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 September 28, 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 November 3, 2014
Common shares	132,576,171 shares

TIM HORTONS INC. AND SUBSIDIARIES

INDEX

	Pages
PART I: Financial Information
Item 1. Financial Statements (Unaudited):
Condensed Consolidated Statement of Operations for the third quarters and year-to-date periods ended September 28, 2014 and September 29, 2013	3
Condensed Consolidated Statement of Comprehensive Income for the third quarters and year-to-date periods ended September 28, 2014 and September 29, 2013	4
Condensed Consolidated Balance Sheet as at September 28, 2014 and December 29, 2013	5
Condensed Consolidated Statement of Cash Flows for the year-to-date periods ended September 28, 2014 and September 29, 2013	6
Condensed Consolidated Statement of Equity for the year-to-date periods ended September 28, 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	31
Item 4. Controls and Procedures	31
PART II: Other Information
Item 1. Legal Proceedings	31
Item 1A. Risk Factors	31
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	32
Item 3. Defaults upon Senior Securities	33
Item 4. Mine Safety Disclosure	33
Item 5. Other Information	33
Item 6. Exhibits	33
Signature	34
Index to Exhibits	35

On November 3, 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$0.8872 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)

	Third quarter ended						Year-to-date period ended
	September 28, 2014			September 29, 2013			September 28, 2014			September 29, 2013
Revenues
Sales (note 13)	$	634,786		$	575,780		$	1,789,645		$	1,668,229
Franchise revenues
Rents and royalties	230,383			212,114			654,845			608,857
Franchise fees	43,986			37,459			105,414			79,943
	274,369			249,573			760,259			688,800
Total revenues	909,155			825,353			2,549,904			2,357,029
Costs and expenses
Cost of sales	545,050			501,856			1,545,765			1,452,302
Operating expenses	86,306			78,307			251,975			231,026
Franchise fee costs	43,577			37,865			106,166			83,743
General and administrative expenses	41,681			38,787			121,141			115,493
Equity (income)	(4,038		)	(4,075		)	(11,359		)	(11,340		)
Transaction costs (note 15)	27,289			—			27,289			—
Corporate reorganization expenses	—			953			—			11,032
Asset impairment (note 13)	—			2,889			—			2,889
Other expense (income), net	484			(57		)	2,467			(1,440		)
Total costs and expenses, net	740,349			656,525			2,043,444			1,883,705
Operating income	168,806			168,828			506,460			473,324
Interest (expense)	(18,518		)	(9,406		)	(53,842		)	(26,991		)
Interest income	879			919			2,994			2,638
Income before income taxes	151,167			160,341			455,612			448,971
Income taxes (note 2)	51,434			45,386			138,092			122,531
Net income	99,733			114,955			317,520			326,440
Net income attributable to noncontrolling interests (note 12)	1,602			1,092			4,730			2,670
Net income attributable to Tim Hortons Inc.	$	98,131		$	113,863		$	312,790		$	323,770
Basic earnings per common share attributable to Tim Hortons Inc. (note 3)	$	0.74		$	0.76		$	2.32		$	2.12
Diluted earnings per common share attributable to Tim Hortons Inc. (note 3)	$	0.74		$	0.75		$	2.31		$	2.12
Weighted average number of common shares outstanding (in thousands) – Basic (note 3)	132,439			150,342			134,817			152,379
Weighted average number of common shares outstanding (in thousands) – Diluted (note 3)	132,934			150,864			135,292			152,919
Dividends per common share	$	0.32		$	0.26		$	0.96		$	0.78

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)

	Third quarter ended						Year-to-date period ended
	September 28, 2014			September 29, 2013			September 28, 2014			September 29, 2013
Net income	$	99,733		$	114,955		$	317,520		$	326,440
Other comprehensive income
Translation adjustments gain (loss)	21,301			(9,133		)	18,471			14,250
Unrealized gains (losses) from cash flow hedges (note 9)
Gain (loss) from change in fair value of derivatives	5,356			(10,686		)	(553		)	(2,607		)
Amount of net loss (gain) reclassified to earnings during the period	47			(2,068		)	(3,654		)	(1,027		)
Tax (expense) recovery (note 9)	(1,260		)	1,509			216			(816		)
Other comprehensive income (loss)	25,444			(20,378		)	14,480			9,800
Comprehensive income	125,177			94,577			332,000			336,240
Comprehensive income attributable to noncontrolling interests	1,602			1,092			4,730			2,670
Comprehensive income attributable to Tim Hortons Inc.	$	123,575		$	93,485		$	327,270		$	333,570

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
	September 28, 2014			December 29, 2013
Assets
Current assets
Cash and cash equivalents	$	109,085		$	50,414
Restricted cash and cash equivalents (note 6)	64,572			155,006
Accounts receivable, net	215,570			210,664
Notes receivable, net (note 4)	6,482			4,631
Deferred income taxes	8,448			10,165
Inventories and other, net (note 5)	141,133			104,326
Advertising fund restricted assets (note 12)	57,230			39,783
Total current assets	602,520			574,989
Property and equipment, net	1,718,192			1,685,043
Notes receivable, net (note 4)	572			4,483
Deferred income taxes	13,067			11,018
Equity investments	40,253			40,738
Other assets	129,850			117,552
Total assets	$	2,504,454		$	2,433,823
Liabilities and equity
Current liabilities
Accounts payable (note 6)	$	215,215		$	204,514
Tim Card obligation (note 6)	112,458			184,443
Accrued liabilities (note 6)	110,757			89,565
Advertising fund liabilities (note 12)	49,211			59,912
Short-term borrowings	—			30,000
Current portion of long-term obligations	18,243			17,782
Total current liabilities	505,884			586,216
Long-term obligations
Long-term debt (note 7)	1,294,880			843,020
Capital leases	125,468			121,049
Deferred income taxes	7,377			9,929
Other long-term liabilities	139,769			112,090
Total long-term obligations	1,567,494			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: 132,576,171 and 141,329,010 shares, respectively	375,880			400,738
Common shares held in Trust, at cost: 315,932 and 293,816 shares, respectively	(14,806		)	(12,924		)
Contributed surplus	12,148			11,033
Retained earnings	154,569			474,409
Accumulated other comprehensive loss	(97,622		)	(112,102		)
Total equity of Tim Hortons Inc.	430,169			761,154
Noncontrolling interests (note 12)	907			365
Total equity	431,076			761,519
Total liabilities and equity	$	2,504,454		$	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
	September 28, 2014			September 29, 2013
Cash flows provided from (used in) operating activities
Net income	$	317,520		$	326,440
Adjustments to reconcile net income to net cash provided from operating activities
Depreciation and amortization	121,163			110,447
Total return swaps (gain)	(26,509		)	(11,037		)
Stock-based compensation expense (note 11)	34,967			17,132
Deferred income taxes	224			(2,458		)
Changes in operating assets and liabilities
Restricted cash and cash equivalents	90,992			50,020
Accounts receivable	(8,506		)	(11,010		)
Inventories and other	(18,666		)	(7,913		)
Accounts payable and accrued liabilities	(35,516		)	(58,213		)
Taxes	4,164			7,183
Settlement of interest rate forwards	(4,851		)	—
Deposit with tax authorities	(1,721		)	—
Other	(25,626		)	17,561
Net cash provided from operating activities	447,635			438,152
Cash flows (used in) provided from investing activities
Capital expenditures	(138,950		)	(132,726		)
Capital expenditures – Advertising fund	(5,237		)	(9,554		)
Other investing activities	10,955			6,709
Net cash (used in) investing activities	(133,232		)	(135,571		)
Cash flows (used in) provided from financing activities
Repurchase of common shares	(527,640		)	(242,222		)
Dividend payments to common shareholders	(129,367		)	(118,579		)
Net proceeds from issuance of debt	448,299			—
Short-term (repayments) borrowings, net	(30,000		)	—
Principal payments on long-term debt obligations	(12,139		)	(12,901		)
Other financing activities	(6,269		)	(5,601		)
Net cash (used in) financing activities	(257,116		)	(379,303		)
Effect of exchange rate changes on cash	1,384			1,460
(Decrease) in cash and cash equivalents	58,671			(75,262		)
Cash and cash equivalents at beginning of period	50,414			120,139
Cash and cash equivalents at end of period	$	109,085		$	44,877
Supplemental disclosures of cash flow information:
Interest paid	$	37,096		$	23,259
Income taxes paid	$	144,297		$	117,418
Non-cash investing and financing activities:
Capital lease obligations incurred	$	23,238		$	25,217

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)	(8,753	)	(24,858		)	(59	)	(3,549		)	—		(502,781		)	—			—			(531,188		)	—			(531,188		)
Disbursed or sold from the Trust(4)	—		—			37		1,667			—		—			—			—			1,667			—			1,667
Stock-based compensation	—		—			—		—			1,115		(214		)	—			—			901			—			901
Other comprehensive income (loss) before reclassifications(5)	—		—			—		—			—		—			18,471			(1,771		)	16,700			—			16,700
Amounts reclassified from AOCI(5)	—		—			—		—			—		—			—			(2,220		)	(2,220		)	—			(2,220		)
NCI transactions	—		—			—		—			—		(268		)	—			—			(268		)	268			—
Net income	—		—			—		—			—		312,790			—			—			312,790			4,730			317,520
Dividends and distributions, net	—		—			—		—			—		(129,367		)	—			—			(129,367		)	(4,456		)	(133,823		)
Balance as at September 28, 2014	132,576		$	375,880		(316	)	$	(14,806	)	$	12,148	$	154,569		$	(85,634	)	$	(11,988	)	$	430,169		$	907		$	431,076

________________

⁽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 and was due to terminate on February 27, 2015, or earlier if the $440.0 million or 10.0% share maximum was reached, or upon the occurrence of certain other termination events. Following the announcement on August 24, 2014 that the Company was in discussions with Burger King Worldwide, Inc. regarding a potential strategic transaction, the 2014 Program was terminated.

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 September 28, 2014, and the results of operations, comprehensive income and cash flows for the third quarters ended September 28, 2014 and September 29, 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 (see Note 15). PSUs are expensed on a straight-line basis over the relevant vesting period.

Proposed transaction with Burger King Worldwide, Inc.

On August 26, 2014, the Company announced that it had entered into a definitive agreement (the “Arrangement Agreement”) with Burger King Worldwide, Inc. (“Burger King”) and certain of its affiliates (see Note 15 for further information).

NOTE 2    INCOME TAXES

The effective income tax rate was 34.0% for the third quarter ended September 28, 2014 (third quarter fiscal 2013: 28.3%) and 30.3% for the year-to-date period ended September 28, 2014 (year-to-date period fiscal 2013: 27.3%). 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 Transaction-related costs (see Note 15), and to a lesser degree an increase in costs in 2014 related to the Company’s new long-term debt, for both of which a full tax benefit cannot be recognized.

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

	Third quarter ended				Year-to-date period ended
	September 28, 2014		September 29, 2013		September 28, 2014		September 29, 2013
Net income attributable to Tim Hortons Inc.	$	98,131	$	113,863	$	312,790	$	323,770
Weighted average shares outstanding for computation of basic earnings per common share attributable to Tim Hortons Inc. (in thousands)	132,439		150,342		134,817		152,379
Dilutive impact of restricted stock units (“RSUs”) and PSUs (in thousands)	219		264		243		285
Dilutive impact of stock options with tandem stock appreciation rights (“SARs”) (in thousands)	276		258		232		255
Weighted average shares outstanding for computation of diluted earnings per common share attributable to Tim Hortons Inc. (in thousands)	132,934		150,864		135,292		152,919
Basic earnings per common share attributable to Tim Hortons Inc.	$	0.74	$	0.76	$	2.32	$	2.12
Diluted earnings per common share attributable to Tim Hortons Inc.	$	0.74	$	0.75	$	2.31	$	2.12

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
	September 28, 2014								December 29, 2013
	Gross		VIEs(2)			Total			Gross		VIEs(2)			Total
Franchise Incentive Program (“FIP”) notes(1)	$	15,404	$	(12,392	)	$	3,012		$	16,677	$	(13,668	)	$	3,009
Other notes receivable(3)	6,173		(594		)	5,579			8,256		(649		)	7,607
Notes receivable	$	21,577	$	(12,986	)	8,591			$	24,933	$	(14,317	)	10,616
Allowance						(1,537		)						(1,502		)
Notes receivable, net						$	7,054							$	9,114
Current portion, net						$	6,482							$	4,631
Long-term portion, net						$	572							$	4,483

	As at
	September 28, 2014								December 29, 2013
Class and Aging	Gross		VIEs(2)			Total			Gross		VIEs(2)			Total
Current status (FIP notes and other)	$	6,974	$	(1,271	)	$	5,703		$	9,688	$	(2,081	)	$	7,607
Past-due status < 90 days (FIP notes)	—		—			—			328		—			328
Past-due status > 90 days (FIP notes)	14,603		(11,715		)	2,888			14,917		(12,236		)	2,681
Notes receivable	$	21,577	$	(12,986	)	$	8,591		$	24,933	$	(14,317	)	$	10,616
Allowance						(1,537		)						(1,502		)
Notes receivable, net						$	7,054							$	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
	September 28, 2014			December 29, 2013
Raw materials	$	21,784		$	22,789
Finished goods	91,346			69,348
	113,130			92,137
Inventory obsolescence provision	(2,057		)	(1,754		)
Inventories, net	111,073			90,383
Prepaids and other(1)	30,060			13,943
Total Inventories and other, net	$	141,133		$	104,326

⁽¹⁾ Includes fair value of the Total Return Swaps of $10.6 million (December 29, 2013: nil) and bearer deposit notes of $7.6 million (December 29, 2013: nil) (see Note 9). Amounts have been reclassified from Other assets since December 29, 2013.

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
	September 28, 2014		December 29, 2013
Accounts payable	$	143,383	$	142,131
Construction holdbacks and accruals	46,772		57,527
Transaction costs (note 15)	24,572		—
Corporate reorganization accrual	488		4,856
Total Accounts payable	$	215,215	$	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, and to a much lesser extent, the recognition of breakage income. 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
	September 28, 2014		December 29, 2013
Salaries and wages	$	26,312	$	22,553
Taxes payable	18,730		14,542
De-branding accruals(1)	1,376		9,538
Other accrued liabilities(2)	64,339		42,932
Total Accrued liabilities	$	110,757	$	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
	September 28, 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	$	4,264		Level 2	$	4,181
Interest rate swap(3)	Level 2	(163		)	Level 2	(49		)
Interest rate forwards(4)	n/a	—			Level 2	285
Total return swaps (“TRS”)(5)	Level 2	47,902			Level 2	21,393
Total Derivatives		$	52,003			$	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 September 28, 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
	September 28, 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	$	7,054		$	7,054		Level 3	$	9,114		$	9,114
Series 1 Notes(3)	Level 2	$	(306,768	)	$	(300,934	)	Level 2	$	(315,519	)	$	(301,196	)
Series 2 Notes(3)	Level 2	$	(458,325	)	$	(449,901	)	Level 2	$	(445,419	)	$	(449,892	)
Series 3 Notes(3)	Level 2	$	(452,435	)	$	(449,887	)	n/a	$	—		$	—
Advertising fund term debt(4)	Level 3	$	(26,415	)	$	(26,415	)	Level 3	$	(30,189	)	$	(30,189	)
Other debt(5)	Level 3	$	(141,995	)	$	(75,651	)	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
	September 28, 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)	$	3,480	$	—		$	3,480		Accounts receivable, net	$	4,181	$	—		$	4,181		Accounts receivable, net
Interest rate swap(2)	$	—	$	(163	)	$	(163	)	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 (current)(4)	$	10,609	$	—		$	10,609		Inventories and other, net	$	—	$	—		$	—		n/a
TRS (long-term)(4)	$	37,293	$	—		$	37,293		Other assets	$	21,393	$	—		$	21,393		Other assets
Forward currency contracts(1)	$	784	$	—		$	784		Accounts receivable, net	$	—	$	—		$	—		n/a

________________ 

⁽¹⁾  Notional value as at September 28, 2014 of $158.6 million (December 29, 2013: $154.0 million), with maturities ranging between October 2014 and April 2015; no associated cash collateral.

⁽²⁾  Notional value as at September 28, 2014 of $26.3 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 $42.3 million as at September 28, 2014 (December 29, 2013: $41.4 million). The TRS have maturities annually, in May, between fiscal 2015 and fiscal 2021.

