its Subsidiaries, or (z) the Grantee engages in unlawful trading in the securities of the Company or any of its Subsidiaries or of another company based on information gained as a result of the Grantee’s employment with, or status as a director to, the Company or any of its Subsidiaries.

7. Satisfaction of Award.

In order to satisfy Restricted Stock Units after vesting pursuant to this Agreement, the Company (or in the case of a Grantee employed by a Subsidiary, the Employer) shall, at its election either (i) deliver authorized but unissued Shares; (ii) deliver cash to a broker designated by the Company who, as agent for the Grantee, shall purchase the appropriate number of Shares on the open market; (iii) contribute cash to a trust fund (the “Trust”) to be used by the trustee thereof (the “Trustee”) to purchase Shares for the purpose of satisfying the Grantee’s entitlements under this Agreement, which Shares shall be held by the Trustee, and the Trustee, upon direction, shall deliver such Shares to the Grantee; or, (iv) any combination of the above.

The aggregate number of Shares issued by the Company, purchased by a broker for the Grantee or delivered by the Trustee to a Grantee at any particular time pursuant to this Section 7 shall correspond to the number of Restricted Stock Units that become vested on the vesting date, with one (1) Restricted Stock Unit corresponding to one (1) Share, subject to any withholding as may be required under Section 9 of this Agreement, notwithstanding any delay between a vesting date and the settlement date. Fractional Shares may be issued or delivered upon settlement of vested Restricted Stock Units. All parties understand, acknowledge and agree that fractional Shares cannot be traded in the public markets, and therefore, any fractional Share issued or delivered to Grantee upon settlement of a vested Restricted Stock Unit, after taking into account the reduction to the number of Shares as required under Section 9 of this Agreement, if applicable, will ultimately be settled in cash when the Grantee sells Shares through the Plan Administrator or transfers Shares out of the Plan Administrator’s system. The Committee shall determine appropriate administration for the settling of vested Restricted Stock Units, including with respect to fractional interests, and

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the Committee’s determination in this regard shall be final and binding upon all Parties. As used herein, “Plan Administrator” shall mean the party engaged by the Company to administratively track awards and accompanying Dividend Equivalent Rights granted under the Plan, as well as handle the process of vesting and settlement of such awards.

The Company will satisfy its obligations in this Section 7 on each vesting date or as soon as administratively practicable but no later than the earlierof: (a) December 31 of the year in which such vesting date occurs, or (b) sixty (60) days after such vesting date. Notwithstanding the foregoing, with respect to Restricted Stock Units that become vested pursuant to Section 4 (other than as a result of the Grantee’s death), if the Grantee is a “specified employee” within the meaning of Section 409A of the Code as of the date the Grantee’s employment terminates and settlement of such Restricted Stock Units is required to be delayed pursuant to Section 409A(a)(2)(B)(i) of the Code, then the Company shall satisfy its obligations in this Section 7 by the later of (i) the date otherwise required by this Section 7 or (ii) the first business day of the calendar month following the date which is six (6) months after the Grantee’s employment terminates.

Any of the Company’s obligations in this Section 7 may be satisfied by the Company or the Employer.

8. No Right to Continued Employment.

Nothing in this Agreement or the Plan shall interfere with or limit in any way the right of the Company or its Subsidiaries to terminate the Grantee’s employment, nor confer upon the Grantee any right to continuance of employment by the Company or any of its Subsidiaries or continuance of service as a Board member.

9. Withholding of Taxes.

Upon (i) the delivery to the Grantee (or the Grantee’s estate, if applicable) of authorized and unissued Shares; (ii) the delivery of cash to a broker to purchase and deliver Shares; or (iii) the delivery by the Trustee of Shares pursuant to the Trust Agreement, in each case pursuant to Sections 1 and 7 hereof, the Company {(or in the case of a Grantee employed by a Subsidiary, the Employer)} [, the Employer] or the Trust, as applicable, shall require payment of or other provision for, as determined by the Company, an amount equal to the federal, state, provincial and local income taxes and other amounts required by law to be withheld or determined to be necessary or appropriate to be withheld by the Company, the Employer or the Trust, as applicable, in connection with such delivery. In its sole discretion, the Company, the Employer or the Trust, as applicable, may require or permit payment of or provision for such withholding taxes through one or more of the following methods: (a) in cash, bank draft, certified cheque, personal cheque or other manner acceptable to the Committee and/or set forth in the relevant exercise procedures; (b) by withholding such amount from other amounts due to the Grantee; (c) by withholding a portion of the Shares then issuable or deliverable to the Grantee having an aggregate fair market value equal to such withholding taxes and, at the Company’s election, either (I) canceling the equivalent portion of the underlying Award and the Company or the Trust paying the withholding taxes on behalf of the Grantee in cash, or (II) selling such Shares

- 7 -

on the Grantee’s behalf; or (d) by withholding such amount from the cash then issuable in connection with the Award.

Fractional Shares may be issued or delivered and/or adjusted upon the withholding of taxes in accordance with this Section 9, and the settlement of the Restricted Stock Units into Shares will be adjusted by the amount of the withholding, including by the fractional Shares generated and/or adjusted upon the withholding transaction. Any fractional Shares will ultimately be paid or settled in cash in accordance with Section 7 of this Agreement. Additional fractional Shares may continue to accrue and be added to existing fractional Shares upon future vesting and settlement of Restricted Stock Units (in accordance with the terms of this Agreement) if vested Shares remain in the Plan Administrator’s system.

10. Grantee Bound by the Plan.

The Grantee hereby acknowledges receipt of a copy of the Plan and agrees to be bound by all the terms and provisions thereof. This Agreement shall be construed in accordance and consistent with, and is subject to, the provisions of the Plan (the provisions of which are hereby incorporated by reference), as well as any and all determinations, policies, instructions, interpretations and rules of the Committee in connection with the Plan. Except as otherwise expressly set forth herein, the capitalized terms used in this Agreement shall have the same definitions as set forth in the Plan.

11. Modification of Agreement.

This Agreement may be modified, amended, suspended or terminated, and any terms or conditions may be waived, but only by a written instrument executed by the Parties hereto.

12. Severability.

Should any provision of this Agreement be held by a court of competent jurisdiction to be unenforceable or invalid for any reason, the remaining provisions of this Agreement shall not be affected by such holding and shall continue in full force in accordance with their terms.

13. Governing Law.

The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the Province of Ontario and the federal laws of Canada applicable therein.

14. Successors in Interest and Assigns.

The Company and the Employer may assign any of their respective rights and obligations under this Agreement without the consent of the Grantee. This Agreement shall inure to the benefit of and be binding upon any successors and assigns of the Company and the Employer. This Agreement shall inure to the benefit of the successors of the Grantee including, without limitation, the estate of the Grantee and the executor, administrator or

- 8 -

trustee of such estate. All obligations imposed upon the Grantee and all rights granted to the Company and the Employer under this Agreement shall be binding upon the successors of the Grantee including, without limitation, the estate of the Grantee and the executor, administrator or trustee of such estate.

15. Language.

The Parties hereto acknowledge that they have requested that this Agreement and all documents ancillary thereto, including all the documentation provided to the Grantee in respect of the Award, be drafted in the English language only. Les parties aux présentes reconnaissent qu’elles ont exigé que la présente convention et tous les documents y afférents, y compris toute la documentation transmise au bénéficiaire relativement à l’octroi des droits prévu aux présentes, soient rédigés en langue anglaise seulement.

16. Resolution of Disputes.

Any dispute or disagreement which may arise under, or as a result of, or in any way relate to, the interpretation, construction or application of this Agreement shall be determined by the Committee. Any determination made hereunder shall be final, binding and conclusive on the Grantee, the Grantee’s heirs, executors, administrators and successors, and the Company and its Subsidiaries for all purposes.

17. Entire Agreement.

This Agreement and the terms and conditions of the Plan (as well as any and all determinations, policies, instructions, interpretations and rules of the Committee in connection with the Plan) constitute the entire understanding between the Grantee and the Company and its Subsidiaries, and supersede all other agreements, whether written or oral, with respect to the Award.

18. Headings.

The headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement.

19. Counterparts.

This Agreement may be executed simultaneously in two or more counterparts, each of which shall constitute an original, but all of which taken together shall constitute one and the same agreement.

20. Compliance with Section 409A.

This Agreement is not intended to provide for the deferral of compensation within the meaning of Section 409A of the Code. If for any reason this Agreement is subject to the requirements of Section 409A of the Code, then this Agreement is intended to satisfy the requirements of Section 409A of the Code and is intended not to be a “salary deferral

- 9 -

arrangement” (a “SDA”) within the meaning of the Income Tax Act (Canada) (“Canadian Tax Act”), and shall be interpreted and administered consistent with such intent. To the extent that the interpretation and administration of this Agreement in accordance with Section 409A of the Code would cause any of the arrangements contemplated herein to be a SDA, then for any Grantee who is subject to the Canadian Tax Act and notsubject to Section 409A of the Code, the Agreement shall be interpreted and administered with respect to such Grantee so that the arrangements are not SDAs. For Grantees subject to both Section 409A of the Code and the Canadian Tax Act, the terms of this Award shall be interpreted, construed, and given effect to achieve compliance with both Section 409A of the Code and the Canadian Tax Act, to the extent practicable. If compliance with both Section 409A of the Code and the Canadian Tax Act is not practicable in connection with the Award covered by this Agreement, the terms of this Award and this Agreement remain subject to amendment at the sole discretion of the Committee to reach a resolution of the conflict as it shall determine in its sole discretion.

21. Recoupment Policy upon Restatement of Financial Results.

The Award, and any proceeds therefrom, is subject to the Company’s right to reclaim its benefits: (i) in the event of a financial restatement pursuant to the Recoupment Policy Relating to Performance-Based Compensation (the “Recoupment Policy”) adopted by the Board, as may be amended from time to time; or (ii) in accordance with the terms of any separate agreement, understanding or arrangement between the Grantee and the Company, or any affiliate thereof. In accordance with the Recoupment Policy, if the Company’s financial statements are required to be restated for any reason (other than restatements due to changes in accounting policy with retroactive effect), the Board will review the Award earned by the Grantee. If the Board determines that, after a review of all of the relevant facts and circumstances, the grant of the Award was predicated upon the achievement of certain financial results that were subsequently corrected as part of a restatement and a lower Award would have been made to the Grantee based upon the restated financial results, then the Board will seek recoupment of the Award to the extent that the Board deems appropriate and as provided by applicable law {and as provided by applicable law}.

22.    Accessing Information.

A copy of the Plan and prospectus for the Plan, as may be amended, can be found by the Grantee by accessing his/her Solium Shareworks account at www.solium.com. That site also contains other general information about the Award.

23.    Confirming Information.

By accepting this Agreement, either through electronic means or by providing a signed copy, the Grantee (i) acknowledges and confirms that he/she has read and understood the Plan, the related prospectus, this Agreement and all information about the Award available at the Solium website, and that he/she has had an opportunity to seek separate fiscal, legal and taxation advice in relation thereto; (ii) acknowledges that he/she has been provided with a hard copy or an electronic copy of the Annual Report on Form 10-K for the most recently completed fiscal year of the Company; (iii) agrees to be bound by the terms and conditions

- 10 -

stated in this Agreement, including without limitation the terms and conditions of the Plan, incorporated by reference herein; and (iv) acknowledges and agrees that acceptance of this Agreement through electronic means is equivalent to doing so by providing a signed copy.

TIM HORTONS INC.
by
	Name:
	Title:

[ ____________________(“Employer”)
by
	Name:
	Title: ]

EX-10.(B)

Exhibit 10(b)

[Note: Text in [ ] is only included in agreements with individuals employed by U.S. subsidiaries of Tim Hortons Inc. Text in { } is only included in agreements with individuals employed by Tim Hortons Inc.]

Participant Name (“Grantee”):    

Employee Number:    

Grant Name:

Date of Grant:    May 15, 2014

Total Award:

Vest Date:     March 1, 2017    

PERFORMANCE STOCK UNIT AWARD AGREEMENT

(with related Dividend Equivalent Rights)

Tim Hortons Inc.

Grant Year: 2014

May 15, 2014

THIS PERFORMANCE STOCK UNIT AWARD AGREEMENT (this “Agreement”) is made effective as of the 15^th day of May, 2014 (the “Date of Grant”), {between} [by and among] Tim Hortons Inc., a corporation incorporated under the Canada Business Corporations Act (the “Company”), [the below noted Employer,] and the above-noted Grantee (collectively, the “Parties”).

WHEREAS, the Company has adopted the Tim Hortons Inc. 2012 Stock Incentive Plan, as amended from time to time (the “Plan”), in order to provide additional incentive compensation to certain employees and directors of the Company and its Subsidiaries; and

WHEREAS, pursuant to Section 4.2 of the Plan, the Human Resource and Compensation Committee (“Committee”) of the Board of Directors of the Company (“Board”) has determined to grant to the Grantee on the Date of Grant an award of the above-noted number of Performance Stock Units (the “Award”) with related Dividend Equivalent Rights to encourage the Grantee’s efforts toward the continuing success of the Company and its Subsidiaries; and

- 2 -

WHEREAS, the Award is evidenced by this Agreement, which (together with the Plan and the Equity Grant and Settlement Policy), describes all the terms and conditions of the Award.

NOW, THEREFORE, the Parties agree as follows:

1. Award.

1.1 The Company (or in the case of a Grantee employed by a Subsidiary {(the “Employer”)}, the Employer) hereby grants to the Grantee in respect of employment services provided by the Grantee the Award with an equal number of related Dividend Equivalent Rights. For greater certainty, the Award granted hereunder is in respect of services rendered by the Grantee in the calendar year in which the Date of Grant occurs. In no event may the Award be allocated to the Grantee for or in respect of services rendered in any period prior to the commencement of the calendar year in which the Award is granted. Subject to Section 6 hereof, each Performance Stock Unit represents the right to receive, at the absolute discretion of the Company, (i) one (1) Share from the Company, (ii) cash delivered to a broker to acquire one (1) Share on the Grantee’s behalf, or (iii) one (1) Share delivered by the Trustee (as defined in Section 7), in any case at the time and in the manner set forth in Section 7 hereof.

1.2 Each Dividend Equivalent Right represents the right to receive the equivalent of all of the cash dividends that would be payable with respect to the Share represented by the Performance Stock Unit to which the Dividend Equivalent Right relates. With respect to each Dividend Equivalent Right, any amount related to cash dividends shall be converted into additional Performance Stock Units based on the Fair Market Value of a Share on the date such dividend is made. Any additional Performance Stock Units granted pursuant to this Section shall be subject to the same terms and conditions applicable to the Performance Stock Unit to which the Dividend Equivalent Right relates, including, without limitation, the restrictions on transfer, forfeiture, vesting and payment provisions contained in Sections 2 through 7, inclusive, of this Agreement. In the event that a Performance Stock Unit is forfeited pursuant to Section 6 hereof, the related Dividend Equivalent Right shall also be forfeited. Fractional Performance Stock Units may be generated upon the automatic settlement of Dividend Equivalent Rights into additional Performance Stock Units and upon the vesting of a portion of a Performance Stock Unit award (see Section 3). These fractional Performance Stock Units continue to accrue additional Dividend Equivalent Rights and accumulate until the fractional interest is of sufficient value to acquire an additional Performance Stock Unit as a result of the settlement of future Dividend Equivalent Rights, subject to adjustment upon the vesting of a portion of the underlying Performance Stock Unit award (see Section 3). The Committee shall determine appropriate administration for the tracking and settlement of Dividend Equivalent Rights, including with respect to fractional interests, and the Committee’s determination in this regard shall be final and binding upon all Parties.

- 3 -

1.3 This Agreement shall be construed in accordance and consistent with, and is subject to, the provisions of the Plan (the provisions of which are hereby incorporated by reference), as well as any and all determinations, policies, instructions, interpretations, rules, etc., of the Committee in connection with the Plan. Except as otherwise expressly set forth herein, the capitalized terms used in this Agreement shall have the same definitions as set forth in the Plan.

2. Restrictions on Transfer.

The Award and Dividend Equivalent Rights granted pursuant to this Agreement may not be sold, transferred or otherwise disposed of and may not be pledged or otherwise hypothecated.

3. Performance Criteria and Vesting.

Performance criteria for determining the number of Performance Stock Units to be vested is forward-looking, based on the Company’s performance from the Date of Grant to March 1, 2017 using both an internal performance metric of Return on Assets (75% weighting) and a relative performance metric of Total Shareholder Return (25% weighting). The performance against target determines the payout to be made along the payout curve (0% to 175% of units granted). Notwithstanding the above, the number of Performance Stock Units that vest on March 1, 2017 is guaranteed to be at least 95% of the number of Performance Stock Units granted. Fractional Performance Stock Units may be generated and/or adjusted upon the vesting of the Performance Stock Units awarded under this Agreement. See Section 7 regarding settlement of fractional Performance Stock Units.

4.Effect of Terminations of Employment.

4.1 Death, Disability or Termination in Connection with Certain Dispositions. If Grantee’s employment terminates as a result of Grantee’s death or becoming Disabled, or if the Grantee is terminated without Cause in connection with the sale or disposition of a Subsidiary, in each case if such termination occurs on or after the Date of Grant, all Performance Stock Units which have not become vested in accordance with Section 3 or 5 hereof shall vest as of the Termination Date.

4.2 Retirement. If Grantee’s employment terminates as a result of the Grantee’s Retirement, and if such termination occurs on or after the Date of Grant, any unvested Performance Stock Units will remain outstanding and will continue to vest in accordance with the vesting schedule described in Section 3 of this Agreement. For the purposes of this Agreement, “Retirement” means a termination of employment after attaining age 60 with at least ten (10) years of service (as defined in the Company’s qualified retirement plans) and other than by (A) death; (B) Disability; (C) for Cause; or (D) a voluntary termination by the Grantee or without Cause termination by the Company, unless the Company and Grantee mutually agree that such termination shall be considered a “Retirement;” provided that if an Award is subject to Section 409A of the Code, a termination of employment must also constitute a “separation from

- 4 -

service” within the meaning of Section 409A of the Code in order for the foregoing to apply.

4.3 Trading Policies and Transfer of Shares. For a period of six (6) months following a termination of employment, whether under Section 4, 5, or 6 of this Agreement, Grantee shall continue to be subject to the Company’s insider trading and window trading policies and must follow all pre-clearance procedures, and all other requirements, included in those policies. In the case of Retirement, a termination due to Disability, or death, Grantee or Grantee’s estate or legal representative, as the case may be, shall take all reasonable steps to transfer all Shares received under this Agreement (and all other Shares that have vested and are maintained by the Plan Administrator (as defined in Section 7) in a brokerage account for the benefit of Grantee) from the Plan Administrator within five (5) years following the Grantee’s termination of employment. For terminations arising for any reason other than death, Disability or Retirement, Grantee shall transfer all Shares received under this Agreement (and all other Shares that have vested and are maintained by the Plan Administrator in a brokerage account for the benefit of Grantee) from the Plan Administrator within one (1) year following the Grantee’s termination of employment.

4.4 Termination. For purposes of this Agreement, the word “terminate” or “termination” in connection with the Grantee’s employment shall mean the Grantee ceasing to perform services for the Company or such Subsidiary, as the case may be, without regard to: (i) whether such Grantee continues thereafter to receive any payment from the Company or such Subsidiary, as the case may be, in respect of the termination of such Grantee’s employment, including, without limitation, any continuation of salary or other compensation in lieu of notice of such termination, or (ii) whether or not Grantee is entitled or claims to be entitled at law to greater notice of such termination or greater compensation in lieu thereof than has been received by such Grantee. In addition, to the extent necessary to comply with the requirements of Section 409A of the Code, any reference to the Grantee’s Termination shall mean the Grantee’s “separation from service” as defined by Section 409A of the Code.

5. Effect of Change in Control.

Subject to Section 6 hereof, in the event of a Change in Control, Section 10.6 of the Plan will apply to the unvested portion of the Award.

- 5 -

6. Forfeiture of Award.

Except as otherwise provided in this Agreement, any and all Performance Stock Units which have not become vested in accordance with Section 3, 4 or 5 hereof shall be forfeited upon:

(a)    the termination of the Grantee’s employment with the Company or any Subsidiary for any reason other than those set forth in Section 4 hereof prior to such vesting; or

(b)    the commission by the Grantee of an Act of Misconduct prior to such vesting.

For purposes of this Agreement, an “Act of Misconduct” shall mean the occurrence of one or more of the following events: (x) the Grantee uses for profit or discloses to unauthorized persons, confidential information or trade secrets of the Company or any of its Subsidiaries, (y) the Grantee breaches any contract with or violates any fiduciary obligation to the Company or any of its Subsidiaries, or (z) the Grantee engages in unlawful trading in the securities of the Company or any of its Subsidiaries or of another company based on information gained as a result of the Grantee’s employment with, or status as a director to, the Company or any of its Subsidiaries.

