x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
¨
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Canada
|
|
98-0641955
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(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)
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Large accelerated filer
|
|
x
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|
Accelerated filer
|
|
¨
|
|
|
|
|
|||
Non-accelerated filer
|
|
¨
(Do not check if a smaller reporting company)
|
|
Smaller reporting company
|
|
¨
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Class
|
|
Outstanding at November 4, 2013
|
Common shares
|
|
147,091,058 shares
|
|
Pages
|
|
|
|
|
|
|
4
2
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|
|
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Item 3. Defaults upon Senior Securities
|
|
Item 4. Mine Safety Disclosure
|
|
|
Third quarter ended
|
|
Year-to-date period ended
|
||||||||||||
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September 29, 2013
|
|
September 30, 2012
|
|
September 29, 2013
|
|
September 30, 2012
|
||||||||
Revenues
|
|
|
|
|
|
|
|
||||||||
Sales (note 14)
|
$
|
575,780
|
|
|
$
|
568,541
|
|
|
$
|
1,668,229
|
|
|
$
|
1,655,615
|
|
Franchise revenues
|
|
|
|
|
|
|
|
||||||||
Rents and royalties
|
212,114
|
|
|
201,556
|
|
|
608,857
|
|
|
580,715
|
|
||||
Franchise fees
|
37,459
|
|
|
31,943
|
|
|
79,943
|
|
|
72,575
|
|
||||
|
249,573
|
|
|
233,499
|
|
|
688,800
|
|
|
653,290
|
|
||||
Total revenues
|
825,353
|
|
|
802,040
|
|
|
2,357,029
|
|
|
2,308,905
|
|
||||
Costs and expenses
|
|
|
|
|
|
|
|
||||||||
Cost of sales (note 14)
|
501,856
|
|
|
497,617
|
|
|
1,452,302
|
|
|
1,455,437
|
|
||||
Operating expenses
|
78,307
|
|
|
73,205
|
|
|
231,026
|
|
|
211,444
|
|
||||
Franchise fee costs
|
37,865
|
|
|
32,083
|
|
|
83,743
|
|
|
77,159
|
|
||||
General and administrative expenses
|
38,787
|
|
|
40,913
|
|
|
115,493
|
|
|
122,608
|
|
||||
Equity (income)
|
(4,075
|
)
|
|
(3,951
|
)
|
|
(11,340
|
)
|
|
(11,056
|
)
|
||||
Corporate reorganization expenses (note 2)
|
953
|
|
|
8,565
|
|
|
11,032
|
|
|
9,842
|
|
||||
Asset impairment (note 14)
|
2,889
|
|
|
—
|
|
|
2,889
|
|
|
(372
|
)
|
||||
Other (income) expense, net
|
(57
|
)
|
|
(51
|
)
|
|
(1,440
|
)
|
|
(278
|
)
|
||||
Total costs and expenses, net
|
656,525
|
|
|
648,381
|
|
|
1,883,705
|
|
|
1,864,784
|
|
||||
Operating income
|
168,828
|
|
|
153,659
|
|
|
473,324
|
|
|
444,121
|
|
||||
Interest (expense)
|
(9,406
|
)
|
|
(8,509
|
)
|
|
(26,991
|
)
|
|
(25,057
|
)
|
||||
Interest income
|
919
|
|
|
760
|
|
|
2,638
|
|
|
2,194
|
|
||||
Income before income taxes
|
160,341
|
|
|
145,910
|
|
|
448,971
|
|
|
421,258
|
|
||||
Income taxes (note 3)
|
45,386
|
|
|
38,956
|
|
|
122,531
|
|
|
115,088
|
|
||||
Net income
|
114,955
|
|
|
106,954
|
|
|
326,440
|
|
|
306,170
|
|
||||
Net income attributable to non-controlling interests (note 13)
|
1,092
|
|
|
1,256
|
|
|
2,670
|
|
|
3,626
|
|
||||
Net income attributable to Tim Hortons Inc.
|
$
|
113,863
|
|
|
$
|
105,698
|
|
|
$
|
323,770
|
|
|
$
|
302,544
|
|
Basic earnings per common share attributable to Tim Hortons Inc. (note 4)
|
$
|
0.76
|
|
|
$
|
0.68
|
|
|
$
|
2.12
|
|
|
$
|
1.94
|
|
Diluted earnings per common share attributable to Tim Hortons Inc. (note 4)
|
$
|
0.75
|
|
|
$
|
0.68
|
|
|
$
|
2.12
|
|
|
$
|
1.94
|
|
Weighted average number of common shares outstanding (in thousands) – Basic (note 4)
|
150,342
|
|
|
154,478
|
|
|
152,379
|
|
|
155,607
|
|
||||
Weighted average number of common shares outstanding (in thousands) – Diluted (note 4)
|
150,864
|
|
|
155,067
|
|
|
152,919
|
|
|
156,247
|
|
||||
Dividends per common share
|
$
|
0.26
|
|
|
$
|
0.21
|
|
|
$
|
0.78
|
|
|
$
|
0.63
|
|
|
Third quarter ended
|
|
Year-to-date period ended
|
||||||||||||
|
September 29, 2013
|
|
September 30, 2012
|
|
September 29, 2013
|
|
September 30, 2012
|
||||||||
Net income
|
$
|
114,955
|
|
|
$
|
106,954
|
|
|
$
|
326,440
|
|
|
$
|
306,170
|
|
Other comprehensive (loss) income
|
|
|
|
|
|
|
|
||||||||
Translation adjustments (loss) gain
|
(9,133
|
)
|
|
(13,292
|
)
|
|
14,250
|
|
|
(12,786
|
)
|
||||
Unrealized (losses) gains from cash flow hedges (note 9)
|
|
|
|
|
|
|
|
||||||||
(Loss) from change in fair value of derivatives
|
(10,686
|
)
|
|
(5,717
|
)
|
|
(2,607
|
)
|
|
(7,106
|
)
|
||||
Amount of net loss (gain) reclassified to earnings during the period
|
(2,068
|
)
|
|
474
|
|
|
(1,027
|
)
|
|
(1,474
|
)
|
||||
Tax recovery (expense) (note 9)
|
1,509
|
|
|
1,444
|
|
|
(816
|
)
|
|
2,395
|
|
||||
Other comprehensive (loss) income
|
(20,378
|
)
|
|
(17,091
|
)
|
|
9,800
|
|
|
(18,971
|
)
|
||||
Comprehensive income
|
94,577
|
|
|
89,863
|
|
|
336,240
|
|
|
287,199
|
|
||||
Comprehensive income attributable to non-controlling interests
|
1,092
|
|
|
1,256
|
|
|
2,670
|
|
|
3,626
|
|
||||
Comprehensive income attributable to Tim Hortons Inc.