		Third quarter ended September 28, 2014									Third quarter ended September 29, 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	$	5,362		$	(659	)	$	4,703		$	(3,368	)	$	(2,300	)	$	(5,668	)
Interest rate swap(3)	Interest (expense)	(6		)	47			41			(83		)	59			(24		)
Interest rate forwards(4)	Interest (expense)	—			659			659			(7,235		)	173			(7,062		)
Total		5,356			47			5,403			(10,686		)	(2,068		)	(12,754		)
Income tax effect	Income taxes	(1,422		)	162			(1,260		)	915			594			1,509
Net of income taxes		$	3,934		$	209		$	4,143		$	(9,771	)	$	(1,474	)	$	(11,245	)

12

TIM HORTONS INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

(in thousands of Canadian dollars)

		Year-to-date period ended September 28, 2014									Year-to-date period ended September 29, 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	$	4,847		$	(5,548	)	$	(701	)	$	4,756		$	(1,685	)	$	3,071
Interest rate swap(3)	Interest (expense)	(264		)	150			(114		)	(128		)	139			11
Interest rate forwards(4)	Interest (expense)	(5,136		)	1,744			(3,392		)	(7,235		)	519			(6,716		)
Total		(553		)	(3,654		)	(4,207		)	(2,607		)	(1,027		)	(3,634		)
Income tax effect	Income taxes	(1,218		)	1,434			216			(1,226		)	410			(816		)
Net of income taxes		$	(1,771	)	$	(2,220	)	$	(3,991	)	$	(3,833	)	$	(617	)	$	(4,450	)

_______________ 

⁽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	Third quarter ended						Year-to-date period ended
		September 28, 2014			September 29, 2013			September 28, 2014			September 29, 2013
TRS	General and administrative expenses	$	(30,756	)	$	(2,802	)	$	(26,509	)	$	(11,037	)
Forward currency contracts	Cost of sales	(741		)	85			(574		)	(264		)
Forward currency contracts	Other (income) expense	(1,175		)	—			(535		)	—
Total loss (gain), net		$	(32,672	)	$	(2,717	)	$	(27,618	)	$	(11,301	)

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

	Third quarter ended						Year-to-date period ended
	September 28, 2014			September 29, 2013			September 28, 2014			September 29, 2013
RSUs and PSUs	$	1,551		$	1,510		$	4,207		$	5,090
Stock options and tandem SARs	27,490			2,573			25,626			9,912
Deferred share units (“DSUs”)	5,040			514			5,134			2,130
Total stock-based compensation expense(1)	$	34,081		$	4,597		$	34,967		$	17,132
TRS (gain)(2)	$	(30,756	)	$	(2,802	)	$	(26,509	)	$	(11,037	)

________________

⁽¹⁾  Primarily included in General and administrative expenses in the Condensed Consolidated Statement of Operations.

⁽²⁾  The Company has entered into TRS contracts as economic hedges, covering 1,027,000 of the Company’s underlying common shares (September 29, 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.

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:

	Third quarter ended
	September 28, 2014						September 29, 2013
	Restaurant VIEs(1)		Advertising fund VIEs(2)		Total VIEs		Restaurant VIEs(1)		Advertising fund VIEs(2)		Total VIEs
Sales	$	94,129	$	—	$	94,129	$	96,049	$	—	$	96,049
Advertising levies	—		2,979		2,979		—		2,865		2,865
Total revenues	94,129		2,979		97,108		96,049		2,865		98,914
Cost of sales	92,183		—		92,183		94,302		—		94,302
Operating expenses	—		2,761		2,761		—		2,379		2,379
Asset impairment(3)	—		—		—		441		—		441
Operating income	1,946		218		2,164		1,306		486		1,792
Interest expense	—		218		218		—		486		486
Income before taxes	1,946		—		1,946		1,306		—		1,306
Income taxes	344		—		344		214		—		214
Net income attributable to noncontrolling interests	$	1,602	$	—	$	1,602	$	1,092	$	—	$	1,092

	Year-to-date period ended
	September 28, 2014						September 29, 2013
	Restaurant VIEs(1)		Advertising fund VIEs(2)		Total VIEs		Restaurant VIEs(1)		Advertising fund VIEs(2)		Total VIEs
Sales	$	271,838	$	—	$	271,838	$	276,273	$	—	$	276,273
Advertising levies	—		8,877		8,877		—		7,965		7,965
Total revenues	271,838		8,877		280,715		276,273		7,965		284,238
Cost of sales	266,038		—		266,038		272,648		—		272,648
Operating expenses	—		8,227		8,227		—		6,771		6,771
Asset impairment(3)	—		—		—		441		—		441
Operating income	5,800		650		6,450		3,184		1,194		4,378
Interest expense	33		650		683		—		1,194		1,194
Income before taxes	5,767		—		5,767		3,184		—		3,184
Income taxes	1,037		—		1,037		514		—		514
Net income attributable to noncontrolling interests	$	4,730	$	—	$	4,730	$	2,670	$	—	$	2,670

______________

⁽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.

⁽³⁾  The Company recognized an impairment charge in the third quarter of 2013 related to certain underperforming markets in the U.S.

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
	September 28, 2014				December 29, 2013
	Restaurant VIEs(1)		Advertising fund VIEs		Restaurant VIEs(1)		Advertising fund VIEs
Cash and cash equivalents	$	7,717	$	—	$	7,773	$	—
Advertising fund restricted assets – current	—		57,230		—		39,783
Other current assets	6,892		—		7,155		—
Property and equipment, net	15,134		62,877		20,471		70,485
Other long-term assets	91		746		370		1,271
Total assets	$	29,834	$	120,853	$	35,769	$	111,539
Notes payable to Tim Hortons Inc. – current(2)(3)	$	12,492	$	8,222	$	13,689	$	3,040
Advertising fund liabilities – current	—		49,211		—		59,913
Other current liabilities(4)	10,509		5,254		11,706		5,253
Notes payable to Tim Hortons Inc. – long-term(2)(3)	494		34,943		628		15,200
Long-term debt(4)	—		21,384		—		25,157
Other long-term liabilities	5,432		1,839		9,381		2,976
Total liabilities	28,927		120,853		35,404		111,539
Equity of VIEs	907		—		365		—
Total liabilities and equity	$	29,834	$	120,853	$	35,769	$	111,539

______________

⁽¹⁾  The Company consolidated 317 Non-owned restaurants as at September 28, 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.

⁽⁴⁾  Includes $26.4 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.

	Third quarter ended						Year-to-date period ended
	September 28, 2014			September 29, 2013			September 28, 2014			September 29, 2013
Revenues(1)
Canada	$	747,692		$	676,006		$	2,092,476		$	1,927,361
U.S.	60,099			47,019			163,152			132,687
Corporate services	4,256			3,414			13,561			12,743
Total reportable segments	812,047			726,439			2,269,189			2,072,791
VIEs	97,108			98,914			280,715			284,238
Total	$	909,155		$	825,353		$	2,549,904		$	2,357,029
Operating Income (Loss)
Canada	$	196,204		$	179,597		$	538,536		$	500,178
U.S.(2)	7,436			2,717			21,047			6,214
Corporate services	(9,709		)	(14,325		)	(32,284		)	(26,414		)
Total reportable segments	193,931			167,989			527,299			479,978
VIEs(2)	2,164			1,792			6,450			4,378
Transaction costs (note 15)	(27,289		)	—			(27,289		)	—
Corporate reorganization expenses	—			(953		)	—			(11,032		)
Consolidated Operating Income	168,806			168,828			506,460			473,324
Interest, Net	(17,639		)	(8,487		)	(50,848		)	(24,353		)
Income before income taxes	$	151,167		$	160,341		$	455,612		$	448,971

________________ 

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

⁽²⁾  In fiscal 2013, the Company recognized an asset impairment charge in the U.S. related to certain non-core and non-priority markets, of which $2.5 million was recognized in the U.S. segment and $0.4 million related to consolidated VIEs.

Consolidated Sales comprise the following:

	Third quarter ended				Year-to-date period ended
	September 28, 2014		September 29, 2013		September 28, 2014		September 29, 2013
Sales
Distribution sales	$	534,456	$	473,641	$	1,498,571	$	1,373,389
Company-operated restaurant sales	6,201		6,090		19,236		18,567
Sales from VIEs	94,129		96,049		271,838		276,273
Total Sales	$	634,786	$	575,780	$	1,789,645	$	1,668,229

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.

NOTE 15    PROPOSED TRANSACTION WITH BURGER KING

On August 26, 2014, the Company announced that it had entered into the Arrangement Agreement with Burger King and certain of its affiliates. Pursuant to and subject to the terms and conditions of the Arrangement Agreement, the transaction (“Transaction”) will result in Burger King and Tim Hortons being indirect subsidiaries of a newly formed Canadian company, 9060669 Canada Inc. (“Holdings”, formerly known as 1011773 B.C. Unlimited Liability Company). The Transaction has been unanimously approved by the Board of Directors of the Company as well as the Board of Directors of Burger King.

Company shareholders will receive, for each Company common share held, at the election of such holder: (a) C$65.50 in cash and 0.8025 common shares of Holdings (the “Arrangement Mixed Consideration”); (b) C$88.50 in cash (the “Arrangement Cash Consideration”); or (c) 3.0879 common shares of Holdings (the “Arrangement Share Consideration”). Common shares of the Corporation with respect to which no election is made will receive the Arrangement Mixed Consideration. Shareholders who elect to receive the Arrangement Cash Consideration or the Arrangement Share Consideration will be subject to proration in accordance with the Arrangement Agreement so that the total amount of cash paid and the total number of common shares of Holdings issued to the Corporation’s shareholders as a whole are equal to the total amount of cash and number of common shares of Holdings that would have been paid and issued if all of the Corporation’s shareholders received the Arrangement Mixed Consideration.

For a Company shareholder electing the Arrangement Mixed Consideration, the value of the consideration received will depend on the price per share of Burger King’s common shares at the time the Transaction is completed. Based on Burger King’s unaffected closing stock price as of August 22, 2014, this represented total value per Company share of $89.39 and based on Burger King’s closing stock price as of August 25, 2014, this represented total value per Company share of $94.05.

The Transaction is subject to customary closing conditions, including, among others, approval by the Company’s shareholders, approval by the Ontario Superior Court of Justice and regulatory approvals. An interim order of the Ontario Superior Court of Justice with respect to the Transaction was issued on November 3, 2014. The approval of Tim Hortons shareholders will be sought at a special meeting of shareholders, for shareholders of record on November 3, 2014. The special meeting is scheduled to be held on December 9, 2014 at the Tim Hortons Innovation Centre, 226 Wyecroft Road in Oakville, Ontario. As 3G Capital currently owns approximately 70.0% of the shares of Burger King and has committed to vote in favour of the Transaction, no stockholder vote is required of Burger King stockholders. The closing of the Transaction is currently anticipated to occur in late 2014 or early 2015.

Upon termination of the Transaction under certain circumstances, the Company may be required to pay Burger King a termination fee of $345.0 million, or Burger King may be required to pay the Company a termination fee of $500.0 million. In addition, if the Company’s shareholders do not approve the Transaction, the Company may be required to pay Burger King a reimbursement fee of $40.0 million.

Certain of the Company’s arrangements and agreements will be impacted by the proposed Transaction, including the Senior Notes included in our Long-term debt, certain agreements with executives, and our outstanding equity awards. For a full description of the impact of the Transaction on the Company, please refer to Amendment No. 4 to the Registration Statement on Form S-4, filed with the SEC on November 3, 2014, by New Red Canada Limited Partnership (“Partnership”, formerly known as New Red Canada Partnership) and Holdings, which is available on the SEC’s EDGAR filing system. The Form S-4 as amended, was declared effective by the SEC on November 5, 2014. Final versions of all documents for use in connection with a special meeting of shareholders of the Company to seek shareholder approval of the Transaction will be filed by the Company on SEDAR and on EDGAR, including the draft management proxy circular, in accordance with applicable corporate and securities laws in Canada and the United States.

The Company has incurred Transaction-related costs of $27.3 million in the year-to-date period ended September 28, 2014, primarily comprised of professional fees to financial and legal advisors.

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 September 28, 2014 filed with the SEC and the CSA on November 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, operating results and outlook based on current expectations, including the Transaction (as defined below), 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 additional risks described herein under Item 1A and elsewhere, 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 showed positive progress in the third quarter of 2014, and we achieved significant sales progression in the third quarter of 2014, as our systemwide sales grew by 7.5% on a constant currency basis, driven by same-store sales growth and new restaurant development.

In the third quarter of 2014, same-store sales growth of 3.5% in Canada and 6.8% in the U.S. was driven primarily by increases in average cheque, with the U.S. also benefiting from an increase in transactions. In the year-to-date period of 2014, same-store sales growth of 2.6% in Canada, and 4.8% in the U.S., was driven by increases in average cheque.

18

On August 26, 2014, the Company announced that it had entered into a definitive agreement (the “Arrangement Agreement”) with Burger King Worldwide, Inc. (“Burger King”) and certain of its affiliates. Pursuant to and subject to the terms and conditions of the Arrangement Agreement, the proposed transaction (“Transaction”) will result in Burger King and Tim Hortons being indirect subsidiaries of a newly formed Canadian company. As a result of the proposed Transaction, the Company has recognized transaction costs of $27.3 million in the year-to-date period ending September 28, 2014, comprised primarily of professional fees paid to financial and legal advisors. Please refer to Item 1. Financial Statements—Note 15 Proposed Transaction with Burger King for more information.

Operating income in the third quarter of 2014 was flat compared to the third quarter of 2013, while adjusted operating income (refer to non-GAAP table on page 20) increased15.5%. Growth in adjusted operating income was primarily driven by systemwide sales growth, resulting in an increase in supply chain and rents and royalties income. Year-to-date in 2014, operating income increased7.0%, while adjusted operating income (refer to non-GAAP table on page 20) increased10.2%, compared to the year-to-date period of 2013. Similar to the quarter, year-to-date systemwide sales growth drove an increase in both rents and royalties and supply chain income. Partially offsetting these growth factors were increased general and administrative expenses, and the timing of expenses related to our CIBC Visa co-branded loyalty rewards credit card (the “Double Double^TM Card”). We continue to expect the launch of our Double Double Card to be cost-neutral on operating income over fiscal 2014.

Net income attributable to Tim Hortons Inc. (“net income”) decreased13.8% in the third quarter of 2014, which was significantly impacted by Transaction costs, for which a full tax benefit cannot be recognized, compared to the third quarter of 2013. In the year-to-date period of 2014, net income decreased3.4%, which again was significantly impacted by Transaction costs, for which a full tax benefit cannot be recognized, compared to the year-to-date period of 2013, which was impacted by Corporate reorganization costs. Aside from the items noted, the change in both periods was due primarily to higher operating income, as discussed above, partially offset by the effect of our recapitalization, which generated higher interest expense and a higher effective tax rate.

Diluted earnings per share attributable to Tim Hortons Inc. (“EPS”) was $0.74 in the third quarter of 2014, which was negatively impacted by approximately $0.21 due to Transaction costs, compared to $0.75 in the third quarter of 2013. Adjusted EPS (refer to non-GAAP table on page 20) was $0.95, an increase of 25.2% compared to the third quarter of 2013. EPS was $2.31 in the year-to-date period of 2014, which was negatively impacted by approximately $0.21 due to Transaction costs, compared to $2.12 in the year-to-date period of 2013, which was negatively impacted by approximately $0.06 due to Corporate reorganization costs. Adjusted EPS (refer to non-GAAP table on page 20) increased 16.0% in the year-to-date period of 2014 compared to the year-to-date period of 2013. Adjusted EPS growth in both periods was driven by strong operating performance, as well as the impact of our recapitalization, the proceeds of which were primarily used for our expanded share repurchase program, which resulted in a lower number of shares outstanding.