7. Satisfaction of Award.

In order to satisfy Performance Stock Units after vesting pursuant to this Agreement, the Company (or in the case of a Grantee employed by a Subsidiary, the Employer) shall, at its election either (i) deliver authorized but unissued Shares; (ii) deliver cash to a broker designated by the Company who, as agent for the Grantee, shall purchase the appropriate number of Shares on the open market; (iii) contribute cash to a trust fund (the “Trust”) to be used by the trustee thereof (the “Trustee”) to purchase Shares for the purpose of satisfying the Grantee’s entitlements under this Agreement, which Shares shall be held by the Trustee, and the Trustee, upon direction, shall deliver such Shares to the Grantee; or, (iv) any combination of the above.

The aggregate number of Shares issued by the Company, purchased by a broker for the Grantee or delivered by the Trustee to a Grantee at any particular time pursuant to this Section 7 shall correspond to the number of Performance Stock Units that become vested on the vesting date, with one (1) Performance Stock Unit corresponding to one (1) Share, subject to any withholding as may be required under Section 9 of this Agreement, notwithstanding any delay between a vesting date and the settlement date. Fractional Shares may be issued or delivered upon settlement of vested Performance Stock Units. All parties understand, acknowledge and agree that fractional Shares cannot be traded in the public markets, and therefore, any fractional Share issued or delivered to Grantee upon settlement of a vested Performance Stock Unit, after taking into account the reduction to the number of Shares as required under Section 9 of this Agreement, if applicable, will ultimately be settled in cash when the Grantee sells Shares through the Plan Administrator or transfers Shares out of the Plan Administrator’s system. The Committee shall determine appropriate administration for

- 6 -

the settling of vested Performance Stock Units, including with respect to fractional interests, and the Committee’s determination in this regard shall be final and binding upon all Parties. As used herein, “Plan Administrator” shall mean the party engaged by the Company to administratively track awards and accompanying Dividend Equivalent Rights granted under the Plan, as well as handle the process of vesting and settlement of such awards.

The Company will satisfy its obligations in this Section 7 on each vesting date or as soon as administratively practicable but no later than December 31 of the year in which such vesting date occurs. Notwithstanding the foregoing, with respect to Performance Stock Units that become vested pursuant to Section 4 (other than as a result of the Grantee’s death), if the Grantee is a “specified employee” within the meaning of Section 409A of the Code as of the date the Grantee’s employment terminates and settlement of such Performance Stock Units is required to be delayed pursuant to Section 409A(a)(2)(B)(i) of the Code, then the Company shall satisfy its obligations in this Section 7 by the later of (i) the date otherwise required by this Section 7 or (ii) the first business day of the calendar month following the date which is six (6) months after the Grantee’s employment terminates.

Any of the Company’s obligations in this Section 7 may be satisfied by the Company or the Employer.

8. No Right to Continued Employment.

Nothing in this Agreement or the Plan shall interfere with or limit in any way the right of the Company or its Subsidiaries to terminate the Grantee’s employment, nor confer upon the Grantee any right to continuance of employment by the Company or any of its Subsidiaries or continuance of service as a Board member.

9. Withholding of Taxes.

Upon (i) the delivery to the Grantee (or the Grantee’s estate, if applicable) of authorized and unissued Shares; (ii) the delivery of cash to a broker to purchase and deliver Shares; or (iii) the delivery by the Trustee of Shares pursuant to the Trust Agreement, in each case pursuant to Sections 1 and 7 hereof, the Company {(or in the case of a Grantee employed by a Subsidiary, the Employer)} [,the Employer] or the Trust, as applicable, shall require payment of or other provision for, as determined by the Company, an amount equal to the federal, state, provincial and local income taxes and other amounts required by law to be withheld or determined to be necessary or appropriate to be withheld by the Company, the Employer or the Trust, as applicable, in connection with such delivery. In its sole discretion, the Company, the Employer or the Trust, as applicable, may require or permit payment of or provision for such withholding taxes through one or more of the following methods: (a) in cash, bank draft, certified cheque, personal cheque or other manner acceptable to the Committee and/or set forth in the relevant exercise procedures; (b) by withholding such amount from other amounts due to the Grantee; (c) by withholding a portion of the Shares then issuable or deliverable to the Grantee having an aggregate fair market value equal to such withholding taxes and, at the Company’s election, either (I) canceling the equivalent portion of the underlying Award and the Company or the Trust paying the withholding taxes on behalf of the Grantee in cash, or (II) selling such Shares

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on the Grantee’s behalf; or (d) by withholding such amount from the cash then issuable in connection with the Award.

Fractional Shares may be issued or delivered and/or adjusted upon the withholding of taxes in accordance with this Section 9, and the settlement of the Performance Stock Units into Shares will be adjusted by the amount of the withholding, including by the fractional Shares generated and/or adjusted upon the withholding transaction. Any fractional Shares will ultimately be paid or settled in cash in accordance with Section 7 of this Agreement. Additional fractional Shares may continue to accrue and be added to existing fractional Shares upon future vesting and settlement of Performance Stock Units (in accordance with the terms of this Agreement) if vested Shares remain in the Plan Administrator’s system.

10. Grantee Bound by the Plan.

The Grantee hereby acknowledges receipt of a copy of the Plan and agrees to be bound by all the terms and provisions thereof. This Agreement shall be construed in accordance and consistent with, and is subject to, the provisions of the Plan (the provisions of which are hereby incorporated by reference), as well as any and all determinations, policies, instructions, interpretations and rules of the Committee in connection with the Plan. Except as otherwise expressly set forth herein, the capitalized terms used in this Agreement shall have the same definitions as set forth in the Plan.

11. Modification of Agreement.

This Agreement may be modified, amended, suspended or terminated, and any terms or conditions may be waived, but only by a written instrument executed by the Parties hereto.

12. Severability.

Should any provision of this Agreement be held by a court of competent jurisdiction to be unenforceable or invalid for any reason, the remaining provisions of this Agreement shall not be affected by such holding and shall continue in full force in accordance with their terms.

13. Governing Law.

The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the Province of Ontario and the federal laws of Canada applicable therein.

14. Successors in Interest and Assigns.

The Company and the Employer may assign any of their respective rights and obligations under this Agreement without the consent of the Grantee. This Agreement shall inure to the benefit of and be binding upon any successors and assigns of the Company and the Employer. This Agreement shall inure to the benefit of the successors of the Grantee including, without limitation, the estate of the Grantee and the executor, administrator or

- 8 -

trustee of such estate. All obligations imposed upon the Grantee and all rights granted to the Company and the Employer under this Agreement shall be binding upon the successors of the Grantee including, without limitation, the estate of the Grantee and the executor, administrator or trustee of such estate.

15. Language.

The Parties hereto acknowledge that they have requested that this Agreement and all documents ancillary thereto, including all the documentation provided to the Grantee in respect of the Award, be drafted in the English language only. Les parties aux présentes reconnaissent qu’elles ont exigé que la présente convention et tous les documents y afférents, y compris toute la documentation transmise au bénéficiaire relativement à l’octroi des droits prévu aux présentes, soient rédigés en langue anglaise seulement.

16. Resolution of Disputes.

Any dispute or disagreement which may arise under, or as a result of, or in any way relate to, the interpretation, construction or application of this Agreement shall be determined by the Committee. Any determination made hereunder shall be final, binding and conclusive on the Grantee, the Grantee’s heirs, executors, administrators and successors, and the Company and its Subsidiaries for all purposes.

17. Entire Agreement.

This Agreement and the terms and conditions of the Plan (as well as any and all determinations, policies, instructions, interpretations and rules of the Committee in connection with the Plan) constitute the entire understanding between the Grantee and the Company and its Subsidiaries, and supersede all other agreements, whether written or oral, with respect to the Award.

18. Headings.

The headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement.

19. Counterparts.

This Agreement may be executed simultaneously in two or more counterparts, each of which shall constitute an original, but all of which taken together shall constitute one and the same agreement.

20. Compliance with Section 409A.

This Agreement is not intended to provide for the deferral of compensation within the meaning of Section 409A of the Code. If for any reason this Agreement is subject to the requirements of Section 409A of the Code, then this Agreement is intended to satisfy the requirements of Section 409A of the Code and is intended not to be a “salary deferral

- 9 -

arrangement” (a “SDA”) within the meaning of the Income Tax Act (Canada) (“Canadian Tax Act”), and shall be interpreted and administered consistent with such intent. To the extent that the interpretation and administration of this Agreement in accordance with Section 409A of the Code would cause any of the arrangements contemplated herein to be a SDA, then for any Grantee who is subject to the Canadian Tax Act and notsubject to Section 409A of the Code, the Agreement shall be interpreted and administered with respect to such Grantee so that the arrangements are not SDAs. For Grantees subject to both Section 409A of the Code and the Canadian Tax Act, the terms of this Award shall be interpreted, construed, and given effect to achieve compliance with both Section 409A of the Code and the Canadian Tax Act, to the extent practicable. If compliance with both Section 409A of the Code and the Canadian Tax Act is not practicable in connection with the Award covered by this Agreement, the terms of this Award and this Agreement remain subject to amendment at the sole discretion of the Committee to reach a resolution of the conflict as it shall determine in its sole discretion.

21. Recoupment Policy upon Restatement of Financial Results.

The Award, and any proceeds therefrom, is subject to the Company’s right to reclaim its benefits: (i) in the event of a financial restatement pursuant to the Recoupment Policy Relating to Performance-Based Compensation (the “Recoupment Policy”) adopted by the Board, as may be amended from time to time; or (ii) in accordance with the terms of any separate agreement, understanding or arrangement between the Grantee and the Company, or any affiliate thereof. In accordance with the Recoupment Policy, if the Company’s financial statements are required to be restated for any reason (other than restatements due to changes in accounting policy with retroactive effect), the Board will review the Award earned by the Grantee. If the Board determines that, after a review of all of the relevant facts and circumstances, the grant of the Award was predicated upon the achievement of certain financial results that were subsequently corrected as part of a restatement and a lower Award would have been made to the Grantee based upon the restated financial results, then the Board will seek recoupment of the Award to the extent that the Board deems appropriate and as provided by applicable law and as provided by applicable law.

22.    Accessing Information.

A copy of the Plan and prospectus for the Plan, as may be amended, can be found by the Grantee by accessing his/her Solium Shareworks account at www.solium.com. That site also contains other general information about the Award.

23.    Confirming Information.

By accepting this Agreement, either through electronic means or by providing a signed copy, the Grantee (i) acknowledges and confirms that he/she has read and understood the Plan, the related prospectus, this Agreement and all information about the Award available at the Solium website, and that he/she has had an opportunity to seek separate fiscal, legal and taxation advice in relation thereto; (ii) acknowledges that he/she has been provided with a hard copy or an electronic copy of the Annual Report on Form 10-K for the most recently completed fiscal year of the Company; (iii) agrees to be bound by the terms and conditions

- 10 -

stated in this Agreement, including without limitation the terms and conditions of the Plan, incorporated by reference herein; and (iv) acknowledges and agrees that acceptance of this Agreement through electronic means is equivalent to doing so by providing a signed copy.

TIM HORTONS INC.
by
	Name:
	Title:

[ _____________________(“Employer”)
by
	Name:
	Title: ]

EX-10.(C)

Exhibit 10(c)

[Note: Text in [ ] is only included in agreements with individuals employed by U.S. subsidiaries of Tim Hortons Inc. Text in { } is only included in agreements with individuals employed by Tim Hortons Inc.]

Participant Name (“Grantee”):    

Employee Number:    

Grant Name:    

Date of Grant:    May 15, 2014

Expiration Date:    May 15, 2021

Option Price:    Cdn.$

Total Award:    

Vest Schedule – Options
Vest Date	Vest Quantity
March 1, 2015	1/3
March 1, 2016	1/3
March 1, 2017	1/3

TIM HORTONS INC.
2012 STOCK INCENTIVE PLAN

NONQUALIFIED STOCK OPTION AWARD AGREEMENT
(with related Stock Appreciation Right)

Grant Year: 2014

THIS NONQUALIFIED STOCK OPTION AWARD AGREEMENT (this “Agreement”) is made effective as of the 15^th day of May, 2014 (the “Date of Grant”), [by and among] {between} Tim Hortons Inc., a corporation incorporated under the Canada Business Corporations Act (the “Company”), [the below-noted Employer,] and the above-noted Grantee (collectively, the “Parties”).

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WHEREAS, the Company has adopted the Tim Hortons Inc. 2012 Stock Incentive Plan, as amended from time to time (the “Plan”), in order to provide additional incentive compensation to certain employees and directors of the Company and its Subsidiaries;

WHEREAS, pursuant to Sections 5 and 6 of the Plan, the Human Resource and Compensation Committee (the “Committee”) of the Board of Directors of the Company (the “Board”) has determined to grant to the Grantee on the Date of Grant a Nonqualified Stock Option and a related Stock Appreciation Right (“SAR”), each as provided herein, to encourage the Grantee’s efforts toward the continuing success of the Company and its Subsidiaries; and

WHEREAS, the Award (as defined herein) is evidenced by this Agreement, which (together with the Plan and the Equity Grant and Settlement Policy) describes all the terms and conditions of the Award (as defined herein).

NOW, THEREFORE, the Parties agree as follows:

1.    Grant of Award. The Company (or in the case of a Grantee employed by a Subsidiary {the “Employer”,}, the Employer) hereby grants to the Grantee, on the Date of Grant, a Nonqualified Stock Option (the “Option”) with a related SAR to purchase the above-noted number of Shares at the above-noted Option Price, subject to the terms and conditions of this Agreement and the Plan (the “Award”). The Option is not intended to be treated as an option that complies with Section 422 of the Internal Revenue Code of 1986, as amended.

2.    Vesting; Term of Award. Except as otherwise provided in this Agreement, the Award shall vest as follows:

(a)One-third (1/3) of the total Shares covered by the Award shall vest on March 1, 2015, subject to rounding down the Award to the nearest whole Share as of the vesting date;

(b)One-half (1/2) of the remaining Shares covered by the Award shall vest on March 1, 2016, subject to rounding down the Award to the nearest whole Share as of the vesting date; and

(c)All of remaining Shares covered by the Award shall vest on March 1, 2017, subject to rounding down the Award to the nearest whole Share as of the vesting date.

The Award shall expire May 15, 2021 (the “Expiration Date”), unless sooner terminated as provided in Section 4 of this Agreement. Notwithstanding anything to the contrary contained in this Agreement, if the Award expires outside of a Trading Window, then the Expiration Date shall be the later of: (i) the date the Award would have expired by its original terms (including the terms set forth in Section 4 of this Agreement), or (ii) the end of the tenth trading day of the immediately succeeding Trading Window during which the Company

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would allow the Grantee to trade in its securities; provided, however, that in no event shall the Award expire beyond the tenth anniversary of the Date of Grant.

3.    Exercise of Award. Subject to the limitations set forth in this Agreement, the Plan, and in the exercise procedures and requirements established by the Committee, the vested portion of the Award may be exercised in whole or in part by providing to the Company or its designee written notice of exercise; provided that the Award may be exercised with respect to whole Shares only. Such notice shall specify (i) whether the Grantee intends to exercise the Option or the SAR and (ii) the number of Shares with respect to which the Award is to be exercised. The Grantee shall have the discretion to determine whether to exercise the Option or the SAR.

(a)    Exercise of SAR. If the Grantee desires to receive cash, as opposed to Shares, upon exercise of all or a portion of the vested amount of the Award, the Grantee will exercise the SAR. Upon the exercise of the SAR, the Grantee shall be entitled to receive a cash amount from the Company or the Employer equal to the product of: (i) the excess of the Fair Market Value of a Share on the date of exercise of the SAR over the Option Price; multiplied by (ii) the number of Shares as to which the SAR is being exercised {, less applicable withholdings}.

(b)    Exercise of Option. If the Grantee desires to receive Shares, as opposed to cash, upon exercise of all or a portion of the vested amount of the Award, the Grantee will exercise the Option. If the Option is exercised, payment of the Option Price for the number of Shares specified in the notice of exercise shall accompany the written notice of exercise. The payment of the Option Price may be made, as determined by the Committee in its sole discretion as of the time of exercise, as follows: (i) in cash, personal or certified cheque, bank draft or other property acceptable to the Committee; or (ii) through a cashless exercise, including through a registered broker-dealer. The Committee shall determine the means and manner by which Shares to be delivered upon exercise of the Option shall be settled and/or satisfied, in its sole and absolute discretion. Notwithstanding the foregoing sentence and Section 3.1(i) of the Plan, Shares delivered upon the exercise of an Option shall be newly-issued Shares.

(c)    Tandem Nature of Award. Upon the exercise of the SAR, the Option shall be canceled (i.e., surrendered to the Company) to the extent of the number of Shares as to which the SAR is exercised. Upon the exercise of the Option, the SAR shall be canceled (i.e., surrendered to the Company) to the extent of the number of Shares as to which the Option is exercised or surrendered.

(d)    Automatic Exercise of SAR.    If the Award (or any portion thereof) has not been exercised by the Expiration Date (and has not been forfeited or otherwise terminated in accordance with the terms of this Agreement), then effective as of the Expiration Date the Grantee will be deemed to have automatically exercised the SAR with respect to the Award (or any remaining portion thereof), and will be entitled to receive a cash amount from the Company or the Employer equal to the product of: (i) the excess of

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the Fair Market Value of a Share on the date of exercise of the SAR over the Option Price; multiplied by (ii) the number of Shares as to which the SAR is being exercised, less applicable withholdings.

4.    Termination of Employment.

(a)    Death or Disability. Upon termination of the Grantee’s employment with the Company and its Subsidiaries as a result of the Grantee’s death or the Grantee becoming Disabled, the Award shall become immediately exercisable as of the Termination Date, and the Grantee (or, to the extent applicable, the Grantee’s legal guardian, legal representative or estate) shall have the right to exercise the Award for a period of four (4) years after the date of such termination or, if earlier, until the Expiration Date.

(b)    Retirement. Upon termination of the Grantee’s employment with the Company and its Subsidiaries by reason of the Grantee’s Retirement, for a period of four (4) years following the Termination Date (but in no event beyond the Expiration Date), the Award shall remain outstanding and (i) to the extent not then fully vested, shall continue to vest in accordance with the vesting schedule set forth in Section 2 of this Agreement, and (ii) the Grantee shall have the right to exercise the vested portion of the Award. For the purposes of this Agreement, “Retirement” means a termination of employment after attaining age 60 with at least ten (10) years of service (as defined in the Company’s qualified retirement plans) and other than by (A) death; (B) Disability; (C) for Cause; or (D) a voluntary termination by the Grantee or without Cause termination by the Company, unless the Company and Grantee mutually agree that such termination shall be considered a “Retirement;” provided that if an Award is subject to Section 409A of the Code, a termination of employment must also constitute a “separation from service” within the meaning of Section 409A of the Code in order for the foregoing to apply.

(c)    Termination in Connection with Certain Dispositions. In the event the Grantee’s employment with the Company and its Subsidiaries is terminated without Cause in connection with a sale or other disposition of a Subsidiary, the Award shall remain outstanding and (i) to the extent not then fully vested, will become immediately vested on the Termination Date, and (ii) the Grantee will have the right to exercise such vested portion of the Award for a period of one (1) year following the Termination Date or, if earlier, until the Expiration Date.

(d)    Termination for Cause. Upon the termination of the Grantee’s employment with the Company and its Subsidiaries for Cause, the portion of the Award that has not been exercised shall be forfeited (whether or not then vested and exercisable) on the Termination Date.

(e)    Termination for Any Other Reason. Upon the termination of the Grantee’s employment with the Company and its Subsidiaries for any reason not described in Section 4(a), 4(b), 4(c), or 4(d) of this Agreement, the Award shall (i) to the extent not vested and exercisable as of the Termination Date, terminate as of the Termination Date,

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and (ii) to the extent vested and exercisable as of the Termination Date, remain exercisable for a period of ninety (90) days following the Termination Date or, in the event of the Grantee’s death during such ninety (90) day period, remain exercisable by the Grantee’s estate until the end of one (1) year period following the Termination Date; provided, however, that, in either case, the Award shall not remain exercisable beyond the Expiration Date.

(f)    Termination Date. For purposes of this Agreement, the word “terminate” or “termination” in connection with the Grantee’s employment shall mean the Grantee ceasing to perform services for the Company or such Subsidiary, as the case may be, without regard to: (i) whether such Grantee continues thereafter to receive any payment from the Company or such Subsidiary, as the case may be, in respect of the termination of such Grantee’s employment, including, without limitation, any continuation of salary or other compensation in lieu of notice of such termination, or (ii) whether or not Grantee is entitled or claims to be entitled at law to greater notice of such termination or greater compensation in lieu thereof than has been received by such Grantee.

5.    Effect of Change in Control. In the event of a Change in Control, Section 10.6 of the Plan will apply to the unvested portion of the Award.

6.    Forfeiture of Award. Except as otherwise provided in this Agreement, any and all Awards which have not become vested in accordance with Section 2, 4 or 5 hereof shall be forfeited upon the commission by the Grantee of an Act of Misconduct prior to such vesting. For purposes of this Agreement, an “Act of Misconduct” shall mean the occurrence of one or more of the following events: (x) the Grantee uses for profit or discloses to unauthorized persons, confidential information or trade secrets of the Company or any of its Subsidiaries, (y) the Grantee breaches any contract with or violates any fiduciary obligation to the Company or any of its Subsidiaries, or (z) the Grantee engages in unlawful trading in the securities of the Company or any of its Subsidiaries or of another company based on information gained as a result of the Grantee’s employment with, or status as a director to, the Company or any of its Subsidiaries.

