Tim Hortons 10-Q 6 Aug 09 2009 Q2 Quarterly report Financial data

Statement Of Income Alternative

Statement Of Income Alternative (CAD $)
In Thousands, except Per Share data	3 Months Ended Jun. 28, 2009	3 Months Ended Jun. 29, 2008	6 Months Ended Jun. 28, 2009	6 Months Ended Jun. 29, 2008
Revenues
Sales	$372,119	$335,873	$711,738	$642,379
Franchise revenues:
Rents and royalties	164,679	153,546	311,818	289,426
Franchise fees	19,287	21,273	39,714	39,204
Franchise Revenue, Total	183,966	174,819	351,532	328,630
Total revenues	556,085	510,692	1,063,270	971,009
Costs and expenses
Cost of sales	328,345	293,101	628,296	565,384
Operating expenses	59,427	54,622	116,533	104,631
Franchise fee costs	19,615	19,908	39,393	38,188
General and administrative expenses	35,694	36,124	69,170	67,010
Equity (income)	(8,694)	(10,001)	(16,549)	(17,363)
Other (income), net	(152)	(615)	(316)	(1,726)
Total costs and expenses, net	434,235	393,139	836,527	756,124
Operating income	121,850	117,553	226,743	214,885
Interest (expense)	(5,092)	(5,969)	(10,549)	(12,320)
Interest income	230	1,073	784	3,063
Income before income taxes	116,988	112,657	216,978	205,628
Income taxes (note 2)	38,784	37,341	72,045	67,830
Net income	78,204	75,316	144,933	137,798
Net income attributable to noncontrolling interests	444	342	734	1,004
Net income attributable to Tim Hortons Inc.	$77,760	$74,974	$144,199	$136,794
Basic earnings per share of common stock attributable to Tim Hortons Inc. (note 3)	0.43	0.41	0.8	0.74
Diluted earnings per share of common stock attributable to Tim Hortons Inc. (note 3)	0.43	0.41	0.8	0.74
Weighted average number of shares of common stock outstanding - Basic (in thousands) (note 3)	180,731	183,983	180,975	184,749
Weighted average number of shares of common stock outstanding - Diluted (in thousands) (note 3)	180,923	184,258	181,140	185,003
Dividend per share of common stock	0.1	0.09	0.2	0.18

Statement Of Financial Position

Statement Of Financial Position Classified (CAD $)
In Thousands	Jun. 28, 2009	Dec. 28, 2008
Current assets
Cash and cash equivalents	$141,928	$101,636
Restricted cash and cash equivalents	36,862	62,329
Accounts receivable, net	138,569	159,505
Notes receivable, net	25,767	22,615
Deferred income taxes	17,862	19,760
Inventories and other, net (note 4)	64,066	71,505
Advertising fund restricted assets (note 5)	23,314	27,684
Total current assets	448,368	465,034
Property and equipment, net	1,324,189	1,332,852
Notes receivable, net	16,820	17,645
Deferred income taxes	27,857	29,285
Intangible assets, net	2,336	2,606
Equity investments	127,862	132,364
Other assets	16,441	12,841
Total assets	1,963,873	1,992,627
Current liabilities
Accounts payable (note 6)	113,895	157,210
Accrued liabilities:
Salaries and wages	13,081	18,492
Taxes	24,251	25,605
Other (note 6)	71,000	110,518
Advertising fund restricted liabilities (note 5)	40,174	47,544
Current portion of long-term obligations	6,965	6,691
Total current liabilities	269,366	366,060
Long-term obligations
Term debt	334,335	332,506
Advertising fund restricted debt (note 5)	3,759	6,929
Capital leases	60,515	59,052
Deferred income taxes	16,953	13,604
Other long-term liabilities	72,344	72,467
Total long-term obligations	487,906	484,558
Commitments and contingencies (note 7)	0	0
Equity of Tim Hortons Inc.
Common stock (US$0.001 par value per share), Authorized: 1,000,000,000 shares, Issued: 193,302,977 shares	289	289
Capital in excess of par value	927,318	929,102
Treasury stock, at cost: 12,306,100 and 11,754,201 shares, respectively (note 8)	(415,751)	(399,314)
Common stock held in trust, at cost: 316,892 and 358,186 shares, respectively	(10,738)	(12,287)
Retained earnings	785,496	677,550
Accumulated other comprehensive loss	(81,067)	(54,936)
Total equity of Tim Hortons Inc.	1,205,547	1,140,404
Noncontrolling interests	1,054	1,605
Total equity	1,206,601	1,142,009
Total liabilities and equity	$1,963,873	$1,992,627