Selected Operating and Financial Highlights

	Third quarter ended						Year-to-date ended
($ in millions, except per share data)	September 28, 2014			September 29, 2013			September 28, 2014			September 29, 2013
Systemwide sales growth(1)	7.5		%	5.3		%	6.4		%	4.5		%
Same-store sales growth(2)
Canada	3.5		%	1.7		%	2.6		%	0.9		%
U.S.	6.8		%	3.0		%	4.8		%	1.3		%
Systemwide restaurants	4,590			4,350			4,590			4,350
Revenues	$	909.2		$	825.4		$	2,549.9		$	2,357.0
Operating income	$	168.8		$	168.8		$	506.5		$	473.3
Adjusted operating income(3)	$	196.1		$	169.8		$	533.7		$	484.4
Net income attributable to Tim Hortons Inc.	$	98.1		$	113.9		$	312.8		$	323.8
Diluted EPS	$	0.74		$	0.75		$	2.31		$	2.12
Adjusted Diluted EPS(3)	$	0.95		$	0.76		$	2.52		$	2.17
Weighted average number of common shares outstanding – Diluted (in millions)	132.9			150.9			135.3			152.9

________________  

⁽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

19

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 7.9% and 5.7% for the third quarters of 2014 and 2013, respectively, and 7.0% and 4.7% 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 and adjusted diluted EPS (“adjusted EPS”) are non-GAAP measures. See below for reconciliation of adjusting items used to calculate adjusted operating income and adjusted EPS. Management uses adjusted operating income and adjusted EPS 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. These non-GAAP measures are not intended to replace the presentation of our financial results in accordance with GAAP. The Company’s use of the term adjusted operating income and adjusted EPS may differ from similar measures reported by other companies. Adjusted operating income and adjusted EPS should not be considered a measure of income generated by our business. The reconciliations of operating income and diluted EPS, which are GAAP measures, to adjusted operating income and adjusted diluted EPS, which are non-GAAP measures, are set forth in the table below:

	Third quarter ended									Year-to-date periods ended
	September 28, 2014		September 29, 2013		Change					September 28, 2014		September 29, 2013		Change
					$			%						$			%
	($ in millions)
Operating income	$	168.8	$	168.8	$	—		—	%	$	506.5	$	473.3	$	33.1		7.0	%
Add: Transaction costs	27.3		—		27.3			n/m		27.3		—		27.3			n/m
Add: Corporate reorganization expenses	—		1.0		(1.0		)	n/m		—		11.0		(11.0		)	n/m
Adjusted operating income	$	196.1	$	169.8	$	26.3		15.5	%	$	533.7	$	484.4	$	49.4		10.2	%

	Third quarter ended									Year-to-date periods ended
	September 28, 2014		September 29, 2013		Change					September 28, 2014		September 29, 2013		Change
					$			%						$			%
	($ per share)
Diluted EPS	0.74		0.75		(0.02)			(2.2	)%	$	2.31	$	2.12	$	0.19		9.2	%
Add: Transaction costs	0.21		—		0.21			n/m		0.21		—		0.21			n/m
Add: Corporate reorganization expenses	—		0.01		(0.01		)	n/m		—		0.06		(0.06		)	n/m
Adjusted diluted EPS	$	0.95	$	0.76	$	0.19		25.2	%	2.52		2.17		0.35			16.0	%

________________ 

All numbers rounded

^n/m    Not meaningful

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 continue to pursue 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:

	Third quarter ended September 28, 2014					Third quarter ended September 29, 2013
	Full-serve Standard and Non-standard		Self-serve Kiosks	Total		Full-serve Standard and Non-standard		Self-serve Kiosks		Total
Canada
Restaurants opened	30		11	41		30		4		34
Restaurants closed	(6	)	—	(6	)	(2	)	—		(2	)
Net change	24		11	35		28		4		32
U.S.
Restaurants opened	10		—	10		12		1		13
Restaurants closed	(7	)	—	(7	)	(2	)	(1	)	(3	)
Net change	3		—	3		10		—		10
International (GCC)
Restaurants opened	6		—	6		4		—		4
Total Company
Restaurants opened	46		11	57		46		5		51
Restaurants closed	(13	)	—	(13	)	(4	)	(1	)	(5	)
Net change	33		11	44		42		4		46

	Year-to-date period ended September 28, 2014					Year-to-date period ended September 29, 2013
	Full-serve Standard and Non-standard		Self-serve Kiosks	Total		Full-serve Standard and Non-standard		Self-serve Kiosks		Total
Canada
Restaurants opened	75		18	93		71		8		79
Restaurants closed	(16	)	—	(16	)	(14	)	(1	)	(15	)
Net change	59		18	77		57		7		64
U.S.
Restaurants opened	22		—	22		24		2		26
Restaurants closed	(12	)	—	(12	)	(9	)	(4	)	(13	)
Net change	10		—	10		15		(2	)	13
International (GCC)
Restaurants opened	18		—	18		9		—		9
Total Company
Restaurants opened	115		18	133		104		10		114
Restaurants closed	(28	)	—	(28	)	(23	)	(5	)	(28	)
Net change	87		18	105		81		5		86

21

Systemwide Restaurant Count

	As at
	September 28, 2014		December 29, 2013		September 29, 2013
Canada
Company-operated	15		14		15
Franchised – standard and non-standard	3,498		3,440		3,354
Franchised – self-serve kiosk	152		134		131
Total	3,665		3,588		3,500
% Franchised	99.6	%	99.6	%	99.6	%
U.S.
Company-operated	3		2		3
Franchised – standard and non-standard	685		676		637
Franchised – self-serve kiosks	181		181		177
Total	869		859		817
% Franchised	99.7	%	99.8	%	99.6	%
International (GCC)
Franchised – standard and non-standard	56		38		33
% Franchised	100.0	%	100.0	%	100.0	%
Total system
Company-operated	18		16		18
Franchised – standard and non-standard	4,239		4,154		4,024
Franchised – self-serve kiosks	333		315		308
Total	4,590		4,485		4,350
% Franchised	99.6	%	99.6	%	99.6	%

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:

	Third quarter ended										Year-to-date period ended
	September 28, 2014			September 29, 2013			Change				September 28, 2014			September 29, 2013			Change
							$		%								$			%
	($ in millions)
Canada	$	196.2		$	179.6		$	16.6	9.2	%	$	538.5		$	500.2		$	38.4		7.7	%
U.S.	$	7.4		$	2.7		$	4.7	n/m		$	21.0		$	6.2		$	14.8		n/m
Corporate services	$	(9.7	)	$	(14.3	)	$	4.6	n/m		$	(32.3	)	$	(26.4	)	$	(5.9	)	n/m

________________

All numbers rounded

^n/m    Not meaningful

Canada

Operating income increased 9.2% in the third quarter of 2014 compared to the third quarter of 2013. Systemwide sales growth of 6.9%, driven by same-store sales growth of 3.5% and the incremental sales from new restaurants year-over-year, resulted in higher rents and royalties income and a higher allocation of supply chain income, including favourable product margin variability. Canada also benefited from lower general and administrative expenses, as breakage income recognized related to our Tim Card obligation (refer to Results of Operations—General and administrative expenses) and lower Cold Stone Creamery promotional expenses, were partially offset by Tim Card program costs, increased salaries and benefits driven by higher performance-related accruals and fewer vacancies in the organization, as well as expenses related to our 50th anniversary

22

restaurant owner convention. We expect the expenses related to our 50th anniversary restaurant owner convention to be primarily offset by lower franchisee meeting costs in the fourth quarter of 2014.

Same-store sales growth in the third quarter of 2014 was driven by an increase in average cheque, resulting from pricing and favourable product mix, partially offset by a modest decline in same-store transactions. We continued to grow total systemwide transactions. In Canada, the gain in average cheque was driven by increased sales in both our breakfast and lunch dayparts, aided in part by the introduction of our Spicy Crispy Chicken Sandwich, as well as sales of baked goods, which benefited from sales of specialty donuts. Our Dark Roast coffee blend, which was introduced systemwide towards the end of the third quarter of 2014, also proved popular amongst our guests.

For the year-to-date period of 2014, operating income increased7.7% compared to the year-to-date period of 2013. Operating income growth was driven primarily by systemwide sales growth of 5.8% in the year-to-date period of 2014, resulting from the net addition of new restaurants and same-store sales growth of 2.6%. 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. Canada also benefited from lower general and administrative expenses, due to the same factors impacting the quarter.

U.S.

Operating income was $7.4 million in the third quarter of 2014, a significant increase of $4.7 million compared to the third quarter of 2013. The third quarter of 2013 included the recognition of an asset impairment charge of $2.5 million. Systemwide sales growth of 12.8% was driven by same-store sales growth of 6.8%, and the incremental sales from the net addition of new restaurants. Systemwide sales growth led to growth in rents and royalties revenues, and same-store sales growth continued to drive a significant reduction in relief from restaurants open 13 months or more. We continued to note lower relief due to specific relief reduction measures, which began in the second half of 2013, and the closure of certain underperforming restaurants in the fourth quarter of 2013. Partially offsetting the growth in rents and royalties income were higher general and administrative expenses, due to increased salaries and benefits as a result of increased performance-related accruals, and the timing of expenses related to our 50th anniversary restaurant owner convention. Foreign currency translation increased U.S. operating income by approximately $0.2 million year-over-year.

In the third quarter of 2014, same-store sales growth was driven by gains in average cheque resulting from favourable product mix and pricing, and to a lesser extent, an increase in same-store transactions. We continued to grow total systemwide transactions. Our same-store sales growth in the third quarter of 2014 continued to benefit from increased sales in our breakfast daypart and cold beverage category, as a result of continued product innovation. Increased sales of coffee and hot beverages in the U.S., also contributed to same-store sales growth in the third quarter of 2014. Our Dark Roast coffee blend, which was introduced systemwide towards the end of the third quarter of 2014, also proved popular amongst our guests.

For the year-to-date period of 2014, operating income was $21.0 million, an increase of $14.8 million compared to the year-to-date period of 2013. The year-to-date period of 2013 included the recognition of an asset impairment charge of $2.5 million. Systemwide sales growth of 11.1% was driven by incremental sales from the net addition of new restaurants and same-store sales growth of 4.8%, 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 third 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, due in part to specific relief reduction measures and certain limited restaurant closures. Rents and royalties income also benefited slightly from favourable lease termination settlements in connection with such restaurant closures. This growth was partially offset by higher operating expenses, due to an overall increase in the number of properties owned or leased. A higher supply chain allocation, driven primarily by systemwide sales growth, also contributed to U.S. operating income growth. Foreign currency translation increased U.S. operating income by approximately $1.3 million year-over-year.

In October 2014, consistent with our strategic plan, we signed an additional area development agreement to develop approximately 10 restaurants in New Jersey over a five-year term. Since the fourth quarter of 2013, we have signed a total of seven agreements to develop approximately 145 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 $9.7 million in the third quarter of 2014, compared to an operating loss of $14.3 million in the third quarter of 2013. The improvement in our Corporate services segment was driven by our supply chain, due to the reversal of unfavourable product margins in the third quarter of 2014 recognized in the first half of 2014, compared to unfavourable product margins recognized in the third quarter of 2013. This was partially offset by increased

23

corporate costs as a result of higher salaries and benefits, primarily driven by increased performance-related accruals, and higher professional fees related to strategic initiatives in the third quarter of 2014 compared to the third quarter of 2013.

Year-to-date in 2014, our Corporate services segment had an operating loss of $32.3 million, compared to an operating loss of $26.4 million in the year-to-date period of 2013. The increase was primarily driven by increased corporate costs as a result of higher salaries and benefits, driven by both increased performance-related accruals and fewer vacancies in the organization, as well as higher professional fees related to strategic initiatives.

Results of Operations

	Third quarter ended											Year-to-date period ended
	September 28, 2014			September 29, 2013			Change(1)					September 28, 2014			September 29, 2013			Change(1)
							$			%								$			%
	($ in millions)
Revenues
Sales	$	634.8		$	575.8		$	59.0		10.2	%	$	1,789.6		$	1,668.2		$	121.4		7.3	%
Franchise revenues:
Rents and royalties(2)	230.4			212.1			18.3			8.6	%	654.8			608.9			46.0			7.6	%
Franchise fees	44.0			37.5			6.5			17.4	%	105.4			79.9			25.5			31.9	%
Total revenues	909.2			825.4			83.8			10.2	%	2,549.9			2,357.0			192.9			8.2	%
Costs and expenses
Cost of sales	545.1			501.9			43.2			8.6	%	1,545.8			1,452.3			93.5			6.4	%
Operating expenses	86.3			78.3			8.0			10.2	%	252.0			231.0			20.9			9.1	%
Franchise fee costs	43.6			37.9			5.7			15.1	%	106.2			83.7			22.4			26.8	%
General and administrative expenses	41.7			38.8			2.9			7.5	%	121.1			115.5			5.6			4.9	%
Equity (income)	(4.0		)	(4.1		)	—			(0.9	)%	(11.4		)	(11.3		)	—			0.2	%
Transaction costs	27.3			—			27.3			n/m		27.3			—			27.3			n/m
Corporate reorganization expenses	—			1.0			(1.0		)	n/m		—			11.0			(11.0		)	n/m
Asset impairment	—			2.9			(2.9		)	n/m		—			2.9			(2.9		)	n/m
Other expense (income), net	0.5			(0.1		)	0.5			n/m		2.5			(1.4		)	3.9			n/m
Total costs and expenses	740.3			656.5			83.8			12.8	%	2,043.4			1,883.7			159.7			8.5	%
Operating income	$	168.8		$	168.8		$	—		—	%	$	506.5		$	473.3		$	33.1		7.0	%
Operating income %	18.6		%	20.5		%						19.9		%	20.1		%
Interest (expense)	(18.5		)	(9.4		)	(9.1		)	n/m		(53.8		)	(27.0		)	(26.9		)	n/m
Income tax rate	34.0		%	28.3		%						30.3		%	27.3		%

_____________

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 third 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:

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	Third quarter ended				Year-to-date period ended
	September 28, 2014		September 29, 2013		September 28, 2014		September 29, 2013
Franchised restaurant sales	(in millions)
Canada (Canadian dollars)	$	1,702.1	$	1,591.8	$	4,836.3	$	4,571.1
U.S. (U.S. dollars)	$	165.5	$	146.5	$	477.5	$	429.2

Revenues

Sales

In the third quarter and year-to-date period of 2014, the growth in sales compared to the respective 2013 periods was driven primarily by increased distribution sales, partially offset by a decrease in sales from variable interest entities (“VIEs”).

Distribution sales. Distribution sales were $534.5 million in the third quarter of 2014, compared to $473.6 million in the third quarter of 2013. The increase of $60.8 million, or 12.8%, was driven by systemwide sales growth, which contributed approximately 6.0% of the increase. Favorable product mix and, to a lesser extent, commodity-related pricing, contributed substantially all of the remaining increase. Sales of our single-serve products through to the grocery channel also contributed to the growth in distribution sales. Foreign currency translation increased distribution sales by approximately 0.3%.

For the year-to-date period of 2014, distribution sales were $1,498.6 million, an increase of $125.2 million, or 9.1%, compared to the year-to-date period of 2013. Similar to the quarter, the increase was driven primarily by systemwide sales growth, which contributed approximately 5.5% of the increase, with favourable product mix contributing substantially all of the remaining increase. Foreign currency translation increased distribution sales by approximately 0.6%.

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 increases. 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, or a large portion of, 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 $94.1 million in the third quarter of 2014, a decrease of 2.0% compared to the third quarter of 2013. In the year-to-date period of 2014, VIEs’ sales were $271.8 million, a decrease of 1.6% compared to the year-to-date period of 2013. The decrease in both periods was driven primarily by the decrease, on average, of 27 fewer VIEs in the third quarter of 2014 and 24 fewer in the year-to-date period of 2014 compared to the respective 2013 periods. The decrease was partially offset by higher sales at consolidated restaurants, and foreign currency translation, which increased VIEs’ sales by 1.4% in the third quarter of 2014 and 2.9% in the year-to-date period of 2014.

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 at the end of each respective period:

	Third quarter ended		Year-to-date period ended		As at
	September 28, 2014	September 29, 2013	September 28, 2014	September 29, 2013	September 28, 2014	December 29, 2013
	Average		Average
Canada	106	117	106	117	109	106
U.S.	212	228	220	233	208	225
Total	318	345	326	350	317	331

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Franchise Revenues

Rents and Royalties. Revenue from rents and royalties increased8.6% in the third quarter of 2014 compared to the third quarter of 2013, and in the year-to-date period of 2014, revenue from rents and royalties increased7.6% compared to the year-to-date period of 2013. The increase in both periods was driven by systemwide sales growth, including a reduction in relief, primarily in the U.S., which collectively contributed approximately 8.2% in the third quarter of 2014 and 6.8% in the year-to-date period of 2014. Foreign currency translation increased rents and royalties revenues by approximately 0.2% and 0.5% in each respective period.

Franchise Fees. Franchise fees increased$6.5 million in the third quarter of 2014 compared to the third quarter of 2013, and in the year-to-date period of 2014, franchise fees increased$25.5 million compared to the year-to-date period of 2013. The increase in both periods was driven primarily by an increase in restaurant development, as well as an increase in renovations in Canada.

Total Costs and Expenses

Cost of Sales

In both the third 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 $457.8 million in the third quarter of 2014, compared to $411.3 million in the third quarter of 2013. The increase of $46.5 million, or 11.3%, was primarily driven by systemwide sales growth, which contributed approximately 6.0% of the increase. The remaining increase was substantially all driven by increased cost of sales due to product mix. Foreign currency translation increased distribution cost of sales by approximately 0.3%.

In the year-to-date period of 2014, distribution cost of sales was $1,290.2 million compared to $1,185.9 million in the year-to-date period of 2013. Similar to the quarter, the increase of $104.3 million, or 8.8%, was driven primarily by systemwide sales growth, which contributed approximately 5.6% of the increase, while product mix drove substantially all of the remaining increase. Foreign currency translation increased distribution cost of sales by approximately 0.6%.

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 $80.9 million in the third quarter of 2014, a decrease of $3.5 million, or 4.1%, compared to the third quarter of 2013. The decrease was primarily due to the decrease in average number of VIEs, partially offset by higher sales at consolidated restaurants and foreign currency translation, which increased VIEs’ cost of sales by approximately 1.5%.

In the year-to-date period of 2014, VIEs’ cost of sales was $236.3 million, a decrease of $10.3 million, or 4.2%, compared to the year-to-date period of 2013, driven primarily by the decrease in the average number of VIEs, partially offset by foreign currency translation, which increased VIEs’ cost of sales by approximately 3.2%.