|
$
|
93,485
|
|
|
$
|
88,607
|
|
|
$
|
333,570
|
|
|
$
|
283,573
|
|
|
As at
|
||||||
|
September 29,
2013 |
|
December 30,
2012 |
||||
Assets
|
|
|
|
||||
Current assets
|
|
|
|
||||
Cash and cash equivalents
|
$
|
44,877
|
|
|
$
|
120,139
|
|
Restricted cash and cash equivalents
|
100,964
|
|
|
150,574
|
|
||
Accounts receivable, net
|
185,819
|
|
|
171,605
|
|
||
Notes receivable, net (note 5)
|
6,565
|
|
|
7,531
|
|
||
Deferred income taxes
|
8,015
|
|
|
7,142
|
|
||
Inventories and other, net (note 6)
|
111,930
|
|
|
107,000
|
|
||
Advertising fund restricted assets (note 13)
|
48,722
|
|
|
45,337
|
|
||
Total current assets
|
506,892
|
|
|
609,328
|
|
||
Property and equipment, net
|
1,615,880
|
|
|
1,553,308
|
|
||
Intangible assets, net
|
2,943
|
|
|
3,674
|
|
||
Notes receivable, net (note 5)
|
5,177
|
|
|
1,246
|
|
||
Deferred income taxes
|
11,686
|
|
|
10,559
|
|
||
Equity investments
|
41,304
|
|
|
41,268
|
|
||
Other assets
|
81,870
|
|
|
64,796
|
|
||
Total assets
|
$
|
2,265,752
|
|
|
$
|
2,284,179
|
|
Liabilities and equity
|
|
|
|
||||
Current liabilities
|
|
|
|
||||
Accounts payable (note 7)
|
$
|
180,102
|
|
|
$
|
169,762
|
|
Accrued liabilities
|
|
|
|
||||
Salaries and wages
|
22,489
|
|
|
21,477
|
|
||
Taxes
|
15,599
|
|
|
8,391
|
|
||
Tim Card obligation and other (note 7)
|
150,997
|
|
|
197,871
|
|
||
Deferred income taxes
|
342
|
|
|
197
|
|
||
Advertising fund liabilities (note 13)
|
63,672
|
|
|
44,893
|
|
||
Current portion of long-term obligations
|
20,549
|
|
|
20,781
|
|
||
Total current liabilities
|
453,750
|
|
|
463,372
|
|
||
Long-term obligations
|
|
|
|
||||
Long-term debt
|
367,231
|
|
|
359,471
|
|
||
Long-term debt – Advertising fund
|
42,375
|
|
|
46,849
|
|
||
Capital leases
|
115,370
|
|
|
104,383
|
|
||
Deferred income taxes
|
8,466
|
|
|
10,399
|
|
||
Other long-term liabilities (note 7)
|
115,752
|
|
|
109,614
|
|
||
Total long-term obligations
|
649,194
|
|
|
630,716
|
|
||
Commitments and contingencies (note 10)
|
|
|
|
|
|
||
Equity
|
|
|
|
||||
Equity of Tim Hortons Inc.
|
|
|
|
||||
Common shares ($2.84 stated value per share), Authorized: unlimited shares. Issued: 149,122,408 and 153,404,839 shares, respectively (note 11)
|
422,871
|
|
|
435,033
|
|
||
Common shares held in Trust, at cost: 340,314 and 316,923 shares, respectively (note 13)
|
(14,969
|
)
|
|
(13,356
|
)
|
||
Contributed surplus
|
14,580
|
|
|
10,970
|
|
||
Retained earnings
|
868,526
|
|
|
893,619
|
|
||
Accumulated other comprehensive loss
|
(129,228
|
)
|
|
(139,028
|
)
|
||
Total equity of Tim Hortons Inc.
|
1,161,780
|
|
|
1,187,238
|
|
||
Non-controlling interests (note 13)
|
1,028
|
|
|
2,853
|
|
||
Total equity
|
1,162,808
|
|
|
1,190,091
|
|
||
Total liabilities and equity
|
$
|
2,265,752
|
|
|
$
|
2,284,179
|
|
|
Year-to-date period ended
|
||||||
|
September 29,
2013 |
|
September 30,
2012 |
||||
Cash flows provided from (used in) operating activities
|
|
|
|
||||
Net income
|
$
|
326,440
|
|
|
$
|
306,170
|
|
Adjustments to reconcile net income to net cash provided from operating activities
|
|
|
|
||||
Depreciation and amortization
|
110,447
|
|
|
96,842
|
|
||
Stock-based compensation expense (note 12)
|
17,132
|
|
|
12,722
|
|
||
Deferred income taxes
|
(2,458
|
)
|
|
(2,387
|
)
|
||
Changes in operating assets and liabilities
|
|
|
|
||||
Restricted cash and cash equivalents
|
50,020
|
|
|
45,728
|
|
||
Accounts receivable
|
(11,010
|
)
|
|
(2,913
|
)
|
||
Inventories and other
|
(7,913
|
)
|
|
26,186
|
|
||
Accounts payable and accrued liabilities
|
(58,213
|
)
|
|
(63,430
|
)
|
||
Taxes
|
7,183
|
|
|
(10,220
|
)
|
||
Other
|
6,524
|
|
|
7,433
|
|
||
Net cash provided from operating activities
|
438,152
|
|
|
416,131
|
|
||
Cash flows (used in) provided from investing activities
|
|
|
|
||||
Capital expenditures
|
(132,726
|
)
|
|
(112,812
|
)
|
||
Capital expenditures – Advertising fund (note 13)
|
(9,554
|
)
|
|
(46,190
|
)
|
||
Other investing activities
|
6,709
|
|
|
(7,812
|
)
|
||
Net cash (used in) investing activities
|
(135,571
|
)
|
|
(166,814
|
)
|
||
Cash flows (used in) provided from financing activities
|
|
|
|
||||
Repurchase of common shares (note 11)
|
(242,222
|
)
|
|
(172,656
|
)
|
||
Dividend payments to common shareholders
|
(118,579
|
)
|
|
(98,172
|
)
|
||
Net proceeds from issue of debt – Advertising fund (note 13)
|
—
|
|
|
42,500
|
|
||
Principal payments on long-term debt obligations
|
(12,901
|
)
|
|
(5,502
|
)
|
||
Other financing activities
|
(5,601
|
)
|
|
(5,336
|
)
|
||
Net cash (used in) financing activities
|
(379,303
|
)
|
|
(239,166
|
)
|
||
Effect of exchange rate changes on cash
|
1,460
|
|
|
(1,586
|
)
|
||
(Decrease) Increase in cash and cash equivalents
|
(75,262
|
)
|
|
8,565
|
|
||
Cash and cash equivalents at beginning of period
|
120,139
|
|
|
126,497
|
|
||
Cash and cash equivalents at end of period
|
$
|
44,877
|
|
|
$
|
135,062
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
||||
Interest paid
|
$
|
23,259
|
|
|
$
|
19,869
|
|
Income taxes paid
|
$
|
117,418
|
|
|
$
|
134,815
|
|
Non-cash investing and financing activities:
|
|
|
|
||||
Capital lease obligations incurred
|
$
|
25,217
|
|
|
$
|
10,864
|
|
|
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 January 1, 2012
|
157,815
|
|
|
$
|
447,558
|
|
|
(277
|
)
|
|
$
|
(10,136
|
)
|
|
$
|
6,375
|
|
|
$
|
836,968
|
|
|
$
|
(128,170
|
)
|
|
$
|
(47
|
)
|
|
$
|
1,152,548
|
|
|
$
|
1,885
|
|
|
$
|
1,154,433
|
|
Repurchase of common shares
(3)
|
(4,410
|
)
|
|
(12,525
|
)
|
|
(112
|
)
|
|
(6,154
|
)
|
|
—
|
|
|
(212,675
|
)
|
|
—
|
|
|
—
|
|
|
(231,354
|
)
|
|
—
|
|
|
(231,354
|
)
|
|||||||||
Disbursed or sold from the Trust
(4)
|
—
|
|
|
—
|
|
|
72
|
|
|
2,934
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,934
|
|
|
—
|
|
|
2,934
|
|
|||||||||
Stock based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,595
|
|
|
(2,143
|
)
|
|
—
|
|
|
—
|
|
|
2,452
|
|
|
—
|
|
|
2,452
|
|
|||||||||
Other comprehensive (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(7,268
|
)
|
|
(3,543
|
)
|
|
(10,811
|
)
|
|
—
|
|
|
(10,811
|
)
|
|||||||||
NCI transactions
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(907
|
)
|
|
—
|
|
|
—
|
|
|
(907
|
)
|
|
907
|
|
|
—
|
|
|||||||||
Net income attributable to NCI
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,881
|
|
|
4,881
|
|
|||||||||
Net income attributable to THI
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
402,885
|
|
|
—
|
|
|
—
|
|
|
402,885
|
|
|
—
|
|
|
402,885
|
|
|||||||||
Dividends and distributions, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(130,509
|
)
|
|
—
|
|
|
—
|
|
|
(130,509
|
)
|
|
(4,820
|
)
|
|
(135,329
|
)
|
|||||||||
Balance as at December 30, 2012
|
153,405
|
|
|
$
|
435,033
|
|
|
(317
|
)
|
|
$
|
(13,356
|
)
|
|
$
|
10,970
|
|
|
$
|
893,619
|
|
|
$
|
(135,438
|
)
|
|
$
|
(3,590
|
)
|
|
$
|
1,187,238
|
|
|
$
|
2,853
|
|
|
$
|
1,190,091
|
|
Repurchase of common shares
(3)
|
(4,283
|
)
|
|
(12,162
|
)
|
|
(43
|
)
|
|
(2,453
|
)
|
|
—
|
|
|
(230,060
|
)
|
|
—
|
|
|
—
|
|
|
(244,675
|
)
|
|
—
|
|
|
(244,675
|
)
|
|||||||||
Disbursed or sold from the Trust
(4)
|
—
|
|
|
—
|
|
|
20
|
|
|
840
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
840
|
|
|
—
|
|
|
840
|
|
|||||||||
Stock based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,610
|
|
|
259
|
|
|
—
|
|
|
—
|
|
|
3,869
|
|
|
—
|
|
|
3,869
|
|
|||||||||
Other comprehensive income (loss) before reclassifications
(5)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14,250
|
|
|
(3,833
|
)
|
|
10,417
|
|
|
—
|
|
|
10,417
|
|
|||||||||
Amounts reclassified from AOCI
(5)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(617
|
)
|
|
(617
|
)
|
|
—
|
|
|
(617
|
)
|
|||||||||
NCI transactions
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(483
|
)
|
|
—
|
|
|
—
|
|
|
(483
|
)
|
|
483
|
|
|
—
|
|
|||||||||
Net income attributable to NCI
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,670
|
|
|
2,670
|
|
|||||||||
Net income attributable to THI
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
323,770
|
|
|
—
|
|
|
—
|
|
|
323,770
|
|
|
—
|
|
|
323,770
|
|
|||||||||
Dividends and distributions, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(118,579
|
)
|
|
—
|
|
|
—
|
|
|
(118,579
|
)
|
|
(4,978
|
)
|
|
(123,557
|
)
|
|||||||||
Balance as at September 29, 2013
|
149,122
|
|
|
$
|
422,871
|
|
|
(340
|
)
|
|
$
|
(14,969
|
)
|
|
$
|
14,580
|
|
|
$
|
868,526
|
|
|
$
|
(121,188
|
)
|
|
$
|
(8,040
|
)
|
|
$
|
1,161,780
|
|
|
$
|
1,028
|
|
|
$
|
1,162,808
|
|
(1)
|
Accumulated other comprehensive income.