1_Statement Of Financial Positi

Statement Of Financial Position Classified (Parenthetical) (CAD $)
	Jun. 28, 2009	Dec. 28, 2008
Common stock, par value	0.001	0.001
Common stock, authorized	1,000,000,000	1,000,000,000
Common stock, issued	193,302,977	193,302,977
Treasury stock, shares	12,306,100	11,754,201
Common stock held in trust, shares	316,892	358,186

Statement Of Cash Flows Indirec

Statement Of Cash Flows Indirect (CAD $)
In Thousands	6 Months Ended Jun. 28, 2009	6 Months Ended Jun. 29, 2008
Cash flows provided from (used in) operating activities
Net income	$144,933	$137,798
Net income attributable to noncontrolling interests	(734)	(1,004)
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization	49,890	44,135
Stock-based compensation expense	4,073	5,552
Equity income, net of cash dividends	4,419	2,902
Deferred income taxes	3,678	(979)
Changes in operating assets and liabilities
Restricted cash and cash equivalents	25,316	19,052
Accounts and notes receivable	20,202	(17,521)
Inventories and other	7,589	3,890
Accounts payable and accrued liabilities	(82,070)	(78,955)
Other, net	(226)	6,416
Net cash provided from operating activities	177,070	121,286
Cash flows (used in) provided from investing activities
Capital expenditures	(68,818)	(66,074)
Principal payments on notes receivable	733	1,075
Other investing activities	(11,841)	(4,274)
Net cash used in investing activities	(79,926)	(69,273)
Cash flows (used in) provided from financing activities
Purchase of treasury stock	(16,701)	(100,294)
Purchase of common stock held in trust	(713)	(3,842)
Dividend payments	(36,253)	(33,277)
Purchase of common stock for settlement of restricted stock units	(232)	(226)
Proceeds from issuance of debt, net of issuance costs	1,150	1,514
Principal payments on other long-term debt obligations	(2,551)	(2,611)
Net cash used in financing activities	(55,300)	(138,736)
Effect of exchange rate changes on cash	(1,552)	1,285
Increase (decrease) in cash and cash equivalents	40,292	(85,438)
Cash and cash equivalents at beginning of period	101,636	157,602
Cash and cash equivalents at end of period	141,928	72,164
Supplemental disclosures of cash flow information:
Interest paid	9,760	11,617
Income taxes paid	74,163	81,557
Non-cash investing and financing activities:
Capital lease obligations incurred	$4,737	$6,821

Statement Of Shareholders Equit

Statement Of Shareholders Equity And Other Comprehensive Income (CAD $)
In Thousands	Common Stock [Member]	Capital in excess of par value	Treasury Stock [Member]		Retained earnings	Accumulated other comprehensive (loss) income	Total equity of Tim Hortons Inc.	Noncontrolling interests	Common stock	Treasury stock	Common stock held in trust	Total
Balance at beginning of period at Dec. 30, 2007									193,303	(6,750)	(421)
Balance at beginning of period at Dec. 30, 2007	$289	$931,084	($235,155)	($14,628)	$458,958	($138,465)		$2,361
Balance at beginning of period at Dec. 30, 2007									193,303	(6,750)	(421)
Balance at beginning of period at Dec. 30, 2007	289	931,084	(235,155)	(14,628)	458,958	(138,465)		2,361
Net Income					284,678			2,217
Purchased during the period				(3,842)
Purchased during the period (note 8)			(165,258)
Other comprehensive (loss) income (note 10)						83,529
Stock-based compensation		(1,982)
Distributions and other to noncontrolling interests								(2,973)
Dividends					(66,086)
Disbursed or sold from Trust during the period				6,183
Reissued during the period			1,099
Purchased during the period											(116)
Purchased during the period (note 8)										(5,036)
Disbursed or sold from Trust during the period											179
Reissued during the period										32
Balance at end of period at Dec. 28, 2008	289	929,102	(399,314)	(12,287)	677,550	(54,936)	1,140,404	1,605				1,142,009
Balance at end of period at Dec. 28, 2008									193,303	(11,754)	(358)	181,191
Balance at beginning of period at Dec. 28, 2008									193,303			181,191
Balance at beginning of period at Dec. 28, 2008	289						1,140,404					1,142,009
Net Income					144,199			734				144,933
Purchased during the period				(713)
Purchased during the period (note 8)			(16,701)
Other comprehensive (loss) income (note 10)						(26,131)
Stock-based compensation		(1,784)
Distributions and other to noncontrolling interests								(1,285)
Dividends					(36,253)
Disbursed or sold from Trust during the period				2,262
Reissued during the period			264
Purchased during the period											(25)
Purchased during the period (note 8)										(560)
Disbursed or sold from Trust during the period											66
Reissued during the period										8
Balance at end of period at Jun. 28, 2009	289	927,318	(415,751)	(10,738)	785,496	(81,067)	1,205,547	1,054				1,206,601
Balance at end of period at Jun. 28, 2009									193,303	(12,306)	(317)	180,680
Balance at beginning of period at Mar. 29, 2009									193,303
Balance at beginning of period at Mar. 29, 2009	289						1,205,547
Balance at end of period at Jun. 28, 2009	$289						$1,205,547
Balance at end of period at Jun. 28, 2009									193,303