Operating Expenses

Total operating expenses increased$8.0 million, or 10.2% in the third quarter of 2014 compared to the third quarter of 2013. Rent expense increased by $4.2 million year-over-year, primarily due to additional properties that were leased and then subleased to restaurant owners, while property-related depreciation expense increased by $3.3 million, 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. Foreign currency translation increased operating expenses by approximately 0.4%.

In the year-to-date period of 2014, operating expenses increased$20.9 million, or 9.1%, compared to the year-to-date period of 2013. Similar to the quarter, the increase was primarily due to increased rent expense of $10.7 million and depreciation expense of $10.3 million. Foreign currency translation increased operating expenses by approximately 0.8%.

Franchise Fee Costs

Franchise fee costs increased$5.7 million in the third quarter of 2014 compared to the third quarter of 2013, due primarily to increased restaurant development, higher costs to support restaurant development initiatives, and an increase in renovations in Canada. In the year-to-date period of 2014, franchise fee costs increased$22.4 million compared to the year-to-date period of 2013, due primarily to an increase in restaurant development and renovations in Canada.

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General and Administrative Expenses

General and administrative expenses increased7.5% in the third quarter of 2014 compared to the third quarter of 2013, due primarily to increased salaries and benefits as a result of increased performance-related accruals and fewer vacancies in the organization, as well as expenses related to our 50th anniversary restaurant owner convention and professional fees related to strategic initiatives unrelated to the Transaction. We expect convention costs to be primarily offset by lower franchisee meeting expenses in the fourth quarter of 2014. In the third quarter of 2014, we recognized breakage income related to our Tim Card obligation for dormant card balances determined based on long periods of inactivity, partially offset by Tim Card program costs. The recognition of breakage income, as well as lower Cold Stone Creamery promotional expenses, partially offset the increases noted above. Foreign currency translation increased general and administrative expenses by approximately 0.7%.

In the year-to-date period of 2014, general and administrative expenses increased4.9% compared to the year-to-date period of 2013. Similar to the quarter, this was driven by increased salaries and benefits resulting primarily from fewer vacancies in the organization, increased performance-related accruals, and higher stock-based compensation expense, as well as expenses related to our 50th anniversary convention and professional fees related to strategic initiatives. Partially offsetting these factors was the recognition of Tim Card breakage income, as noted above, and lower promotional expenses, related primarily to Cold Stone Creamery in Canada. Foreign currency translation increased general and administrative expenses by approximately 1.1%.

Transaction Costs

As a result of the Transaction, the Company has recognized transaction costs of $27.3 million in the year-to-date period ending September 28, 2014 comprised primarily of financial and legal professional fees and, prior to, and on the completion of the Transaction, expects to recognize, total Transaction costs of approximately $80.0 to $90.0 million, comprised primarily of financial and legal professional fees. The proposed Transaction is expected to close in late 2014 or early 2015. Please refer to Item 1. Financial Statements—Note 15 Proposed Transaction with Burger King for more information.

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 expense recognized in the third quarter of 2014 and in the year-to-date period of 2014 is primarily related to the launch of our Double Double Credit Card, which occurred in July 2014. We continue to expect the launch of the Double Double Credit Card to be cost-neutral over fiscal 2014. In comparison, 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 favourable foreign exchange.

Interest Expense

The increase in interest expense in both the third quarter of 2014 and year-to-date period of 2014, compared to the respective 2013 periods, was primarily due 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 Transaction-related costs, and to a lesser degree an increase in costs in 2014 related to our new long-term debt, for both of which a full tax benefit cannot be recognized.

A Notice of Appeal to the Tax Court of Canada was filed in July 2012 in respect of a dispute with the CRA related to the deductibility of approximately $10.0 million of interest expense for the 2002 taxation year. The court date for this matter has been adjourned from the second half of 2014 to the first half of 2015. The Company continues to believe it will ultimately prevail in sustaining the tax benefit of the interest deduction, and, accordingly, has not made a provision for this matter.

There have been no other significant developments related to the Canada Revenue Agency matters discussed in our Annual Report.

27

Liquidity and Capital Resources

The following reflects the Company’s current liquidity and capital resources, and does not reflect any considerations related to the proposed Transaction with Burger King. Please refer to Item 1. Financial Statements—Note 15 Proposed Transaction with Burger King for more information.

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). 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.

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 September 28, 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 may use 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 September 28, 2014, we had utilized $5.9 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 September 28, 2014.

Common Shares

On February 19, 2014, 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 Company Manual. The 2014 Program commenced February 28, 2014 and was due to terminate on February 27, 2015, or earlier if the $440.0 million or 10% share maximum was reached, or upon the occurrence of certain other termination events. Following the announcement on August 24, 2014 that the Company was in discussions with Burger King regarding a potential strategic Transaction, the 2014 Program was terminated. In total, we repurchased 5.6 million common shares pursuant to the 2014 Program, which have subsequently been cancelled.

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Our outstanding share capital is comprised solely of common shares. An unlimited number of common shares, without par value, is authorized, and as at September 28, 2014, we had 132,576,171 common shares outstanding, and outstanding stock options with tandem stock appreciation rights held by current and former officers and employees to acquire 1,604,848of our common shares pursuant to our 2006 Stock Incentive Plan and 2012 Stock Incentive Plan, of which 706,848 were exercisable.

Comparative Cash Flows

Operating Activities.Net cash provided from operating activities in the year-to-date period of 2014 was $447.6 million compared to $438.2 million in the year-to-date period of 2013, an increase of $9.5 million in the year-to-date period of 2014 compared to the year-to-date period of 2013, primarily due to strong earnings, as there were offsetting changes within operating assets and liabilities.

Investing Activities. Net cash used in investing activities was $133.2 million in the year-to-date period of 2014 compared to $135.6 million in the year-to-date period of 2013, a decrease of $2.3 million. Decreases in capital expenditures of the Ad Fund, as the Expanded Menu Board Program nears completion, and increases in other investing activities, were partially offset by 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
	September 28, 2014		September 29, 2013
	(in millions)
Capital expenditures(1)
New restaurants	$	53.5	$	59.7
Existing restaurants(2)	73.1		59.3
Other capital expenditures(3)	12.4		13.8
Total capital expenditures	$	139.0	$	132.7

________________

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.

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

	Year-to-date periods ended
	September 28, 2014		September 29, 2013
	(in millions)
Canada	$	111.6	$	90.7
U.S.	18.1		32.1
Corporate Services	9.4		10.0
Total capital expenditures	$	139.0	$	132.7

Financing Activities. Financing activities used cash of $257.1 million in the year-to-date period of 2014 compared to using cash of $379.3 million in the year-to-date period of 2013, a decrease of $122.2 million. Net proceeds from the issuance of our Series 3 Notes were offset by an additional $296.2 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 September 28, 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.

29

Recent Accounting Pronouncements

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

30

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.

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 and the risk factors below, 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 risk factors and information provided in this Form 10-Q may not describe every risk facing our Company. For a full description of the risks relating to the Transaction, please refer to the amended registration statement on Form S-4 filed with the SEC on November 3, 2014 by Partnership and Holdings. 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.

Risk Factors Relating to the Transaction

The Arrangement Agreement may be terminated in accordance with its terms and the Transaction may not be completed.

The Arrangement Agreement contains a number of conditions that must be fulfilled to complete the Transaction. Those conditions include, among other customary conditions, the approval of the arrangement resolution by Tim Hortons shareholders, the approval of the arrangement by the Ontario court, receipt of requisite regulatory approvals, absence of orders prohibiting consummation of the Transaction, effectiveness of the registration statement that has been filed by Holdings and Partnership to register the shares of Holdings common stock and Partnership exchangeable units that will be issued as consideration in the Transaction, approval of the Holdings common shares for listing on the NYSE and conditional approval for listing on the TSX and conditional approval of the Partnership exchangeable units for listing on the TSX. These conditions to the closing of the Transaction may not be fulfilled and, accordingly, the Transaction may not be completed. In addition, if the Transaction is not completed by March 31, 2015 (subject to extension to April 30, 2015, if the only conditions not satisfied or waived (other than those conditions that by their nature are to be satisfied at the closing, which conditions shall be capable of being satisfied) are conditions relating to regulatory approvals and the absence of any orders relating to regulatory approvals), either Tim Hortons or Burger King may choose to terminate the Arrangement Agreement. In addition, Tim Hortons or Burger King may elect to terminate the Arrangement Agreement in certain other circumstances, and the parties can mutually decide to terminate the Arrangement Agreement at any time prior to the closing, before or after the approval of Tim Hortons shareholders or Burger King’s stockholders, as applicable.

31

Failure to complete the Transaction could negatively impact our share price and our future business and financial results.

If the Transaction is not completed, the ongoing business of Tim Hortons may be adversely affected. Additionally, if the Transaction is not completed and the Arrangement Agreement is terminated, in certain circumstances, we may be required to pay to Burger King a termination fee of up to C$345 million. In addition, we may incur significant transaction expenses in connection with the Transaction regardless of whether the Transaction is completed. The foregoing risks, or other risks arising in connection with the failure of the Transaction, including the diversion of management attention from conducting the business of the Company and pursuing other opportunities during the pendency of the Transaction, may have a material adverse effect on our business, operations, financial results and share price. In addition, we could be subject to litigation related to any failure to consummate the Transaction or any related action that could be brought to enforce a party’s obligation under the Arrangement Agreement.

While the Transaction is pending, we are restricted from taking certain actions. In addition to affecting our business operations, this may also affect relationships with employees.

The Arrangement Agreement restricts us from taking specified actions until the Transaction occurs without the consent of the other party. These restrictions may prevent us from pursuing attractive business opportunities that may arise prior to the completion of the Transaction. In addition, employee retention may be challenging during the pendency of the Transaction, as certain employees may experience uncertainty about their future roles.

Our business relationships, including relationships with franchisees and customer relationships, may be subject to disruption due to uncertainty associated with the Transaction.

Parties with which we currently do business or may do business in the future, including franchisees, customers and suppliers, may experience uncertainty associated with the Transaction, including with respect to current or future business relationships with us, Partnership or Holdings. As a result, our business relationships may be subject to disruptions if franchisees, customers, suppliers and others attempt to negotiate changes in existing business relationships or consider entering into business relationships with parties other than Tim Hortons as a result of the Transaction. These disruptions could have a material and adverse effect on the businesses, financial condition, results of operations or prospects of Holdings and Partnership following the closing. The effect of such disruptions could be exacerbated by a delay in the consummation of the Transaction or termination of the Arrangement Agreement.

We may be named in legal proceedings in connection with the Transaction, the outcomes of which are uncertain, and which could delay or prevent the completion of the Transaction.

We and our directors may be named as defendants in shareholder class actions challenging the proposed Transaction. Among other remedies, the plaintiffs in such actions, if they do arise, may seek to enjoin the Transaction. Such legal proceedings could delay or prevent the Transaction from becoming effective within the agreed upon timeframe.

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 #7 (June 30, 2014 – August 3, 2014)	308,187	60.95	308,187	$	120,346,565
Monthly Period #8 (August 4, 2014 – August 31, 2014)	241,700	65.91	241,700	—
Monthly Period #9 (September 1, 2014 – September 28, 2014)	—	—	—	—
Total	549,887	62.13	549,887	$	—

________________

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⁽¹⁾  Based on settlement date.

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

⁽³⁾  On February 19, 2014, 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 Company Manual. The 2014 Program commenced February 28, 2014 and was due to terminate on February 27, 2015, or earlier if the $440.0 million or 10% share maximum was reached, or upon the occurrence of certain other termination events. Following the announcement on August 24, 2014 that the Company was in discussions with Burger King Worldwide, Inc. regarding a potential strategic transaction, the 2014 Program was terminated. Common shares purchased pursuant to the 2014 Program have been cancelled.

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:	November 6, 2014	/s/ CYNTHIA J. DEVINE
		Cynthia J. Devine
		Chief Financial Officer

34

TIM HORTONS INC. AND SUBSIDIARIES

INDEX TO EXHIBITS

Exhibit	Description	Where found
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.

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.”

35

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: November 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: November 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 September 28, 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: November 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 September 28, 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: November 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” or "Tim Hortons") 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 November 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.

Risk Factors related to the Proposed Transaction with Burger King Worldwide, Inc.

On August 26, 2014, the Company announced that it had entered into a definitive agreement (the “Arrangement Agreement”) with Burger King Worldwide, Inc. (“Burger King”) and certain of its affiliates. Pursuant to and subject to the terms and conditions of the Arrangement Agreement, Burger King has agreed to acquire the Company in a transaction (“Transaction”) that will result in Burger King and Tim Hortons being indirect subsidiaries of 9060669 Canada Inc. (“Holdings”) as further described in an amended registration statement on Form S-4 (the “Form S-4”) filed with the SEC on November 3, 2014 by Holdings and New Red Canada Limited Partnership (the “Partnership”). In addition to the risks described above, readers should also be aware of certain risks relating to the Transaction. For a full description of the risks relating to the Transaction, please refer to the Form S-4. Risks relating to the Transaction include the following:

Terminations. The Arrangement Agreement contains a number of conditions that must be fulfilled to complete the Transaction. Those conditions include, among other customary conditions, the approval of the arrangement resolution by Tim Hortons shareholders, the approval of the arrangement by the Ontario court, receipt of requisite regulatory approvals, absence of orders prohibiting consummation of the Transaction, effectiveness of the registration statement that has been filed by Holdings and Partnership to register the shares of Holdings common stock and Partnership exchangeable units that will be issued as consideration in the Transaction, approval of the Holdings common shares for listing on the NYSE and conditional approval for listing on the TSX and conditional approval of the Partnership exchangeable units for listing on the TSX. These conditions to the closing of the Transaction may not be fulfilled and, accordingly, the Transaction may not be completed. In addition, if the Transaction is not completed by March 31, 2015 (subject to extension to April 30, 2015, if the only conditions not satisfied or waived (other than those conditions that by their nature are to be satisfied at the closing, which conditions shall be capable of being

satisfied) are conditions relating to regulatory approvals and the absence of any orders relating to regulatory approvals), either Tim Hortons or Burger King may choose to terminate the Arrangement Agreement. In addition, Tim Hortons or Burger King may elect to terminate the Arrangement Agreement in certain other circumstances, and the parties can mutually decide to terminate the Arrangement Agreement at any time prior to the closing, before or after the approval of Tim Hortons shareholders or Burger King’s stockholders, as applicable.

Failure to Complete. If the Transaction is not completed, the ongoing business of Tim Hortons may be adversely affected. Additionally, if the Transaction is not completed and the Arrangement Agreement is terminated, in certain circumstances, we may be required to pay to Burger King a termination fee of up to C$345 million. In addition, we may incur significant transaction expenses in connection with the Transaction regardless of whether the Transaction is completed. The foregoing risks, or other risks arising in connection with the failure of the Transaction, including the diversion of management attention from conducting the business of the Company and pursuing other opportunities during the pendency of the Transaction, may have a material adverse effect on our business, operations, financial results and share price. In addition, we could be subject to litigation related to any failure to consummate the Transaction or any related action that could be brought to enforce a party’s obligation under the Arrangement Agreement.

Restrictions. The Arrangement Agreement restricts us from taking specified actions until the Transaction occurs without the consent of the other party. These restrictions may prevent us from pursuing attractive business opportunities that may arise prior to the completion of the Transaction. In addition, employee retention may be challenging during the pendency of the Transaction, as certain employees may experience uncertainty about their future roles.

Business Disruption.Parties with which we currently do business or may do business in the future, including franchisees, customers and suppliers, may experience uncertainty associated with the Transaction, including with respect to current or future business relationships with us, Partnership or Holdings. As a result, our business relationships may be subject to disruptions if franchisees, customers, suppliers and others attempt to negotiate changes in existing business relationships or consider entering into business relationships with parties other than Tim Hortons as a result of the Transaction. These disruptions could have a material and adverse effect on the businesses, financial condition, results of operations or prospects of Holdings and Partnership following the closing. The effect of such disruptions could be exacerbated by a delay in the consummation of the Transaction or termination of the Arrangement Agreement.

Litigation.We and our directors may be named as defendants in shareholder class actions challenging the proposed Transaction. Among other remedies, the plaintiffs in such actions, if they do arise, may seek to enjoin the Transaction. Such legal proceedings could delay or prevent the Transaction from becoming effective within the agreed upon timeframe.