|
(2)
|
Non-controlling interests.
|
(3)
|
Amounts reflected in Retained earnings represent consideration in excess of the stated value.
|
(4)
|
Amounts are net of tax (see note 12).
|
(5)
|
Amounts are net of tax (see note 9).
|
|
Third quarter ended
|
|
Year-to-date period ended
|
||||||||
|
September 29, 2013
|
|
September 30, 2012
|
|
September 29, 2013
|
|
September 30, 2012
|
||||
Systemwide Restaurant Count
|
|
|
|
|
|
|
|
||||
Franchised restaurants in operation – beginning of period
|
4,284
|
|
|
4,050
|
|
|
4,242
|
|
|
3,996
|
|
Restaurants opened
|
51
|
|
|
72
|
|
|
111
|
|
|
140
|
|
Restaurants closed
|
(5
|
)
|
|
(6
|
)
|
|
(27
|
)
|
|
(18
|
)
|
Net transfers within the franchised system
|
2
|
|
|
(1
|
)
|
|
6
|
|
|
(3
|
)
|
Franchised restaurants in operation – end of period
|
4,332
|
|
|
4,115
|
|
|
4,332
|
|
|
4,115
|
|
Company-operated restaurants – end of period
|
18
|
|
|
23
|
|
|
18
|
|
|
23
|
|
Total systemwide restaurants – end of period
(1)
|
4,350
|
|
|
4,138
|
|
|
4,350
|
|
|
4,138
|
|
% of restaurants franchised – end of period
|
99.6
|
%
|
|
99.4
|
%
|
|
99.6
|
%
|
|
99.4
|
%
|
(1)
|
Includes various types of standard and non-standard restaurant formats in Canada, the U.S. and the Gulf Cooperation Council (“GCC”) with differing restaurant sizes and menu offerings as well as self-serve kiosks, which serve primarily coffee products and a limited product selection. Collectively, the Company refers to all of these restaurants and kiosks as “systemwide restaurants.”
|
|
Third quarter ended
|
|
Year-to-date period ended
|
||||||||||||
|
September 29,
2013 |
|
September 30,
2012 |
|
September 29,
2013 |
|
September 30,
2012 |
||||||||
Termination costs
|
$
|
—
|
|
|
$
|
4,255
|
|
|
$
|
6,632
|
|
|
$
|
4,255
|
|
Professional fees and other
|
—
|
|
|
2,079
|
|
|
2,543
|
|
|
3,356
|
|
||||
CEO transition costs
|
953
|
|
|
2,231
|
|
|
1,857
|
|
|
2,231
|
|
||||
Total Corporate reorganization expenses
|
$
|
953
|
|
|
$
|
8,565
|
|
|
$
|
11,032
|
|
|
$
|
9,842
|
|
|
Termination
costs
|
|
Professional
fees and other
|
|
CEO transition
costs
|
|
Total
|
||||||||
Cost incurred during fiscal 2012
|
$
|
9,016
|
|
|
$
|
7,602
|
|
|
$
|
2,256
|
|
|
$
|
18,874
|
|
Paid during fiscal 2012
|
(1,458
|
)
|
|
(3,775
|
)
|
|
(411
|
)
|
|
(5,644
|
)
|
||||
Accrued as at December 30, 2012
|
7,558
|
|
|
3,827
|
|
|
1,845
|
|
|
13,230
|
|
||||
Cost incurred during fiscal 2013 to-date
|
6,632
|
|
|
2,543
|
|
|
1,857
|
|
|
11,032
|
|
||||
Paid during fiscal 2013 to-date
|
(12,354
|
)
|
|
(6,141
|
)
|
|
(210
|
)
|
|
(18,705
|
)
|
||||
Accrued as at September 29, 2013
(1)
|
$
|
1,836
|
|
|
$
|
229
|
|
|
$
|
3,492
|
|
|
$
|
5,557
|
|
(1)
|
Of the total accrual,
$4.9 million
is recognized in Accounts Payable (December 30,
2012
:
$12.4 million
).
|
|
Third quarter ended
|
|
Year-to-date period ended
|
||||||||||||
|
September 29,
2013 |
|
September 30, 2012
|
|
September 29,
2013 |
|
September 30, 2012
|
||||||||
Net income attributable to Tim Hortons Inc.
|
$
|
113,863
|
|
|
$
|
105,698
|
|
|
$
|
323,770
|
|
|
$
|
302,544
|
|
Weighted average shares outstanding for computation of basic earnings per common share attributable to Tim Hortons Inc. (in thousands)
|
150,342
|
|
|
154,478
|
|
|
152,379
|
|
|
155,607
|
|
||||
Dilutive impact of RSUs
(1)
|
264
|
|
|
304
|
|
|
285
|
|
|
329
|
|
||||
Dilutive impact of stock options with tandem SARs
(2)
|
258
|
|
|
285
|
|
|
255
|
|
|
311
|
|
||||
Weighted average shares outstanding for computation of diluted earnings per common share attributable to Tim Hortons Inc. (in thousands)
|
150,864
|
|
|
155,067
|
|
|
152,919
|
|
|
156,247
|
|
||||
Basic earnings per common share attributable to Tim Hortons Inc.
|
$
|
0.76
|
|
|
$
|
0.68
|
|
|
$
|
2.12
|
|
|
$
|
1.94
|
|
Diluted earnings per common share attributable to Tim Hortons Inc.
|
$
|
0.75
|
|
|
$
|
0.68
|
|
|
$
|
2.12
|
|
|
$
|
1.94
|
|
(1)
|
Restricted stock units (“RSUs”).
|
(2)
|
Stock appreciation rights (“SARs”).