Notes to Financial Statements

Notes to Financial Statements
	6 Months Ended Jun. 28, 2009 CAD ($) CAD / shares
Notes to Financial Statements [Abstract]
NOTE 1 MANAGEMENT STATEMENT AND BASIS OF PRESENTATION	NOTE 1 MANAGEMENT STATEMENT AND BASIS OF PRESENTATION Tim Hortons Inc. is a Delaware corporation (together with its subsidiaries, collectively referred to herein as the Company) and, prior to March29, 2006, was a wholly-owned subsidiary of Wendys International, Inc. (together with its subsidiaries, collectively referred to herein as Wendys). The Companys principal business is the development and franchising, and to a much lesser extent the operation, of quick-service restaurants that serve coffee and other hot and cold beverages, baked goods, sandwiches, soups and other food products. In addition, the Company has vertically integrated manufacturing, warehouse and distribution operations which supply a significant portion of the system restaurants with paper and equipment, as well as food products, including shelf-stable products, and, from one distribution centre, refrigerated and frozen food products. The Company also controls the real estate underlying a substantial majority of the system restaurants, which generates another source of revenue. As of June28, 2009, the Company and its franchisees operated 2,939 restaurants in Canada (99.5% franchised) and 536 restaurants in the United States (U.S.) (99.1% franchised) under the name Tim Hortons. In addition, the Company has 297 licensed locations in the Republic of Ireland and the United Kingdom as of June28, 2009. 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 Companys financial position as of June28, 2009 and December28, 2008, and the condensed consolidated results of operations, comprehensive income (see Note 10) and cash flows for the quarters and year-to-date periods ended June28, 2009 and June29, 2008. All of these financial statements are unaudited. These Condensed Consolidated Financial Statements should be read in conjunction with the 2008 Consolidated Financial Statements which are contained in the Companys Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on February26, 2009. The December28, 2008 Condensed Consolidated Balance Sheet was derived from the same audited 2008 Consolidated Financial Statements, except as discussed below, but does not include all disclosures required by U.S. GAAP. The functional currency of Tim Hortons Inc. is the Canadian dollar as the majority of the Companys cash flows are in Canadian dollars. The functional currency of each of the Companys subsidiaries and legal entities is the local currency in which each subsidiary operates, which is the Canadian dollar, the U.S. dollar or the Euro. The majority of the Companys operations, restaurants and cash flows are based in Canada, and the Company is primarily managed in Canadian dollars. As a result, the Companys reporting currency is the Canadian dollar. Evaluation of subsequent events In accordance with Statement of Accounting Standards (SFAS) No.165Subsequent Eve
NOTE 2 INCOME TAXES	NOTE 2 INCOME TAXES The effective tax rate was 33.2% and 33.1% for the second quarters ended June28, 2009 and June29, 2008, respectively. The effective tax rate for the year-to-date periods ended June28, 2009 and June29, 2008 was 33.2% and 33.0%, respectively. The variance between periods is primarily explained by a valuation allowance on certain U.S. deferred tax assets which increased the effective tax rate and was substantially offset by lower Canadian statutory income and withholding tax rates.
NOTE 3 NET INCOME PER SHARE OF COMMON STOCK ATTRIBUTABLE TO TIM HORTONS INC.	NOTE 3 NET INCOME PER SHARE OF COMMON STOCK ATTRIBUTABLE TO TIM HORTONS INC. Basic earnings per share of common stock attributable to Tim Hortons Inc. are computed by dividing net income attributable to Tim Hortons Inc.s common stockholders by the weighted average number of shares of common stock outstanding. Diluted computations are based on the treasury stock method and include assumed issuances of outstanding restricted stock units and stock options with tandem stock appreciation rights (SARs), as prescribed in SFAS No.128Earnings Per Share , as the sum of: (i)the amount, if any, the employee must pay upon exercise; (ii)the amount of compensation cost attributed to future services and not yet recognized; and (iii)the amount of tax benefits (both current and deferred), if any, that would be credited to additional paid-in capital assuming exercise of the options, net of shares assumed to be repurchased from the assumed proceeds, when dilutive. Stock options granted in 