7.    Non-Transferability of Award. Except to the extent that the Grantee’s legal representative or estate is permitted to exercise the Award pursuant to the terms of the Plan or in accordance with a determination of the Committee, the Award is exercisable only during the Grantee’s lifetime and only by the Grantee. Unless otherwise provided for by a determination of the Committee, the Award shall not be transferable except by will or the laws of descent and distribution.

8.    No Right to Continued Employment. Nothing in this Agreement or the Plan shall interfere with or limit in any way the right of the Company or its Subsidiaries to terminate the Grantee’s employment, nor be construed as giving the Grantee any right to continuance of employment by the Company or any of its Subsidiaries or continuance of service to the Company or any of its Subsidiaries.

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9.    Withholding of Taxes. Upon the exercise of the Award, the Company or the Employer {,as applicable,} shall require payment of or other provision for, as determined by the Company, an amount equal to the federal, state, provincial and local income taxes and other amounts required by law to be withheld or determined to be necessary or appropriate to be withheld by the Company or the Employer, as applicable, in connection with such exercise. In its sole discretion, the Company or the Employer, as applicable, may require or permit payment of or provision for such withholding taxes through one or more of the following methods: (a) in cash, bank draft, certified cheque, personal cheque or other manner acceptable to the Committee and/or set forth in the relevant exercise procedures; (b) by withholding such amount from other amounts due to the Grantee; (c) by withholding the delivery of a portion of the Shares then deliverable to the Grantee having an aggregate fair market value equal to such withholding taxes (provided that, for clarity, Shares with an aggregate value equal to the gross amount of the Award shall be issued) and, at the Company’s election, either (I) the Company or the Employer paying the withholding taxes on behalf of the Grantee in cash, or (II) selling such Shares on the Grantee’s behalf; (d) by withholding such amount from the cash then issuable in connection with the Award; or (e) by entering into any other arrangements for the receipt of such amount suitable to the Company. The Grantee acknowledges and agrees that, notwithstanding that the Employer is not a party to this Agreement, the Employer, if applicable, shall be entitled to take such actions provided for in this Section as the Employer shall deem appropriate.

10.    Grantee Bound by Plan; Award Subject to Terms of Plan. The Grantee hereby acknowledges receipt of a copy of the Plan and agrees to be bound by all the terms and provisions thereof. This Agreement shall be construed in accordance and consistent with, and is subject to, the provisions of the Plan (the provisions of which are hereby incorporated by reference), as well as any and all determinations, policies, instructions, interpretations and rules of the Committee in connection with the Plan, including the Option/SAR Exercise and Settlement Policy and related procedures adopted by the Committee. Except as otherwise expressly set forth herein, the capitalized terms used in this Agreement shall have the same definitions as set forth in the Plan.

11.    Modification of Agreement. The Board or Committee may make amendments or changes to this Award, subject to the terms and conditions of Section 21 of the Plan.

12.    Severability. Should any provision of this Agreement be held by a court of competent jurisdiction to be unenforceable or invalid for any reason, the remaining provisions of this Agreement shall not be affected by such holding and shall continue in full force in accordance with their terms.

13.    Governing Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the Province of Ontario and the federal laws of Canada applicable therein.

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14.    Successors in Interest and Assigns. The Company and the Employer may assign any of their respective rights and obligations under this Agreement without the consent of the Grantee. This Agreement shall inure to the benefit of and be binding upon any successors and assigns of the Company and the Employer. This Agreement shall inure to the benefit of the successors of the Grantee including, without limitation, the estate of the Grantee and the executor, administrator or trustee of such estate. All obligations imposed upon the Grantee and all rights granted to the Company and the Employer under this Agreement shall be binding upon the successors of the Grantee including, without limitation, the estate of the Grantee and the executor, administrator or trustee of such estate.

15.    Resolution of Disputes. Any dispute or disagreement which may arise under, or as a result of, or in any way relate to, the interpretation, construction or application of this Agreement shall be determined by the Committee. Any determination made hereunder shall be final, binding and conclusive on the Grantee, the Grantee’s heirs, executors, administrators and successors, and the Company and its Subsidiaries for all purposes.

16.    Entire Agreement. This Agreement and the terms and conditions of the Plan (as well as any and all determinations, policies, instructions, interpretations and rules of the Committee in connection with the Plan, including the Option/SAR Exercise and Settlement Policy and related procedures adopted by the Committee) constitute the entire understanding between the Grantee and the Company and its Subsidiaries, and supersede all other agreements, whether written or oral, with respect to the Award.

17.    Headings. The headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement.

18.    Counterparts. This Agreement may be executed simultaneously in two or more counterparts, each of which shall constitute an original, but all of which taken together shall constitute one and the same agreement.

19.     Recoupment Policy upon Restatement of Financial Results. The Award, and any proceeds therefrom, is subject to the Company’s right to reclaim its benefits: (i) in the event of a financial restatement pursuant to the Recoupment Policy Relating to Performance-Based Compensation (the “Recoupment Policy”) adopted by the Board, as may be amended from time to time; or (ii) in accordance with the terms of any separate agreement, understanding or arrangement between the Grantee and the Company, or any affiliate thereof. In accordance with the Recoupment Policy, if the Company’s financial statements are required to be restated for any reason (other than restatements due to changes in accounting policy with retroactive effect), the Board will review the Award earned by the Grantee. If the Board determines that, after a review of all of the relevant facts and circumstances, the grant of the Award was predicated upon the achievement of certain financial results that were subsequently corrected as part of a restatement and a lower Award would have been made to the Grantee based upon the restated financial results, then the Board will seek recoupment of the Award to the extent that the Board deems appropriate and as provided by applicable law.

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20.     Compliance with Section 409A. This Agreement is not intended to provide for the deferral of compensation within the meaning of Section 409A of the Code. If for any reason this Agreement is subject to the requirements of Section 409A of the Code, then this Agreement is intended to satisfy the requirements of Section 409A of the Code and is intended not to be a “salary deferral arrangement” (a “SDA”) within the meaning of the Income Tax Act (Canada) (“Canadian Tax Act”), and shall be interpreted and administered consistent with such intent. To the extent that the interpretation and administration of this Agreement in accordance with Section 409A of the Code would cause any of the arrangements contemplated herein to be a SDA, then for any Grantee who is subject to the Canadian Tax Act and notsubject to Section 409A of the Code, the Agreement shall be interpreted and administered with respect to such Grantee so that the arrangements are not SDAs. For Grantees subject to both Section 409A of the Code and the Canadian Tax Act, the terms of this Award shall be interpreted, construed, and given effect to achieve compliance with both Section 409A of the Code and the Canadian Tax Act, to the extent practicable. If compliance with both Section 409A of the Code and the Canadian Tax Act is not practicable in connection with the Award covered by this Agreement, the terms of this Award and this Agreement remain subject to amendment at the sole discretion of the Committee to reach a resolution of the conflict as it shall determine in its sole discretion.

21.    Language. The Parties hereto acknowledge that they have requested that this Agreement and all documents ancillary thereto, including all the documentation provided to the Grantee in respect of the Award, be drafted in the English language only. Les parties aux présentes reconnaissent qu’elles ont exigé que la présente convention et tous les documents y afférents, y compris toute la documentation transmise au bénéficiaire relativement à l’octroi des droits prévu aux présentes, soient rédigés en langue anglaise seulement.

22.    Accessing Information. A copy of the Plan and prospectus for the Plan, as may be amended, can be found by the Grantee by accessing his/her Solium Shareworks account at www.solium.com. That site also contains other general information about the Award.

23.    Confirming Information. By accepting this Agreement, either through electronic means or by providing a signed copy, the Grantee (i) acknowledges and confirms that he/she has read and understood the Plan, the related prospectus, this Agreement and all information about the Award available at the Solium website, and that he/she has had an opportunity to seek separate fiscal, legal and taxation advice in relation thereto; (ii) acknowledges that he/she has been provided with a hard copy or an electronic copy of the Annual Report on Form 10-K for the most recently completed fiscal year of the Company; (iii) agrees to be bound by the terms and conditions stated in this Agreement, including without limitation the terms and conditions of the Plan, incorporated by reference herein; and (iv) acknowledges and agrees that acceptance of this Agreement through electronic means is equivalent to doing so by providing a signed copy.

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{24.    Company Election. Unless the Committee has expressly indicated in writing and delivered to the Grantee, the Committee’s intention to cause the Company to elect in prescribed form and duly file any election (the “Company Election”) required in subsection 110(1.1) of the Income Tax Act (Canada) that neither the Company nor any person not dealing at arm’s length with the Company will deduct in computing its income for a taxation year, any amount paid to a Grantee upon the exercise by the Grantee of a SAR hereunder in accordance with the provisions of paragraph 3(a), then upon the exercise by a Grantee of a SAR hereunder, the Committee at its sole discretion, may or may not cause the Company to make the Company Election.}

TIM HORTONS INC.

By:    

Name:    

Title:    

[TIM HORTONS USA INC. “Employer”)

By:    

Name:    

Title:     ]

EX-10.(D)

Exhibit 10(d)

AMENDED AND RESTATED

DEFERRED STOCK UNIT AWARD AGREEMENT

(with related Dividend Equivalent Rights)

(Canadian Directors)

Tim Hortons Inc.

Date

THIS AGREEMENT, made effective as of the day of , (the “Effective Date”) is between Tim Hortons Inc., a Federal corporation incorporated under the Canada Business Corporations Act (the “Company”) and (the “Grantee”);

WHEREAS, pursuant to Section 4 of the Tim Hortons Inc. Non-Employee Director Deferred Stock Unit Plan (the "Plan"), the Company may grant, from time-to-time, to the Grantee Elective DSUs, Formula DSUs, Voluntary Formula DSUs and Discretionary DSUs (all as defined in the Plan and collectively referred to herein as "DSUs" or, individually, a "DSU") with related Dividend Equivalent Rights;

AND WHEREAS, each grant of DSUs shall be evidenced by this Agreement, which (together with the Plan), describes all the terms and conditions of the respective DSU grant;

AND WHEREAS, the Grantee serves as a director of the Company and is not otherwise employed by the Company or its subsidiaries ("Subsidiaries") in any capacity and is therefore eligible to participate in the Plan;

AND WHEREAS, subject to the terms of the Plan and this Agreement, the DSUs awarded to the Grantee under this Agreement will vest and be paid to the Grantee after the Grantee ceases to serve as a director of the Company;

AND WHEREAS, the Company has determined that the Grantee is subject to the tax laws of the Canada (and not subject to tax under the laws of the United States) in respect of the DSUs granted hereunder;

NOW, THEREFORE, the Parties agree as follows:

1 Award.

1.1The Company hereby grants to the Granteeawards (the "Awards") of the number of Formula DSUs, Voluntary Formula DSUs, Elective DSUs and Discretionary DSUs as set out on Schedule A hereto with an equal number of related Dividend Equivalent Rights on the date(s) of grant (each, a "Grant Date") set forth on Schedule A. Grants of DSUs are subject to certain administrative determinations to be made by the Human Resource and Compensation Committee

of the Company (the "Committee") from time-to-time, which are described on Schedule A and which, unless otherwise specified on Schedule A, shall apply in respect of all existing and future Awards; provided that no such administrative determination will impair the rights of the Grantee without the consent of the Grantee, except as may be permitted pursuant to Section 11 of this Agreement. Each DSU is a bookkeeping entry, equivalent in value to one common share of Company or any other securities into which such share is converted or for which such share is exchanged ("Share"). Distributions and payments for DSUs and Dividend Equivalent Rights shall be made in accordance with the terms of Section 5 and 6 hereof, respectively. The DSUs and related Dividend Equivalent Rights granted pursuant to the Awards were subject to the execution and return of this Agreement by the Grantee. On a quarterlybasis, the Company will deliver to the Grantee an updated Schedule A setting out the total number of DSUs that have been granted to the Grantee under the Plan and pursuant to this Agreement from the Effective Date to the date of such Schedule. Grantee shall be deemed to have (i) accepted and agreed to the terms and conditions of the Awards and other information described on the Schedule and (ii) confirmed their agreement and acknowledgment that the terms of this Agreement continue to apply in full force and effect to all such future Awards, unless Grantee notifies the Company within 15 business days after receipt of the respective quarterly Schedule A.

1.2Each Dividend Equivalent Right is a bookkeeping entry, equivalent in value to the cash dividends or other distributions that are or would be payable with respect to the number of DSUs held by the Grantee if the DSUs were Shares. Dividend Equivalent Rights shall be converted into additional DSUs based on the Fair Market Value of a Share on the date such dividend is paid. "Fair Market Value" or "FMV" on any relevant date shall mean the closing price for Shares traded on the Toronto Stock Exchange, or if the Committee elects on or prior to such date, the New York Stock Exchange, for the immediately preceding date on which the Toronto Stock Exchange or New York Stock Exchange, as applicable, is open for trading. Any additional DSUs granted pursuant to this Section shall be subject to the same terms and conditions applicable to the DSU to which the Dividend Equivalent Right relates, including, without limitation, the restrictions on transfer, forfeiture, vesting and payment provisions contained in Sections 2 through 5, inclusive, of this Agreement. In the event that a DSU is forfeited pursuant to Section 5 hereof, the related Dividend Equivalent Right shall also be forfeited.

1.3This Agreement shall be construed in accordance and consistent with, and subject to, the provisions of the Plan (the provisions of which are hereby incorporated by reference) and, except as otherwise expressly set forth herein, the capitalized terms used in this Agreement shall have the same definitions as set forth in the Plan.

2 Restrictions on Transfer.

The DSUs and Dividend Equivalent Rights granted pursuant to this Agreement may not be sold, transferred or otherwise disposed of and may not be pledged or otherwise hypothecated.

3 Vesting.

All DSUs and accompanying Dividend Equivalents Rights granted hereunder shall vest upon the Grantee's separation from service. For purposes of this Agreement, "separation from

2

service" shall occur on the earliest dateon which both the following conditions have been met: (i) the Grantee has ceased to be employed by the Company or any of its Subsidiaries for any reason whatsoever and (ii) the Grantee is not a member of the Board of Directors of the Company or any of its Subsidiaries.

4 Effect of Change of Shares Subject to the Plan.

In the event of a Change in Capitalization (as defined in the Tim Hortons Inc. 2012 Stock Incentive Plan (the "2012 Stock Plan")), the Committee shall conclusively determine the appropriate adjustments, if any, to the Grantee's outstanding DSUs. If adjustments are to be made, they shall be made in the same manner as adjustments are made to awards that are outstanding under the 2012 Stock Plan. Adjusted DSUs shall remain subject to the same conditions that were applicable to the DSUs prior to the adjustments, provided that, notwithstanding the foregoing, any adjustment to a DSU shall be on the basis that the amounts payable under such DSU shall continue to depend on the FMV of the Shares of the Company, or a corporation related thereto, at a time within the period beginning one year before the Grantee's separation from service and ending at the time of receipt of payment.

5 Distributions.

All DSUs granted to Grantee under the Agreement shall be paid out in a lump sum as soon as administratively possible following separation from service, but no later than 30 days after separation from service, unless the Grantee has filed an election, in accordance with the provisions of Section 4.7 of the Plan, to defer the payment of the DSUs subject to such election. Notwithstanding the foregoing, and for greater certainty, Formula DSUs (not including Voluntary Formula DSUs or Elective DSUs) and, unless otherwise set out on Schedule A hereto with respect to a specific Award, Discretionary DSUs, shall be forfeited and no payment shall be made in respect thereof if the Grantee's separation from service is as a result of the Grantee being removed from service due to the commission of an act of fraud or intentional misrepresentation or an act of embezzlement, misappropriation or conversion of assets or opportunities of the Company or any of its Subsidiaries.

6 Payment.

All DSUs shall be paid in cash based on the Fair Market Value of a Share on the date of the Grantee's separation from service in accordance with the administrative determinations made by the Committee from time-to-time regarding the payments of DSUs upon settlement, which shall be noted on Schedule A from time-to-time, as applicable. Notwithstanding the foregoing, the Company shall be entitled to withhold and/or deduct any and all amounts required to be withheld from any payment hereunder on account of taxes or other governmental charges.

7 No Right to Continued Service.

Nothing in this Agreement or the Plan shall confer upon the Grantee any right to continuance of service as a Board member or otherwise as an employee of the Company or any of its Subsidiaries.

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8 Residency of Grantee.

The Grantee certifies that he or she is a resident of Canada for Canadian and U.S. income tax purposes and is not subject to U.S. income tax in respect of the DSUs covered by this Agreement. The Grantee hereby agrees to notify the Company within 15 business days of any change in his or her residency for Canadian and U.S. income tax purposes.

9 Grantee Bound by the Plan.

The Grantee hereby acknowledges receipt of a copy of the Plan and agrees to be bound by all the terms and provisions thereof. In the event of a conflict between the terms of the Plan and the terms of this Agreement, the terms of the Plan will govern. Capitalized terms used in this Agreement that are not otherwise defined herein shall have the meanings attributed to such terms in the Plan.

In the event of a separation of service as a result of the death or disability of the Grantee, the payment in respect of the DSUs held by the Grantee shall be made to the Grantee's estate or legal representatives, as applicable.

10 Modification of Agreement.

This Agreement may be modified, amended, suspended or terminated, and any terms or conditions may be waived, but only by a written instrument executed by the Parties hereto; provided, however, that (a) Grantee shall be deemed to have accepted, without signature required, the terms and conditions of this Agreement applicable to future grants, unless notice of objection is made, as described in Section 1 hereof and (b) nothing herein shall restrict the Committee's right to amend this Agreement without the Grantee's consent and without additional consideration to the Grantee to the extent necessary to avoid penalties arising under Section 409A of the Code, or to comply with the requirements of Regulation 6801(d) under the Income Tax Act (Canada) (the "ITA"), even if those amendments reduce, restrict or eliminate rights granted under this Agreement before those amendments are adopted.

11 Notice.

All notices and other communications hereunder shall be in writing. Any notice, request, demand, claim or other communication hereunder shall be deemed duly given if (and then three business days after) it is sent by registered or certified mail, return receipt requested, postage prepaid, and addressed to the intended recipient as set forth below:

If to the Company:

Tim Hortons Inc.

874 Sinclair Road

Oakville, Ontario L6K 2Y1

Attn:     Executive Vice President, General Counsel and Secretary

4

Fax:     905-845-2931

If to Grantee:

Name:    

Address:     

Tel:     
Fax:     
Email:     

Either party may send any notice or other communication hereunder to the intended recipient at the address, facsimile number or electronic mail address set forth above using any other means (including personal delivery, expedited courier, messenger service, telecopy, telex, ordinary mail or electronic mail), but no such notice, request, demand, claim or other communication will be deemed to have been duly given unless and until it actually is received by the intended recipient. Either party may change the address, facsimile number or electronic mail address to which notices and other communications hereunder are to be delivered by giving the other parties notice in the manner herein set forth.

12 Severability.

Should any provision of this Agreement be held by a court of competent jurisdiction to be unenforceable or invalid for any reason, the remaining provisions of this Agreement shall not be affected by such holding and shall continue in full force in accordance with their terms.

13 Governing Law.

The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the Province of Ontario and the federal laws of Canada applicable therein.

14 Successors in Interest.

This Agreement shall inure to the benefit of and be binding upon any successor to the Company. This Agreement shall inure to the benefit of the Grantee's legal representatives. All obligations imposed upon the Grantee and all rights granted to the Company under this Agreement shall be binding upon the Grantee's heirs, executors, administrators and successors.

15 Resolution of Disputes.

Any dispute or disagreement which may arise under, or as a result of, or in any way relate to, the interpretation, construction or application of this Agreement shall be determined by the Committee. Any determination made hereunder shall be final, binding and conclusive on the Grantee, the Grantee's heirs, executors, administrators and successors, and the Company and its Subsidiaries for all purposes.

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16 Entire Agreement.

This Agreement and the terms and conditions of the Plan, including the provisions of the 2012 Stock Plan to the extent specifically referred to herein or directly applicable to the terms hereof, constitute the entire understanding between the Grantee and the Company and its Subsidiaries, and supersede all other agreements, whether written or oral, with respect to the Award.

17 Headings.

The headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement.

18 Counterparts.

This Agreement may be executed simultaneously in two or more counterparts, each of which shall constitute an original, but all of which taken together shall constitute one and the same agreement.

19 Compliance with Section 409A.

This Agreement is intended to satisfy the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the "Code") and is intended not to be a "salary deferral arrangement" (a "SDA") within the meaning of the ITA, and shall be interpreted and administered consistent with such intent. To the extent that the interpretation and administration of this Agreement in accordance with Section 409A of the Code would cause any of the arrangements contemplated herein to be a SDA, then for any Grantee who is subject to the ITA and notsubject to Section 409A of the Code, the Agreement shall be interpreted and administered with respect to such Grantee so that the arrangements are not SDAs. For Grantees subject to both Section 409A of the Code and the ITA, the terms of the Awards shall be interpreted, construed, and given effect to achieve compliance with both Section 409A of the Code and the ITA, to the extent practicable. If compliance with both Section 409A of the Code and the ITA is not practicable in connection with the Awards covered by this Agreement, the terms of the Awards and this Agreement remain subject to amendment at the sole discretion of the Committee to reach a resolution of the conflict as it shall determine in its sole discretion.