|
|
As at
|
||||||||||||||||||||||
|
September 29, 2013
|
|
December 30, 2012
|
||||||||||||||||||||
|
Gross
|
|
VIEs
(2)
|
|
Total
|
|
Gross
|
|
VIEs
(2)
|
|
Total
|
||||||||||||
Franchise Incentive Program (“FIP”) notes
(1)
|
$
|
18,806
|
|
|
$
|
(13,466
|
)
|
|
$
|
5,340
|
|
|
$
|
20,235
|
|
|
$
|
(14,441
|
)
|
|
$
|
5,794
|
|
Other notes receivable
(3)
|
8,567
|
|
|
—
|
|
|
8,567
|
|
|
4,773
|
|
|
—
|
|
|
4,773
|
|
||||||
Notes receivable
|
$
|
27,373
|
|
|
$
|
(13,466
|
)
|
|
13,907
|
|
|
$
|
25,008
|
|
|
$
|
(14,441
|
)
|
|
10,567
|
|
||
Allowance
|
|
|
|
|
(2,165
|
)
|
|
|
|
|
|
(1,790
|
)
|
||||||||||
Notes receivable, net
|
|
|
|
|
$
|
11,742
|
|
|
|
|
|
|
$
|
8,777
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Current portion, net
|
|
|
|
|
$
|
6,565
|
|
|
|
|
|
|
$
|
7,531
|
|
||||||||
Long-term portion, net
|
|
|
|
|
$
|
5,177
|
|
|
|
|
|
|
$
|
1,246
|
|
|
As at
|
||||||||||||||||||||||
|
September 29, 2013
|
|
December 30, 2012
|
||||||||||||||||||||
Class and Aging
|
Gross
|
|
VIEs
(2)
|
|
Total
|
|
Gross
|
|
VIEs
(2)
|
|
Total
|
||||||||||||
Current status (FIP notes and other)
|
$
|
10,283
|
|
|
$
|
(1,917
|
)
|
|
$
|
8,366
|
|
|
$
|
6,969
|
|
|
$
|
(1,269
|
)
|
|
$
|
5,700
|
|
Past-due status < 90 days (FIP notes)
|
—
|
|
|
—
|
|
|
—
|
|
|
407
|
|
|
(407
|
)
|
|
—
|
|
||||||
Past-due status > 90 days (FIP notes)
|
17,090
|
|
|
(11,549
|
)
|
|
5,541
|
|
|
17,632
|
|
|
(12,765
|
)
|
|
4,867
|
|
||||||
Notes receivable
|
$
|
27,373
|
|
|
$
|
(13,466
|
)
|
|
$
|
13,907
|
|
|
$
|
25,008
|
|
|
$
|
(14,441
|
)
|
|
$
|
10,567
|
|
Allowance
|
|
|
|
|
(2,165
|
)
|
|
|
|
|
|
(1,790
|
)
|
||||||||||
Notes receivable, net
|
|
|
|
|
$
|
11,742
|
|
|
|
|
|
|
$
|
8,777
|
|
(1)
|
The Company has outstanding FIP arrangements with certain U.S. restaurant owners, which generally provided interest-free financing for the purchase of certain restaurant equipment, furniture, trade fixtures and signage.
|
(2)
|
The notes payable to the Company by VIEs are eliminated on consolidation, which reduces the Notes receivable, net recognized on the Condensed Consolidated Balance Sheet (see note 13).
|
(3)
|
Relates primarily to notes issued to vendors in conjunction with the financing of a property sale, and on various equipment and other financing programs.
|
|
As at
|
||||||
|
September 29,
2013 |
|
December 30,
2012 |
||||
Raw materials
|
$
|
27,745
|
|
|
$
|
19,941
|
|
Finished goods
|
76,180
|
|
|
75,660
|
|
||
|
103,925
|
|
|
95,601
|
|
||
Inventory obsolescence provision
|
(920
|
)
|
|
(1,015
|
)
|
||
Inventories, net
|
103,005
|
|
|
94,586
|
|
||
Prepaids and other
|
8,925
|
|
|
12,414
|
|
||
Total Inventories and other, net
|
$
|
111,930
|
|
|
$
|
107,000
|
|
NOTE 7
|
ACCOUNTS PAYABLE, TIM CARD OBLIGATION AND OTHER, AND OTHER LONG–TERM LIABILITIES
|
|
As at
|
||||||
|
September 29,
2013 |
|
December 30,
2012 |
||||
Accounts payable
|
$
|
128,334
|
|
|
$
|
126,312
|
|
Construction holdbacks and accruals
|
46,906
|
|
|
31,008
|
|
||
Corporate reorganization accrual (note 2)
|
4,862
|
|
|
12,442
|
|
||
Total Accounts payable
|
$
|
180,102
|
|
|
$
|
169,762
|
|
|
As at
|
||||||
|
September 29,
2013 |
|
December 30,
2012 |
||||
Tim Card obligation
|
$
|
104,682
|
|
|
$
|
159,745
|
|
Contingent rent expense accrual
|
9,645
|
|
|
9,962
|
|
||
Maidstone Bakeries supply contract deferred liability
|
7,553
|
|
|
7,929
|
|
||
Other accrued liabilities
(1)
|
29,117
|
|
|
20,235
|
|
||
Total Accrued liabilities, Other
|
$
|
150,997
|
|
|
$
|
197,871
|
|
(1)
|
Includes deferred revenues, deposits, and various equipment and other accruals.
|
|
As at
|
||||||
|
September 29,
2013 |
|
December 30,
2012 |
||||
Accrued rent leveling liability
|
$
|
30,875
|
|
|
$
|
29,244
|
|
Uncertain tax position liability
(1)
|
32,862
|
|
|
28,610
|
|
||
Stock-based compensation liabilities (note 12)
|
23,867
|
|
|
17,479
|
|
||
Maidstone Bakeries supply contract deferred liability
|
9,781
|
|
|
15,352
|
|
||
Other accrued long-term liabilities
(2)
|
18,367
|
|
|
18,929
|
|
||
Total Other long-term liabilities
|
$
|
115,752
|
|
|
$
|
109,614
|
|
(1)
|
Includes accrued interest.
|
(2)
|
Includes deferred revenues and various other accruals.
|
|
As at
|
||||||||||
|
September 29, 2013
|
|
December 30, 2012
|
||||||||
|
Fair value
hierarchy
|
|
Fair value
asset
(liability)
(1)
|
|
Fair value
hierarchy
|
|
Fair value
asset
(liability)
(1)
|
||||
Derivatives
|
|
|
|
|
|
|
|
||||
Forward currency contracts
(2)
|
Level 2
|
|
$
|
1,320
|
|
|
Level 2
|
|
$
|
(2,014
|
)
|
Interest rate swap
(3)
|
Level 2
|
|
11
|
|
|
n/a
|
|
—
|
|
||
2013 Interest rate forwards
(4)
|
Level 2
|
|
(7,235
|
)
|
|
n/a
|
|
—
|
|
||
Total return swaps (“TRS”)
(5)
|
Level 2
|
|
18,541
|
|
|
Level 2
|
|
7,504
|
|
||
Total Derivatives
|
|
|
$
|
12,637
|
|
|
|
|
$
|
5,490
|
|
(1)
|
The Company values its derivatives using valuations that are calibrated to the initial trade prices. Subsequent valuations are based on observable inputs to the valuation model.
|
(2)
|
The fair value of forward currency contracts is determined using prevailing exchange rates.
|
(3)
|
The fair value is estimated using discounted cash flows and market-based observable inputs, including interest rate yield curves and discount rates.
|
(4)
|
Interest rate forwards are valued using a regression analysis that considers the respective Government of Canada bond yield and over-the-counter interest rates representing the yield for lending securities against cash, also known as repo rates. The regression analysis includes using a hypothetical derivative approach for both prospective and retrospective effectiveness assessments.
|
(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 (“TSX”).