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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Inventories and Other Net (Detail) (CAD) In Thousands, unless otherwise specified	Sep. 28, 2014	Dec. 29, 2013
Inventory Disclosure [Abstract]
Raw materials	21,784	22,789
Finished goods	91,346	69,348
Inventories, gross	113,130	92,137
Inventory obsolescence provision	(2,057)	(1,754)
Inventories, net	111,073	90,383
Prepaids and other	30,060	13,943
Total Inventories and other, net	141,133	104,326

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Assets and Liabilities of Variable Interest Entities (Detail) (CAD) In Thousands, unless otherwise specified	Sep. 28, 2014	Dec. 29, 2013	Sep. 29, 2013	Dec. 30, 2012
Variable Interest Entity [Line Items]
Cash and cash equivalents	109,085	50,414	44,877	120,139
Advertising fund restricted assets – current	57,230	39,783
Property and equipment, net	1,718,192	1,685,043
Other long-term assets	129,850	117,552
Total assets	2,504,454	2,433,823
Other current liabilities	110,757	89,565
Other long-term liabilities	139,769	112,090
Equity of VIEs	907	365
Total liabilities and equity	2,504,454	2,433,823
Restaurant VIEs
Variable Interest Entity [Line Items]
Cash and cash equivalents	7,717	7,773
Advertising fund restricted assets – current	0	0
Other current assets	6,892	7,155
Property and equipment, net	15,134	20,471
Other long-term assets	91	370
Total assets	29,834	35,769
Notes payable to Tim Hortons Inc. – current	12,492	13,689
Advertising fund liabilities – current	0	0
Other current liabilities	10,509	11,706
Notes payable to Tim Hortons Inc. - long-term	494	628
Long-term debt	0	0
Other long-term liabilities	5,432	9,381
Total liabilities	28,927	35,404
Equity of VIEs	907	365
Total liabilities and equity	29,834	35,769
Ad Fund VIEs
Variable Interest Entity [Line Items]
Cash and cash equivalents	0	0
Advertising fund restricted assets – current	57,230	39,783
Other current assets	0	0
Property and equipment, net	62,877	70,485
Other long-term assets	746	1,271
Total assets	120,853	111,539
Notes payable to Tim Hortons Inc. – current	8,222	3,040
Advertising fund liabilities – current	49,211	59,913
Other current liabilities	5,254	5,253
Notes payable to Tim Hortons Inc. - long-term	34,943	15,200
Long-term debt	21,384	25,157
Other long-term liabilities	1,839	2,976
Total liabilities	120,853	111,539
Equity of VIEs	0	0
Total liabilities and equity	120,853	111,539

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Summary Of Fair Value Of Derivative Instruments On Consolidated Balance Sheet (Parenthetical) (Detail) (CAD) In Millions, unless otherwise specified	Sep. 28, 2014	Dec. 29, 2013
Forward Currency Contracts
Derivatives, Fair Value [Line Items]
Derivative, Notional Amount	158.6	154.0
Interest Rate Forwards
Derivatives, Fair Value [Line Items]
Derivative, Notional Amount		90.0
TRS
Derivatives, Fair Value [Line Items]
Derivative, Notional Amount	42.3	41.4
Canadian Ad Fund | Interest Rate Swap
Derivatives, Fair Value [Line Items]
Derivative, Notional Amount	26.3	30.0

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Assets and Liabilities of Variable Interest Entities (Parenthetical) (Detail) (CAD) In Thousands, unless otherwise specified	Sep. 28, 2014	Dec. 29, 2013
Variable Interest Entity [Line Items]
Other current liabilities	18,243	17,782
Restaurant VIEs
Variable Interest Entity [Line Items]
Number of Consolidated Non Owned Restaurants	317	331
Ad Fund VIEs | Term Loan
Variable Interest Entity [Line Items]
Advertising fund term debt	26,400	30,200
Other current liabilities	5,000	5,000

XML

Fair Values Financial Assets and Liabilities Not Measured At Fair Value (Parenthetical) (Details)	9 Months Ended
	Sep. 28, 2014
Fair Value Disclosures [Abstract]
Interest Rate Reset Period (in days)	90 days

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Segment Reporting (Tables)

9 Months Ended

Sep. 28, 2014

Segment Reporting [Abstract]

Information on Reportable Segments

	Third quarter ended						Year-to-date period ended
	September 28, 2014			September 29, 2013			September 28, 2014			September 29, 2013
Revenues(1)
Canada	$	747,692		$	676,006		$	2,092,476		$	1,927,361
U.S.	60,099			47,019			163,152			132,687
Corporate services	4,256			3,414			13,561			12,743
Total reportable segments	812,047			726,439			2,269,189			2,072,791
VIEs	97,108			98,914			280,715			284,238
Total	$	909,155		$	825,353		$	2,549,904		$	2,357,029
Operating Income (Loss)
Canada	$	196,204		$	179,597		$	538,536		$	500,178
U.S.(2)	7,436			2,717			21,047			6,214
Corporate services	(9,709		)	(14,325		)	(32,284		)	(26,414		)
Total reportable segments	193,931			167,989			527,299			479,978
VIEs(2)	2,164			1,792			6,450			4,378
Transaction costs (note 15)	(27,289		)	—			(27,289		)	—
Corporate reorganization expenses	—			(953		)	—			(11,032		)
Consolidated Operating Income	168,806			168,828			506,460			473,324
Interest, Net	(17,639		)	(8,487		)	(50,848		)	(24,353		)
Income before income taxes	$	151,167		$	160,341		$	455,612		$	448,971

________________ 

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

⁽²⁾  In fiscal 2013, the Company recognized an asset impairment charge in the U.S. related to certain non-core and non-priority markets, of which $2.5 million was recognized in the U.S. segment and $0.4 million related to consolidated VIEs.

Consolidated Sales Information

Consolidated Sales comprise the following:

	Third quarter ended				Year-to-date period ended
	September 28, 2014		September 29, 2013		September 28, 2014		September 29, 2013
Sales
Distribution sales	$	534,456	$	473,641	$	1,498,571	$	1,373,389
Company-operated restaurant sales	6,201		6,090		19,236		18,567
Sales from VIEs	94,129		96,049		271,838		276,273
Total Sales	$	634,786	$	575,780	$	1,789,645	$	1,668,229

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Consolidated Sales Information (Detail) (CAD) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 28, 2014	Sep. 29, 2013	Sep. 28, 2014	Sep. 29, 2013
Segment Reporting [Abstract]
Distribution sales	534,456	473,641	1,498,571	1,373,389
Company-operated restaurant sales	6,201	6,090	19,236	18,567
Sales from VIEs	94,129	96,049	271,838	276,273
Total Sales	634,786	575,780	1,789,645	1,668,229

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

9 Months Ended

Sep. 28, 2014

Earnings Per Share [Abstract]

Computations of Basic and Diluted Earnings Per Common Share

	Third quarter ended				Year-to-date period ended
	September 28, 2014		September 29, 2013		September 28, 2014		September 29, 2013
Net income attributable to Tim Hortons Inc.	$	98,131	$	113,863	$	312,790	$	323,770
Weighted average shares outstanding for computation of basic earnings per common share attributable to Tim Hortons Inc. (in thousands)	132,439		150,342		134,817		152,379
Dilutive impact of restricted stock units (“RSUs”) and PSUs (in thousands)	219		264		243		285
Dilutive impact of stock options with tandem stock appreciation rights (“SARs”) (in thousands)	276		258		232		255
Weighted average shares outstanding for computation of diluted earnings per common share attributable to Tim Hortons Inc. (in thousands)	132,934		150,864		135,292		152,919
Basic earnings per common share attributable to Tim Hortons Inc.	$	0.74	$	0.76	$	2.32	$	2.12
Diluted earnings per common share attributable to Tim Hortons Inc.	$	0.74	$	0.75	$	2.31	$	2.12

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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		9 Months Ended
	Sep. 28, 2014	Sep. 29, 2013	Sep. 28, 2014	Sep. 29, 2013
Summary of (Gain) loss on Derivatives Not Designated as Hedging Instruments [Line Items]
Loss (gain), net	(32,672)	(2,717)	(27,618)	(11,301)
General and Administrative Expense | TRS
Summary of (Gain) loss on Derivatives Not Designated as Hedging Instruments [Line Items]
Loss (gain), net	(30,756)	(2,802)	(26,509)	(11,037)
Cost Of Sales | Forward Currency Contracts
Summary of (Gain) loss on Derivatives Not Designated as Hedging Instruments [Line Items]
Loss (gain), net	(741)	85	(574)	(264)
Other Operating (Income) Expense | Forward Currency Contracts
Summary of (Gain) loss on Derivatives Not Designated as Hedging Instruments [Line Items]
Loss (gain), net	(1,175)	0	(535)	0

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Accrued Liabilities (Details) (CAD) In Thousands, unless otherwise specified	Sep. 28, 2014	Dec. 29, 2013
Payables and Accruals [Abstract]
Salaries and wages	26,312	22,553
Taxes payable	18,730	14,542
De-branding accruals	1,376	9,538
Other accrued liabilities	64,339	42,932
Total Accrued liabilities	110,757	89,565

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Notes Receivable By Segment (Detail) (CAD) In Thousands, unless otherwise specified	Sep. 28, 2014	Dec. 29, 2013
Notes Receivable By Segment [Line Items]
Notes receivable	8,591	10,616
Allowance	(1,537)	(1,502)
Notes receivable, net	7,054	9,114
Current portion, net	6,482	4,631
Long-term portion, net	572	4,483
Gross
Notes Receivable By Segment [Line Items]
Notes receivable	21,577	24,933
VIEs
Notes Receivable By Segment [Line Items]
Notes receivable	(12,986)	(14,317)
Franchise Incentive Program ("FIP") notes
Notes Receivable By Segment [Line Items]
Notes receivable	3,012	3,009
Franchise Incentive Program ("FIP") notes | Gross
Notes Receivable By Segment [Line Items]
Notes receivable	15,404	16,677
Franchise Incentive Program ("FIP") notes | VIEs
Notes Receivable By Segment [Line Items]
Notes receivable	(12,392)	(13,668)
Other notes receivable
Notes Receivable By Segment [Line Items]
Notes receivable	5,579	7,607
Other notes receivable | Gross
Notes Receivable By Segment [Line Items]
Notes receivable	6,173	8,256
Other notes receivable | VIEs
Notes Receivable By Segment [Line Items]
Notes receivable	(594)	(649)

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Stock-Based Compensation Additional Information (Detail) In Thousands, unless otherwise specified	Sep. 28, 2014	Sep. 29, 2013
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Underlying Common Stock Covered Under Total Return Swap Contracts	1,027	1,008

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Summary Of Fair Value Of Derivative Instruments On Consolidated Balance Sheet (Detail) (CAD) In Thousands, unless otherwise specified	Sep. 28, 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	3,480	4,181
Fair Value Liability	0	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	3,480	4,181
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	(163)	(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	(163)	(49)
Not Designated as Hedging Instrument | Forward Currency Contracts
Other Derivatives Not Designated as Hedging Instruments at Fair Value, Net [Abstract]
Fair Value Assets	784	0
Fair Value Liability	0	0
Fair Value, Net		0
Not Designated as Hedging Instrument | Forward Currency Contracts | Accounts Receivable
Other Derivatives Not Designated as Hedging Instruments at Fair Value, Net [Abstract]
Fair Value, Net	784
Not Designated as Hedging Instrument | TRS
Other Derivatives Not Designated as Hedging Instruments at Fair Value, Net [Abstract]
Fair Value Assets		0
Fair Value Liability	0	0
Fair Value, Net		0
Not Designated as Hedging Instrument | TRS | Inventory and other, net
Other Derivatives Not Designated as Hedging Instruments at Fair Value, Net [Abstract]
Fair Value Assets	10,609	0
Fair Value, Net	10,609
Not Designated as Hedging Instrument | TRS | Other Assets
Other Derivatives Not Designated as Hedging Instruments at Fair Value, Net [Abstract]
Fair Value Assets	37,293	21,393
Fair Value Liability		0
Fair Value, Net	37,293	21,393

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Basis of Presentation

9 Months Ended

Sep. 28, 2014

Accounting Policies [Abstract]

Basis of Presentation

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 September 28, 2014, and the results of operations, comprehensive income and cash flows for the third quarters ended September 28, 2014 and September 29, 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 (see Note 15). PSUs are expensed on a straight-line basis over the relevant vesting period.

Proposed transaction with Burger King Worldwide, Inc.

On August 26, 2014, the Company announced that it had entered into a definitive agreement (the “Arrangement Agreement”) with Burger King Worldwide, Inc. (“Burger King”) and certain of its affiliates (see Note 15 for further information).

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

XML

Fair Values (Tables)

9 Months Ended

Sep. 28, 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
	September 28, 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	$	4,264		Level 2	$	4,181
Interest rate swap(3)	Level 2	(163		)	Level 2	(49		)
Interest rate forwards(4)	n/a	—			Level 2	285
Total return swaps (“TRS”)(5)	Level 2	47,902			Level 2	21,393
Total Derivatives		$	52,003			$	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
	September 28, 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	$	7,054		$	7,054		Level 3	$	9,114		$	9,114
Series 1 Notes(3)	Level 2	$	(306,768	)	$	(300,934	)	Level 2	$	(315,519	)	$	(301,196	)
Series 2 Notes(3)	Level 2	$	(458,325	)	$	(449,901	)	Level 2	$	(445,419	)	$	(449,892	)
Series 3 Notes(3)	Level 2	$	(452,435	)	$	(449,887	)	n/a	$	—		$	—
Advertising fund term debt(4)	Level 3	$	(26,415	)	$	(26,415	)	Level 3	$	(30,189	)	$	(30,189	)
Other debt(5)	Level 3	$	(141,995	)	$	(75,651	)	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 and Accrued Liabilities (Tables)

9 Months Ended

Sep. 28, 2014

Payables and Accruals [Abstract]

Accounts Payable

Accounts payable

	As at
	September 28, 2014		December 29, 2013
Accounts payable	$	143,383	$	142,131
Construction holdbacks and accruals	46,772		57,527
Transaction costs (note 15)	24,572		—
Corporate reorganization accrual	488		4,856
Total Accounts payable	$	215,215	$	204,514

Schedule of Accrued Liabilities

Accrued liabilities

	As at
	September 28, 2014		December 29, 2013
Salaries and wages	$	26,312	$	22,553
Taxes payable	18,730		14,542
De-branding accruals(1)	1,376		9,538
Other accrued liabilities(2)	64,339		42,932
Total Accrued liabilities	$	110,757	$	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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Information on Reportable Segments (Detail) (CAD) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 28, 2014	Sep. 29, 2013	Sep. 28, 2014	Sep. 29, 2013
Segment Reporting Information [Line Items]
Revenues	909,155	825,353	2,549,904	2,357,029
Operating income	168,806	168,828	506,460	473,324
Interest, Net	(17,639)	(8,487)	(50,848)	(24,353)
Income before income taxes	151,167	160,341	455,612	448,971
Asset Impairment	0	2,889	0	2,889
U.S.
Segment Reporting Information [Line Items]
Asset Impairment				2,500
Operating Segments
Segment Reporting Information [Line Items]
Revenues	812,047	726,439	2,269,189	2,072,791
Operating income	193,931	167,989	527,299	479,978
Operating Segments | Canada
Segment Reporting Information [Line Items]
Revenues	747,692	676,006	2,092,476	1,927,361
Operating income	196,204	179,597	538,536	500,178
Operating Segments | U.S.
Segment Reporting Information [Line Items]
Revenues	60,099	47,019	163,152	132,687
Operating income	7,436	2,717	21,047	6,214
Operating Segments | Corporate Services
Segment Reporting Information [Line Items]
Revenues	4,256	3,414	13,561	12,743
Operating income	(9,709)	(14,325)	(32,284)	(26,414)
VIEs
Segment Reporting Information [Line Items]
Revenues	97,108	98,914	280,715	284,238
Operating income	2,164	1,792	6,450	4,378
Asset Impairment				400
Transaction costs
Segment Reporting Information [Line Items]
Operating income	(27,289)	0	(27,289)	0
Corporate Reorganization Expenses
Segment Reporting Information [Line Items]
Operating income	0	(953)	0	(11,032)

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Financial Assets and Liabilities Measured at Fair Value (Detail) (CAD) In Thousands, unless otherwise specified	Sep. 28, 2014	Dec. 29, 2013
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Fair value asset (liability)	52,003	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)	4,264	4,181
Level 2 | Interest Rate Swap | Canadian Ad Fund
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Fair value asset (liability)	(163)	(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)	47,902	21,393

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Derivatives (Tables)

9 Months Ended

Sep. 28, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Summary of Fair Value of Derivative Instruments on Consolidated Balance Sheet

	As at
	September 28, 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)	$	3,480	$	—		$	3,480		Accounts receivable, net	$	4,181	$	—		$	4,181		Accounts receivable, net
Interest rate swap(2)	$	—	$	(163	)	$	(163	)	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 (current)(4)	$	10,609	$	—		$	10,609		Inventories and other, net	$	—	$	—		$	—		n/a
TRS (long-term)(4)	$	37,293	$	—		$	37,293		Other assets	$	21,393	$	—		$	21,393		Other assets
Forward currency contracts(1)	$	784	$	—		$	784		Accounts receivable, net	$	—	$	—		$	—		n/a

________________ 

⁽¹⁾  Notional value as at September 28, 2014 of $158.6 million (December 29, 2013: $154.0 million), with maturities ranging between October 2014 and April 2015; no associated cash collateral.