[SIGNATURE PAGE FOLLOWS ON NEXT PAGE]

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TIM HORTONS INC.

By:

Name:         Title:     

GRANTEE

By:

Name:    

7

SCHEDULE A

Grant Date	Cash Value (Cdn.$) on Grant Date	# and Type of DSUs*	Director Residency
Total of DSUs as of <>: <>

* Specify Formula DSUs, Voluntary Formula DSUs, Elective DSUs or Discretionary DSUs.

Notice Regarding Administrative Decisions made by the Committee

• Grants and settlements of DSUs shall be determined in accordance with the Equity Grant and Settlement Policy (the "Policy") approved and adopted by the Human Resource and Compensation Committee of the Board of Directors of the Company, as may be amended from time to time.

• No interest or other compensation shall accrue as a result of the delay between the date of the Board meeting and the actual DSU grant date as set forth in the Policy.

• Consistent with Section 6 of the Agreement, DSUs are payable and will be settled in Canadian dollars.

EX-10.(E)

Exhibit 10(e)

AMENDED AND RESTATED

DEFERRED STOCK UNIT AWARD AGREEMENT

(with related Dividend Equivalent Rights)

(U.S. Directors)

Tim Hortons Inc.

Date

THIS AGREEMENT, made effective as of the day of , (the “Effective Date”) is between Tim Hortons Inc., a Federal corporation incorporated under the Canada Business Corporations Act (the “Company”) and (the “Grantee”);

WHEREAS, pursuant to Section 4 of the Tim Hortons Inc. Non-Employee Director Deferred Stock Unit Plan (the "Plan"), the Company may grant, from time-to-time, to the Grantee Elective DSUs, Formula DSUs, Voluntary Formula DSUs and Discretionary DSUs (all as defined in the Plan and collectively referred to herein as "DSUs" or, individually, a "DSU") with related Dividend Equivalent Rights;

AND WHEREAS, each grant of DSUs shall be evidenced by this Agreement, which (together with the Plan), describes all the terms and conditions of the respective DSU grant;

AND WHEREAS, the Grantee serves as a director of the Company and is not otherwise employed by the Company or its subsidiaries ("Subsidiaries") in any capacity and is therefore eligible to participate in the Plan;

AND WHEREAS, subject to the terms of the Plan and this Agreement, the DSUs awarded to the Grantee under this Agreement will vest and be paid to the Grantee after the Grantee ceases to serve as a director of the Company;

AND WHEREAS, the Company has determined that the Grantee is subject to the tax laws of the United States in respect of the DSUs granted hereunder;

NOW, THEREFORE, the Parties agree as follows:

1 Award.

1.1The Company hereby grants to the Granteeawards (the "Awards") of the number of Formula DSUs, Voluntary Formula DSUs, Elective DSUs and Discretionary DSUs as set out on Schedule A hereto with an equal number of related Dividend Equivalent Rights on the date(s) of grant (each, a "Grant Date") set forth on Schedule A. Grants of DSUs are subject to certain administrative determinations to be made by the Human Resource and Compensation Committee of the Company (the "Committee") from time-to-time, which are described on Schedule A and

1

which, unless otherwise specified on Schedule A, shall apply in respect of all existing and future Awards; provided that no such administrative determination will impair the rights of the Grantee without the consent of the Grantee, except as may be permitted pursuant to Section 11 of this Agreement. Each DSU is a bookkeeping entry, equivalent in value to one common share of Company or any other securities into which such share is converted or for which such share is exchanged ("Share"). Distributions and payments for DSUs and Dividend Equivalent Rights shall be made in accordance with the terms of Section 5 and 6 hereof, respectively. The DSUs and related Dividend Equivalent Rights granted pursuant to the Awards were subject to the execution and return of this Agreement by the Grantee. On a quarterlybasis, the Company will deliver to the Grantee an updated Schedule A setting out the total number of DSUs that have been granted to the Grantee under the Plan and pursuant to this Agreement from the Effective Date to the date of such Schedule. Grantee shall be deemed to have (i) accepted and agreed to the terms and conditions of the Awards and other information described on the Schedule and (ii) confirmed their agreement and acknowledgment that the terms of this Agreement continue to apply in full force and effect to all such future Awards, unless Grantee notifies the Company within 15 business days after receipt of the respective quarterly Schedule A.

1.2Each Dividend Equivalent Right is a bookkeeping entry, equivalent in value to the cash dividends or other distributions that are or would be payable with respect to the number of DSUs held by the Grantee if the DSUs were Shares. Dividend Equivalent Rights shall be converted into additional DSUs based on the Fair Market Value of a Share on the date such dividend is paid. "Fair Market Value" or "FMV" on any relevant date shall mean the closing price for Shares traded on the Toronto Stock Exchange, or if the Committee elects on or prior to such date, the New York Stock Exchange, for the immediately preceding date on which the Toronto Stock Exchange or New York Stock Exchange, as applicable, is open for trading. Any additional DSUs granted pursuant to this Section shall be subject to the same terms and conditions applicable to the DSU to which the Dividend Equivalent Right relates, including, without limitation, the restrictions on transfer, forfeiture, vesting and payment provisions contained in Sections 2 through 5, inclusive, of this Agreement. In the event that a DSU is forfeited pursuant to Section 5 hereof, the related Dividend Equivalent Right shall also be forfeited.

1.3This Agreement shall be construed in accordance and consistent with, and subject to, the provisions of the Plan (the provisions of which are hereby incorporated by reference) and, except as otherwise expressly set forth herein, the capitalized terms used in this Agreement shall have the same definitions as set forth in the Plan.

2 Restrictions on Transfer.

The DSUs and Dividend Equivalent Rights granted pursuant to this Agreement may not be sold, transferred or otherwise disposed of and may not be pledged or otherwise hypothecated.

3 Vesting.

All DSUs and accompanying Dividend Equivalents Rights granted hereunder shall vest upon the Grantee's separation from service. For purposes of this Agreement, "separation from

2

service" shall mean a "separation from service" within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the "Code"), and Treasury Regulation Section 1.409A-1(h).

4 Effect of Change of Shares Subject to the Plan.

In the event of a Change in Capitalization (as defined in the Tim Hortons Inc. 2012 Stock Incentive Plan (the "2012 Stock Plan")), the Committee shall conclusively determine the appropriate adjustments, if any, to the Grantee's outstanding DSUs. If adjustments are to be made, they shall be made in the same manner as adjustments are made to awards that are outstanding under the 2012 Stock Plan. Adjusted DSUs shall remain subject to the same conditions that were applicable to the DSUs prior to the adjustments, provided that, notwithstanding the foregoing, any adjustment to a DSU shall be on the basis that the amounts payable under such DSU shall continue to depend on the FMV of the Shares of the Company, or a corporation related thereto, at a time within the period beginning one year before the Grantee's separation from service and ending at the time of receipt of payment.

5 Distributions.

All DSUs granted to Grantee under the Agreement shall be paid out in a lump sum as soon as administratively possible following separation from service, but no later than 30 days after separation from service, unless the Grantee has filed an election, in accordance with the provisions of Appendix A of the Plan, to defer the payment of the DSUs subject to such election. Notwithstanding the foregoing, and for greater certainty, Formula DSUs (not including Voluntary Formula DSUs or Elective DSUs) and, unless otherwise set out on Schedule A hereto with respect to a specific Award, Discretionary DSUs, shall be forfeited and no payment shall be made in respect thereof if the Grantee's separation from service is as a result of the Grantee being removed from service due to the commission of an act of fraud or intentional misrepresentation or an act of embezzlement, misappropriation or conversion of assets or opportunities of the Company or any of its Subsidiaries.

6 Payment.

All DSUs shall be paid in cash based on the Fair Market Value of a Share on the date of the Grantee's separation from service in accordance with the administrative determinations made by the Committee from time-to-time regarding the payments of DSUs upon settlement, which shall be noted on Schedule A from time-to-time, as applicable. Notwithstanding the foregoing, the Company shall be entitled to withhold and/or deduct any and all amounts required to be withheld from any payment hereunder on account of taxes or other governmental charges.

7 No Right to Continued Service.

Nothing in this Agreement or the Plan shall confer upon the Grantee any right to continuance of service as a Board member or otherwise as an employee of the Company or any of its Subsidiaries.

3

8 Residency of Grantee.

The Grantee certifies that he or she is a citizen of, or resident in, the United States for Canadian and U.S. tax purposes. The Grantee hereby agrees to notify the Company within 15 business days of any change in his or her residency for Canadian and U.S. income tax purposes.

9 Grantee Bound by the Plan.

The Grantee hereby acknowledges receipt of a copy of the Plan and agrees to be bound by all the terms and provisions thereof. In the event of a conflict between the terms of the Plan and the terms of this Agreement, the terms of the Plan will govern. Capitalized terms used in this Agreement that are not otherwise defined herein shall have the meanings attributed to such terms in the Plan.

In the event of a separation of service as a result of the death or disability of the Grantee, the payment in respect of the DSUs held by the Grantee shall be made to the Grantee's estate or legal representatives, as applicable.

10 Modification of Agreement.

This Agreement may be modified, amended, suspended or terminated, and any terms or conditions may be waived, but only by a written instrument executed by the Parties hereto; provided, however, that (a) Grantee shall be deemed to have accepted, without signature required, the terms and conditions of this Agreement applicable to future grants, unless notice of objection is made, as described in Section 1 hereof and (b) nothing herein shall restrict the Committee's right to amend this Agreement without the Grantee's consent and without additional consideration to the Grantee to the extent necessary to avoid penalties arising under Section 409A of the Code, or to comply with the requirements of Regulation 6801(d) under the Income Tax Act (Canada) (the "ITA"), even if those amendments reduce, restrict or eliminate rights granted under this Agreement before those amendments are adopted.

11 Notice.

All notices and other communications hereunder shall be in writing. Any notice, request, demand, claim or other communication hereunder shall be deemed duly given if (and then three business days after) it is sent by registered or certified mail, return receipt requested, postage prepaid, and addressed to the intended recipient as set forth below:

If to the Company:

Tim Hortons Inc.

874 Sinclair Road

Oakville, Ontario L6K 2Y1

Attn:     Executive Vice President, General Counsel and Secretary

Fax:    905-845-2931

4

If to Grantee:

Name:     

Address:

Tel:     
Fax:     
Email:     

Either party may send any notice or other communication hereunder to the intended recipient at the address, facsimile number or electronic mail address set forth above using any other means (including personal delivery, expedited courier, messenger service, telecopy, telex, ordinary mail or electronic mail), but no such notice, request, demand, claim or other communication will be deemed to have been duly given unless and until it actually is received by the intended recipient. Either party may change the address, facsimile number or electronic mail address to which notices and other communications hereunder are to be delivered by giving the other parties notice in the manner herein set forth.

12 Severability.

Should any provision of this Agreement be held by a court of competent jurisdiction to be unenforceable or invalid for any reason, the remaining provisions of this Agreement shall not be affected by such holding and shall continue in full force in accordance with their terms.

13 Governing Law.

The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the Province of Ontario and the federal laws of Canada applicable therein and, to the extent applicable, the Code.

14 Successors in Interest.

This Agreement shall inure to the benefit of and be binding upon any successor to the Company. This Agreement shall inure to the benefit of the Grantee's legal representatives. All obligations imposed upon the Grantee and all rights granted to the Company under this Agreement shall be binding upon the Grantee's heirs, executors, administrators and successors.

15 Resolution of Disputes.

Any dispute or disagreement which may arise under, or as a result of, or in any way relate to, the interpretation, construction or application of this Agreement shall be determined by the Committee. Any determination made hereunder shall be final, binding and conclusive on the Grantee, the Grantee's heirs, executors, administrators and successors, and the Company and its Subsidiaries for all purposes.

5

16 Entire Agreement.

This Agreement and the terms and conditions of the Plan, including the provisions of the 2012 Stock Plan to the extent specifically referred to herein or directly applicable to the terms hereof, constitute the entire understanding between the Grantee and the Company and its Subsidiaries, and supersede all other agreements, whether written or oral, with respect to the Award.

17 Headings.

The headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement.

18 Counterparts.

This Agreement may be executed simultaneously in two or more counterparts, each of which shall constitute an original, but all of which taken together shall constitute one and the same agreement.

19 Compliance with Section 409A.

This Agreement is intended to satisfy the requirements of Section 409A of the Code and is intended not to be a "salary deferral arrangement" (a "SDA") within the meaning of the ITA, and shall be interpreted and administered consistent with such intent. To the extent that the interpretation and administration of this Agreement in accordance with Section 409A of the Code would cause any of the arrangements contemplated herein to be a SDA, then for any Grantee who is subject to the ITA and notsubject to Section 409A of the Code, the Agreement shall be interpreted and administered with respect to such Grantee so that the arrangements are not SDAs. For Grantees subject to both Section 409A of the Code and the ITA, the terms of the Awards shall be interpreted, construed, and given effect to achieve compliance with both Section 409A of the Code and the ITA, to the extent practicable. If compliance with both Section 409A of the Code and the ITA is not practicable in connection with the Awards covered by this Agreement, the terms of the Awards and this Agreement remain subject to amendment at the sole

6

discretion of the Committee to reach a resolution of the conflict as it shall determine in its sole discretion.

TIM HORTONS INC.

By:

Name:    

Title:     

GRANTEE

By:

Name:    

7

SCHEDULE A

Grant Date	Cash Value (Cdn.$) on Grant Date	# and Type of DSUs*	Director Residency
Total DSUs as of <>: <>

* Specify Formula DSUs, Voluntary Formula DSUs, Elective DSUs or Discretionary DSUs.

Notice Regarding Administrative Decisions made by the Committee

• Grants and settlements of DSUs shall be determined in accordance with the Equity Grant and Settlement Policy (the "Policy") approved and adopted by the Human Resource and Compensation Committee of the Board of Directors of the Company, as may be amended from time to time.

• No interest or other compensation shall accrue as a result of the delay between the date of the Board meeting and the actual DSU grant date as set forth in the Policy.

• Consistent with Section 6 of the Agreement, DSUs are payable and will be settled in Canadian dollars. For a director subject to U.S. taxation in respect of his or her DSUs, the Canadian dollars will be translated into U.S. dollars as of the date of separation of service, unless the director provides notice to the Company that he or she would like to receive Canadian dollars; provided, however, that additional deferrals under the U.S. Non-Employee Director Deferred Compensation Plan (for DSUs granted in respect of 2009 and prior years' services) or in accordance with Appendix A of the Plan (for all other awards) can be made only in U.S. dollars.

EX-31.(A)

Exhibit 31(a)

CERTIFICATION OF PERIODIC REPORT

UNDER SECTION 302 OF THE SARBANES OXLEY ACT OF 2002

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 6, 2014

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

EX-31.(B)

Exhibit 31(b)

CERTIFICATION OF PERIODIC REPORT

UNDER SECTION 302 OF THE SARBANES OXLEY ACT OF 2002

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 6, 2014

/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 June 29, 2014 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 6, 2014

/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 June 29, 2014 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 6, 2014

/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.

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,” “target,” “aspiration,” “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, our aspirations, our strategic 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 25, 2014 (“Form 10-K”), as updated in the Quarterly Report on Form 10-Q filed on August 6, 2014, 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, revenue, share 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 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 at the corporate or 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: (i) prospects and execution risks concerning our growth strategy; (ii) the absence of an adverse event or condition that damages our strong brand position and reputation; (iii) the absence of a material increase in competition or in volume or type of competitive activity within the quick service restaurant segment of the food service industry; (iv) cost and availability of commodities; (v) the absence of an adverse event or condition that disrupts our distribution operations or impacts our supply chain; (vi) continuing positive working relationships with the majority of the Company’s restaurant owners; (vii) the absence of any material adverse effects arising as a result of litigation; (viii) there being no significant change in the Company’s ability to comply with current or future regulatory requirements; (ix) the ability to retain our senior management team or the inability to attract and retain new qualified personnel; (x) the Company’s ability to maintain investment grade credit ratings; (xi) the Company’s ability to obtain financing on favorable terms; and (xii) 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 any other purposes.

Factors Affecting Growth and Other Important Strategic Initiatives. The Company’s growth strategy and other strategic initiatives may not be successful and may expose the Company to certain risks, including the following:

•     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 negatively impact the same-store sales growth and profitability of existing restaurants in the market. When the Company enters new markets, it may be necessary to extend or provide relief and support programs for restaurant owners which could increase costs and thus decrease net income.

• The Company may enter markets where its brand is not well known and where it has little or no operating experience. New markets may have different competitive conditions, consumer tastes or discretionary spending patterns than existing markets and/or higher construction, occupancy, and operating costs for restaurants. As a result, new restaurants in those

markets may have lower average restaurant sales than restaurants in existing markets and may take longer than expected to reach target sales and profit levels or may never do so, thereby affecting overall financial condition and/or financial results. The Company will need to build brand awareness in those markets it enters through advertising and promotional activity which may not be as effective as intended.

• The Company may rationalize and close underperforming restaurants in order to improve overall profitability. Such closures may be accompanied by impairment charges, closure costs, and/or valuation allowances that may have a negative impact on 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 the Company cannot obtain desirable locations for restaurants at reasonable prices, then 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 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. There can be no assurance that the Company will be able to complete desirable transactions.

• The Company may continue to pursue strategic alliances (including co-branding) with third parties but there can be no assurance that new strategic partners can be found, that current strategic alliances can be maintained or that significant value will be recognized through such strategic alliances. Furthermore, such relationships as well as the expansion of the Company’s current business through other similar 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 achieving its financial objectives and long-range aspirational goals.

The Importance of Canadian Segment Performance and Brand Reputation. The Company’s success is largely dependent upon its ability to maintain and enhance the value of its brand, guests’ connection to and perception of the brand, and a positive relationship with restaurant owners. Brand value can be severely damaged even by isolated incidents, particularly if the incidents receive considerable negative publicity or result in litigation. Some of these incidents may arise from events that are beyond the Company’s control and may damage the brand, such as: actions taken (or not taken) by one or more restaurant owners or their employees relating to health, safety, quality assurance, environmental, welfare, labor matters, public policy or social issues, or otherwise; litigation and claims; failure of, or security breaches or other fraudulent activities associated with, the Company’s networks and systems; illegal activity targeted at the Company; negative incidents occurring at or affecting business partners, suppliers, affiliates, or corporate social responsibility programs of the Company; the quality of products from vertically integrated manufacturing facilities or the Company’s other suppliers; negative comments about us or improper disclosure of proprietary or personal information on social media; and negative publicity, whether true or not.

The Tim Hortons brand is synonymous with the delivery of quality food products at value prices. If the Company is unable to maintain in Canada, or unable to maintain and/or achieve in other markets, an appropriate price-to-value relationship for its products in the minds of guests, its ability to increase or maintain same-store sales may be affected. The ability of the Company to maintain or achieve the appropriate price-to-value relationship also may be affected by discounting or other promotional activity of competitors, which can be very aggressive. Furthermore, the Company’s financial performance is highly dependent on its Canadian business unit and any substantial or sustained decline in its Canadian business would materially and adversely affect the overall financial performance of the Company.

Competition. The quick service restaurant segment of the food service industry is intensely competitive. The Company competes with international, regional, and local organizations primarily through the quality, variety, and value perception of food and beverage products offered. Other key competitive factors include: the number and location of restaurants; quality and speed of service; attractiveness of facilities; effectiveness and magnitude of advertising, marketing, promotional, and operational programs; 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/or perceptions; and, new product development. If the Company is unable to maintain its competitive position there could be a lower demand for products, downward pressure on prices, reduced margins, an inability to take advantage of new business opportunities, a loss of market share, and an inability to attract qualified restaurant owners in the future.

Innovation. The success of the Company’s same-store sales growth strategy is dependent partly on its ability to extend product offerings, introduce innovative new products, adapt to consumer trends and desires, achieve the hospitality and speed of service standards expected by guests and provide a distinctive and overall quality guest experience. The Company’s ability to develop commercially successful new products will depend on its ability to gather sufficient data and effectively gauge the

direction of trends and identify, develop, manufacture, market and sell new or improved products in response to such trends. The speed of service and capacity in Tim Hortons restaurants may be impacted by new product offerings which could have an adverse effect on financial conditions or results of operations.

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 and sugar, 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 cost increases, price volatility for commodities it purchases has increased due to conditions beyond its control, including economic and political conditions, currency fluctuations, availability of supply, weather conditions, pest damage and changing 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. The Company may choose not to pass along all commodity cost increases to its restaurant owners which could have a significant effect on the business and results of operations of the Company. Price fluctuations may also impact margins as many of these commodities are typically priced based on a fixed-dollar mark-up. 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. If the supply or quality of commodities, including coffee, fails to meet demand or quality standards, the Company’s restaurant owners may experience reduced sales which would reduce rents and royalty income as well as distribution income of the Company. 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: unclean water; food-borne illness; food tampering, food contamination, product recall, hygiene and cleanliness failures or impropriety at Tim Hortons, or other quick service restaurants unrelated to Tim Hortons, or potential health impacts of consuming certain of the Company’s products, including its core products, could result in negative publicity, damage to the Company’s brand value and, potentially, 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 the business, results of operations and financial condition of the Company.