|
|
As at
|
||||||||||||||||||
|
September 29, 2013
|
|
December 30, 2012
|
||||||||||||||||
|
Fair value
hierarchy
|
|
Fair value
asset
(liability)
|
|
Carrying
value
|
|
Fair value
hierarchy
|
|
Fair value
asset
(liability)
|
|
Carrying
value
|
||||||||
Bearer deposit notes
(1)
|
Level 2
|
|
$
|
41,403
|
|
|
$
|
41,403
|
|
|
Level 2
|
|
$
|
41,403
|
|
|
$
|
41,403
|
|
Notes receivable, net
(2)
|
Level 3
|
|
$
|
11,742
|
|
|
$
|
11,742
|
|
|
Level 3
|
|
$
|
8,777
|
|
|
$
|
8,777
|
|
Senior unsecured notes, series 1
(3)
|
Level 2
|
|
$
|
(313,653
|
)
|
|
$
|
(301,283
|
)
|
|
Level 2
|
|
$
|
(325,857
|
)
|
|
$
|
(301,544
|
)
|
Advertising fund term debt
(4)
|
Level 3
|
|
$
|
(50,446
|
)
|
|
$
|
(50,446
|
)
|
|
Level 3
|
|
$
|
(56,500
|
)
|
|
$
|
(56,500
|
)
|
Other debt
(5)
|
Level 3
|
|
$
|
(124,687
|
)
|
|
$
|
(68,825
|
)
|
|
Level 3
|
|
$
|
(125,000
|
)
|
|
$
|
(60,223
|
)
|
(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 LP.
|
(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.
|
|
As at
|
||||||||||||||||||||||||||
|
September 29, 2013
|
|
December 30, 2012
|
||||||||||||||||||||||||
|
Asset
|
|
Liability
|
|
Net
asset
(liability)
|
|
Classification on
Condensed
Consolidated
Balance Sheet
|
|
Asset
|
|
Liability
|
|
Net
asset
(liability)
|
|
Classification on
Condensed
Consolidated
Balance Sheet
|
||||||||||||
Derivatives designated as cash flow hedging instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Forward currency contracts
(1)
|
$
|
2,317
|
|
|
$
|
(1,068
|
)
|
|
$
|
1,249
|
|
|
Accounts receivable, net
|
|
$
|
494
|
|
|
$
|
(2,315
|
)
|
|
$
|
(1,821
|
)
|
|
Accounts payable, net
|
Interest rate swap
(2)
|
$
|
11
|
|
|
$
|
—
|
|
|
$
|
11
|
|
|
Other assets
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
n/a
|
2013 Interest rate forwards
(3)
|
$
|
—
|
|
|
$
|
(7,235
|
)
|
|
$
|
(7,235
|
)
|
|
Accounts payable, net
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
n/a
|
Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
TRS
(4)
|
$
|
18,541
|
|
|
$
|
—
|
|
|
$
|
18,541
|
|
|
Other assets
|
|
$
|
8,614
|
|
|
$
|
(1,110
|
)
|
|
$
|
7,504
|
|
|
Other assets
|
Forward currency contracts
(1)
|
$
|
71
|
|
|
$
|
—
|
|
|
$
|
71
|
|
|
Accounts receivable, net
|
|
$
|
5
|
|
|
$
|
(198
|
)
|
|
$
|
(193
|
)
|
|
Accounts payable, net
|
(1)
|
Notional value as at
September 29, 2013
of $
151.9 million
(December 30, 2012: $
195.1 million
), with maturities ranging between October 2013 and December 2014; no associated cash collateral.
|
(2)
|
Notional value as at
September 29, 2013
of $
31.3 million
(December 30, 2012:
nil
), with maturities through fiscal 2019; no associated cash collateral.
|
(3)
|
Notional value as at
September 29, 2013
of $
498.0 million
(December 30, 2012:
nil
), with maturities in December 2013; no associated cash collateral.
|
(4)
|
The notional value and associated cash collateral, in the form of bearer deposit notes (see note 8), was $
41.4 million
as at
September 29, 2013
(December 30, 2012: $
41.4 million
). The TRS have maturities annually, in May, between fiscal 2015 and fiscal 2019.
|
|
|
|
Third quarter ended September 29, 2013
|
|
Third quarter ended September 30, 2012
|
||||||||||||||||||||
Derivatives designated as cash flow
hedging instruments
(1)
|
Classification on
Condensed
Consolidated
Statement of
Operations
|
|
Amount of
gain (loss)
recognized
in OCI
(2)
|
|
Amount of net
(gain) loss
reclassified
to earnings
|
|
Total effect
on OCI
(2)
|
|
Amount of
gain (loss)
recognized
in OCI
(2)
|
|
Amount of net
(gain) loss
reclassified
to earnings
|
|
Total effect
on OCI
(2)
|
||||||||||||
Forward currency contracts
|
Cost of sales
|
|
$
|
(3,368
|
)
|
|
$
|
(2,300
|
)
|
|
$
|
(5,668
|
)
|
|
$
|
(5,717
|
)
|
|
$
|
302
|
|
|
$
|
(5,415
|
)
|
Interest rate swap
(3)
|
Interest (expense)
|
|
(83
|
)
|
|
59
|
|
|
(24
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
2010 Interest rate forwards
(4)
|
Interest (expense)
|
|
—
|
|
|
173
|
|
|
173
|
|
|
—
|
|
|
172
|
|
|
172
|
|
||||||
2013 Interest rate forwards
(5)
|
n/a
|
|
(7,235
|
)
|
|
—
|
|
|
(7,235
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Total
|
|
|
(10,686
|
)
|
|
(2,068
|
)
|
|
(12,754
|
)
|
|
(5,717
|
)
|
|
474
|
|
|
(5,243
|
)
|
||||||
Income tax effect
|
Income taxes
|
|
915
|
|
|
594
|
|
|
1,509
|
|
|
1,569
|
|
|
(125
|
)
|
|
1,444
|
|
||||||
Net of income taxes
|
|
|
$
|
(9,771
|
)
|
|
$
|
(1,474
|
)
|
|
$
|
(11,245
|
)
|
|
$
|
(4,148
|
)
|
|
$
|
349
|
|
|
$
|
(3,799
|
)
|
|
|
|
Year-to-date period ended September 29, 2013
|
|
Year-to-date period ended September 30, 2012
|
||||||||||||||||||||
Derivatives designated as cash flow
hedging instruments
(1)
|
Classification on
Condensed
Consolidated
Statement of
Operations
|
|
Amount of
gain (loss)
recognized
in OCI
(2)
|
|
Amount of net
(gain) loss
reclassified
to earnings
|
|
Total effect
on OCI
(2)
|
|
Amount of
gain (loss)
recognized
in OCI
(2)
|
|
Amount of net
(gain) loss
reclassified
to earnings
|
|
Total effect
on OCI
(2)
|
||||||||||||
Forward currency contracts
|
Cost of sales
|
|
$
|
4,756
|
|
|
$
|
(1,685
|
)
|
|
$
|
3,071
|
|
|
$
|
(7,106
|
)
|
|
$
|
(1,992
|
)
|
|
$
|
(9,098
|
)
|
Interest rate swap
(3)
|
Interest (expense)
|
|
(128
|
)
|
|
139
|
|
|
11
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
2010 Interest rate forwards
(4)
|
Interest (expense)
|
|
—
|
|
|
519
|
|
|
519
|
|
|
—
|
|
|
518
|
|
|
518
|
|
||||||
2013 Interest rate forwards
(5)
|
n/a
|
|
(7,235
|
)
|
|
—
|
|
|
(7,235
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Total
|
|
|
(2,607
|
)
|
|
(1,027
|
)
|
|
(3,634
|
)
|
|
(7,106
|
)
|
|
(1,474
|
)
|
|
(8,580
|
)
|
||||||
Income tax effect
|
Income taxes
|
|
(1,226
|
)
|
|
410
|
|
|
(816
|
)
|
|
2,011
|
|
|
384
|
|
|
2,395
|
|
||||||
Net of income taxes
|
|
|
$
|
(3,833
|
)
|
|
$
|
(617
|
)
|
|
$
|
(4,450
|
)
|
|
$
|
(5,095
|
)
|
|
$
|
(1,090
|
)
|
|
$
|
(6,185
|
)
|
(1)
|
Excludes amounts related to ineffectiveness, as they were not significant.
|
(2)
|
Other comprehensive income (“OCI”).