⁽²⁾  Notional value as at September 28, 2014 of $26.3 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 $42.3 million as at September 28, 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

		Third quarter ended September 28, 2014									Third quarter ended September 29, 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	$	5,362		$	(659	)	$	4,703		$	(3,368	)	$	(2,300	)	$	(5,668	)
Interest rate swap(3)	Interest (expense)	(6		)	47			41			(83		)	59			(24		)
Interest rate forwards(4)	Interest (expense)	—			659			659			(7,235		)	173			(7,062		)
Total		5,356			47			5,403			(10,686		)	(2,068		)	(12,754		)
Income tax effect	Income taxes	(1,422		)	162			(1,260		)	915			594			1,509
Net of income taxes		$	3,934		$	209		$	4,143		$	(9,771	)	$	(1,474	)	$	(11,245	)

		Year-to-date period ended September 28, 2014									Year-to-date period ended September 29, 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	$	4,847		$	(5,548	)	$	(701	)	$	4,756		$	(1,685	)	$	3,071
Interest rate swap(3)	Interest (expense)	(264		)	150			(114		)	(128		)	139			11
Interest rate forwards(4)	Interest (expense)	(5,136		)	1,744			(3,392		)	(7,235		)	519			(6,716		)
Total		(553		)	(3,654		)	(4,207		)	(2,607		)	(1,027		)	(3,634		)
Income tax effect	Income taxes	(1,218		)	1,434			216			(1,226		)	410			(816		)
Net of income taxes		$	(1,771	)	$	(2,220	)	$	(3,991	)	$	(3,833	)	$	(617	)	$	(4,450	)

_______________ 

⁽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

Derivatives not designated as cash flow hedging instruments	Classification on Condensed Consolidated Statement of Operations	Third quarter ended						Year-to-date period ended
		September 28, 2014			September 29, 2013			September 28, 2014			September 29, 2013
TRS	General and administrative expenses	$	(30,756	)	$	(2,802	)	$	(26,509	)	$	(11,037	)
Forward currency contracts	Cost of sales	(741		)	85			(574		)	(264		)
Forward currency contracts	Other (income) expense	(1,175		)	—			(535		)	—
Total loss (gain), net		$	(32,672	)	$	(2,717	)	$	(27,618	)	$	(11,301	)

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Stock-Based Compensation (Tables)

9 Months Ended

Sep. 28, 2014

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

Stock Based Compensation Expenses Included in General and Administrative Expenses

	Third quarter ended						Year-to-date period ended
	September 28, 2014			September 29, 2013			September 28, 2014			September 29, 2013
RSUs and PSUs	$	1,551		$	1,510		$	4,207		$	5,090
Stock options and tandem SARs	27,490			2,573			25,626			9,912
Deferred share units (“DSUs”)	5,040			514			5,134			2,130
Total stock-based compensation expense(1)	$	34,081		$	4,597		$	34,967		$	17,132
TRS (gain)(2)	$	(30,756	)	$	(2,802	)	$	(26,509	)	$	(11,037	)

________________

⁽¹⁾  Primarily included in General and administrative expenses in the Condensed Consolidated Statement of Operations.

⁽²⁾  The Company has entered into TRS contracts as economic hedges, covering 1,027,000 of the Company’s underlying common shares (September 29, 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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Condensed Consolidated Statement of Equity (Parenthetical) (Share Repurchase Program Two Thousand And Fourteen, CAD)	Feb. 14, 2014
Share Repurchase Program Two Thousand And Fourteen
Maximum Common Shares Allowed To Be Repurchased Value	440.0
Percentage Of Outstanding Shares	10.00%

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Variable Interest Entities (Tables)

9 Months Ended

Sep. 28, 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:

	Third quarter ended
	September 28, 2014						September 29, 2013
	Restaurant VIEs(1)		Advertising fund VIEs(2)		Total VIEs		Restaurant VIEs(1)		Advertising fund VIEs(2)		Total VIEs
Sales	$	94,129	$	—	$	94,129	$	96,049	$	—	$	96,049
Advertising levies	—		2,979		2,979		—		2,865		2,865
Total revenues	94,129		2,979		97,108		96,049		2,865		98,914
Cost of sales	92,183		—		92,183		94,302		—		94,302
Operating expenses	—		2,761		2,761		—		2,379		2,379
Asset impairment(3)	—		—		—		441		—		441
Operating income	1,946		218		2,164		1,306		486		1,792
Interest expense	—		218		218		—		486		486
Income before taxes	1,946		—		1,946		1,306		—		1,306
Income taxes	344		—		344		214		—		214
Net income attributable to noncontrolling interests	$	1,602	$	—	$	1,602	$	1,092	$	—	$	1,092

	Year-to-date period ended
	September 28, 2014						September 29, 2013
	Restaurant VIEs(1)		Advertising fund VIEs(2)		Total VIEs		Restaurant VIEs(1)		Advertising fund VIEs(2)		Total VIEs
Sales	$	271,838	$	—	$	271,838	$	276,273	$	—	$	276,273
Advertising levies	—		8,877		8,877		—		7,965		7,965
Total revenues	271,838		8,877		280,715		276,273		7,965		284,238
Cost of sales	266,038		—		266,038		272,648		—		272,648
Operating expenses	—		8,227		8,227		—		6,771		6,771
Asset impairment(3)	—		—		—		441		—		441
Operating income	5,800		650		6,450		3,184		1,194		4,378
Interest expense	33		650		683		—		1,194		1,194
Income before taxes	5,767		—		5,767		3,184		—		3,184
Income taxes	1,037		—		1,037		514		—		514
Net income attributable to noncontrolling interests	$	4,730	$	—	$	4,730	$	2,670	$	—	$	2,670

______________

⁽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.

⁽³⁾  The Company recognized an impairment charge in the third quarter of 2013 related to certain underperforming markets in the U.S.

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
	September 28, 2014				December 29, 2013
	Restaurant VIEs(1)		Advertising fund VIEs		Restaurant VIEs(1)		Advertising fund VIEs
Cash and cash equivalents	$	7,717	$	—	$	7,773	$	—
Advertising fund restricted assets – current	—		57,230		—		39,783
Other current assets	6,892		—		7,155		—
Property and equipment, net	15,134		62,877		20,471		70,485
Other long-term assets	91		746		370		1,271
Total assets	$	29,834	$	120,853	$	35,769	$	111,539
Notes payable to Tim Hortons Inc. – current(2)(3)	$	12,492	$	8,222	$	13,689	$	3,040
Advertising fund liabilities – current	—		49,211		—		59,913
Other current liabilities(4)	10,509		5,254		11,706		5,253
Notes payable to Tim Hortons Inc. – long-term(2)(3)	494		34,943		628		15,200
Long-term debt(4)	—		21,384		—		25,157
Other long-term liabilities	5,432		1,839		9,381		2,976
Total liabilities	28,927		120,853		35,404		111,539
Equity of VIEs	907		—		365		—
Total liabilities and equity	$	29,834	$	120,853	$	35,769	$	111,539

______________

⁽¹⁾  The Company consolidated 317 Non-owned restaurants as at September 28, 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.

⁽⁴⁾  Includes $26.4 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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Inventories and Other, Net Inventories and other, net footnote (Details) (CAD)	Sep. 28, 2014	Dec. 29, 2013
Inventory and other, net
Derivative [Line Items]
Bearer deposit notes	7,600,000	0
Not Designated as Hedging Instrument | TRS
Derivative [Line Items]
Fair Value Assets		0
Not Designated as Hedging Instrument | Inventory and other, net | TRS
Derivative [Line Items]
Fair Value Assets	10,609,000	0

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Revenues and Expenses of Variable Interest Entities (Detail) (CAD) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 28, 2014	Sep. 29, 2013	Sep. 28, 2014	Sep. 29, 2013
Variable Interest Entity [Line Items]
Sales	634,786	575,780	1,789,645	1,668,229
Total revenues	909,155	825,353	2,549,904	2,357,029
Cost of sales	545,050	501,856	1,545,765	1,452,302
Operating expenses	86,306	78,307	251,975	231,026
Asset Impairment	0	2,889	0	2,889
Operating income	168,806	168,828	506,460	473,324
Interest expense	18,518	9,406	53,842	26,991
Income before income taxes	151,167	160,341	455,612	448,971
Income taxes	51,434	45,386	138,092	122,531
Net income attributable to noncontrolling interests	1,602	1,092	4,730	2,670
Restaurant VIEs
Variable Interest Entity [Line Items]
Sales	94,129	96,049	271,838	276,273
Advertising levies	0	0	0	0
Total revenues	94,129	96,049	271,838	276,273
Cost of sales	92,183	94,302	266,038	272,648
Operating expenses	0	0	0	0
Asset Impairment	0	441	0	441
Operating income	1,946	1,306	5,800	3,184
Interest expense	0	0	33	0
Income before income taxes	1,946	1,306	5,767	3,184
Income taxes	344	214	1,037	514
Net income attributable to noncontrolling interests	1,602	1,092	4,730	2,670
Ad Fund VIEs
Variable Interest Entity [Line Items]
Sales	0	0	0	0
Advertising levies	2,979	2,865	8,877	7,965
Total revenues	2,979	2,865	8,877	7,965
Cost of sales	0	0	0	0
Operating expenses	2,761	2,379	8,227	6,771
Asset Impairment	0	0	0	0
Operating income	218	486	650	1,194
Interest expense	218	486	650	1,194
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	94,129	96,049	271,838	276,273
Advertising levies	2,979	2,865	8,877	7,965
Total revenues	97,108	98,914	280,715	284,238
Cost of sales	92,183	94,302	266,038	272,648
Operating expenses	2,761	2,379	8,227	6,771
Asset Impairment	0	441	0	441
Operating income	2,164	1,792	6,450	4,378
Interest expense	218	486	683	1,194
Income before income taxes	1,946	1,306	5,767	3,184
Income taxes	344	214	1,037	514
Net income attributable to noncontrolling interests	1,602	1,092	4,730	2,670

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Condensed Consolidated Statement Of Operations (CAD) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 28, 2014	Sep. 29, 2013	Sep. 28, 2014	Sep. 29, 2013
Revenues
Sales	634,786	575,780	1,789,645	1,668,229
Franchise revenues
Rents and royalties	230,383	212,114	654,845	608,857
Franchise fees	43,986	37,459	105,414	79,943
Franchise Revenue, Total	274,369	249,573	760,259	688,800
Total revenues	909,155	825,353	2,549,904	2,357,029
Costs and expenses
Cost of sales	545,050	501,856	1,545,765	1,452,302
Operating expenses	86,306	78,307	251,975	231,026
Franchise fee costs	43,577	37,865	106,166	83,743
General and administrative expenses	41,681	38,787	121,141	115,493
Equity (income)	(4,038)	(4,075)	(11,359)	(11,340)
Transactions costs	27,289	0	27,289	0
Corporate reorganization expenses	0	953	0	11,032
Asset Impairment	0	2,889	0	2,889
Other expense (income), net	484	(57)	2,467	(1,440)
Total costs and expenses, net	740,349	656,525	2,043,444	1,883,705
Operating income	168,806	168,828	506,460	473,324
Interest (expense)	(18,518)	(9,406)	(53,842)	(26,991)
Interest income	879	919	2,994	2,638
Income before income taxes	151,167	160,341	455,612	448,971
Income taxes	51,434	45,386	138,092	122,531
Net income	99,733	114,955	317,520	326,440
Net income attributable to noncontrolling interests	1,602	1,092	4,730	2,670
Net income attributable to Tim Hortons Inc.	98,131	113,863	312,790	323,770
Basic earnings per common share attributable to Tim Hortons Inc. (in Canadian dollars per share)	0.74	0.76	2.32	2.12
Diluted earnings per common share attributable to Tim Hortons Inc. (in Canadian dollars per share)	0.74	0.75	2.31	2.12
Weighted average number of common shares outstanding (in thousands) – Basic	132,439	150,342	134,817	152,379
Weighted average number of common shares outstanding (in thousands) – Diluted	132,934	150,864	135,292	152,919
Dividends per common share (in Canadian dollars per share)	0.32	0.26	0.96	0.78

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Financial Assets and Liabilities Not Measured at Fair Value (Detail) (CAD)	Sep. 28, 2014	Dec. 29, 2013
Carrying Value
Bearer deposit notes	129,850,000	117,552,000
Notes receivable, net	8,591,000	10,616,000
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	42,520,000	41,403,000
Carrying Value
Bearer deposit notes	42,520,000	41,403,000
Level 2 | Series 1 Notes
Fair Value Asset (Liability)
Senior Notes Payable	(306,768,000)	(315,519,000)
Carrying Value
Senior Notes Payable	(300,934,000)	(301,196,000)
Level 2 | Series 2 Notes
Fair Value Asset (Liability)
Senior Notes Payable	(458,325,000)	(445,419,000)
Carrying Value
Senior Notes Payable	(449,901,000)	(449,892,000)
Level 2 | Series 3 Notes
Fair Value Asset (Liability)
Senior Notes Payable	(452,435,000)
Carrying Value
Senior Notes Payable	(449,887,000)
Level 3
Fair Value Asset (Liability)
Notes receivable, net	7,054,000	9,114,000
Advertising fund term debt	(26,415,000)	(30,189,000)
Other debt	(141,995,000)	(126,548,000)
Carrying Value
Notes receivable, net	7,054,000	9,114,000
Advertising fund term debt	(26,415,000)	(30,189,000)
Other debt	(75,651,000)	(69,794,000)

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Condensed Consolidated Statement Of Cash Flows (CAD) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 28, 2014	Sep. 29, 2013
Cash flows provided from (used in) operating activities
Net income	317,520	326,440
Adjustments to reconcile net income to net cash provided from operating activities
Depreciation and amortization	121,163	110,447
Total return swaps (gain)	(26,509)	(11,037)
Stock-based compensation expense	34,967	17,132
Deferred income taxes	224	(2,458)
Changes in operating assets and liabilities
Restricted cash and cash equivalents	90,992	50,020
Accounts receivable	(8,506)	(11,010)
Inventories and other	(18,666)	(7,913)
Accounts payable and accrued liabilities	(35,516)	(58,213)
Taxes	4,164	7,183
Settlement of interest rate forwards	(4,851)	0
Deposit with tax authorities	(1,721)	0
Other	(25,626)	17,561
Net cash provided from operating activities	447,635	438,152
Cash flows (used in) provided from investing activities
Capital expenditures	(138,950)	(132,726)
Capital expenditures – Advertising fund	(5,237)	(9,554)
Other investing activities	10,955	6,709
Net cash (used in) investing activities	(133,232)	(135,571)
Cash flows (used in) provided from financing activities
Repurchase of common shares	(527,640)	(242,222)
Dividend payments to common shareholders	(129,367)	(118,579)
Net proceeds from issuance of debt	448,299	0
Short-term (repayments) borrowings, net	(30,000)	0
Principal payments on long-term debt obligations	(12,139)	(12,901)
Other financing activities	(6,269)	(5,601)
Net cash (used in) financing activities	(257,116)	(379,303)
Effect of exchange rate changes on cash	1,384	1,460
(Decrease) in cash and cash equivalents	58,671	(75,262)
Cash and cash equivalents at beginning of period	50,414	120,139
Cash and cash equivalents at end of period	109,085	44,877
Supplemental disclosures of cash flow information:
Interest paid	37,096	23,259
Income taxes paid	144,297	117,418
Non-cash investing and financing activities:
Capital lease obligations incurred	23,238	25,217

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Income Taxes - Additional Information (Detail)	3 Months Ended		9 Months Ended
	Sep. 28, 2014	Sep. 29, 2013	Sep. 28, 2014	Sep. 29, 2013
Income Tax Disclosure [Abstract]
Effective income tax rate	34.00%	28.30%	30.30%	27.30%

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Recent Accounting Pronouncements

9 Months Ended

Sep. 28, 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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Computations of Basic and Diluted Earnings Per Common Share (Detail) (CAD) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 28, 2014	Sep. 29, 2013	Sep. 28, 2014	Sep. 29, 2013
Earnings Per Share [Abstract]
Net income attributable to Tim Hortons Inc.	98,131	113,863	312,790	323,770
Weighted average shares outstanding for computation of basic earnings per common share attributable to Tim Hortons Inc. (in thousands)	132,439	150,342	134,817	152,379
Dilutive impact of RSUs and PSUs (in thousands)	219	264	243	285
Dilutive Impact of Stock Options with tandem SARs (in thousands)	276	258	232	255
Weighted average shares outstanding for computation of diluted earnings per common share attributable to Tim Hortons Inc. (in thousands)	132,934	150,864	135,292	152,919
Basic earnings per common share attributable to Tim Hortons Inc. (in Canadian dollars per share)	0.74	0.76	2.32	2.12
Diluted earnings per common share attributable to Tim Hortons Inc. (in Canadian dollars per share)	0.74	0.75	2.31	2.12

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Basis of Presentation (Policies)

9 Months Ended

Sep. 28, 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 September 28, 2014, and the results of operations, comprehensive income and cash flows for the third quarters ended September 28, 2014 and September 29, 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 (see Note 15). PSUs are expensed on a straight-line basis over the relevant vesting period.