2008 and 2009 were anti-dilutive for the second quarter and year-to-date periods ended June28, 2009 and June29, 2008, respectively, and therefore were excluded from the calculation of earnings per share of common stock attributable to Tim Hortons Inc. The computations of basic and diluted earnings per share of common stock attributable to Tim Hortons Inc. are shown below: Second quarter ended Year-to-dateperiodended June 28, 2009 June 29, 2008 June 28, 2009 June 29, 2008 Net income attributable to Tim Hortons Inc. for computation of basic and diluted earnings per share of common stock attributable to Tim Hortons Inc. $ 77,760 $ 74,974 $ 144,199 $ 136,794 Weighted average shares outstanding for computation of basic earnings per share of common stock attributable to Tim Hortons Inc. (in thousands) 180,731 183,983 180,975 184,749 Dilutive restricted stock units (in thousands) 192 275 165 254 Weighted average shares outstanding for computation of diluted earnings per share of common stock attributable to Tim Hortons Inc. (in thousands) 180,923 184,258 181,140 185,003 Basic earnings per share of common stock attributable to Tim Hortons Inc. $ 0.43 $ 0.41 $ 0.80 $ 0.74 Diluted earnings per share of common stock attributable to Tim Hortons Inc. $ 0.43 $ 0.41 $ 0.80 $ 0.74
NOTE 4 INVENTORIES AND OTHER, NET	NOTE 4 INVENTORIES AND OTHER, NET Inventories (which are comprised primarily of finished goods) and other, net include the following as at June28, 2009 and December28, 2008: June28, 2009 December28, 2008 Inventories finished goods $ 44,348 $ 43,252 Inventory obsolescence provision (453 ) (873 ) Inventories, net 43,895 42,379 Prepaids and other 20,171 29,126 Total inventories and other, net $ 64,066 $ 71,505
NOTE 5 RESTRICTED ASSETS AND LIABILITIES - ADVERTISING FUND	NOTE 5 RESTRICTED ASSETS AND LIABILITIES- ADVERTISING FUND The Company participates in two advertising funds established to collect and administer funds contributed for use in advertising and promotional programs designed to increase sales and enhance the reputation of the Company and its franchise owners. Separate advertising funds are administered for Canada and the U.S. In accordance with SFAS No.45Accounting for Franchisee Fee Revenue, the revenue, expenses and cash flows of the advertising funds are not included in the Companys Condensed Consolidated Statements of Operations or Cash Flows because the contributions to these advertising funds are designated for specific purposes, and the Company acts, in substance, as an agent with regard to these contributions. The assets held by these advertising funds are considered restricted. These current restricted assets, current restricted liabilities and advertising fund restricted collateralized long-term debt are identified on the Companys Condensed Consolidated Balance Sheet. In addition, at June28, 2009 and December28, 2008, Property and equipment, net, included $22.7 million and $26.8 million, respectively, of advertising fund property and equipment, and Deferred income taxes long-term included $2.1 million and nil, respectively, of advertising fund deferred income taxes.
NOTE 6 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES - OTHER	NOTE 6 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES- OTHER Included within Accounts payable are the following obligations as at June28, 2009 and December28, 2008: June28, 2009 December28, 2008 Accounts payable $ 100,137 $ 138,704 Construction holdbacks and accruals 13,758 18,506 $ 113,895 $ 157,210 Included within Accrued liabilities, Other are the following obligations as at June28, 2009 and December28, 2008: June28, 2009 December28, 2008 Gift certificate obligations $ 9,886 $ 12,960 Cash card obligations 37,731 62,882 Other accrued liabilities 23,383 34,676 $ 71,000 $ 110,518 Accrued liabilities, Other include accrued rent expense, deposits, and various equipment and other accruals.
NOTE 7 COMMITMENTS AND CONTINGENCIES	NOTE 7 COMMITMENTS AND CONTINGENCIES The Company has guaranteed certain lease and debt payments, primarily related to franchisees, amounting to $0.7 million as at both June28, 2009 and December28, 2008. In the event of default by a franchise owner, the Company generally retains the right to acquire possession of the related restaurants. The Company is also the guarantor on $9.8 million as at June28, 2009 and $8.7 million as at December28, 2008 in letters of credit and surety bonds with various parties; however, management does not expect any material loss to result from these instruments because management does not believe performance will be required as the underlying event(s) that would