|
(3)
|
In February 2013, the Tim Hortons Advertising and Promotion Fund (Canada) Inc. (“Ad Fund”) entered into an amortizing interest rate swap to fix a portion of the interest expense on its term debt.
|
(4)
|
The Company entered into and settled interest rate forwards in fiscal 2010 relating to the Company’s outstanding term debt.
|
(5)
|
The Company entered into interest rate forwards during the third quarter of fiscal 2013 in anticipation of the Company obtaining longer-term financing in the fourth quarter of 2013, barring unforeseen market conditions and subject to the negotiation and execution of agreements.
|
|
Classification on
Condensed Consolidated
Statement of Operations
|
|
Third quarter ended
|
|
Year-to-date period ended
|
||||||||||||
|
September 29,
2013 |
|
September 30, 2012
|
|
September 29,
2013 |
|
September 30, 2012
|
||||||||||
TRS
|
General and administrative expenses
|
|
$
|
(2,802
|
)
|
|
$
|
2,523
|
|
|
$
|
(11,037
|
)
|
|
$
|
(889
|
)
|
Forward currency contracts
|
Cost of sales
|
|
85
|
|
|
315
|
|
|
(264
|
)
|
|
1,274
|
|
||||
Total (gain) loss, net
|
|
|
$
|
(2,717
|
)
|
|
$
|
2,838
|
|
|
$
|
(11,301
|
)
|
|
$
|
385
|
|
|
Third quarter ended
|
|
Year-to-date period ended
|
||||||||||||
|
September 29, 2013
|
|
September 30, 2012
|
|
September 29, 2013
|
|
September 30, 2012
|
||||||||
RSUs
|
$
|
1,510
|
|
|
$
|
2,362
|
|
|
$
|
5,090
|
|
|
$
|
8,152
|
|
Stock options and tandem SARs
|
2,573
|
|
|
(1,416
|
)
|
|
9,912
|
|
|
3,634
|
|
||||
DSUs
(1)
|
514
|
|
|
(93
|
)
|
|
2,130
|
|
|
936
|
|
||||
Total stock-based compensation expense
(2)
|
$
|
4,597
|
|
|
$
|
853
|
|
|
$
|
17,132
|
|
|
$
|
12,722
|
|
(1)
|
Deferred share units (“DSUs”).
|
(2)
|
Generally included in General and administrative expenses.
|
|
Restricted Stock
Units
|
|
Weighted
Average Grant
Value per Unit
|
|||
|
(in thousands)
|
|
(in dollars)
|
|||
Balance as at January 1, 2012
|
306
|
|
|
$
|
40.91
|
|
Granted
|
192
|
|
|
54.49
|
|
|
Dividend equivalent rights
|
6
|
|
|
50.30
|
|
|
Vested and settled
(1)
|
(160
|
)
|
|
36.72
|
|
|
Forfeited
|
(32
|
)
|
|
46.35
|
|
|
Balance as at December 30, 2012
|
312
|
|
|
$
|
50.91
|
|
Granted
|
159
|
|
|
56.69
|
|
|
Dividend equivalent rights
|
5
|
|
|
55.00
|
|
|
Vested and settled
(1)
|
(44
|
)
|
|
51.39
|
|
|
Forfeited
|
(19
|
)
|
|
52.03
|
|
|
Balance as at September 29, 2013
|
413
|
|
|
$
|
53.08
|
|
(1)
|
Generally settled with common shares from the TDL RSU Employee Benefit Plan Trust (“Trust”).
|
|
Stock Options with SARs
|
|
Weighted Average
Exercise Price
|
|||
|
(in thousands)
|
|
(in dollars)
|
|||
Balance as at January 1, 2012
|
1,182
|
|
|
$
|
36.05
|
|
Granted
|
254
|
|
|
54.86
|
|
|
Exercised
(1)
|
(218
|
)
|
|
31.64
|
|
|
Forfeited
|
(46
|
)
|
|
41.66
|
|
|
Balance as at December 30, 2012
|
1,172
|
|
|
$
|
40.73
|
|
Granted
|
360
|
|
|
57.84
|
|
|
Exercised
(1)
|
(256
|
)
|
|
35.85
|
|
|
Forfeited
|
(10
|
)
|
|
52.38
|
|
|
Balance as at September 29, 2013
|
1,266
|
|
|
$
|
46.49
|
|
(1)
|
Total cash settlement, net of applicable withholding taxes, of
$3.8 million
of SARs in the year-to-date period ended
September 29, 2013
(year-to-date period fiscal
2012
:
130,000
units for
$2.1 million
). The associated options were cancelled.
|
|
Third quarter ended
|
|
Year-to-date period ended
|
||||||||||||
|
September 29, 2013
|
|
September 30, 2012
|
|
September 29, 2013
|
|
September 30, 2012
|
||||||||
Company contributions
|
$
|
2,651
|
|
|
$
|
2,651
|
|
|
$
|
8,163
|
|
|
$
|
7,972
|
|
Contributions from consolidated non-owned restaurants
|
3,576
|
|
|
3,169
|
|
|
10,301
|
|
|
9,232
|
|
||||
Total Company contributions
|
$
|
6,227
|
|
|
$
|
5,820
|
|
|
$
|
18,464
|
|
|
$
|
17,204
|
|
|
Third quarter ended
|
||||||||||||||||||||||
|
September 29, 2013
|
|
September 30, 2012
|
||||||||||||||||||||
|
Restaurant
VIEs
|
|
Advertising
fund VIEs
|
|
Total
VIEs
|
|
Restaurant
VIEs
|
|
Advertising
fund VIEs
|
|
Total
VIEs
|
||||||||||||
Sales
|
$
|
96,049
|
|
|
$
|
—
|
|
|
$
|
96,049
|
|
|
$
|
85,442
|
|
|
$
|
—
|
|
|
$
|
85,442
|
|
Advertising levies
(1)
|
—
|
|
|
2,865
|
|
|
2,865
|
|
|
—
|
|
|
1,727
|
|
|
1,727
|
|
||||||
Total revenues
|
96,049
|
|
|
2,865
|
|
|
98,914
|
|
|
85,442
|
|
|
1,727
|
|
|
87,169
|
|
||||||
Cost of sales
(2)
|
94,302
|
|
|
—
|
|
|
94,302
|
|
|
83,926
|
|
|
—
|
|
|
83,926
|
|
||||||
Operating expenses
(1)
|
—
|
|
|
2,379
|
|
|
2,379
|
|
|
—
|
|
|
1,467
|
|
|
1,467
|
|
||||||
Asset impairment
(3)
|
441
|
|
|
—
|
|
|
441
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Operating income
|
1,306
|
|
|
486
|
|
|
1,792
|
|
|
1,516
|
|
|
260
|
|
|
1,776
|
|
||||||
Interest expense
|
—
|
|
|
486
|
|
|
486
|
|
|
—
|
|
|
260
|
|
|
260
|
|
||||||
Income before taxes
|
1,306
|
|
|
—
|
|
|
1,306
|
|
|
1,516
|
|
|
—
|
|
|
1,516
|
|
||||||
Income taxes
|
214
|
|
|
—
|
|
|
214
|
|
|
260
|
|
|
—
|
|
|
260
|
|
||||||
Net income attributable to non-controlling interests
|
$
|
1,092
|
|
|
$
|
—
|
|
|
$
|
1,092
|
|
|
$
|
1,256
|
|
|
$
|
—
|
|
|
$
|
1,256
|
|
|
Year-to-date period ended
|
||||||||||||||||||||||
|
September 29, 2013
|
|
September 30, 2012
|
||||||||||||||||||||
|
Restaurant
VIEs
|
|
Advertising
fund VIEs
|
|
Total
VIEs
|
|
Restaurant
VIEs
|
|
Advertising
fund VIEs
|
|
Total
VIEs
|
||||||||||||
Sales
|
$
|
276,273
|
|
|
$
|
—
|
|
|
$
|
276,273
|
|
|
$
|
248,915
|
|
|
$
|
—
|
|
|
$
|
248,915
|
|
Advertising levies
(1)
|
—
|
|
|
7,965
|
|
|
7,965
|
|
|
—
|
|
|
3,270
|
|
|
3,270
|
|
||||||
Total revenues
|
276,273
|
|
|
7,965
|
|
|
284,238
|
|
|
248,915
|
|
|
3,270
|
|
|
252,185
|
|
||||||
Cost of sales
(2)
|
272,648
|
|
|
—
|
|
|
272,648
|
|
|
244,580
|
|
|
—
|
|
|
244,580
|
|
||||||
Operating expenses
(1)
|
—
|
|
|
6,771
|
|
|
6,771
|
|
|
—
|
|
|
2,529
|
|
|
2,529
|
|
||||||
Asset impairment
(3)
|
441
|
|
|
—
|
|
|
441
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Operating income
|
3,184
|
|
|
1,194
|
|
|
4,378
|
|
|
4,335
|
|
|
741
|
|
|
5,076
|
|
||||||
Interest expense
|
—
|
|
|
1,194
|
|
|
1,194
|
|
|
—
|
|
|
741
|
|
|
741
|
|
||||||
Income before taxes
|
3,184
|
|
|
—
|
|
|
3,184
|
|
|
4,335
|
|
|
—
|
|
|
4,335
|
|
||||||
Income taxes
|
514
|
|
|
—
|
|
|
514
|
|
|
709
|
|
|
—
|
|
|
709
|
|
||||||
Net income attributable to non-controlling interests
|
$
|
2,670
|
|
|
$
|
—
|
|
|
$
|
2,670
|
|
|
$
|
3,626
|
|
|
$
|
—
|
|
|
$
|
3,626
|
|
(1)
|
Generally, the advertising levies that are not related to the Expanded Menu Board Program are netted with advertising and marketing expenses incurred by the advertising funds in operating expenses, as these contributions are designated for specific purposes. The Company acts as an agent with regard to these contributions.