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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]		(8,753)	(59)
Repurchase of common shares	[3],[6]		(24,858)	(3,549)		(502,781)					(531,188)			(531,188)
Disbursed or sold from the Trust (in shares)	[4]			37
Disbursed or sold from the Trust	[4]			1,667							1,667			1,667
Stock based compensation					1,115	(214)					901			901
Other comprehensive income, before reclassifications	[5]						18,471	[1]	(1,771)	[1]	16,700			16,700
Amounts reclassified from AOCI	[5]								(2,220)	[1]	(2,220)			(2,220)
NCI transactions						(268)					(268)	268	[2]	0
Net income		317,520												317,520
Net income attributable to NCI		4,730										4,730	[2]
Net income attributable to THI		312,790				312,790					312,790
Dividends and distributions, net						(129,367)					(129,367)	(4,456)	[2]	(133,823)
Balance at Sep. 28, 2014		431,076	375,880	(14,806)	12,148	154,569	(85,634)	[1]	(11,988)	[1]	430,169	907	[2]	431,076
Balance (in shares) at Sep. 28, 2014			132,576	316

[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 and was due to terminate on February 27, 2015, or earlier if the $440.0 million or 10.0% share maximum was reached, or upon the occurrence of certain other termination events. Following the announcement on August 24, 2014 that the Company was in discussions with Burger King Worldwide, Inc. regarding a potential strategic transaction, the 2014 Program was terminated.

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Condensed Consolidated Statement Of Comprehensive Income (CAD) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 28, 2014	Sep. 29, 2013	Sep. 28, 2014	Sep. 29, 2013
Statement of Comprehensive Income [Abstract]
Net income	99,733	114,955	317,520	326,440
Other comprehensive income
Translation adjustments gain (loss)	21,301	(9,133)	18,471	14,250
Unrealized (losses) gains from cash flow hedges
Gain (loss) from change in fair value of derivatives	5,356	(10,686)	(553)	(2,607)
Amount of net loss (gain) reclassified to earnings during the period	47	(2,068)	(3,654)	(1,027)
Tax (expense) recovery	(1,260)	1,509	216	(816)
Other comprehensive income (loss)	25,444	(20,378)	14,480	9,800
Comprehensive income	125,177	94,577	332,000	336,240
Comprehensive income atributable to non-controlling interests	1,602	1,092	4,730	2,670
Comprehensive income attributable to Tim Hortons Inc.	123,575	93,485	327,270	333,570

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Derivatives

9 Months Ended

Sep. 28, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives

DERIVATIVES

	As at
	September 28, 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)	$	3,480	$	—		$	3,480		Accounts receivable, net	$	4,181	$	—		$	4,181		Accounts receivable, net
Interest rate swap(2)	$	—	$	(163	)	$	(163	)	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 (current)(4)	$	10,609	$	—		$	10,609		Inventories and other, net	$	—	$	—		$	—		n/a
TRS (long-term)(4)	$	37,293	$	—		$	37,293		Other assets	$	21,393	$	—		$	21,393		Other assets
Forward currency contracts(1)	$	784	$	—		$	784		Accounts receivable, net	$	—	$	—		$	—		n/a

________________ 

⁽¹⁾  Notional value as at September 28, 2014 of $158.6 million (December 29, 2013: $154.0 million), with maturities ranging between October 2014 and April 2015; no associated cash collateral.

⁽²⁾  Notional value as at September 28, 2014 of $26.3 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 $42.3 million as at September 28, 2014 (December 29, 2013: $41.4 million). The TRS have maturities annually, in May, between fiscal 2015 and fiscal 2021.

		Third quarter ended September 28, 2014									Third quarter ended September 29, 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	$	5,362		$	(659	)	$	4,703		$	(3,368	)	$	(2,300	)	$	(5,668	)
Interest rate swap(3)	Interest (expense)	(6		)	47			41			(83		)	59			(24		)
Interest rate forwards(4)	Interest (expense)	—			659			659			(7,235		)	173			(7,062		)
Total		5,356			47			5,403			(10,686		)	(2,068		)	(12,754		)
Income tax effect	Income taxes	(1,422		)	162			(1,260		)	915			594			1,509
Net of income taxes		$	3,934		$	209		$	4,143		$	(9,771	)	$	(1,474	)	$	(11,245	)

		Year-to-date period ended September 28, 2014									Year-to-date period ended September 29, 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	$	4,847		$	(5,548	)	$	(701	)	$	4,756		$	(1,685	)	$	3,071
Interest rate swap(3)	Interest (expense)	(264		)	150			(114		)	(128		)	139			11
Interest rate forwards(4)	Interest (expense)	(5,136		)	1,744			(3,392		)	(7,235		)	519			(6,716		)
Total		(553		)	(3,654		)	(4,207		)	(2,607		)	(1,027		)	(3,634		)
Income tax effect	Income taxes	(1,218		)	1,434			216			(1,226		)	410			(816		)
Net of income taxes		$	(1,771	)	$	(2,220	)	$	(3,991	)	$	(3,833	)	$	(617	)	$	(4,450	)

_______________ 

⁽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	Third quarter ended						Year-to-date period ended
		September 28, 2014			September 29, 2013			September 28, 2014			September 29, 2013
TRS	General and administrative expenses	$	(30,756	)	$	(2,802	)	$	(26,509	)	$	(11,037	)
Forward currency contracts	Cost of sales	(741		)	85			(574		)	(264		)
Forward currency contracts	Other (income) expense	(1,175		)	—			(535		)	—
Total loss (gain), net		$	(32,672	)	$	(2,717	)	$	(27,618	)	$	(11,301	)

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Document and Entity Information	9 Months Ended
	Sep. 28, 2014	Nov. 03, 2014
Document Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 28, 2014
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q3
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		132,576,171

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Commitments and Contingencies

9 Months Ended

Sep. 28, 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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Condensed Consolidated Balance Sheet (CAD) In Thousands, unless otherwise specified	Sep. 28, 2014	Dec. 29, 2013
Current assets
Cash and cash equivalents	109,085	50,414
Restricted cash and cash equivalents	64,572	155,006
Accounts receivable, net	215,570	210,664
Notes receivable, net	6,482	4,631
Deferred income taxes	8,448	10,165
Inventories and other, net	141,133	104,326
Advertising fund restricted assets	57,230	39,783
Total current assets	602,520	574,989
Property and equipment, net	1,718,192	1,685,043
Notes receivable, net	572	4,483
Deferred income taxes	13,067	11,018
Equity investments	40,253	40,738
Other assets	129,850	117,552
Total assets	2,504,454	2,433,823
Current liabilities
Accounts payable	215,215	204,514
Tim Card obligation	112,458	184,443
Accrued liabilities	110,757	89,565
Advertising fund liabilities	49,211	59,912
Short-term borrowings	0	30,000
Current portion of long-term obligations	18,243	17,782
Total current liabilities	505,884	586,216
Long-term obligations
Long-term debt	1,294,880	843,020
Capital leases	125,468	121,049
Deferred income taxes	7,377	9,929
Other long-term liabilities	139,769	112,090
Total long-term obligations	1,567,494	1,086,088
Commitments and contingencies
Equity of Tim Hortons Inc.
Common shares ($2.84 stated value per share), Authorized: unlimited shares. Issued: 132,576,171 and 141,329,010 shares, respectively	375,880	400,738
Common shares held in Trust, at cost: 315,932 and 293,816 shares, respectively	(14,806)	(12,924)
Contributed surplus	12,148	11,033
Retained earnings	154,569	474,409
Accumulated other comprehensive loss	(97,622)	(112,102)
Total equity of Tim Hortons Inc.	430,169	761,154
Noncontrolling interests	907	365
Total equity	431,076	761,519
Total liabilities and equity	2,504,454	2,433,823

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Notes Receivable, Net

9 Months Ended

Sep. 28, 2014

Receivables [Abstract]

Notes Receivable, Net

NOTES RECEIVABLE, NET

	As at
	September 28, 2014								December 29, 2013
	Gross		VIEs(2)			Total			Gross		VIEs(2)			Total
Franchise Incentive Program (“FIP”) notes(1)	$	15,404	$	(12,392	)	$	3,012		$	16,677	$	(13,668	)	$	3,009
Other notes receivable(3)	6,173		(594		)	5,579			8,256		(649		)	7,607
Notes receivable	$	21,577	$	(12,986	)	8,591			$	24,933	$	(14,317	)	10,616
Allowance						(1,537		)						(1,502		)
Notes receivable, net						$	7,054							$	9,114
Current portion, net						$	6,482							$	4,631
Long-term portion, net						$	572							$	4,483

	As at
	September 28, 2014								December 29, 2013
Class and Aging	Gross		VIEs(2)			Total			Gross		VIEs(2)			Total
Current status (FIP notes and other)	$	6,974	$	(1,271	)	$	5,703		$	9,688	$	(2,081	)	$	7,607
Past-due status < 90 days (FIP notes)	—		—			—			328		—			328
Past-due status > 90 days (FIP notes)	14,603		(11,715		)	2,888			14,917		(12,236		)	2,681
Notes receivable	$	21,577	$	(12,986	)	$	8,591		$	24,933	$	(14,317	)	$	10,616
Allowance						(1,537		)						(1,502		)
Notes receivable, net						$	7,054							$	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.

9 Months Ended

Sep. 28, 2014

Earnings Per Share [Abstract]

Earnings Per Common Share Attributable to Tim Hortons Inc.

EARNINGS PER COMMON SHARE ATTRIBUTABLE TO TIM HORTONS INC.

	Third quarter ended				Year-to-date period ended
	September 28, 2014		September 29, 2013		September 28, 2014		September 29, 2013
Net income attributable to Tim Hortons Inc.	$	98,131	$	113,863	$	312,790	$	323,770
Weighted average shares outstanding for computation of basic earnings per common share attributable to Tim Hortons Inc. (in thousands)	132,439		150,342		134,817		152,379
Dilutive impact of restricted stock units (“RSUs”) and PSUs (in thousands)	219		264		243		285
Dilutive impact of stock options with tandem stock appreciation rights (“SARs”) (in thousands)	276		258		232		255
Weighted average shares outstanding for computation of diluted earnings per common share attributable to Tim Hortons Inc. (in thousands)	132,934		150,864		135,292		152,919
Basic earnings per common share attributable to Tim Hortons Inc.	$	0.74	$	0.76	$	2.32	$	2.12
Diluted earnings per common share attributable to Tim Hortons Inc.	$	0.74	$	0.75	$	2.31	$	2.12

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Proposed Transaction with Burger King Worldwide Proposed Transaction with Burger King Worldwide

9 Months Ended

Sep. 28, 2014

Proposed Transaction with Burger King Worldwide [Abstract]

Proposed transaction with Burger King Worldwide

PROPOSED TRANSACTION WITH BURGER KING

On August 26, 2014, the Company announced that it had entered into the Arrangement Agreement with Burger King and certain of its affiliates. Pursuant to and subject to the terms and conditions of the Arrangement Agreement, the transaction (“Transaction”) will result in Burger King and Tim Hortons being indirect subsidiaries of a newly formed Canadian company, 9060669 Canada Inc. (“Holdings”, formerly known as 1011773 B.C. Unlimited Liability Company). The Transaction has been unanimously approved by the Board of Directors of the Company as well as the Board of Directors of Burger King.

Company shareholders will receive, for each Company common share held, at the election of such holder: (a) C$65.50 in cash and 0.8025 common shares of Holdings (the “Arrangement Mixed Consideration”); (b) C$88.50 in cash (the “Arrangement Cash Consideration”); or (c) 3.0879 common shares of Holdings (the “Arrangement Share Consideration”). Common shares of the Corporation with respect to which no election is made will receive the Arrangement Mixed Consideration. Shareholders who elect to receive the Arrangement Cash Consideration or the Arrangement Share Consideration will be subject to proration in accordance with the Arrangement Agreement so that the total amount of cash paid and the total number of common shares of Holdings issued to the Corporation’s shareholders as a whole are equal to the total amount of cash and number of common shares of Holdings that would have been paid and issued if all of the Corporation’s shareholders received the Arrangement Mixed Consideration.

For a Company shareholder electing the Arrangement Mixed Consideration, the value of the consideration received will depend on the price per share of Burger King’s common shares at the time the Transaction is completed. Based on Burger King’s unaffected closing stock price as of August 22, 2014, this represented total value per Company share of $89.39 and based on Burger King’s closing stock price as of August 25, 2014, this represented total value per Company share of $94.05.

The Transaction is subject to customary closing conditions, including, among others, approval by the Company’s shareholders, approval by the Ontario Superior Court of Justice and regulatory approvals. An interim order of the Ontario Superior Court of Justice with respect to the Transaction was issued on November 3, 2014. The approval of Tim Hortons shareholders will be sought at a special meeting of shareholders, for shareholders of record on November 3, 2014. The special meeting is scheduled to be held on December 9, 2014 at the Tim Hortons Innovation Centre, 226 Wyecroft Road in Oakville, Ontario. As 3G Capital currently owns approximately 70.0% of the shares of Burger King and has committed to vote in favour of the Transaction, no stockholder vote is required of Burger King stockholders. The closing of the Transaction is currently anticipated to occur in late 2014 or early 2015.

Upon termination of the Transaction under certain circumstances, the Company may be required to pay Burger King a termination fee of $345.0 million, or Burger King may be required to pay the Company a termination fee of $500.0 million. In addition, if the Company’s shareholders do not approve the Transaction, the Company may be required to pay Burger King a reimbursement fee of $40.0 million.

Certain of the Company’s arrangements and agreements will be impacted by the proposed Transaction, including the Senior Notes included in our Long-term debt, certain agreements with executives, and our outstanding equity awards. For a full description of the impact of the Transaction on the Company, please refer to Amendment No. 4 to the Registration Statement on Form S-4, filed with the SEC on November 3, 2014, by New Red Canada Limited Partnership (“Partnership”, formerly known as New Red Canada Partnership) and Holdings, which is available on the SEC’s EDGAR filing system. The Form S-4 as amended, was declared effective by the SEC on November 5, 2014. Final versions of all documents for use in connection with a special meeting of shareholders of the Company to seek shareholder approval of the Transaction will be filed by the Company on SEDAR and on EDGAR, including the draft management proxy circular, in accordance with applicable corporate and securities laws in Canada and the United States.

The Company has incurred Transaction-related costs of $27.3 million in the year-to-date period ended September 28, 2014, primarily comprised of professional fees to financial and legal advisors.

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Stock-Based Compensation

9 Months Ended

Sep. 28, 2014

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

Stock-Based Compensation

STOCK-BASED COMPENSATION

	Third quarter ended						Year-to-date period ended
	September 28, 2014			September 29, 2013			September 28, 2014			September 29, 2013
RSUs and PSUs	$	1,551		$	1,510		$	4,207		$	5,090
Stock options and tandem SARs	27,490			2,573			25,626			9,912
Deferred share units (“DSUs”)	5,040			514			5,134			2,130
Total stock-based compensation expense(1)	$	34,081		$	4,597		$	34,967		$	17,132
TRS (gain)(2)	$	(30,756	)	$	(2,802	)	$	(26,509	)	$	(11,037	)

________________

⁽¹⁾  Primarily included in General and administrative expenses in the Condensed Consolidated Statement of Operations.

⁽²⁾  The Company has entered into TRS contracts as economic hedges, covering 1,027,000 of the Company’s underlying common shares (September 29, 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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Long Term Debt (Notes)

9 Months Ended

Sep. 28, 2014

Debt Disclosure [Abstract]

Long-term Debt

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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Inventories and Other, Net

9 Months Ended

Sep. 28, 2014

Inventory Disclosure [Abstract]

Inventories and Other, Net

INVENTORIES AND OTHER, NET

	As at
	September 28, 2014			December 29, 2013
Raw materials	$	21,784		$	22,789
Finished goods	91,346			69,348
	113,130			92,137
Inventory obsolescence provision	(2,057		)	(1,754		)
Inventories, net	111,073			90,383
Prepaids and other(1)	30,060			13,943
Total Inventories and other, net	$	141,133		$	104,326

⁽¹⁾ Includes fair value of the Total Return Swaps of $10.6 million (December 29, 2013: nil) and bearer deposit notes of $7.6 million (December 29, 2013: nil) (see Note 9). Amounts have been reclassified from Other assets since December 29, 2013.