require payment are not expected to occur and have not occurred as of June28, 2009. The length of the lease, loan and other arrangements guaranteed by the Company or for which the Company is contingently liable varies, but generally does not exceed seven years. The Company has entered into purchase arrangements with some of its suppliers having terms which generally do not exceed one fiscal year. The range of prices and volume of purchases under the agreements may vary according to the Companys demand for the products and fluctuations in market rates. These agreements help the Company secure pricing and product availability. The Company does not believe these agreements expose the Company to significant risk. Third parties may seek to hold the Company responsible for retained liabilities of Wendys. Under the separation agreements, Wendys has agreed to indemnify the Company for claims and losses relating to these retained liabilities. However, if those liabilities are significant, and Wendys is not able to fully pay or will not make payment, and the Company is ultimately held liable for these liabilities, there can be no assurance that the Company will be able to recover the full amount of its losses from Wendys. In addition to the guarantees described above, the Company is party to many agreements executed in the ordinary course of business that provide for indemnification of third parties, under specified circumstances, such as lessors of real property leased by the Company, distributors, service providers for various types of services (including commercial banking, investment banking, tax, actuarial and other services), software licensors, marketing and advertising firms, securities underwriters and others. Generally, these agreements obligate the Company to indemnify the third parties only if certain events occur or claims are made, as these contingent events or claims are defined in each of these agreements. The Company believes that the resolution of any claims that might arise in the future, either individually or in the aggregate, would not materially affect the earnings or financial condition of the Company. On June12, 2008, a claim was filed against the Company and certain of its affiliates in the Ontario Superior Court of Justice (Court) by two of its franchisees, Fairview Donut Inc. and Brule Foods Ltd., alleging, generally, that the Companys Always Fresh baking system and expansion of lunch offerings have led to lower franchisee
NOTE 8 CAPITAL STOCK	NOTE 8 CAPITAL STOCK In November 2008, the Companys Board of Directors approved a 2009 share repurchase program for up to $200 million, not to exceed the regulatory maximum of 9,077,438 shares, which was equivalent to 5% of the Companys outstanding shares of common stock at the time of regulatory approval on February25, 2009. The 2009 program commenced on March2, 2009 and will end March1, 2010 or sooner if the $200 million maximum or the 5% of outstanding share limit is reached, or, at the discretion of management or the Companys Board of Directors, subject to the Companys compliance with regulatory requirements. Purchases were planned to be made under the 2009 repurchase program at managements discretion, subject to applicable regulatory requirements and market, cost and other considerations. As a result of the Companys Board of Directors decision in May 2009 to approve a transaction to reorganize the Company as a Canadian public company, subject to stockholder approval and the satisfaction of additional transaction conditions, the Company decided, at that time, to suspend additional purchases under the 2009 share repurchase program until it could undertake a complete review of its capital allocation activities post-reorganization. In the year-to-date period ended June28, 2009, the Company purchased approximately 0.6million shares of common stock for a total cost of $16.7 million under the 2009 repurchase program. No shares were repurchased during the second quarter of 2009 as a result of the suspension of the share repurchase program. In the year-to-date period ended June29, 2008, the Company purchased approximately 2.9million shares of common stock for a total cost of $100.3 million under the Companys 2007-2008 repurchase program, which expired in October 2008.