|
(2)
|
Includes rents, royalties, advertising expenses and product purchases from the Company which are eliminated upon the consolidation of these VIEs.
|
(3)
|
The Company recognized an impairment charge in the third quarter of 2013 related to certain underperforming markets in the U.S. (see note 14).
|
|
As at
|
||||||||||||||
|
September 29, 2013
|
|
December 30, 2012
|
||||||||||||
|
Restaurant
VIEs
|
|
Advertising
fund VIEs
|
|
Restaurant
VIEs
|
|
Advertising
fund VIEs
|
||||||||
Cash and cash equivalents
|
$
|
8,299
|
|
|
$
|
—
|
|
|
$
|
10,851
|
|
|
$
|
—
|
|
Advertising fund restricted assets – current
|
—
|
|
|
48,722
|
|
|
—
|
|
|
45,337
|
|
||||
Other current assets
|
7,355
|
|
|
—
|
|
|
6,770
|
|
|
—
|
|
||||
Property and equipment, net
|
19,957
|
|
|
65,515
|
|
|
19,536
|
|
|
57,925
|
|
||||
Other long-term assets
|
57
|
|
|
1,816
|
|
|
572
|
|
|
2,095
|
|
||||
Total assets
|
$
|
35,668
|
|
|
$
|
116,053
|
|
|
$
|
37,729
|
|
|
$
|
105,357
|
|
Notes payable to Tim Hortons Inc. – current
(1)
|
$
|
12,321
|
|
|
$
|
—
|
|
|
$
|
13,637
|
|
|
$
|
—
|
|
Advertising fund liabilities – current
|
—
|
|
|
63,672
|
|
|
—
|
|
|
44,893
|
|
||||
Other current liabilities
(2)
|
11,934
|
|
|
8,345
|
|
|
14,548
|
|
|
9,919
|
|
||||
Notes payable to Tim Hortons Inc. – long-term
(1)
|
1,145
|
|
|
—
|
|
|
804
|
|
|
—
|
|
||||
Long-term debt
(2)
|
—
|
|
|
42,375
|
|
|
—
|
|
|
46,849
|
|
||||
Other long-term liabilities
|
9,240
|
|
|
1,661
|
|
|
5,887
|
|
|
3,696
|
|
||||
Total liabilities
|
34,640
|
|
|
116,053
|
|
|
34,876
|
|
|
105,357
|
|
||||
Equity of VIEs
|
1,028
|
|
|
—
|
|
|
2,853
|
|
|
—
|
|
||||
Total liabilities and equity
|
$
|
35,668
|
|
|
$
|
116,053
|
|
|
$
|
37,729
|
|
|
$
|
105,357
|
|
(1)
|
Various assets and liabilities are eliminated upon the consolidation of these VIEs, the most significant of which are the FIP Notes payable to the Company, which reduces the Notes receivable, net reported on the Condensed Consolidated Balance Sheet (see note 5).
|
(2)
|
Includes
$50.4 million
of debt relating to the Expanded Menu Board Program (December 30,
2012
:
$56.5 million
), of which
$8.1 million
is recognized in Other current liabilities (December 30,
2012
:
$9.7 million
) with the remainder recognized as Long-term debt.
|
|
Third quarter ended
|
|
Year-to-date period ended
|
||||||||||||
|
September 29, 2013
|
|
September 30, 2012
|
|
September 29, 2013
|
|
September 30, 2012
|
||||||||
Revenues
(1)
|
|
|
|
|
|
|
|
||||||||
Canada
|
$
|
676,006
|
|
|
$
|
672,684
|
|
|
$
|
1,927,361
|
|
|
$
|
1,923,928
|
|
U.S.
|
47,019
|
|
|
39,254
|
|
|
132,687
|
|
|
120,837
|
|
||||
Corporate services
|
3,414
|
|
|
2,933
|
|
|
12,743
|
|
|
11,955
|
|
||||
Total reportable segments
|
726,439
|
|
|
714,871
|
|
|
2,072,791
|
|
|
2,056,720
|
|
||||
VIEs
|
98,914
|
|
|
87,169
|
|
|
284,238
|
|
|
252,185
|
|
||||
Total
|
$
|
825,353
|
|
|
$
|
802,040
|
|
|
$
|
2,357,029
|
|
|
$
|
2,308,905
|
|
Operating Income (Loss)
|
|
|
|
|
|
|
|
||||||||
Canada
|
$
|
179,597
|
|
|
$
|
171,990
|
|
|
$
|
500,178
|
|
|
$
|
484,576
|
|
U.S.
(2)
|
2,717
|
|
|
1,458
|
|
|
6,214
|
|
|
7,213
|
|
||||
Corporate services
|
(14,325
|
)
|
|
(13,000
|
)
|
|
(26,414
|
)
|
|
(42,902
|
)
|
||||
Total reportable segments
|
167,989
|
|
|
160,448
|
|
|
479,978
|
|
|
448,887
|
|
||||
VIEs
(2)
|
1,792
|
|
|
1,776
|
|
|
4,378
|
|
|
5,076
|
|
||||
Corporate reorganization expenses
|
(953
|
)
|
|
(8,565
|
)
|
|
(11,032
|
)
|
|
(9,842
|
)
|
||||
Consolidated Operating Income
|
168,828
|
|
|
153,659
|
|
|
473,324
|
|
|
444,121
|
|
||||
Interest, Net
|
(8,487
|
)
|
|
(7,749
|
)
|
|
(24,353
|
)
|
|
(22,863
|
)
|
||||
Income before income taxes
|
$
|
160,341
|
|
|
$
|
145,910
|
|
|
$
|
448,971
|
|
|
$
|
421,258
|
|
(1)
|
There are no inter-segment revenues included in the above table.
|
(2)
|
The Company recognized an impairment charge of
$2.9 million
in the third quarter and year-to-date period of 2013 (third quarter of fiscal 2012:
nil
; year-to-date period of 2012
$(0.4) million
) related to certain underperforming markets in the U.S.,
$2.5 million
of which is recognized in our U.S. segment (third quarter of 2012:
nil
; year-to-date period of 2012:
$(0.4) million
), remainder recognized in VIEs.
|
|
Third quarter ended
|
|
Year-to-date period ended
|
||||||||||||
|
September 29, 2013
|
|
September 30, 2012
|
|
September 29, 2013
|
|
September 30, 2012
|
||||||||
Capital expenditures
|
|
|
|
|
|
|
|
||||||||
Canada
|
$
|
30,275
|
|
|
$
|
27,462
|
|
|
$
|
90,696
|
|
|
$
|
70,608
|
|
U.S.
|
8,913
|
|
|
15,827
|
|
|
32,059
|
|
|
34,516
|
|
||||
Corporate services
|
5,266
|
|
|
2,895
|
|
|
9,971
|
|
|
7,688
|
|
||||
Total reportable segments
|
$
|
44,454
|
|
|
$
|
46,184
|
|
|
$
|
132,726
|
|
|
$
|
112,812
|
|
|
As at
|
||||||
|
September 29,
2013 |
|
December 30,
2012 |
||||
Total Property and equipment, net
|
|
|
|
||||
Canada
(1)
|
$
|
962,600
|
|
|
$
|
915,733
|
|
U.S.