Distribution Operations and Supply Chain. The Company’s distribution operations and supply chain may be impacted by various factors, some of which are beyond its control, that could injure its brand and negatively affect results of operations and/or increase costs, including: increased transportation, shipping, food and other supply costs; inclement weather or extreme weather events; risks of having a single source of supply for certain food and beverage products; shortages or interruptions in the availability or supply of high-quality coffee beans, perishable food products and/or their ingredients; variations in the quality of the Company’s food and beverage products and/or their ingredients; potential cost and disruption of a product recall; potential negative impacts on the Company’s relationship with restaurant owners associated with an increase of required purchases, or prices, of products purchased from its distribution business; and political, physical, environmental, labor, or technological disruptions in manufacturing and/or warehousing 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 operate substantially all of the Tim Hortons restaurants. Accordingly, the Company’s financial results are, to a large extent, dependent upon the operational and financial success of Tim Hortons restaurant owners. There can be no assurance that the Company will be able to maintain positive relationships with existing restaurant owners or attract sufficient numbers of qualified restaurant owners, either of which could materially and adversely affect its business and operating results. Furthermore, success of the Company’s same-store sales growth strategy and brand reputation is dependent on, among other things, achievement of hospitality, operational standards, and a positive overall guest experience. There can be no assurance that the Company and restaurant team members will be able to continue to attract, retain and motivate sufficient numbers of qualified restaurant employees who will be able and willing to achieve the hospitality and operational restaurant-level standards of the Company. Restaurant owners are independent contractors and some restaurant owners may not successfully operate restaurants in a manner consistent with the Company’s standards and requirements or comply with federal, provincial or state labor laws (including minimum wage requirements, overtime, working and safety conditions, employment eligibility and temporary foreign worker requirements). Furthermore, some restaurant owners may not be able to hire, train and retain qualified managers and other restaurant personnel. Any operational shortcoming of a franchised restaurant is likely to be attributed by guests to the Company, thus damaging its brand reputation and potentially affecting revenues and profitability. Competitors that have a significantly higher percentage of company-operated restaurants than Tim Hortons may have greater control over their respective restaurant systems and have greater flexibility to implement operational initiatives and business strategies. Since the Company receive revenues in the form of rents, royalties, and franchise fees from restaurant owners, its revenues and profits would decline and its brand reputation could also be harmed if a significant number of restaurant owners were to: experience operational failures, including health, safety and quality assurance issues; experience financial difficulty; be unwilling or unable to pay for food and supplies, or for royalties, rent or other fees; fail to enter into renewals of franchise, operating or license agreements; or experience

labor shortages, including due to changes in employment eligibility requirements, the cessation or limitation of access to federal or provincial labor programs, including the temporary foreign worker program, or significant increases in labor or other costs of running their businesses.

Litigation. From time to time, the Company is subject to claims incidental to its business, such as “slip and fall” accidents at franchised or Company-operated restaurants, claims and disputes in connection with site development and restaurant construction as well as employment claims. In addition, class action lawsuits have been filed in the past, and may continue to be filed, against quick service restaurants alleging that quick service restaurants have failed to disclose the health risks associated with their products or that certain food products contribute to obesity. The Company may also be subject to claims from employees, guests, and others relating to health and safety risks and conditions of Tim Hortons restaurants associated with design, operation, construction, site location and development, indoor or airborne contaminants and/or certain equipment utilized in operations. In addition, the Company may face claims from: (a) employees relating to employment or labor matters, including, potentially, class action suits regarding wages, discrimination, unfair or unequal treatment, harassment, wrongful termination, or overtime compensation; (b) restaurant owners and/or operators regarding their profitability, wrongful termination of their franchise or operating (license) agreement, as the case may be, or other restaurant-owner relationship matters; (c) taxation authorities regarding tax disputes or tax positions taken by the Company; and/or (d) business partners, stakeholders or other third parties relating to intellectual property infringement claims. In certain agreements, the Company may agree to indemnify its business partners against any losses or costs incurred in connection with claims by a third party alleging that the Company’s services infringe the intellectual property rights of the third party. Companies have increasingly become subject to infringement threats from non-practicing organizations (sometimes referred to as “patent trolls”) filing lawsuits for patent infringement. The Company, or its partners, may become subject to claims for infringement and it may be required to indemnify or defend its business partners from such claims. All of these types of matters have the potential to unduly distract management’s attention and increase costs, including costs associated with defending such 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 such claims. Should management’s evaluations prove incorrect and such claims are successful, the Company’s exposure could exceed expectations and have a material adverse effect on its business, financial condition and results of operations. Although some losses may be covered by insurance, if there are significant losses that are not covered, or there is a delay in receiving insurance proceeds, or the proceeds are insufficient to offset our losses fully, our consolidated financial condition or results of operations may be adversely affected.

Tax Authorities. A taxation authority may disagree with certain views of the Company, including, for example, the allocation of profits by tax jurisdiction, the deductibility of interest expenses, or the tax aspects of reorganizations, initiatives or transactions that the Company has undertaken and such tax authority may take the position that material income tax liabilities, interests, penalties, or other amounts are payable by the Company. The Company expects it would contest such an assessment, but this may be lengthy and costly and, if unsuccessful, the implications could be materially adverse to the Company and affect its effective tax rate or operating income. Under the Company’s current corporate structure, an increase in debt levels beyond the current target of $900.0 million could result in further increases in the effective tax rate resulting from incurring additional interest expense for which it may not receive a tax benefit, and/or increases in income or withholding taxes on distributions from the Canadian operating company to its parent corporation. Addressing constraints in the Company’s corporate structure is an important consideration to maintaining its effective tax rate over the longer term, although there can be no assurance that the Company will be able to address these constraints in a timely or tax efficient manner. The Company’s inability to address these constraints in a timely or efficient manner could negatively affect its projected results, future operations, and financial condition.

Regulation. The Company is subject to various laws and regulations, including laws and regulations relating to: zoning, land use (including the development and/or operation of drive-thru windows), transportation and traffic; health, food, sanitation and safety; taxes; privacy laws, including the collection, retention, sharing and security of data; immigration, employment and labor laws (such as the U.S. Fair Labor Standards Act and similar Canadian legislation), including some increases in minimum wage requirements that were implemented in certain provinces in Canada and states in the U.S. in 2013 and other increases in such jurisdictions that may occur in the future, that have increased, or will increase, the Company’s and restaurant owners’ labor costs in those provinces and states; preventing discrimination and harassment in the workplace and providing certain civil rights to individuals with disabilities; laws affecting the design of facilities and accessibility (such as the Americans with Disabilities Act of 1990 and similar Canadian legislation); taxes; environmental matters; product safety; nutritional disclosure and regulations regarding nutritional content, including menu labeling and TFA content; advertising and marketing; record keeping and document retention procedures; new and/or additional franchise legislation; and anti-corruption laws. The Company is also subject to applicable accounting and reporting requirements and regulations, including those imposed by Canadian and U.S. securities regulatory authorities, the NYSE and the TSX. The complexity of the regulatory environment in which the Company operates and the related costs of compliance are increasing. Changes in such laws and regulations and/or failure to comply with existing or future laws and regulations could adversely affect the Company and expose it to litigation or sanction, damage its brand reputation and/or lower profits. Compliance with these laws and regulations and planning initiatives undertaken in connection with such laws and regulations could increase the Company’s cost of doing business; reduce operational efficiencies; and, damage its reputation.

Increases in costs could impact profitability of the Company and restaurant owners. Failure to comply with such laws or regulations on a timely basis may lead to civil and criminal liability, cancellation of licenses, fines, and other corrective action, any of which could adversely affect the business and future financial results of the Company and have an adverse impact on its brand.

Senior Management Team. The Company’s success will continue to depend to a significant extent on its executive management team and the ability of other key management personnel to replace executives who retire or resign. The Company may not be able to retain its executive officers and key personnel or attract additional qualified management personnel to replace executives who retire or resign. Failure to retain the leadership team of the Company and attract and retain other important personnel could lead to ineffective management and operations, which could decrease profitability. Effective July 2, 2013, the board of directors of the Company appointed Mr. Marc Caira to the position of President and Chief Executive Officer. 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.

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: (i) fluctuations in the U.S. and Canadian dollar exchange rates; (ii) an inability to adequately protect the Company’s intellectual property and trade secrets from infringement actions or unauthorized use by others; (iii) potential liabilities and losses associated with owning and leasing significant amounts of real estate; (iv) changes in its debt levels and a downgrade of its credit ratings; (v) challenging economic conditions; (vi) uncertain international expansion; (vii) catastrophic events; and (viii) 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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Accrued Liabilities (Details) (CAD) In Thousands, unless otherwise specified	Jun. 29, 2014	Dec. 29, 2013
Payables and Accruals [Abstract]
Salaries and wages	14,276	22,553
Taxes payable	5,316	14,542
De-branding accruals(1)	1,947	9,538
Other accrued liabilities(2)	44,296	42,932
Total Accrued liabilities	65,835	89,565

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Consolidated Sales Information (Detail) (CAD) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 29, 2014	Jun. 30, 2013	Jun. 29, 2014	Jun. 30, 2013
Segment Reporting [Abstract]
Distribution sales	511,762	468,597	964,115	899,748
Company-operated restaurant sales	7,739	6,501	13,035	12,477
Sales from VIEs	94,328	93,464	177,709	180,224
Total Sales	613,829	568,562	1,154,859	1,092,449

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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. 29, 2014	Jun. 30, 2013	Jun. 29, 2014	Jun. 30, 2013
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
RSUs and PSUs	1,386	2,478	2,656	3,580
Stock options and tandem SARs	(362)	2,264	(1,864)	7,339
DSUs	108	406	94	1,616
Total stock-based compensation expense	1,132	5,148	886	12,535
TRS loss (gain)	2,805	(1,551)	5,053	(8,584)
General and Administrative Expense | TRS
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
TRS loss (gain)	1,998	(1,482)	4,246	(8,235)

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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. 29, 2014	Jun. 30, 2013	Jun. 29, 2014	Jun. 30, 2013
Derivative Instruments, Gain (Loss) [Line Items]
Amount of net (gain) loss reclassified to earnings	(999)	378	(3,700)	1,041
Cash Flow Hedging
Derivative Instruments, Gain (Loss) [Line Items]
Amount of gain (loss) recognized in OCI	(4,968)	5,307	(5,910)	8,079
Amount of gain (loss) recognized in OCI, Income tax effect	1,321	(1,279)	205	(2,141)
Amount of gain (loss) recognized in OCI, Net of income taxes	(3,647)	4,028	(5,705)	5,938
Amount of net (gain) loss reclassified to earnings	(999)	378	(3,700)	1,041
Amount of net (gain) loss reclassified to earnings, Net of income taxes	(557)	324	(2,429)	857
Total effect on OCI	(5,967)	5,685	(9,610)	9,120
Total effect on OCI, Income tax effect	1,763	(1,333)	1,476	(2,325)
Total effect on OCI, Net of income taxes	(4,204)	4,352	(8,134)	6,795
Cash Flow Hedging | Income Taxes [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of net (gain) loss reclassified to earnings, Income tax effect	442	(54)	1,271	(184)
Cash Flow Hedging | Forward Currency Contracts
Derivative Instruments, Gain (Loss) [Line Items]
Amount of gain (loss) recognized in OCI	(4,921)	4,851	(516)	8,124
Total effect on OCI	(6,637)	4,995	(5,404)	8,739
Cash Flow Hedging | Forward Currency Contracts | Cost Of Sales
Derivative Instruments, Gain (Loss) [Line Items]
Amount of net (gain) loss reclassified to earnings	(1,716)	144	(4,888)	615
Cash Flow Hedging | Interest Rate Swap | Canadian Ad Fund
Derivative Instruments, Gain (Loss) [Line Items]
Amount of gain (loss) recognized in OCI	(47)	456	(258)	(45)
Total effect on OCI	3	517	(155)	35
Cash Flow Hedging | Interest Rate Swap | Interest (Expense) | Canadian Ad Fund
Derivative Instruments, Gain (Loss) [Line Items]
Amount of net (gain) loss reclassified to earnings	50	61	103	80
Cash Flow Hedging | Interest Rate Forwards
Derivative Instruments, Gain (Loss) [Line Items]
Amount of gain (loss) recognized in OCI	0	0	(5,136)	0
Total effect on OCI	667	173	(4,051)	346
Cash Flow Hedging | Interest Rate Forwards | Interest (Expense)
Derivative Instruments, Gain (Loss) [Line Items]
Amount of net (gain) loss reclassified to earnings	667	173	1,085	346

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Income Taxes - Additional Information (Detail)	3 Months Ended		6 Months Ended
	Jun. 29, 2014	Jun. 30, 2013	Jun. 29, 2014	Jun. 30, 2013
Income Tax Disclosure [Abstract]
Effective income tax rate	28.30%	26.10%	28.50%	26.70%

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Inventories and Other, Net (Tables)

6 Months Ended

Jun. 29, 2014

Inventory Disclosure [Abstract]

Inventories and Other, Net

	As at
	June 29, 2014			December 29, 2013
Raw materials	$	25,061		$	22,789
Finished goods	78,332			69,348
	103,393			92,137
Inventory obsolescence provision	(1,418		)	(1,754		)
Inventories, net	101,975			90,383
Prepaids and other	15,801			13,943
Total Inventories and other, net	$	117,776		$	104,326

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Revenues and Expenses of Variable Interest Entities (Detail) (CAD) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 29, 2014	Jun. 30, 2013	Jun. 29, 2014	Jun. 30, 2013
Variable Interest Entity [Line Items]
Sales	613,829	568,562	1,154,859	1,092,449
Total revenues	874,347	800,139	1,640,749	1,531,676
Cost of sales	527,132	489,092	1,000,715	950,446
Operating expenses	84,411	76,986	165,669	152,719
Operating income	192,367	176,579	337,654	304,496
Interest expense	18,648	8,922	35,324	17,585
Income before income taxes	174,857	168,448	304,445	288,630
Income taxes	49,425	43,886	86,658	77,145
Net income attributable to noncontrolling interests	1,682	826	3,128	1,578
Restaurant VIEs
Variable Interest Entity [Line Items]
Sales	94,328	93,464	177,709	180,224
Advertising levies	0	0	0	0
Total revenues	94,328	93,464	177,709	180,224
Cost of sales	92,242	92,480	173,855	178,346
Operating expenses	0	0	0	0
Operating income	2,086	984	3,854	1,878
Interest expense	33	0	33	0
Income before income taxes	2,053	984	3,821	1,878
Income taxes	371	158	693	300
Net income attributable to noncontrolling interests	1,682	826	3,128	1,578
Ad Fund VIEs
Variable Interest Entity [Line Items]
Sales	0	0	0	0
Advertising levies	2,906	2,569	5,898	5,100
Total revenues	2,906	2,569	5,898	5,100
Cost of sales	0	0	0	0
Operating expenses	2,704	2,293	5,466	4,392
Operating income	202	276	432	708
Interest expense	202	276	432	708
Income before income 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	94,328	93,464	177,709	180,224
Advertising levies	2,906	2,569	5,898	5,100
Total revenues	97,234	96,033	183,607	185,324
Cost of sales	92,242	92,480	173,855	178,346
Operating expenses	2,704	2,293	5,466	4,392
Operating income	2,288	1,260	4,286	2,586
Interest expense	235	276	465	708
Income before income taxes	2,053	984	3,821	1,878
Income taxes	371	158	693	300
Net income attributable to noncontrolling interests	1,682	826	3,128	1,578

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Financial Assets and Liabilities Not Measured at Fair Value (Detail) (CAD) In Thousands, unless otherwise specified	Jun. 29, 2014	Dec. 29, 2013
Carrying Value
Bearer deposit notes	117,452	117,552
Notes receivable, net	9,628	10,616
Series 3 Notes
Fair Value Asset (Liability)
Senior Notes Payable		0
Carrying Value
Senior Notes Payable		0
Level 2
Fair Value Asset (Liability)
Bearer deposit notes	42,520	41,403
Carrying Value
Bearer deposit notes	42,520	41,403
Level 2 | Series 1 Notes
Fair Value Asset (Liability)
Senior Notes Payable	(317,877)	(315,519)
Carrying Value
Senior Notes Payable	(301,022)	(301,196)
Level 2 | Series 2 Notes
Fair Value Asset (Liability)
Senior Notes Payable	(474,687)	(445,419)
Carrying Value
Senior Notes Payable	(449,898)	(449,892)
Level 2 | Series 3 Notes
Fair Value Asset (Liability)
Senior Notes Payable	(453,614)
Carrying Value
Senior Notes Payable	(449,880)
Level 3
Fair Value Asset (Liability)
Notes receivable, net	8,217	9,114
Advertising fund term debt	(27,673)	(30,189)
Other debt	(138,650)	(126,548)
Carrying Value
Notes receivable, net	8,217	9,114
Advertising fund term debt	(27,673)	(30,189)
Other debt	(72,664)	(69,794)

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Inventories and Other Net (Detail) (CAD) In Thousands, unless otherwise specified	Jun. 29, 2014	Dec. 29, 2013
Inventory Disclosure [Abstract]
Raw materials	25,061	22,789
Finished goods	78,332	69,348
Inventories, gross	103,393	92,137
Inventory obsolescence provision	(1,418)	(1,754)
Inventories, net	101,975	90,383
Prepaid Expense and Other Assets	15,801	13,943
Total Inventories and other, net	117,776	104,326

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Assets and Liabilities of Variable Interest Entities (Parenthetical) (Detail) (CAD)	Jun. 29, 2014	Dec. 29, 2013
Variable Interest Entity [Line Items]
Other liabilities	18,336,000	17,782,000
Restaurant VIEs
Variable Interest Entity [Line Items]
Number of Consolidated Non Owned Restaurants	328	331
Notes payable to Tim Hortons Inc. – current	12,996,000	13,689,000
Ad Fund VIEs
Variable Interest Entity [Line Items]
Notes payable to Tim Hortons Inc. – current	23,040,000	3,040,000
Ad Fund VIEs | Revolving Credit Facility
Variable Interest Entity [Line Items]
Notes payable to Tim Hortons Inc. – current	20,000,000	0
Ad Fund VIEs | Term Loan
Variable Interest Entity [Line Items]
Advertising fund term debt	27,700,000	30,200,000
Other liabilities	5,000,000	5,000,000

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Derivatives Summary of (Gain) Loss on Derivatives Not Designated as Hedging Instruments (Details) (CAD) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 29, 2014	Jun. 30, 2013	Jun. 29, 2014	Jun. 30, 2013
Summary of (Gain) loss on Derivatives Not Designated as Hedging Instruments [Line Items]
Loss (gain), net	2,805	(1,551)	5,053	(8,584)
General and Administrative Expense | TRS
Summary of (Gain) loss on Derivatives Not Designated as Hedging Instruments [Line Items]
Loss (gain), net	1,998	(1,482)	4,246	(8,235)
Cost Of Sales | Forward Currency Contracts
Summary of (Gain) loss on Derivatives Not Designated as Hedging Instruments [Line Items]
Loss (gain), net	167	(69)	167	(349)
Other Operating Income (Expense) [Member] | Forward Currency Contracts
Summary of (Gain) loss on Derivatives Not Designated as Hedging Instruments [Line Items]
Loss (gain), net	640	0	640	0

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Income Taxes

6 Months Ended

Jun. 29, 2014

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

The effective income tax rate was 28.3% for the second quarter ended June 29, 2014 (second quarter fiscal 2013: 26.1%) and 28.5% for the year-to-date period ended June 29, 2014 (year-to-date period fiscal 2013: 26.7%). The increase in the effective tax rate for the 2014 quarter-to-date and year-to-date periods as compared to the respective 2013 periods is primarily due to the favourable impact of a change in reserve balances in 2013 and an increase in costs in 2014 related to the Company’s new long-term debt, for which a full tax benefit cannot be recognized.

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Fair Values Financial Assets and Liabilities Not Measured At Fair Value (Parenthetical) (Details)	6 Months Ended
	Jun. 29, 2014
Fair Value Disclosures [Abstract]
Interest Rate Reset Period (in days)	90 days

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Stock-Based Compensation (Tables)

6 Months Ended

Jun. 29, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock Based Compensation Expenses Included in General and Administrative Expenses

	Second quarter ended						Year-to-date period ended
	June 29, 2014			June 30, 2013			June 29, 2014			June 30, 2013
RSUs and PSUs	$	1,386		$	2,478		$	2,656		$	3,580
Stock options and tandem SARs	(362		)	2,264			(1,864		)	7,339
Deferred share units (“DSUs”)	108			406			94			1,616
Total stock-based compensation expense	$	1,132		$	5,148		$	886		$	12,535
TRS loss (gain)(1)	$	1,998		$	(1,482	)	$	4,246		$	(8,235	)

________________

⁽¹⁾  The Company has entered into TRS contracts as economic hedges, covering 1,027,000 of the Company’s underlying common shares (June 30, 2013: 1,008,000), which represents a portion of its outstanding stock options with tandem SARs, and substantially all of its cash obligation related to DSUs. See note 9 for the revaluation of the TRS contracts.