NOTE 9 STOCK-BASED COMPENSATION	NOTE 9 STOCK-BASED COMPENSATION Total stock-based compensation expense included in General and administrative expenses on the Condensed Consolidated Statement of Operations is detailed as follows: Secondquarterended Year-to-dateperiodended June28, 2009 June29, 2008 June 28, 2009 June 29, 2008 Restricted stock units $ 1,713 $ 3,452 $ 2,919 $ 4,989 Stock options and tandem SARs 772 384 723 384 Deferred stock units $ 103 $ 65 $ 431 $ 179 Total stock-based compensation expense $ 2,588 $ 3,901 $ 4,073 $ 5,552 In addition, a loss of approximately $0.4 million was recorded during both the second quarter of 2009 and 2008 ($0.5 million year-to-date 2009 and $0.4 million year-to-date 2008, respectively) relating to the total return swap (TRS) (see Note 12). Details of stock-based compensation grants and settlements during year-to-date 2009 are set forth below. Restricted stock units The Companys Human Resource and Compensation Committee (HRCC) approved awards of 139,757 restricted stock units (RSUs) with dividend equivalent rights, which were granted on May15, 2009. The fair market value of each RSU awarded as part of this grant (the mean of the high and low prices for the Companys shares of common stock traded on the TSX) on May15, 2009 was $28.87. Awards under this grant are scheduled to vest in either equal installments or in one lump sum at the end of a 30-month period. In accordance with SFAS No.123RShare-Based Payment (revised 2004) (SFAS 123R), RSUs granted to retirement-eligible employees are expensed immediately. In the second quarter ended June28, 2009, the Company funded its employee benefit plan trust, which, in turn, purchased approximately 25,000 shares of common stock for approximately $0.7 million (116,000 shares for $3.8 million in Q2 2008). For accounting purposes, the cost of the purchase of shares held in trust has been accounted for as a reduction in outstanding shares of common stock, and the trust has been consolidated in accordance with FIN 46R, since the Company is the primary beneficiary, as that term is defined by FIN 46R. The trust is used to fix the Companys future cash requirements in connection with the settlement, after vesting, of outstanding RSUs by delivery of shares of common stock held in the trust to most of the Canadian officers and employees that participate in the 2006 Stock Incentive Plan, as amended and restated from time to time (the 2006 Plan). In the second quarter of 2009, approximately 150,000 (210,000 in Q2 2008) RSUs that were previously granted vested in accordance with the terms of such awards. The Companys settlement obligations, after provision for the payment of minimum statutory withholding tax requirements for which employees are responsible, were satisfied by the disbursement of approximately 66,000 (93,000 in Q2 2008) shares held in the employee benefit plan trust, approximately 8,000 (15,000 in Q2 2008) shares issued from treasury, and the purchase of approximately 8,000 (7,000 on May15, 2008) shares by a
NOTE 10 CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME	NOTE 10 CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME The components of other comprehensive (loss) income (OCI) and total comprehensive (loss) income are shown below: Second quarter ended Year-to-dateperiodended June 28, 2009 June 29, 2008 June 28, 2009 June 29, 2008 Net income $ 78,204 $ 75,316 $ 144,933 $ 137,798 Other comprehensive (loss) income Translation adjustments (31,743 ) (4,776 ) (20,957 ) 10,322 Cash flow hedges: Net change in fair value of derivatives (484 ) 414 227 (1,023 ) Amounts realized in earnings during the period (1,723 ) (99 ) (5,401 ) 1,379 Total cash flow hedges (2,207 ) 315 (5,174 ) 356 Total other comprehensive (loss) income (33,950 ) (4,461 ) (26,131 ) 10,678 Total comprehensive income 44,254 70,855 118,802 148,476 Total comprehensive income attributable to noncontrolling interests 444 342 734 1,004 Total comprehensive income attributable to Tim Hortons Inc. $ 43,810 $ 70,513 $ 118,068 $ 147,472 Income tax (expense)/recovery components netted in the above table are detailed as follows: Secondquarterended Year-to-dateperiodended June28, 2009 June29, 2008 June 28, 2009 June 29, 2008 Cash flow hedges: Net change in fair value of derivatives $ 583 $ (405 ) $ 231 $ 706 Amounts realized in earnings $ (965 ) $ (47 ) $ (706 ) $ (47 )