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Accounts Payable

9 Months Ended

Sep. 28, 2014

Payables and Accruals [Abstract]

Accounts Payable and Accrued Liabilities

ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable

	As at
	September 28, 2014		December 29, 2013
Accounts payable	$	143,383	$	142,131
Construction holdbacks and accruals	46,772		57,527
Transaction costs (note 15)	24,572		—
Corporate reorganization accrual	488		4,856
Total Accounts payable	$	215,215	$	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, and to a much lesser extent, the recognition of breakage income. 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
	September 28, 2014		December 29, 2013
Salaries and wages	$	26,312	$	22,553
Taxes payable	18,730		14,542
De-branding accruals(1)	1,376		9,538
Other accrued liabilities(2)	64,339		42,932
Total Accrued liabilities	$	110,757	$	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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Fair Values

9 Months Ended

Sep. 28, 2014

Fair Value Disclosures [Abstract]

Fair Values

FAIR VALUES

Financial assets and liabilities measured at fair value

	As at
	September 28, 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	$	4,264		Level 2	$	4,181
Interest rate swap(3)	Level 2	(163		)	Level 2	(49		)
Interest rate forwards(4)	n/a	—			Level 2	285
Total return swaps (“TRS”)(5)	Level 2	47,902			Level 2	21,393
Total Derivatives		$	52,003			$	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 September 28, 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
	September 28, 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	$	7,054		$	7,054		Level 3	$	9,114		$	9,114
Series 1 Notes(3)	Level 2	$	(306,768	)	$	(300,934	)	Level 2	$	(315,519	)	$	(301,196	)
Series 2 Notes(3)	Level 2	$	(458,325	)	$	(449,901	)	Level 2	$	(445,419	)	$	(449,892	)
Series 3 Notes(3)	Level 2	$	(452,435	)	$	(449,887	)	n/a	$	—		$	—
Advertising fund term debt(4)	Level 3	$	(26,415	)	$	(26,415	)	Level 3	$	(30,189	)	$	(30,189	)
Other debt(5)	Level 3	$	(141,995	)	$	(75,651	)	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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Basis of Presentation Additional Information (Details)	9 Months Ended
	Sep. 28, 2014 performance_measure
Accounting Policies [Abstract]
Number of Performance Measures for Performance Stock Units	2

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Stock-Based Compensation Expense Included In General And Administrative Expenses (Detail) (CAD) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 28, 2014	Sep. 29, 2013	Sep. 28, 2014	Sep. 29, 2013
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
RSUs and PSUs	1,551	1,510	4,207	5,090
Stock options and tandem SARs	27,490	2,573	25,626	9,912
Deferred share units (“DSUs”)	5,040	514	5,134	2,130
Total stock-based compensation expense	34,081	4,597	34,967	17,132
TRS loss (gain)	(32,672)	(2,717)	(27,618)	(11,301)
General and Administrative Expense | TRS
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
TRS loss (gain)	(30,756)	(2,802)	(26,509)	(11,037)

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Segment Reporting

9 Months Ended

Sep. 28, 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.

	Third quarter ended						Year-to-date period ended
	September 28, 2014			September 29, 2013			September 28, 2014			September 29, 2013
Revenues(1)
Canada	$	747,692		$	676,006		$	2,092,476		$	1,927,361
U.S.	60,099			47,019			163,152			132,687
Corporate services	4,256			3,414			13,561			12,743
Total reportable segments	812,047			726,439			2,269,189			2,072,791
VIEs	97,108			98,914			280,715			284,238
Total	$	909,155		$	825,353		$	2,549,904		$	2,357,029
Operating Income (Loss)
Canada	$	196,204		$	179,597		$	538,536		$	500,178
U.S.(2)	7,436			2,717			21,047			6,214
Corporate services	(9,709		)	(14,325		)	(32,284		)	(26,414		)
Total reportable segments	193,931			167,989			527,299			479,978
VIEs(2)	2,164			1,792			6,450			4,378
Transaction costs (note 15)	(27,289		)	—			(27,289		)	—
Corporate reorganization expenses	—			(953		)	—			(11,032		)
Consolidated Operating Income	168,806			168,828			506,460			473,324
Interest, Net	(17,639		)	(8,487		)	(50,848		)	(24,353		)
Income before income taxes	$	151,167		$	160,341		$	455,612		$	448,971

________________ 

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

⁽²⁾  In fiscal 2013, the Company recognized an asset impairment charge in the U.S. related to certain non-core and non-priority markets, of which $2.5 million was recognized in the U.S. segment and $0.4 million related to consolidated VIEs.

Consolidated Sales comprise the following:

	Third quarter ended				Year-to-date period ended
	September 28, 2014		September 29, 2013		September 28, 2014		September 29, 2013
Sales
Distribution sales	$	534,456	$	473,641	$	1,498,571	$	1,373,389
Company-operated restaurant sales	6,201		6,090		19,236		18,567
Sales from VIEs	94,129		96,049		271,838		276,273
Total Sales	$	634,786	$	575,780	$	1,789,645	$	1,668,229

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Notes Receivable, Net (Tables)

9 Months Ended

Sep. 28, 2014

Receivables [Abstract]

Notes Receivable by Segment

	As at
	September 28, 2014								December 29, 2013
	Gross		VIEs(2)			Total			Gross		VIEs(2)			Total
Franchise Incentive Program (“FIP”) notes(1)	$	15,404	$	(12,392	)	$	3,012		$	16,677	$	(13,668	)	$	3,009
Other notes receivable(3)	6,173		(594		)	5,579			8,256		(649		)	7,607
Notes receivable	$	21,577	$	(12,986	)	8,591			$	24,933	$	(14,317	)	10,616
Allowance						(1,537		)						(1,502		)
Notes receivable, net						$	7,054							$	9,114
Current portion, net						$	6,482							$	4,631
Long-term portion, net						$	572							$	4,483

Notes Receivable by Class and Aging

	As at
	September 28, 2014								December 29, 2013
Class and Aging	Gross		VIEs(2)			Total			Gross		VIEs(2)			Total
Current status (FIP notes and other)	$	6,974	$	(1,271	)	$	5,703		$	9,688	$	(2,081	)	$	7,607
Past-due status < 90 days (FIP notes)	—		—			—			328		—			328
Past-due status > 90 days (FIP notes)	14,603		(11,715		)	2,888			14,917		(12,236		)	2,681
Notes receivable	$	21,577	$	(12,986	)	$	8,591		$	24,933	$	(14,317	)	$	10,616
Allowance						(1,537		)						(1,502		)
Notes receivable, net						$	7,054							$	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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Summary Of Effect Of Derivative Instruments On Consolidated Statement Of Comprehensive Income (Detail) (CAD) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 28, 2014	Sep. 29, 2013	Sep. 28, 2014	Sep. 29, 2013
Derivative Instruments, Gain (Loss) [Line Items]
Amount of net (gain) loss reclassified to earnings	47	(2,068)	(3,654)	(1,027)
Cash Flow Hedging
Derivative Instruments, Gain (Loss) [Line Items]
Amount of gain (loss) recognized in OCI	5,356	(10,686)	(553)	(2,607)
Amount of gain (loss) recognized in OCI, Income tax effect	(1,422)	915	(1,218)	(1,226)
Amount of gain (loss) recognized in OCI, Net of income taxes	3,934	(9,771)	(1,771)	(3,833)
Amount of net (gain) loss reclassified to earnings	47	(2,068)	(3,654)	(1,027)
Amount of net (gain) loss reclassified to earnings, Net of income taxes	209	(1,474)	(2,220)	(617)
Total effect on OCI	5,403	(12,754)	(4,207)	(3,634)
Total effect on OCI, Income tax effect	(1,260)	1,509	216	(816)
Total effect on OCI, Net of income taxes	4,143	(11,245)	(3,991)	(4,450)
Cash Flow Hedging | Income Taxes
Derivative Instruments, Gain (Loss) [Line Items]
Amount of net (gain) loss reclassified to earnings, Income tax effect	162	594	1,434	410
Cash Flow Hedging | Forward Currency Contracts
Derivative Instruments, Gain (Loss) [Line Items]
Amount of gain (loss) recognized in OCI	5,362	(3,368)	4,847	4,756
Total effect on OCI	4,703	(5,668)	(701)	3,071
Cash Flow Hedging | Forward Currency Contracts | Cost Of Sales
Derivative Instruments, Gain (Loss) [Line Items]
Amount of net (gain) loss reclassified to earnings	(659)	(2,300)	(5,548)	(1,685)
Cash Flow Hedging | Interest Rate Swap | Canadian Ad Fund
Derivative Instruments, Gain (Loss) [Line Items]
Amount of gain (loss) recognized in OCI	(6)	(83)	(264)	(128)
Total effect on OCI	41	(24)	(114)	11
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	47	59	150	139
Cash Flow Hedging | Interest Rate Forwards
Derivative Instruments, Gain (Loss) [Line Items]
Amount of gain (loss) recognized in OCI	0	(7,235)	(5,136)	(7,235)
Total effect on OCI	659	(7,062)	(3,392)	(6,716)
Cash Flow Hedging | Interest Rate Forwards | Interest (Expense)
Derivative Instruments, Gain (Loss) [Line Items]
Amount of net (gain) loss reclassified to earnings	659	173	1,744	519

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Accounts Payable (Detail) (CAD) In Thousands, unless otherwise specified	Sep. 28, 2014	Dec. 29, 2013
Payables and Accruals [Abstract]
Accounts payable	143,383	142,131
Construction holdbacks and accruals	46,772	57,527
Transaction cost	24,572	0
Corporate reorganization accrual	488	4,856
Total Accounts payable	215,215	204,514

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Condensed Consolidated Balance Sheet (Parenthetical) (CAD)	Sep. 28, 2014	Dec. 29, 2013
Statement of Financial Position [Abstract]
Common shares, stated value per share	2.84	2.84
Common shares, issued	132,576,171	141,329,010
Common shares held in Trust, shares	315,932	293,816

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Income Taxes

9 Months Ended

Sep. 28, 2014

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

The effective income tax rate was 34.0% for the third quarter ended September 28, 2014 (third quarter fiscal 2013: 28.3%) and 30.3% for the year-to-date period ended September 28, 2014 (year-to-date period fiscal 2013: 27.3%). 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 Transaction-related costs (see Note 15), and to a lesser degree an increase in costs in 2014 related to the Company’s new long-term debt, for both of which a full tax benefit cannot be recognized.

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Proposed Transaction with Burger King Worldwide Proposed Transaction with Burger King Worldwide (Details)	3 Months Ended		9 Months Ended
	Sep. 28, 2014 CAD	Sep. 29, 2013 CAD	Sep. 28, 2014 CAD	Sep. 29, 2013 CAD	Aug. 26, 2014 CAD	Aug. 25, 2014 USD ($)	Aug. 22, 2014 USD ($)
Proposed Transaction with Burger King Worldwide [Abstract]
Cash and share option, cash amount received per share held					65.50
Cash and share option, common shares received per share held					0.8025
Cash option, cash received per share held					88.50
Shares option, common shares received per share held					3.0879
Share price						$ 94.05	$ 89.39
Majority ownership percentage of Burger King					70.00%
Fee required by the company if agreement is terminated					345,000,000.0
Fee required by the Burger King if agreement is terminated					500,000,000.0
Reimbursement fee required if unapproved by shareholders					40,000,000.0
Transactions costs	27,289,000	0	27,289,000	0

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Inventories and Other, Net (Tables)

9 Months Ended

Sep. 28, 2014

Inventory Disclosure [Abstract]

Inventories and Other, Net

	As at
	September 28, 2014			December 29, 2013
Raw materials	$	21,784		$	22,789
Finished goods	91,346			69,348
	113,130			92,137
Inventory obsolescence provision	(2,057		)	(1,754		)
Inventories, net	111,073			90,383
Prepaids and other(1)	30,060			13,943
Total Inventories and other, net	$	141,133		$	104,326

⁽¹⁾ Includes fair value of the Total Return Swaps of $10.6 million (December 29, 2013: nil) and bearer deposit notes of $7.6 million (December 29, 2013: nil) (see Note 9). Amounts have been reclassified from Other assets since December 29, 2013.

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Notes Receivable By Class and Aging (Detail) (CAD) In Thousands, unless otherwise specified	Sep. 28, 2014	Dec. 29, 2013
Notes Receivable By Class And Aging [Line Items]
Notes receivable	8,591	10,616
Allowance	(1,537)	(1,502)
Notes receivable, net	7,054	9,114
Current Status (FIPs And Other)
Notes Receivable By Class And Aging [Line Items]
Notes receivable	5,703	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	2,888	2,681
Gross
Notes Receivable By Class And Aging [Line Items]
Notes receivable	21,577	24,933
Gross | Current Status (FIPs And Other)
Notes Receivable By Class And Aging [Line Items]
Notes receivable	6,974	9,688
Gross | Past Due Status Less Than 90 Days (FIPs)
Notes Receivable By Class And Aging [Line Items]
Notes receivable	0	328
Gross | Past Due Status Greater Than 90 Days (FIPs)
Notes Receivable By Class And Aging [Line Items]
Notes receivable	14,603	14,917
VIEs
Notes Receivable By Class And Aging [Line Items]
Notes receivable	(12,986)	(14,317)
VIEs | Current Status (FIPs And Other)
Notes Receivable By Class And Aging [Line Items]
Notes receivable	(1,271)	(2,081)
VIEs | Past Due Status Less Than 90 Days (FIPs)
Notes Receivable By Class And Aging [Line Items]
Notes receivable	0	0
VIEs | Past Due Status Greater Than 90 Days (FIPs)
Notes Receivable By Class And Aging [Line Items]
Notes receivable	(11,715)	(12,236)

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Variable Interest Entities

9 Months Ended

Sep. 28, 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:

	Third quarter ended
	September 28, 2014						September 29, 2013
	Restaurant VIEs(1)		Advertising fund VIEs(2)		Total VIEs		Restaurant VIEs(1)		Advertising fund VIEs(2)		Total VIEs
Sales	$	94,129	$	—	$	94,129	$	96,049	$	—	$	96,049
Advertising levies	—		2,979		2,979		—		2,865		2,865
Total revenues	94,129		2,979		97,108		96,049		2,865		98,914
Cost of sales	92,183		—		92,183		94,302		—		94,302
Operating expenses	—		2,761		2,761		—		2,379		2,379
Asset impairment(3)	—		—		—		441		—		441
Operating income	1,946		218		2,164		1,306		486		1,792
Interest expense	—		218		218		—		486		486
Income before taxes	1,946		—		1,946		1,306		—		1,306
Income taxes	344		—		344		214		—		214
Net income attributable to noncontrolling interests	$	1,602	$	—	$	1,602	$	1,092	$	—	$	1,092

	Year-to-date period ended
	September 28, 2014						September 29, 2013
	Restaurant VIEs(1)		Advertising fund VIEs(2)		Total VIEs		Restaurant VIEs(1)		Advertising fund VIEs(2)		Total VIEs
Sales	$	271,838	$	—	$	271,838	$	276,273	$	—	$	276,273
Advertising levies	—		8,877		8,877		—		7,965		7,965
Total revenues	271,838		8,877		280,715		276,273		7,965		284,238
Cost of sales	266,038		—		266,038		272,648		—		272,648
Operating expenses	—		8,227		8,227		—		6,771		6,771
Asset impairment(3)	—		—		—		441		—		441
Operating income	5,800		650		6,450		3,184		1,194		4,378
Interest expense	33		650		683		—		1,194		1,194
Income before taxes	5,767		—		5,767		3,184		—		3,184
Income taxes	1,037		—		1,037		514		—		514
Net income attributable to noncontrolling interests	$	4,730	$	—	$	4,730	$	2,670	$	—	$	2,670

______________

⁽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.

⁽³⁾  The Company recognized an impairment charge in the third quarter of 2013 related to certain underperforming markets in the U.S.

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
	September 28, 2014				December 29, 2013
	Restaurant VIEs(1)		Advertising fund VIEs		Restaurant VIEs(1)		Advertising fund VIEs
Cash and cash equivalents	$	7,717	$	—	$	7,773	$	—
Advertising fund restricted assets – current	—		57,230		—		39,783
Other current assets	6,892		—		7,155		—
Property and equipment, net	15,134		62,877		20,471		70,485
Other long-term assets	91		746		370		1,271
Total assets	$	29,834	$	120,853	$	35,769	$	111,539
Notes payable to Tim Hortons Inc. – current(2)(3)	$	12,492	$	8,222	$	13,689	$	3,040
Advertising fund liabilities – current	—		49,211		—		59,913
Other current liabilities(4)	10,509		5,254		11,706		5,253
Notes payable to Tim Hortons Inc. – long-term(2)(3)	494		34,943		628		15,200
Long-term debt(4)	—		21,384		—		25,157
Other long-term liabilities	5,432		1,839		9,381		2,976
Total liabilities	28,927		120,853		35,404		111,539
Equity of VIEs	907		—		365		—
Total liabilities and equity	$	29,834	$	120,853	$	35,769	$	111,539

______________

⁽¹⁾  The Company consolidated 317 Non-owned restaurants as at September 28, 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.

⁽⁴⁾  Includes $26.4 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.