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Derivatives (Tables)

6 Months Ended

Jun. 29, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Summary of Fair Value of Derivative Instruments on Consolidated Balance Sheet

	As at
	June 29, 2014									December 29, 2013
	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)	$	919	$	(2,142	)	$	(1,223	)	Accounts payable, net	$	4,181	$	—		$	4,181		Accounts receivable, net
Interest rate swap(2)	$	—	$	(204	)	$	(204	)	Other long-term liabilities	$	—	$	(49	)	$	(49	)	Other long-term liabilities
Interest rate forwards(3)	$	—	$	—		$	—		n/a	$	285	$	—		$	285		Accounts receivable, net
Derivatives not designated as hedging instruments
TRS(4)	$	17,160	$	(13	)	$	17,147		Other assets	$	21,393	$	—		$	21,393		Other assets
Forward currency contracts(1)	$	15	$	(822	)	$	(807	)	Accounts payable, net	$	—	$	—		$	—		n/a

________________ 

⁽¹⁾  Notional value as at June 29, 2014 of $167.8 million (December 29, 2013: $154.0 million), with maturities ranging between June 2014 and April 2015; no associated cash collateral.

⁽²⁾  Notional value as at June 29, 2014 of $27.5 million (December 29, 2013: $30.0 million), with maturities through fiscal 2019; no associated cash collateral.

⁽³⁾  The interest rate forwards were settled in the first quarter of 2014 (notional amount at December 29, 2013: $90.0 million).

⁽⁴⁾  The notional value and associated cash collateral, in the form of bearer deposit notes (see note 8), was $42.5 million as at June 29, 2014 (December 29, 2013: $41.4 million). The TRS have maturities annually, in May, between fiscal 2015 and fiscal 2021.

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

		Second quarter ended June 29, 2014									Second quarter ended June 30, 2013
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	$	(4,921	)	$	(1,716	)	$	(6,637	)	$	4,851		$	144		$	4,995
Interest rate swap(3)	Interest (expense)	(47		)	50			3			456			61			517
Interest rate forwards(4)	Interest (expense)	—			667			667			—			173			173
Total		(4,968		)	(999		)	(5,967		)	5,307			378			5,685
Income tax effect	Income taxes	1,321			442			1,763			(1,279		)	(54		)	(1,333		)
Net of income taxes		$	(3,647	)	$	(557	)	$	(4,204	)	$	4,028		$	324		$	4,352

		Year-to-date period ended June 29, 2014									Year-to-date period ended June 30, 2013
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	$	(516	)	$	(4,888	)	$	(5,404	)	$	8,124		$	615		$	8,739
Interest rate swap(3)	Interest (expense)	(258		)	103			(155		)	(45		)	80			35
Interest rate forwards(4)	Interest (expense)	(5,136		)	1,085			(4,051		)	—			346			346
Total		(5,910		)	(3,700		)	(9,610		)	8,079			1,041			9,120
Income tax effect	Income taxes	205			1,271			1,476			(2,141		)	(184		)	(2,325		)
Net of income taxes		$	(5,705	)	$	(2,429	)	$	(8,134	)	$	5,938		$	857		$	6,795

_______________ 

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

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

⁽³⁾  The Ad Fund entered into an amortizing interest rate swap to fix a portion of the interest expense on its term debt.

⁽⁴⁾  The Company entered into and settled interest rate forwards relating to the issuance of its long-term deb

Summary of (Gain) loss on Derivatives Not Designated as Hedging Instruments [Table Text Block]

Derivatives not designated as cash flow hedging instruments	Classification on Condensed Consolidated Statement of Operations	Second quarter ended					Year-to-date period ended
		June 29, 2014		June 30, 2013			June 29, 2014		June 30, 2013
TRS	General and administrative expenses	$	1,998	$	(1,482	)	$	4,246	$	(8,235	)
Forward currency contracts	Cost of sales	167		(69		)	167		(349		)
Forward currency contracts	Other (income) expense	640		—			640		—
Total loss (gain), net		$	2,805	$	(1,551	)	$	5,053	$	(8,584	)

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Summary Of Fair Value Of Derivative Instruments On Consolidated Balance Sheet (Detail) (CAD) In Thousands, unless otherwise specified	Jun. 29, 2014	Dec. 29, 2013
Derivatives Designated As Cash Flow Hedging Instruments | Forward Currency Contracts
Cash Flow Hedges Derivative Instruments at Fair Value, Net [Abstract]
Fair Value Asset	919	4,181
Fair Value Liability	(2,142)	0
Derivatives Designated As Cash Flow Hedging Instruments | Forward Currency Contracts | Accounts Receivable
Cash Flow Hedges Derivative Instruments at Fair Value, Net [Abstract]
Fair Value, Net		4,181
Derivatives Designated As Cash Flow Hedging Instruments | Forward Currency Contracts | Accounts Payable [Member]
Cash Flow Hedges Derivative Instruments at Fair Value, Net [Abstract]
Fair Value, Net	(1,223)
Derivatives Designated As Cash Flow Hedging Instruments | Interest Rate Forwards
Cash Flow Hedges Derivative Instruments at Fair Value, Net [Abstract]
Fair Value Asset	0	285
Fair Value Liability	0	0
Fair Value, Net	0
Derivatives Designated As Cash Flow Hedging Instruments | Interest Rate Forwards | Accounts Receivable
Cash Flow Hedges Derivative Instruments at Fair Value, Net [Abstract]
Fair Value, Net		285
Derivatives Designated As Cash Flow Hedging Instruments | Canadian Ad Fund | Interest Rate Swap
Cash Flow Hedges Derivative Instruments at Fair Value, Net [Abstract]
Fair Value Asset	0	0
Fair Value Liability	(204)	(49)
Derivatives Designated As Cash Flow Hedging Instruments | Canadian Ad Fund | Interest Rate Swap | Other Long-term Liabilities
Cash Flow Hedges Derivative Instruments at Fair Value, Net [Abstract]
Fair Value, Net	(204)	(49)
Derivatives Not Designated As Hedging Instruments | Forward Currency Contracts
Other Derivatives Not Designated as Hedging Instruments at Fair Value, Net [Abstract]
Fair Value Assets	15	0
Fair Value Liability	(822)	0
Fair Value, Net		0
Derivatives Not Designated As Hedging Instruments | Forward Currency Contracts | Accounts Payable [Member]
Other Derivatives Not Designated as Hedging Instruments at Fair Value, Net [Abstract]
Fair Value, Net	(807)
Derivatives Not Designated As Hedging Instruments | TRS
Other Derivatives Not Designated as Hedging Instruments at Fair Value, Net [Abstract]
Fair Value Assets	17,160	21,393
Fair Value Liability	(13)	0
Derivatives Not Designated As Hedging Instruments | TRS | Other Assets
Other Derivatives Not Designated as Hedging Instruments at Fair Value, Net [Abstract]
Fair Value, Net	17,147	21,393

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Variable Interest Entities (Tables)

6 Months Ended

Jun. 29, 2014

Organization, Consolidation and Presentation of Financial Statements [Abstract]

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 29, 2014						June 30, 2013
	Restaurant VIEs(1)		Advertising fund VIEs(2)		Total VIEs		Restaurant VIEs(1)		Advertising fund VIEs(2)		Total VIEs
Sales	$	94,328	$	—	$	94,328	$	93,464	$	—	$	93,464
Advertising levies	—		2,906		2,906		—		2,569		2,569
Total revenues	94,328		2,906		97,234		93,464		2,569		96,033
Cost of sales	92,242		—		92,242		92,480		—		92,480
Operating expenses	—		2,704		2,704		—		2,293		2,293
Operating income	2,086		202		2,288		984		276		1,260
Interest expense	33		202		235		—		276		276
Income before taxes	2,053		—		2,053		984		—		984
Income taxes	371		—		371		158		—		158
Net income attributable to noncontrolling interests	$	1,682	$	—	$	1,682	$	826	$	—	$	826

	Year-to-date period ended
	June 29, 2014						June 30, 2013
	Restaurant VIEs(1)		Advertising fund VIEs(2)		Total VIEs		Restaurant VIEs(1)		Advertising fund VIEs(2)		Total VIEs
Sales	$	177,709	$	—	$	177,709	$	180,224	$	—	$	180,224
Advertising levies	—		5,898		5,898		—		5,100		5,100
Total revenues	177,709		5,898		183,607		180,224		5,100		185,324
Cost of sales	173,855		—		173,855		178,346		—		178,346
Operating expenses	—		5,466		5,466		—		4,392		4,392
Operating income	3,854		432		4,286		1,878		708		2,586
Interest expense	33		432		465		—		708		708
Income before taxes	3,821		—		3,821		1,878		—		1,878
Income taxes	693		—		693		300		—		300
Net income attributable to noncontrolling interests	$	3,128	$	—	$	3,128	$	1,578	$	—	$	1,578

______________

⁽¹⁾  Includes rents, royalties, advertising expenses and product purchases from the Company which are eliminated upon the consolidation of these VIEs.

⁽²⁾  The advertising levies, depreciation, interest costs, capital expenditures and financing associated with the Ad Fund’s program to acquire and install LCD screens, media engines, drive-thru menu boards and ancillary equipment for our restaurants (the “Expanded Menu Board Program”) are presented on a gross basis. 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.

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 29, 2014				December 29, 2013
	Restaurant VIEs(1)		Advertising fund VIEs		Restaurant VIEs(1)		Advertising fund VIEs
Cash and cash equivalents	$	7,733	$	—	$	7,773	$	—
Advertising fund restricted assets – current	—		39,078		—		39,783
Other current assets	7,060		—		7,155		—
Property and equipment, net	19,638		65,661		20,471		70,485
Other long-term assets	119		960		370		1,271
Total assets	$	34,550	$	105,699	$	35,769	$	111,539
Notes payable to Tim Hortons Inc. – current(2)(3)	$	12,996	$	23,040	$	13,689	$	3,040
Advertising fund liabilities – current	—		38,782		—		59,913
Other current liabilities(4)	11,313		5,268		11,706		5,253
Notes payable to Tim Hortons Inc. – long-term(2)(3)	543		13,680		628		15,200
Long-term debt(4)	—		22,641		—		25,157
Other long-term liabilities	8,090		2,288		9,381		2,976
Total liabilities	32,942		105,699		35,404		111,539
Equity of VIEs	1,608		—		365		—
Total liabilities and equity	$	34,550	$	105,699	$	35,769	$	111,539

______________

⁽¹⁾  The Company consolidated 328 Non-owned restaurants as at June 29, 2014 (December 29, 2013: 331).

⁽²⁾  Various assets and liabilities are eliminated upon the consolidation of the Restaurant 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 4).

⁽³⁾  The Notes payable to the Company by the Advertising Fund VIEs, which are funded by the Restricted cash and cash equivalents related to our Tim Card program, are eliminated upon consolidation of the Ad Fund. The Ad Fund drew $20.0 million in the year-to-date period ended June 29, 2014 (year-to-date period ended June 30, 2013: $nil) for purposes of the Expanded Menu Board Program.

⁽⁴⁾  Includes $27.7 million of Advertising fund VIEs debt with a Canadian financial institution relating to the Expanded Menu Board Program (December 29, 2013: $30.2 million), of which $5.0 million is recognized in Other current liabilities (December 29, 2013: $5.0 million) with the remainder recognized as Long-term debt.

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Segment Reporting (Tables)

6 Months Ended

Jun. 29, 2014

Segment Reporting [Abstract]

Information on Reportable Segments

	Second quarter ended						Year-to-date period ended
	June 29, 2014			June 30, 2013			June 29, 2014			June 30, 2013
Revenues(1)
Canada	$	721,599		$	657,682		$	1,344,784		$	1,251,355
U.S.	51,878			41,220			103,053			85,668
Corporate services	3,636			5,204			9,305			9,329
Total reportable segments	777,113			704,106			1,457,142			1,346,352
VIEs	97,234			96,033			183,607			185,324
Total	$	874,347		$	800,139		$	1,640,749		$	1,531,676
Operating Income (Loss)
Canada	$	188,866		$	174,760		$	342,332		$	320,581
U.S.	9,254			2,587			13,611			3,497
Corporate services	(8,041		)	(1,424		)	(22,575		)	(12,089		)
Total reportable segments	190,079			175,923			333,368			311,989
VIEs	2,288			1,260			4,286			2,586
Corporate reorganization expenses	—			(604		)	—			(10,079		)
Consolidated Operating Income	192,367			176,579			337,654			304,496
Interest, Net	(17,510		)	(8,131		)	(33,209		)	(15,866		)
Income before income taxes	$	174,857		$	168,448		$	304,445		$	288,630

________________ 

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

Consolidated Sales Information

Consolidated Sales comprise the following:

	Second quarter ended				Year-to-date period ended
	June 29, 2014		June 30, 2013		June 29, 2014		June 30, 2013
Sales
Distribution sales	$	511,762	$	468,597	$	964,115	$	899,748
Company-operated restaurant sales	7,739		6,501		13,035		12,477
Sales from VIEs	94,328		93,464		177,709		180,224
Total Sales	$	613,829	$	568,562	$	1,154,859	$	1,092,449

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Basis of Presentation

6 Months Ended

Jun. 29, 2014

Accounting Policies [Abstract]

Basis of Presentation

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 29, 2014, and the results of operations, comprehensive income and cash flows for the second quarters ended June 29, 2014 and June 30, 2013. These Condensed Consolidated Financial Statements should be read in conjunction with the audited 2013 Consolidated Financial Statements which are contained in our most recent Annual Report. The December 29, 2013 Condensed Consolidated Balance Sheet included herein was derived from the audited 2013 Consolidated Financial Statements, but does not include all of the year-end disclosures required by U.S. GAAP.

Stock-based compensation - performance stock units

In May 2014, the Company granted performance stock units ("PSUs") to certain of its employees. PSU payout levels will be based on two forward looking performance measures: return on assets and total shareholder return. PSUs are expensed on a straight-line basis over the relevant vesting period.

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Basis of Presentation Additional Information (Details)	3 Months Ended
	Jun. 29, 2014
Additional Information [Abstract]
Number of Performance Measures for Performance Stock Units	2

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Long Term Debt (Details) (CAD)	3 Months Ended
	Mar. 30, 2014
Series 3 Notes | Senior Notes [Member]
Debt [Line Items]
Proceeds from Issuance of Senior Long-term Debt	449,900,000
Debt Instrument, Unamortized Discount	100,000
2013 Facility [Member] | Revolving Credit Facility
Debt [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity	400,000,000.0

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Information on Reportable Segments (Detail) (CAD) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 29, 2014	Jun. 30, 2013	Jun. 29, 2014	Jun. 30, 2013
Segment Reporting Information [Line Items]
Revenues	874,347	800,139	1,640,749	1,531,676
Operating income	192,367	176,579	337,654	304,496
Interest, Net	(17,510)	(8,131)	(33,209)	(15,866)
Income before income taxes	174,857	168,448	304,445	288,630
Operating Segments
Segment Reporting Information [Line Items]
Revenues	777,113	704,106	1,457,142	1,346,352
Operating income	190,079	175,923	333,368	311,989
Operating Segments | Canada
Segment Reporting Information [Line Items]
Revenues	721,599	657,682	1,344,784	1,251,355
Operating income	188,866	174,760	342,332	320,581
Operating Segments | U.S.
Segment Reporting Information [Line Items]
Revenues	51,878	41,220	103,053	85,668
Operating income	9,254	2,587	13,611	3,497
Operating Segments | Corporate Services
Segment Reporting Information [Line Items]
Revenues	3,636	5,204	9,305	9,329
Operating income	(8,041)	(1,424)	(22,575)	(12,089)
VIEs
Segment Reporting Information [Line Items]
Revenues	97,234	96,033	183,607	185,324
Operating income	2,288	1,260	4,286	2,586
Corporate Reorganization Expenses
Segment Reporting Information [Line Items]
Operating income	0	(604)	0	(10,079)

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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. 29, 2014	Jun. 30, 2013	Jun. 29, 2014	Jun. 30, 2013
Revenues
Sales	613,829	568,562	1,154,859	1,092,449
Franchise revenues
Rents and royalties	224,953	209,289	424,462	396,743
Franchise fees	35,565	22,288	61,428	42,484
Franchise Revenue, Total	260,518	231,577	485,890	439,227
Total revenues	874,347	800,139	1,640,749	1,531,676
Costs and expenses
Cost of sales	527,132	489,092	1,000,715	950,446
Operating expenses	84,411	76,986	165,669	152,719
Franchise fee costs	34,906	23,326	62,589	45,878
General and administrative expenses	40,241	38,038	79,460	76,706
Equity (income)	(3,975)	(3,916)	(7,321)	(7,265)
Corporate reorganization expenses	0	604	0	10,079
Other expense (income), net	(735)	(570)	1,983	(1,383)
Total costs and expenses, net	681,980	623,560	1,303,095	1,227,180
Operating income	192,367	176,579	337,654	304,496
Interest (expense)	(18,648)	(8,922)	(35,324)	(17,585)
Interest income	1,138	791	2,115	1,719
Income before income taxes	174,857	168,448	304,445	288,630
Income taxes	49,425	43,886	86,658	77,145
Net income	125,432	124,562	217,787	211,485
Net income attributable to noncontrolling interests	1,682	826	3,128	1,578
Net income attributable to Tim Hortons Inc.	123,750	123,736	214,659	209,907
Basic earnings per common share attributable to Tim Hortons Inc. (in Canadian dollars per share)	0.92	0.81	1.58	1.38
Diluted earnings per common share attributable to Tim Hortons Inc. (in Canadian dollars per share)	0.92	0.81	1.57	1.37
Weighted average number of common shares outstanding (in thousands) – Basic (note 3)	133,899	152,083	136,007	152,597
Weighted average number of common shares outstanding (in thousands) – Diluted (note 3)	134,367	152,637	136,477	153,133
Dividends per common share (in Canadian dollars per share)	0.32	0.26	0.64	0.52

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Summary Of Fair Value Of Derivative Instruments On Consolidated Balance Sheet (Parenthetical) (Detail) (CAD) In Millions, unless otherwise specified	Jun. 29, 2014	Dec. 29, 2013
Forward Currency Contracts
Derivatives, Fair Value [Line Items]
Derivative, Notional Amount	167.8	154.0
Interest Rate Forwards
Derivatives, Fair Value [Line Items]
Derivative, Notional Amount		90.0
TRS
Derivatives, Fair Value [Line Items]
Derivative, Notional Amount	42.5	41.4
Canadian Ad Fund | Interest Rate Swap
Derivatives, Fair Value [Line Items]
Derivative, Notional Amount	27.5	30.0

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Condensed Consolidated Statement Of Cash Flows (CAD) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 29, 2014	Jun. 30, 2013
Cash flows provided from (used in) operating activities
Net income	217,787	211,485
Adjustments to reconcile net income to net cash provided from operating activities
Depreciation and amortization	79,774	72,368
Stock-based compensation expense	886	12,535
Deferred income taxes	2,149	(2,539)
Changes in operating assets and liabilities
Restricted cash and cash equivalents	69,141	46,356
Accounts receivable	(16,667)	(8,254)
Inventories and other	(13,593)	(5,218)
Accounts payable and accrued liabilities	(81,678)	(75,262)
Taxes	(9,230)	4,144
Settlement of interest rate forwards	(4,851)	0
Deposits with Tax Authority	(1,721)	0
Other	(14,274)	2,714
Net cash provided from operating activities	227,723	258,329
Cash flows (used in) provided from investing activities
Capital expenditures	(94,442)	(88,272)
Capital expenditures – Advertising fund	(4,438)	(5,224)
Other investing activities	3,038	6,125
Net cash (used in) investing activities	(95,842)	(87,371)
Cash flows (used in) provided from financing activities
Repurchase of common shares	(493,476)	(113,803)
Dividend payments to common shareholders	(86,910)	(79,348)
Net proceeds from issuance of Debt	448,299	0
Short-term (repayments) borrowings, net	(15,000)	0
Principal payments on long-term debt obligations	(8,280)	(8,543)
Other financing activities	(1,980)	(5,001)
Net cash (used in) financing activities	(157,347)	(206,695)
Effect of exchange rate changes on cash	139	2,201
(Decrease) in cash and cash equivalents	(25,327)	(33,536)
Cash and cash equivalents at beginning of period	50,414	120,139
Cash and cash equivalents at end of period	25,087	86,603
Supplemental disclosures of cash flow information:
Interest paid	30,712	17,131
Income taxes paid	102,946	77,540
Non-cash investing and financing activities:
Capital lease obligations incurred	14,173	19,219

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Notes Receivable By Segment (Detail) (CAD) In Thousands, unless otherwise specified	Jun. 29, 2014	Dec. 29, 2013
Notes Receivable By Segment [Line Items]
Notes receivable	9,628	10,616
Allowance	(1,411)	(1,502)
Notes receivable, net	8,217	9,114
Current portion, net	7,619	4,631
Long-term portion, net	598	4,483
Gross
Notes Receivable By Segment [Line Items]
Notes receivable	23,167	24,933
VIEs
Notes Receivable By Segment [Line Items]
Notes receivable	(13,539)	(14,317)
Franchise Incentive Program ("FIP") notes
Notes Receivable By Segment [Line Items]
Notes receivable	2,878	3,009
Franchise Incentive Program ("FIP") notes | Gross
Notes Receivable By Segment [Line Items]
Notes receivable	15,702	16,677
Franchise Incentive Program ("FIP") notes | VIEs
Notes Receivable By Segment [Line Items]
Notes receivable	(12,824)	(13,668)
Other notes receivable
Notes Receivable By Segment [Line Items]
Notes receivable	6,750	7,607
Other notes receivable | Gross
Notes Receivable By Segment [Line Items]
Notes receivable	7,465	8,256
Other notes receivable | VIEs
Notes Receivable By Segment [Line Items]
Notes receivable	(715)	(649)

XML

Basis of Presentation (Policies)

6 Months Ended

Jun. 29, 2014

Accounting Policies [Abstract]

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 29, 2014, and the results of operations, comprehensive income and cash flows for the second quarters ended June 29, 2014 and June 30, 2013. These Condensed Consolidated Financial Statements should be read in conjunction with the audited 2013 Consolidated Financial Statements which are contained in our most recent Annual Report. The December 29, 2013 Condensed Consolidated Balance Sheet included herein was derived from the audited 2013 Consolidated Financial Statements, but does not include all of the year-end disclosures required by U.S. GAAP.