NOTE 11 SEGMENT REPORTING	NOTE 11 SEGMENT REPORTING The Company operates in the food-service industry and has determined that its reportable segments are those that are based on the Companys methods of internal reporting and management structure. The Companys reportable segments are the geographic locations of Canada and the U.S. As set forth in the table below, there are no amounts of revenues shown between reportable segments. The table below presents information about reportable segments: Second quarter ended Year-to-date period ended June 28, 2009 % of Total June 29, 2008 % of Total June 28, 2009 % of Total June 29, 2008 % of Total Revenues Canada $ 477,007 85.8 % $ 438,537 85.9 % $ 913,610 85.9 % $ 838,687 86.4 % U.S. 46,135 8.3 % 35,514 7.0 % 86,608 8.1 % 65,478 6.7 % Total reportable segments 523,142 94.1 % 474,051 92.8 % 1,000,218 94.1 % 904,165 93.1 % Noncontrolling interests - restaurants consolidated under FIN 46R 32,943 5.9 % 36,641 7.2 % 63,052 5.9 % 66,844 6.9 % Total $ 556,085 100.0 % $ 510,692 100.0 % $ 1,063,270 100.0 % $ 971,009 100.0 % Segment operating income (loss) Canada $ 130,967 97.7 % $ 130,433 100.1 % $ 246,343 99.0 % $ 236,968 101.3 % U.S. 3,141 2.3 % (190 ) (0.1 )% 2,577 1.0 % (3,069 ) (1.3 )% Reportable segment operating income 134,108 100.0 % 130,243 100.0 % 248,920 100.0 % 233,899 100.0 % Noncontrolling interests - restaurants consolidated under FIN 46R 460 428 857 1,256 Corporate charges (1) (12,718 ) (13,118 ) (23,034 ) (20,270 ) Consolidated operating income 121,850 117,553 226,743 214,885 Interest, net (4,862 ) (4,896 ) (9,765 ) (9,257 ) Income taxes (38,784 ) (37,341 ) (72,045 ) (67,830 ) Net income 78,204 75,316 144,933 137,798 Net income attributable to noncontrolling interests 444 342 734 1,004 Net income attributable to Tim Hortons Inc. $ 77,760 $ 74,974 $ 144,199 $ 136,794
NOTE 12 DERIVATIVES AND FAIR VALUE MEASUREMENTS	NOTE 12 DERIVATIVES AND FAIR VALUE MEASUREMENTS Derivatives SFAS No.133, as amended, requires companies to recognize all derivatives as either assets or liabilities at fair value on the Condensed Consolidated Balance Sheet. SFAS No.133 also permits companies to designate all derivatives that qualify as hedging instruments as fair value hedges, cash flow hedges, or hedges of net investments in foreign operations. This designation is based on the exposure being hedged. The Company has a policy prohibiting speculative trading in derivatives. The Company may enter into derivatives that are not designated as hedging instruments for accounting purposes, but which largely offset the economic impact of certain foreign currency transactions. The Company limits its counterparty risk associated with its slate of derivative instruments by utilizing a number of different financial institutions. The Company continually monitors its positions, and the credit ratings of its counterparties, and adjusts positions if appropriate. The Company did not have any significant exposure to any individual counterparty at June28, 2009 or December28, 2008. Cash flow hedges: The Companys exposure to foreign exchange risk is mainly related to fluctuations between the Canadian dollar and the U.S. dollar. The Company is also exposed to changes in interest rates. The Company seeks to manage its cash flow and income exposures arising from these fluctuations and may use derivative products to reduce the risk of a significant impact on its cash flows or income. The Company does not hedge foreign currency and interest rate exposure in a manner that would entirely eliminate the effect of changes in foreign currency exchange rates, or interest rates on net income and cash flows. The fair value of derivatives used by the Company are based on quoted market prices for comparable products and have, therefore, been classified as observable Level 2 inputs as defined by SFAS No.157 (see below). The Company enters into cash flow hedges to reduce the exposure to variability in certain expected future cash flows. The types of cash flow hedges the Company may enter into include, but are not limited to: (i)interest rate swaps that effectively convert a portion of floating rate debt to fixed rate debt and are designed to reduce the impact of interest rate changes on future interest expense; and (ii)forward foreign exchange contracts that are entered into to fix the price of U.S. dollar denominated future purchases. For cash flow hedges, the effective portion of the gains or losses on derivatives is reported in the cash flow hedges component of accumulated other comprehensive (loss) income in Total equity of Tim Hortons Inc. and reclassified into earnings in the same period or periods in which the hedged transaction affects earnings. The ineffective portion of gains or losses on derivatives is reported in the Condensed Consolidated Statement of Operations. The Company discontinues hedge accounting: (i)when it determines that the cash flow derivative is no longer effective in offsetting changes in the cash flows of a hedged item; (ii)when the derivative expires or is sold, term