Stock-based compensation - performance stock units

In May 2014, the Company granted performance stock units ("PSUs") to certain of its employees. PSU payout levels will be based on two forward looking performance measures: return on assets and total shareholder return. PSUs are expensed on a straight-line basis over the relevant vesting period.

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Notes Receivable By Class and Aging (Detail) (CAD) In Thousands, unless otherwise specified	Jun. 29, 2014	Dec. 29, 2013
Notes Receivable By Class And Aging [Line Items]
Notes receivable	9,628	10,616
Allowance	(1,411)	(1,502)
Notes receivable, net	8,217	9,114
Current Status (FIPs And Other)
Notes Receivable By Class And Aging [Line Items]
Notes receivable	6,869	7,607
Past Due Status Less Than 90 Days (FIPs)
Notes Receivable By Class And Aging [Line Items]
Notes receivable	0	328
Past Due Status Greater Than 90 Days (FIPs)
Notes Receivable By Class And Aging [Line Items]
Notes receivable	2,759	2,681
Gross
Notes Receivable By Class And Aging [Line Items]
Notes receivable	23,167	24,933
Gross | Current Status (FIPs And Other)
Notes Receivable By Class And Aging [Line Items]
Notes receivable	8,222	9,688
Gross | Past Due Status Less Than 90 Days (FIPs)
Notes Receivable By Class And Aging [Line Items]
Notes receivable	329	328
Gross | Past Due Status Greater Than 90 Days (FIPs)
Notes Receivable By Class And Aging [Line Items]
Notes receivable	14,616	14,917
VIEs
Notes Receivable By Class And Aging [Line Items]
Notes receivable	(13,539)	(14,317)
VIEs | Current Status (FIPs And Other)
Notes Receivable By Class And Aging [Line Items]
Notes receivable	(1,353)	(2,081)
VIEs | Past Due Status Less Than 90 Days (FIPs)
Notes Receivable By Class And Aging [Line Items]
Notes receivable	(329)	0
VIEs | Past Due Status Greater Than 90 Days (FIPs)
Notes Receivable By Class And Aging [Line Items]
Notes receivable	(11,857)	(12,236)

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Notes Receivable, Net (Tables)

6 Months Ended

Jun. 29, 2014

Receivables [Abstract]

Notes Receivable by Segment

	As at
	June 29, 2014								December 29, 2013
	Gross		VIEs(2)			Total			Gross		VIEs(2)			Total
Franchise Incentive Program (“FIP”) notes(1)	$	15,702	$	(12,824	)	$	2,878		$	16,677	$	(13,668	)	$	3,009
Other notes receivable(3)	7,465		(715		)	6,750			8,256		(649		)	7,607
Notes receivable	$	23,167	$	(13,539	)	9,628			$	24,933	$	(14,317	)	10,616
Allowance						(1,411		)						(1,502		)
Notes receivable, net						$	8,217							$	9,114
Current portion, net						$	7,619							$	4,631
Long-term portion, net						$	598							$	4,483

Notes Receivable by Class and Aging

	As at
	June 29, 2014								December 29, 2013
Class and Aging	Gross		VIEs(2)			Total			Gross		VIEs(2)			Total
Current status (FIP notes and other)	$	8,222	$	(1,353	)	$	6,869		$	9,688	$	(2,081	)	$	7,607
Past-due status < 90 days (FIP notes)	329		(329		)	—			328		—			328
Past-due status > 90 days (FIP notes)	14,616		(11,857		)	2,759			14,917		(12,236		)	2,681
Notes receivable	$	23,167	$	(13,539	)	$	9,628		$	24,933	$	(14,317	)	$	10,616
Allowance						(1,411		)						(1,502		)
Notes receivable, net						$	8,217							$	9,114

________________ 

⁽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 12).

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

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Condensed Consolidated Statement Of Equity (CAD) In Thousands, unless otherwise specified		Total	Common Stock	Common Shares Held In Trust	Contributed Surplus	Retained Earnings	AOCI, Translation Adjustment		AOCI, Cash Flow Hedges		Total Equity Of Tim Hortons Inc.	Noncontrolling Interest		Total Equity
Balance at Dec. 30, 2012			435,033	(13,356)	10,970	893,619	(135,438)	[1]	(3,590)	[1]	1,187,238	2,853	[2]	1,190,091
Balance (in shares) at Dec. 30, 2012			153,405	317
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Repurchase of common shares (in shares)	[3]		(12,076)	(43)
Repurchase of common shares	[3]		(34,295)	(2,453)		(686,243)					(722,991)			(722,991)
Disbursed or sold from the Trust (in shares)	[4]			66
Disbursed or sold from the Trust	[4]			2,885							2,885			2,885
Stock based compensation					63	(712)					(649)			(649)
Other comprehensive income, before reclassifications	[5]						31,333	[1]	(2,407)	[1]	28,926			28,926
Amounts reclassified from AOCI	[5]								(2,000)	[1]	(2,000)			(2,000)
NCI transactions						(483)					(483)	483	[2]	0
Net income														428,649
Net income attributable to NCI	[2]											4,280
Net income attributable to THI						424,369					424,369
Dividends and distributions, net						(156,141)					(156,141)	(7,251)	[2]	(163,392)
Balance at Dec. 29, 2013		761,519	400,738	(12,924)	11,033	474,409	(104,105)	[1]	(7,997)	[1]	761,154	365	[2]	761,519
Balance (in shares) at Dec. 29, 2013			141,329	294
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Repurchase of common shares (in shares)	[3],[6]		(8,203)	(59)
Repurchase of common shares	[3],[6]		(23,296)	(3,548)		(470,178)					(497,022)			(497,022)
Disbursed or sold from the Trust (in shares)	[4]			24
Disbursed or sold from the Trust	[4]			1,050							1,050			1,050
Stock based compensation					881	215					1,096			1,096
Other comprehensive income, before reclassifications	[5]						(2,830)	[1]	(5,705)	[1]	(8,535)			(8,535)
Amounts reclassified from AOCI	[5]								(2,429)	[1]	(2,429)			(2,429)
NCI transactions						(269)					(269)	269	[2]	0
Net income		217,787												217,787
Net income attributable to NCI		3,128										3,128	[2]
Net income attributable to THI		214,659				214,659					214,659
Dividends and distributions, net						(86,910)					(86,910)	(2,154)	[2]	(89,064)
Balance at Jun. 29, 2014		384,402	377,442	(15,422)	11,914	131,926	(106,935)	[1]	(16,131)	[1]	382,794	1,608	[2]	384,402
Balance (in shares) at Jun. 29, 2014			133,126	329

[1] Accumulated other comprehensive income (“AOCI”).

[2] Noncontrolling interests (“NCI”).

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

[4] Amounts are net of tax.

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

[6] The 2014 share repurchase program, as described in the Company’s Annual Report on Form 10-K for the year ended December 29, 2013 (“Annual Report”), filed with the SEC and the CSA on February 25, 2014, commenced on February 28, 2014.

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Condensed Consolidated Statement Of Comprehensive Income (CAD) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 29, 2014	Jun. 30, 2013	Jun. 29, 2014	Jun. 30, 2013
Statement of Comprehensive Income [Abstract]
Net income	125,432	124,562	217,787	211,485
Other comprehensive (loss) income
Translation adjustments (loss) gain	(17,765)	15,205	(2,830)	23,382
Unrealized (losses) gains from cash flow hedges
(Loss) gain from change in fair value of derivatives	(4,968)	5,307	(5,910)	8,079
Amount of net (gain) loss reclassified to earnings during the period	(999)	378	(3,700)	1,041
Tax (expense)	1,763	(1,333)	1,476	(2,325)
Other comprehensive (loss) income	(21,969)	19,557	(10,964)	30,177
Comprehensive income	103,463	144,119	206,823	241,662
Comprehensive income atributable to non-controlling interests	1,682	826	3,128	1,578
Comprehensive income attributable to Tim Hortons Inc.	101,781	143,293	203,695	240,084

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Commitments and Contingencies

6 Months Ended

Jun. 29, 2014

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

COMMITMENTS AND CONTINGENCIES

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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Document and Entity Information	6 Months Ended
	Jun. 29, 2014	Aug. 01, 2014
Document Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 29, 2014
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q2
Trading Symbol	THI
Entity Registrant Name	Tim Hortons Inc.
Entity Central Index Key	0001345111
Current Fiscal Year End Date	--12-28
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		132,817,871

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Stock-Based Compensation

6 Months Ended

Jun. 29, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation

STOCK-BASED COMPENSATION

	Second quarter ended						Year-to-date period ended
	June 29, 2014			June 30, 2013			June 29, 2014			June 30, 2013
RSUs and PSUs	$	1,386		$	2,478		$	2,656		$	3,580
Stock options and tandem SARs	(362		)	2,264			(1,864		)	7,339
Deferred share units (“DSUs”)	108			406			94			1,616
Total stock-based compensation expense	$	1,132		$	5,148		$	886		$	12,535
TRS loss (gain)(1)	$	1,998		$	(1,482	)	$	4,246		$	(8,235	)

________________

⁽¹⁾  The Company has entered into TRS contracts as economic hedges, covering 1,027,000 of the Company’s underlying common shares (June 30, 2013: 1,008,000), which represents a portion of its outstanding stock options with tandem SARs, and substantially all of its cash obligation related to DSUs. See note 9 for the revaluation of the TRS contracts.

During the second quarter of 2014, the Company granted a total of 62,000 RSUs and 72,000 PSUs (2013: total of 80,000 RSUs and 61,000 performance-conditioned restricted stock units), with a weighted average grant day fair value per unit of $60.09 (2013: $56.12). Also during the second quarter of 2014, the Company granted 578,000 stock options and tandem SARs (2013: 241,000), with a weighted average exercise per unit of $60.09 (2013: $56.12).

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Condensed Consolidated Balance Sheet (CAD) In Thousands, unless otherwise specified	Jun. 29, 2014	Dec. 29, 2013
Current assets
Cash and cash equivalents	25,087	50,414
Restricted cash and cash equivalents	85,926	155,006
Accounts receivable, net	220,157	210,664
Notes receivable, net	7,619	4,631
Deferred income taxes	9,985	10,165
Inventories and other, net	117,776	104,326
Advertising fund restricted assets	39,078	39,783
Total current assets	505,628	574,989
Property and equipment, net	1,681,010	1,685,043
Notes receivable, net	598	4,483
Deferred income taxes	11,693	11,018
Equity investments	40,372	40,738
Other assets	117,452	117,552
Total assets	2,356,753	2,433,823
Current liabilities
Accounts payable	171,118	204,514
Tim Card obligation	128,517	184,443
Accrued liabilities	65,835	89,565
Advertising fund liabilities	38,782	59,912
Short-term borrowings	15,000	30,000
Current portion of long-term obligations	18,336	17,782
Total current liabilities	437,588	586,216
Long-term obligations
Long-term debt	1,293,035	843,020
Capital leases	125,048	121,049
Deferred income taxes	8,123	9,929
Other long-term liabilities	108,557	112,090
Total long-term obligations	1,534,763	1,086,088
Commitments and contingencies
Equity of Tim Hortons Inc.
Common shares ($2.84 stated value per share), Authorized: unlimited shares. Issued: 133,126,058 and 141,329,010 shares, respectively	377,442	400,738
Common shares held in Trust, at cost: 329,089 and 293,816 shares, respectively	(15,422)	(12,924)
Contributed surplus	11,914	11,033
Retained earnings	131,926	474,409
Accumulated other comprehensive loss	(123,066)	(112,102)
Total equity of Tim Hortons Inc.	382,794	761,154
Noncontrolling interests	1,608	365
Total equity	384,402	761,519
Total liabilities and equity	2,356,753	2,433,823

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Inventories and Other, Net

6 Months Ended

Jun. 29, 2014

Inventory Disclosure [Abstract]

Inventories and Other, Net

INVENTORIES AND OTHER, NET

	As at
	June 29, 2014			December 29, 2013
Raw materials	$	25,061		$	22,789
Finished goods	78,332			69,348
	103,393			92,137
Inventory obsolescence provision	(1,418		)	(1,754		)
Inventories, net	101,975			90,383
Prepaids and other	15,801			13,943
Total Inventories and other, net	$	117,776		$	104,326

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Notes Receivable, Net

6 Months Ended

Jun. 29, 2014

Receivables [Abstract]

Notes Receivable, Net

NOTES RECEIVABLE, NET

	As at
	June 29, 2014								December 29, 2013
	Gross		VIEs(2)			Total			Gross		VIEs(2)			Total
Franchise Incentive Program (“FIP”) notes(1)	$	15,702	$	(12,824	)	$	2,878		$	16,677	$	(13,668	)	$	3,009
Other notes receivable(3)	7,465		(715		)	6,750			8,256		(649		)	7,607
Notes receivable	$	23,167	$	(13,539	)	9,628			$	24,933	$	(14,317	)	10,616
Allowance						(1,411		)						(1,502		)
Notes receivable, net						$	8,217							$	9,114
Current portion, net						$	7,619							$	4,631
Long-term portion, net						$	598							$	4,483

	As at
	June 29, 2014								December 29, 2013
Class and Aging	Gross		VIEs(2)			Total			Gross		VIEs(2)			Total
Current status (FIP notes and other)	$	8,222	$	(1,353	)	$	6,869		$	9,688	$	(2,081	)	$	7,607
Past-due status < 90 days (FIP notes)	329		(329		)	—			328		—			328
Past-due status > 90 days (FIP notes)	14,616		(11,857		)	2,759			14,917		(12,236		)	2,681
Notes receivable	$	23,167	$	(13,539	)	$	9,628		$	24,933	$	(14,317	)	$	10,616
Allowance						(1,411		)						(1,502		)
Notes receivable, net						$	8,217							$	9,114

________________ 

⁽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 12).

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

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

6 Months Ended

Jun. 29, 2014

Earnings Per Share [Abstract]

Computations of Basic and Diluted Earnings Per Common Share

	Second quarter ended				Year-to-date period ended
	June 29, 2014		June 30, 2013		June 29, 2014		June 30, 2013
Net income attributable to Tim Hortons Inc.	$	123,750	$	123,736	$	214,659	$	209,907
Weighted average shares outstanding for computation of basic earnings per common share attributable to Tim Hortons Inc. (in thousands)	133,899		152,083		136,007		152,597
Dilutive impact of restricted stock units (“RSUs”) and PSUs (in thousands)	260		295		252		286
Dilutive impact of stock options with tandem stock appreciation rights (“SARs”) (in thousands)	208		259		218		250
Weighted average shares outstanding for computation of diluted earnings per common share attributable to Tim Hortons Inc. (in thousands)	134,367		152,637		136,477		153,133
Basic earnings per common share attributable to Tim Hortons Inc.	$	0.92	$	0.81	$	1.58	$	1.38
Diluted earnings per common share attributable to Tim Hortons Inc.	$	0.92	$	0.81	$	1.57	$	1.37

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Variable Interest Entities

6 Months Ended

Jun. 29, 2014

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Variable Interest Entities

VARIABLE INTEREST ENTITIES

VIEs for which the Company is the primary beneficiary

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 29, 2014						June 30, 2013
	Restaurant VIEs(1)		Advertising fund VIEs(2)		Total VIEs		Restaurant VIEs(1)		Advertising fund VIEs(2)		Total VIEs
Sales	$	94,328	$	—	$	94,328	$	93,464	$	—	$	93,464
Advertising levies	—		2,906		2,906		—		2,569		2,569
Total revenues	94,328		2,906		97,234		93,464		2,569		96,033
Cost of sales	92,242		—		92,242		92,480		—		92,480
Operating expenses	—		2,704		2,704		—		2,293		2,293
Operating income	2,086		202		2,288		984		276		1,260
Interest expense	33		202		235		—		276		276
Income before taxes	2,053		—		2,053		984		—		984
Income taxes	371		—		371		158		—		158
Net income attributable to noncontrolling interests	$	1,682	$	—	$	1,682	$	826	$	—	$	826

	Year-to-date period ended
	June 29, 2014						June 30, 2013
	Restaurant VIEs(1)		Advertising fund VIEs(2)		Total VIEs		Restaurant VIEs(1)		Advertising fund VIEs(2)		Total VIEs
Sales	$	177,709	$	—	$	177,709	$	180,224	$	—	$	180,224
Advertising levies	—		5,898		5,898		—		5,100		5,100
Total revenues	177,709		5,898		183,607		180,224		5,100		185,324
Cost of sales	173,855		—		173,855		178,346		—		178,346
Operating expenses	—		5,466		5,466		—		4,392		4,392
Operating income	3,854		432		4,286		1,878		708		2,586
Interest expense	33		432		465		—		708		708
Income before taxes	3,821		—		3,821		1,878		—		1,878
Income taxes	693		—		693		300		—		300
Net income attributable to noncontrolling interests	$	3,128	$	—	$	3,128	$	1,578	$	—	$	1,578

______________

⁽¹⁾  Includes rents, royalties, advertising expenses and product purchases from the Company which are eliminated upon the consolidation of these VIEs.

⁽²⁾  The advertising levies, depreciation, interest costs, capital expenditures and financing associated with the Ad Fund’s program to acquire and install LCD screens, media engines, drive-thru menu boards and ancillary equipment for our restaurants (the “Expanded Menu Board Program”) are presented on a gross basis. 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.

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 29, 2014				December 29, 2013
	Restaurant VIEs(1)		Advertising fund VIEs		Restaurant VIEs(1)		Advertising fund VIEs
Cash and cash equivalents	$	7,733	$	—	$	7,773	$	—
Advertising fund restricted assets – current	—		39,078		—		39,783
Other current assets	7,060		—		7,155		—
Property and equipment, net	19,638		65,661		20,471		70,485
Other long-term assets	119		960		370		1,271
Total assets	$	34,550	$	105,699	$	35,769	$	111,539
Notes payable to Tim Hortons Inc. – current(2)(3)	$	12,996	$	23,040	$	13,689	$	3,040
Advertising fund liabilities – current	—		38,782		—		59,913
Other current liabilities(4)	11,313		5,268		11,706		5,253
Notes payable to Tim Hortons Inc. – long-term(2)(3)	543		13,680		628		15,200
Long-term debt(4)	—		22,641		—		25,157
Other long-term liabilities	8,090		2,288		9,381		2,976
Total liabilities	32,942		105,699		35,404		111,539
Equity of VIEs	1,608		—		365		—
Total liabilities and equity	$	34,550	$	105,699	$	35,769	$	111,539

______________

⁽¹⁾  The Company consolidated 328 Non-owned restaurants as at June 29, 2014 (December 29, 2013: 331).

⁽²⁾  Various assets and liabilities are eliminated upon the consolidation of the Restaurant 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 4).

⁽³⁾  The Notes payable to the Company by the Advertising Fund VIEs, which are funded by the Restricted cash and cash equivalents related to our Tim Card program, are eliminated upon consolidation of the Ad Fund. The Ad Fund drew $20.0 million in the year-to-date period ended June 29, 2014 (year-to-date period ended June 30, 2013: $nil) for purposes of the Expanded Menu Board Program.

⁽⁴⁾  Includes $27.7 million of Advertising fund VIEs debt with a Canadian financial institution relating to the Expanded Menu Board Program (December 29, 2013: $30.2 million), of which $5.0 million is recognized in Other current liabilities (December 29, 2013: $5.0 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.

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Fair Values

6 Months Ended

Jun. 29, 2014

Fair Value Disclosures [Abstract]

Fair Values

FAIR VALUES

Financial assets and liabilities measured at fair value

	As at
	June 29, 2014				December 29, 2013
	Fair value hierarchy	Fair value asset (liability)(1)			Fair value hierarchy	Fair value asset (liability)(1)
Derivatives
Forward currency contracts(2)	Level 2	$	(2,030	)	Level 2	$	4,181
Interest rate swap(3)	Level 2	(204		)	Level 2	(49		)
Interest rate forwards(4)	n/a	—			Level 2	285
Total return swaps (“TRS”)(5)	Level 2	17,147			Level 2	21,393
Total Derivatives		$	14,913			$	25,810

________________  

⁽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⁾  The fair value is estimated using discounted cash flows and market-based observable inputs, including interest rate yield curves and discount rates.

⁽⁴⁾  The interest rate forwards were settled as part of the issuance of the Series 3 Notes (see note 7).

⁽⁵⁾  The fair value of the TRS is determined using the Company’s common share closing price on the last business day of the fiscal period, as quoted on the Toronto Stock Exchange.

Other financial assets and liabilities not measured at fair value

As at June 29, 2014 and December 29, 2013, the carrying values of Cash and cash equivalents and Restricted cash and cash equivalents approximated their fair values due to the short-term nature of these investments. 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 29, 2014							December 29, 2013
	Fair value hierarchy	Fair value asset (liability)			Carrying value			Fair value hierarchy	Fair value asset (liability)			Carrying value
Bearer deposit notes(1)	Level 2	$	42,520		$	42,520		Level 2	$	41,403		$	41,403
Notes receivable, net(2)	Level 3	$	8,217		$	8,217		Level 3	$	9,114		$	9,114
Series 1 Notes(3)	Level 2	$	(317,877	)	$	(301,022	)	Level 2	$	(315,519	)	$	(301,196	)
Series 2 Notes(3)	Level 2	$	(474,687	)	$	(449,898	)	Level 2	$	(445,419	)	$	(449,892	)
Series 3 Notes(3)	Level 2	$	(453,614	)	$	(449,880	)	n/a	$	—		$	—
Advertising fund term debt(4)	Level 3	$	(27,673	)	$	(27,673	)	Level 3	$	(30,189	)	$	(30,189	)
Other debt(5)	Level 3	$	(138,650	)	$	(72,664	)	Level 3	$	(126,548	)	$	(69,794	)

________________

⁽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⁾  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.

⁽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 L.P.

⁽⁴⁾  Management estimates the fair value of this variable rate debt using a market approach, based on prevailing interest rates plus an applicable margin.

⁽⁵⁾  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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Accounts Payable

6 Months Ended

Jun. 29, 2014

Payables and Accruals [Abstract]

Schedule of Accounts Payable and Accrued Liabilities

ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable

	As at
	June 29, 2014		December 29, 2013
Accounts payable	$	137,112	$	142,131
Construction holdbacks and accruals	33,065		57,527
Corporate reorganization accrual	941		4,856
Total Accounts payable	$	171,118	$	204,514

Tim Card obligation

The decrease in our Tim Card obligation, and resulting decrease in Restricted cash and cash equivalents, is primarily driven by Tim Card redemptions, which can be seasonal. In addition, Restricted cash and cash equivalents decreased due to additional borrowings by the Tim Hortons Advertising and Promotion Fund (Canada) Inc. (“Ad Fund”) (see note 12).

Accrued liabilities

	As at
	June 29, 2014		December 29, 2013
Salaries and wages	$	14,276	$	22,553
Taxes payable	5,316		14,542
De-branding accruals(1)	1,947		9,538
Other accrued liabilities(2)	44,296		42,932
Total Accrued liabilities	$	65,835	$	89,565

 ________________

⁽¹⁾  Accruals related to Cold Stone Creamery^® de-branding activity in Tim Hortons locations in Canada.

⁽²⁾  Includes accruals for contingent rent, current portion of the Maidstone Bakeries supply contract, deferred revenues, deposits, the current portion of deferred income taxes, and various equipment and other accruals.

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Long Term Debt (Notes)

6 Months Ended

Jun. 29, 2014

Debt Disclosure [Abstract]

Long-term Debt [Text Block]

LONG TERM DEBT

The Company offered Senior Unsecured Notes, Series 3, due April 1, 2019 (“Series 3 Notes”) on a private placement basis in the first quarter of 2014 for total net proceeds of $449.9 million, which included a discount of $0.1 million. A portion of the proceeds from the Series 3 Notes were used to retire the balance of our 364-day $400.0 million revolving bank facility. Please refer to Note 7, Long term debt, in the interim financial statements for the quarter ended March 30, 2014, filed on Form 10-Q with the SEC and CSA on May 7, 2014, for further information.

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Derivatives

6 Months Ended

Jun. 29, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives

DERIVATIVES

	As at
	June 29, 2014									December 29, 2013
	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)	$	919	$	(2,142	)	$	(1,223	)	Accounts payable, net	$	4,181	$	—		$	4,181		Accounts receivable, net
Interest rate swap(2)	$	—	$	(204	)	$	(204	)	Other long-term liabilities	$	—	$	(49	)	$	(49	)	Other long-term liabilities
Interest rate forwards(3)	$	—	$	—		$	—		n/a	$	285	$	—		$	285		Accounts receivable, net
Derivatives not designated as hedging instruments
TRS(4)	$	17,160	$	(13	)	$	17,147		Other assets	$	21,393	$	—		$	21,393		Other assets
Forward currency contracts(1)	$	15	$	(822	)	$	(807	)	Accounts payable, net	$	—	$	—		$	—		n/a

________________ 

⁽¹⁾  Notional value as at June 29, 2014 of $167.8 million (December 29, 2013: $154.0 million), with maturities ranging between June 2014 and April 2015; no associated cash collateral.

⁽²⁾  Notional value as at June 29, 2014 of $27.5 million (December 29, 2013: $30.0 million), with maturities through fiscal 2019; no associated cash collateral.

⁽³⁾  The interest rate forwards were settled in the first quarter of 2014 (notional amount at December 29, 2013: $90.0 million).

⁽⁴⁾  The notional value and associated cash collateral, in the form of bearer deposit notes (see note 8), was $42.5 million as at June 29, 2014 (December 29, 2013: $41.4 million). The TRS have maturities annually, in May, between fiscal 2015 and fiscal 2021.

		Second quarter ended June 29, 2014									Second quarter ended June 30, 2013
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	$	(4,921	)	$	(1,716	)	$	(6,637	)	$	4,851		$	144		$	4,995
Interest rate swap(3)	Interest (expense)	(47		)	50			3			456			61			517
Interest rate forwards(4)	Interest (expense)	—			667			667			—			173			173
Total		(4,968		)	(999		)	(5,967		)	5,307			378			5,685
Income tax effect	Income taxes	1,321			442			1,763			(1,279		)	(54		)	(1,333		)
Net of income taxes		$	(3,647	)	$	(557	)	$	(4,204	)	$	4,028		$	324		$	4,352

		Year-to-date period ended June 29, 2014									Year-to-date period ended June 30, 2013
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	$	(516	)	$	(4,888	)	$	(5,404	)	$	8,124		$	615		$	8,739
Interest rate swap(3)	Interest (expense)	(258		)	103			(155		)	(45		)	80			35
Interest rate forwards(4)	Interest (expense)	(5,136		)	1,085			(4,051		)	—			346			346
Total		(5,910		)	(3,700		)	(9,610		)	8,079			1,041			9,120
Income tax effect	Income taxes	205			1,271			1,476			(2,141		)	(184		)	(2,325		)
Net of income taxes		$	(5,705	)	$	(2,429	)	$	(8,134	)	$	5,938		$	857		$	6,795

_______________ 

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

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

⁽³⁾  The Ad Fund entered into an amortizing interest rate swap to fix a portion of the interest expense on its term debt.

⁽⁴⁾  The Company entered into and settled interest rate forwards relating to the issuance of its long-term debt.

Derivatives not designated as cash flow hedging instruments	Classification on Condensed Consolidated Statement of Operations	Second quarter ended					Year-to-date period ended
		June 29, 2014		June 30, 2013			June 29, 2014		June 30, 2013
TRS	General and administrative expenses	$	1,998	$	(1,482	)	$	4,246	$	(8,235	)
Forward currency contracts	Cost of sales	167		(69		)	167		(349		)
Forward currency contracts	Other (income) expense	640		—			640		—
Total loss (gain), net		$	2,805	$	(1,551	)	$	5,053	$	(8,584	)

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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
	Jun. 29, 2014	Jun. 30, 2013	Jun. 29, 2014	Jun. 30, 2013
Earnings Per Share [Abstract]
Net income attributable to Tim Hortons Inc.	123,750	123,736	214,659	209,907
Weighted average shares outstanding for computation of basic earnings per common share attributable to Tim Hortons Inc. (in thousands)	133,899	152,083	136,007	152,597
Dilutive impact of RSUs and PSUs (in thousands)	260	295	252	286
Dilutive Impact of Stock Options with tandem SARs (in thousands)	208	259	218	250
Weighted average shares outstanding for computation of diluted earnings per common share attributable to Tim Hortons Inc. (in thousands)	134,367	152,637	136,477	153,133
Basic earnings per common share attributable to Tim Hortons Inc. (in Canadian dollars per share)	0.92	0.81	1.58	1.38
Diluted earnings per common share attributable to Tim Hortons Inc. (in Canadian dollars per share)	0.92	0.81	1.57	1.37

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Assets and Liabilities of Variable Interest Entities (Detail) (CAD)	Jun. 29, 2014	Dec. 29, 2013	Jun. 30, 2013	Dec. 30, 2012
Variable Interest Entity [Line Items]
Cash and cash equivalents	25,087,000	50,414,000	86,603,000	120,139,000
Advertising fund restricted assets – current	39,078,000	39,783,000
Property and equipment, net	1,681,010,000	1,685,043,000
Other long-term assets	117,452,000	117,552,000
Total assets	2,356,753,000	2,433,823,000
Total Accrued liabilities	65,835,000	89,565,000
Other long-term liabilities	108,557,000	112,090,000
Equity of VIEs	1,608,000	365,000
Total liabilities and equity	2,356,753,000	2,433,823,000
Restaurant VIEs
Variable Interest Entity [Line Items]
Cash and cash equivalents	7,733,000	7,773,000
Advertising fund restricted assets – current	0	0
Other current assets	7,060,000	7,155,000
Property and equipment, net	19,638,000	20,471,000
Other long-term assets	119,000	370,000
Total assets	34,550,000	35,769,000
Notes payable to Tim Hortons Inc. – current	12,996,000	13,689,000
Advertising fund liabilities – current	0	0
Total Accrued liabilities	11,313,000	11,706,000
Notes payable to Tim Hortons Inc. - long-term	543,000	628,000
Long-term debt	0	0
Other long-term liabilities	8,090,000	9,381,000
Total liabilities	32,942,000	35,404,000
Equity of VIEs	1,608,000	365,000
Total liabilities and equity	34,550,000	35,769,000
Ad Fund VIEs
Variable Interest Entity [Line Items]
Cash and cash equivalents	0	0
Advertising fund restricted assets – current	39,078,000	39,783,000
Other current assets	0	0
Property and equipment, net	65,661,000	70,485,000
Other long-term assets	960,000	1,271,000
Total assets	105,699,000	111,539,000
Notes payable to Tim Hortons Inc. – current	23,040,000	3,040,000
Advertising fund liabilities – current	38,782,000	59,913,000
Total Accrued liabilities	5,268,000	5,253,000
Notes payable to Tim Hortons Inc. - long-term	13,680,000	15,200,000
Long-term debt	22,641,000	25,157,000
Other long-term liabilities	2,288,000	2,976,000
Total liabilities	105,699,000	111,539,000
Equity of VIEs	0	0
Total liabilities and equity	105,699,000	111,539,000

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Recent Accounting Pronouncements

6 Months Ended

Jun. 29, 2014

Accounting Changes and Error Corrections [Abstract]

Recent Accounting Pronouncements

RECENT ACCOUNTING PRONOUNCEMENTS

In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09 Revenue from Contracts with Customers. The amendments in this ASU are intended to provide a more robust framework for addressing revenue issues; improve comparability of revenue recognition practices across entities, industries, jurisdictions and markets; and provide more useful information to financial statement users through improved disclosure requirements. The amendments in this ASU are effective for fiscal years and interim periods beginning on or after December 15, 2016, and should be applied retrospectively using one of two acceptable application methods as noted in the ASU. The Company is currently assessing the potential impact that the adoption and transition to this ASU may have on its Consolidated Financial Statements and related disclosures.

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Accounts Payable and Accrued Liabilities (Tables)

6 Months Ended

Jun. 29, 2014

Payables and Accruals [Abstract]

Accounts Payable

Accounts payable

	As at
	June 29, 2014		December 29, 2013
Accounts payable	$	137,112	$	142,131
Construction holdbacks and accruals	33,065		57,527
Corporate reorganization accrual	941		4,856
Total Accounts payable	$	171,118	$	204,514

Schedule of Accrued Liabilities

Accrued liabilities

	As at
	June 29, 2014		December 29, 2013
Salaries and wages	$	14,276	$	22,553
Taxes payable	5,316		14,542
De-branding accruals(1)	1,947		9,538
Other accrued liabilities(2)	44,296		42,932
Total Accrued liabilities	$	65,835	$	89,565

 ________________

⁽¹⁾  Accruals related to Cold Stone Creamery^® de-branding activity in Tim Hortons locations in Canada.

⁽²⁾  Includes accruals for contingent rent, current portion of the Maidstone Bakeries supply contract, deferred revenues, deposits, the current portion of deferred income taxes, and various equipment and other accruals.

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Stock-Based Compensation Additional Information (Detail) (CAD) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Jun. 29, 2014	Jun. 30, 2013
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Underlying Common Stock Covered Under Total Return Swap Contracts	1,027	1,008
Restricted Stock Units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	62	80
Performance Shares [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	72	61
Restricted Stock Units (RSUs) and Performance Stock Units (PSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period, Weighted Average Grant Date Fair Value	60.09	56.12
Stock Options And Tandem Stock Appreciation Rights [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Net of Forfeitures	578	241
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price	60.09	56.12

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Financial Assets and Liabilities Measured at Fair Value (Detail) (CAD) In Thousands, unless otherwise specified	Jun. 29, 2014	Dec. 29, 2013
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Fair value asset (liability)	14,913	25,810
Interest Rate Forwards
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Fair value asset (liability)	0
Level 2 | Forward Currency Contracts
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Fair value asset (liability)	(2,030)	4,181
Level 2 | Interest Rate Swap | Canadian Ad Fund
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Fair value asset (liability)	(204)	(49)
Level 2 | Interest Rate Forwards
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Fair value asset (liability)		285
Level 2 | TRS
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Fair value asset (liability)	17,147	21,393

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Condensed Consolidated Balance Sheet (Parenthetical) (CAD)	Jun. 29, 2014	Dec. 29, 2013
Statement of Financial Position [Abstract]
Common shares, stated value per share	2.84	2.84
Common shares, issued	133,126,058	141,329,010
Common shares held in Trust, shares	329,089	293,816

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Earnings Per Common Share Attributable to Tim Hortons Inc.

6 Months Ended

Jun. 29, 2014

Earnings Per Share [Abstract]

Earnings Per Common Share Attributable to Tim Hortons Inc.

EARNINGS PER COMMON SHARE ATTRIBUTABLE TO TIM HORTONS INC.

	Second quarter ended				Year-to-date period ended
	June 29, 2014		June 30, 2013		June 29, 2014		June 30, 2013
Net income attributable to Tim Hortons Inc.	$	123,750	$	123,736	$	214,659	$	209,907
Weighted average shares outstanding for computation of basic earnings per common share attributable to Tim Hortons Inc. (in thousands)	133,899		152,083		136,007		152,597
Dilutive impact of restricted stock units (“RSUs”) and PSUs (in thousands)	260		295		252		286
Dilutive impact of stock options with tandem stock appreciation rights (“SARs”) (in thousands)	208		259		218		250
Weighted average shares outstanding for computation of diluted earnings per common share attributable to Tim Hortons Inc. (in thousands)	134,367		152,637		136,477		153,133
Basic earnings per common share attributable to Tim Hortons Inc.	$	0.92	$	0.81	$	1.58	$	1.38
Diluted earnings per common share attributable to Tim Hortons Inc.	$	0.92	$	0.81	$	1.57	$	1.37

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Fair Values (Tables)

6 Months Ended

Jun. 29, 2014

Fair Value Disclosures [Abstract]

Fair Value of Derivative Instruments on Condensed Consolidated Balance Sheet

Financial assets and liabilities measured at fair value

	As at
	June 29, 2014				December 29, 2013
	Fair value hierarchy	Fair value asset (liability)(1)			Fair value hierarchy	Fair value asset (liability)(1)
Derivatives
Forward currency contracts(2)	Level 2	$	(2,030	)	Level 2	$	4,181
Interest rate swap(3)	Level 2	(204		)	Level 2	(49		)
Interest rate forwards(4)	n/a	—			Level 2	285
Total return swaps (“TRS”)(5)	Level 2	17,147			Level 2	21,393
Total Derivatives		$	14,913			$	25,810

________________  

⁽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⁾  The fair value is estimated using discounted cash flows and market-based observable inputs, including interest rate yield curves and discount rates.

⁽⁴⁾  The interest rate forwards were settled as part of the issuance of the Series 3 Notes (see note 7).

⁽⁵⁾  The fair value of the TRS is determined using the Company’s common share closing price on the last business day of the fiscal period, as quoted on the Toronto Stock Exchange.

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 29, 2014							December 29, 2013
	Fair value hierarchy	Fair value asset (liability)			Carrying value			Fair value hierarchy	Fair value asset (liability)			Carrying value
Bearer deposit notes(1)	Level 2	$	42,520		$	42,520		Level 2	$	41,403		$	41,403
Notes receivable, net(2)	Level 3	$	8,217		$	8,217		Level 3	$	9,114		$	9,114
Series 1 Notes(3)	Level 2	$	(317,877	)	$	(301,022	)	Level 2	$	(315,519	)	$	(301,196	)
Series 2 Notes(3)	Level 2	$	(474,687	)	$	(449,898	)	Level 2	$	(445,419	)	$	(449,892	)
Series 3 Notes(3)	Level 2	$	(453,614	)	$	(449,880	)	n/a	$	—		$	—
Advertising fund term debt(4)	Level 3	$	(27,673	)	$	(27,673	)	Level 3	$	(30,189	)	$	(30,189	)
Other debt(5)	Level 3	$	(138,650	)	$	(72,664	)	Level 3	$	(126,548	)	$	(69,794	)

________________

⁽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⁾  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.

⁽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 L.P.

⁽⁴⁾  Management estimates the fair value of this variable rate debt using a market approach, based on prevailing interest rates plus an applicable margin.

⁽⁵⁾  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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Accounts Payable (Detail) (CAD) In Thousands, unless otherwise specified	Jun. 29, 2014	Dec. 29, 2013
Payables and Accruals [Abstract]
Accounts payable	137,112	142,131
Construction holdbacks and accruals	33,065	57,527
Corporate reorganization accrual	941	4,856
Total Accounts payable	171,118	204,514

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Segment Reporting

6 Months Ended

Jun. 29, 2014

Segment Reporting [Abstract]

Segment Reporting

SEGMENT REPORTING

The Company operates exclusively in the quick service restaurant industry. The chief decision maker views and evaluates the Company’s reportable segments as follows:

Canadian and U.S. business units.The results of each of the Canadian and U.S. business units includes 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, driven primarily by the business units’ respective systemwide sales; (iii) franchise fees; (iv) corporate restaurants; (v) equity income related to restaurant operating ventures; and (vi) 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 to a much lesser extent, 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 and predictable pricing. 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. Corporate services also includes the results of our international operations, which are currently not significant.

	Second quarter ended						Year-to-date period ended
	June 29, 2014			June 30, 2013			June 29, 2014			June 30, 2013
Revenues(1)
Canada	$	721,599		$	657,682		$	1,344,784		$	1,251,355
U.S.	51,878			41,220			103,053			85,668
Corporate services	3,636			5,204			9,305			9,329
Total reportable segments	777,113			704,106			1,457,142			1,346,352
VIEs	97,234			96,033			183,607			185,324
Total	$	874,347		$	800,139		$	1,640,749		$	1,531,676
Operating Income (Loss)
Canada	$	188,866		$	174,760		$	342,332		$	320,581
U.S.	9,254			2,587			13,611			3,497
Corporate services	(8,041		)	(1,424		)	(22,575		)	(12,089		)
Total reportable segments	190,079			175,923			333,368			311,989
VIEs	2,288			1,260			4,286			2,586
Corporate reorganization expenses	—			(604		)	—			(10,079		)
Consolidated Operating Income	192,367			176,579			337,654			304,496
Interest, Net	(17,510		)	(8,131		)	(33,209		)	(15,866		)
Income before income taxes	$	174,857		$	168,448		$	304,445		$	288,630

________________ 

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

Consolidated Sales comprise the following:

	Second quarter ended				Year-to-date period ended
	June 29, 2014		June 30, 2013		June 29, 2014		June 30, 2013
Sales
Distribution sales	$	511,762	$	468,597	$	964,115	$	899,748
Company-operated restaurant sales	7,739		6,501		13,035		12,477
Sales from VIEs	94,328		93,464		177,709		180,224
Total Sales	$	613,829	$	568,562	$	1,154,859	$	1,092,449