NOTE 13 RECENT ACCOUNTING PRONOUNCEMENTS	NOTE 13 RECENT ACCOUNTING PRONOUNCEMENTS In June 2009, the FASB issued SFAS No.167Amendments to FASB Interpretation No.46(R) (SFAS No.167). This Statement amends Interpretation 46(R) to require an enterprise to perform an analysis to determine whether the enterprises variable interest or interests give it a controlling financial interest in a variable interest entity. This analysis identifies the primary beneficiary of a variable interest entity as the enterprise that has both of the following characteristics: (a)the power to direct the activities of a variable interest entity that most significantly impact the entitys economic performance; and (b)the obligation to absorb losses of the entity that could potentially be significant to the variable interest entity or the right to receive benefits from the entity that could potentially be significant to the variable interest entity. Additionally, an enterprise is required to assess whether it has an implicit financial responsibility to ensure that a variable interest entity operates as designed when determining whether it has the power to direct the activities of the variable interest entity that most significantly impact the entitys economic performance. This statement also amends Interpretation 46(R) to eliminate the quantitative approach previously required for determining the primary beneficiary of a variable interest entity, amends certain guidance for determining whether an entity is a variable interest entity, adds an additional reconsideration event for determining whether an entity is a variable interest entity, and requires enhanced disclosures that will provide users of financial statements with more transparent information about an enterprises involvement in a variable interest entity. This Standard is effective for annual reporting periods that begin after November15, 2009. The Company is currently assessing the potential impact, if any, the adoption of SFAS No.167 may have on its Condensed Consolidated Financial Statements. In June 2009, the FASB issued SFAS No.168The FASB Accounting Standards CodificationTM and Hierarchy of Generally Accepted Accounting Principles a replacement of FASB Statement No.162 (SFAS No.168). The FASB Accounting Standards CodificationTM (Codification) will become the source of authoritative U.S. GAAP recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (SEC) under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. On the effective date of SFAS No.168, the Codification will supersede all then-existing non-SEC accounting and reporting standards. All other nongrandfathered non-SEC accounting literature not included in the Codification will become nonauthoritative. Once the Codification is in effect, all of its content will carry the same level of authority, effectively superseding Statement 162, resulting in the GAAP hierarchy being modified to include only two levels of GAAP: authoritative and nonauthoritative. As a result, SFAS No.168 replaces Statement 162 to indicate this change to the GAAP hierarchy. This Stat
NOTE 14 SUBSEQUENT EVENT	NOTE 14 SUBSEQUENT EVENT A wholly-owned subsidiary of the Company, Tim Hortons Inc., a corporation incorporated under the Canada Business Corporations Act, filed a Form S-4 on June29, 2009, as amended by the Form S-4/A, filed on July27, 2009, File No.333-160286 (central index key: 0001467019) (S-4) with the U.S. Securities and Exchange Commission in connection with proposed transaction to reorganize the Company as a Canadian public company. The Company expects to incur certain charges for discrete items, the majority of which would be non-cash tax charges, and transactional costs in the year of implementation. If the transaction is implemented in 2009, the impact of the charges and transactional costs would cause the Companys 2009 tax rate to increase to between 37% and 39%. Completion of the transaction is subject to various conditions, including stockholder approval and the Board of Directors right in its sole discretion to defer or abandon the transaction before or after stockholder approval, and there can be no assurance that the reorganization will be completed.

Document Information

Document Information
	6 Months Ended Jun. 28, 2009 CAD ($) CAD / shares
Document Information [Text Block]
Document Type	10-Q
Amendment Flag	false
Amendment Description	N.A.
Document Period End Date	2009-06-28

Entity Information

Entity Information (CAD $)
	6 Months Ended Jun. 28, 2009	Aug. 05, 2009	Jun. 27, 2008
Entity [Text Block]
Trading Symbol	THI
Entity Registrant Name	TIM HORTONS INC.
Entity Central Index Key	0001345111
Current Fiscal Year End Date	--01-03
Entity Well-known Seasoned Issuer	Yes
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		180,996,877
Entity Public Float			$5,242,106,039