(1)
|
398,123
|
|
|
378,457
|
|
||
Corporate services
(2)
|
173,259
|
|
|
184,938
|
|
||
Total reportable segments
|
1,533,982
|
|
|
1,479,128
|
|
||
VIEs
|
81,898
|
|
|
74,180
|
|
||
Consolidated Property and equipment, net
|
$
|
1,615,880
|
|
|
$
|
1,553,308
|
|
Total Assets
|
|
|
|
||||
Canada
|
$
|
1,246,847
|
|
|
$
|
1,175,552
|
|
U.S.
|
428,247
|
|
|
400,231
|
|
||
Corporate services
|
278,880
|
|
|
281,043
|
|
||
Total reportable segments
|
1,953,974
|
|
|
1,856,826
|
|
||
VIEs
|
148,153
|
|
|
139,462
|
|
||
Unallocated assets
(3)
|
163,625
|
|
|
287,891
|
|
||
Consolidated Total assets
|
$
|
2,265,752
|
|
|
$
|
2,284,179
|
|
(1)
|
Includes primarily restaurant-related assets such as land, building and leasehold improvements.
|
(2)
|
Includes property and equipment related to distribution services, manufacturing activities, and other corporate assets.
|
(3)
|
Includes Cash and cash equivalents, Restricted cash and cash equivalents, Deferred income taxes and Prepaids, except as related to VIEs.
|
|
Third quarter ended
|
|
Year-to-date period ended
|
||||||||||||
|
September 29, 2013
|
|
September 30, 2012
|
|
September 29, 2013
|
|
September 30, 2012
|
||||||||
Sales
|
|
|
|
|
|
|
|
||||||||
Distribution sales
|
$
|
473,641
|
|
|
$
|
475,243
|
|
|
$
|
1,373,389
|
|
|
$
|
1,386,245
|
|
Company-operated restaurant sales
|
6,090
|
|
|
7,856
|
|
|
18,567
|
|
|
20,455
|
|
||||
Sales from VIEs
|
96,049
|
|
|
85,442
|
|
|
276,273
|
|
|
248,915
|
|
||||
Total Sales
|
$
|
575,780
|
|
|
$
|
568,541
|
|
|
$
|
1,668,229
|
|
|
$
|
1,655,615
|
|
|
Third quarter ended
|
|
Year-to-date period ended
|
||||||||||||
|
September 29, 2013
|
|
September 30, 2012
|
|
September 29, 2013
|
|
September 30, 2012
|
||||||||
Cost of sales
|
|
|
|
|
|
|
|
||||||||
Distribution cost of sales
|
$
|
411,290
|
|
|
$
|
414,439
|
|
|
$
|
1,185,862
|
|
|
$
|
1,214,611
|
|
Company-operated restaurant cost of sales
|
6,207
|
|
|
8,042
|
|
|
19,830
|
|
|
21,819
|
|
||||
Cost of sales from VIEs
|
84,359
|
|
|
75,136
|
|
|
246,610
|
|
|
219,007
|
|
||||
Total Cost of sales
|
$
|
501,856
|
|
|
$
|
497,617
|
|
|
$
|
1,452,302
|
|
|
$
|
1,455,437
|
|
|
Third quarter ended
|
|
Year-to-date ended
|
||||||||||||
($ in millions, except per share data)
|
September 29, 2013
|
|
September 30, 2012
|
|
September 29, 2013
|
|
September 30, 2012
|
||||||||
Systemwide sales growth
(1)
|
5.3
|
%
|
|
5.9
|
%
|
|
4.5
|
%
|
|
7.0
|
%
|
||||
Same-store sales growth
(1)
|
|
|
|
|
|
|
|
||||||||
Canada
|
1.7
|
%
|
|
1.9
|
%
|
|
0.9
|
%
|
|
2.9
|
%
|
||||
U.S.
|
3.0
|
%
|
|
2.3
|
%
|
|
1.3
|
%
|
|
5.1
|
%
|
||||
Systemwide restaurants
|
4,350
|
|
|
4,138
|
|
|
4,350
|
|
|
4,138
|
|
||||
Revenues
|
$
|
825.4
|
|
|
$
|
802.0
|
|
|
$
|
2,357.0
|
|
|
$
|
2,308.9
|
|
Operating income
|
$
|
168.8
|
|
|
$
|
153.7
|
|
|
$
|
473.3
|
|
|
$
|
444.1
|
|
Adjusted operating income
(2)
|
$
|
169.8
|
|
|
$
|
162.2
|
|
|
$
|
484.4
|
|
|
$
|
454.0
|
|
Net income attributable to Tim Hortons Inc.
|
$
|
113.9
|
|
|
$
|
105.7
|
|
|
$
|
323.8
|
|
|
$
|
302.5
|
|
Diluted EPS
|
$
|
0.75
|
|
|
$
|
0.68
|
|
|
$
|
2.12
|
|
|
$
|
1.94
|
|
Weighted average number of common shares outstanding – Diluted (in millions)
|
150.9
|
|
|
155.1
|
|
|
152.9
|
|
|
156.2
|
|
(1)
|
See
Systemwide Sales Growth
and
Same-Store Sales Growth
.
|
(2)
|
Adjusted operating income is a non-GAAP measure. See below for reconciliation of adjusting items used to calculate adjusted operating income. Management uses adjusted operating income to assist in the evaluation of year-over-year performance and believes that it will be helpful to investors as a measure of underlying operational growth rates. This non-GAAP measure is not intended to replace the presentation of our financial results in accordance with GAAP. The Company’s use of the term adjusted operating income may differ from similar measures reported by other companies. The reconciliation of operating income, a GAAP measure, to adjusted operating income, a non-GAAP measure, is set forth in the table below:
|
|
Third quarter ended
|
|
Change from prior year
|
|||||||||||
|
September 29, 2013
|
|
September 30, 2012
|
|
Dollars
|
|
Percentage
|
|||||||
|
(in millions)
|
|
|
|
|
|||||||||
Operating income
|
$
|
168.8
|
|
|
$
|
153.7
|
|
|
$
|
15.2
|
|
|
9.9
|
%
|
Add: Corporate reorganization expenses
|
1.0
|
|
|
8.6
|
|
|
(7.6
|
)
|
|
n/m
|
|
|||
Adjusted operating income
|
$
|
169.8
|
|
|
$
|
162.2
|
|
|
$
|
7.6
|
|
|
4.7
|
%
|
|
Year-to-date period ended
|
|
Change from prior year
|
|||||||||||
|
September 29, 2013
|
|
September 30, 2012
|
|
Dollars
|
|
Percentage
|
|||||||
|
(in millions)
|
|
|
|
|
|||||||||
Operating income
|
$
|
473.3
|
|
|
$
|
444.1
|
|
|
$
|
29.2
|
|
|
6.6
|
%
|
Add: Corporate reorganization expenses
|
11.0
|
|
|
9.8
|
|
|
1.2
|
|
|
n/m
|
|
|||
Adjusted operating income
|
$
|
484.4
|
|
|
$
|
454.0
|
|
|
$
|
30.4
|
|
|
6.7
|
%
|
|
Third quarter ended September 29, 2013
|
|
Third quarter ended September 30, 2012
|
||||||||||||||
|
Full-serve
Standard and
Non-standard
|
|
Self-serve
Kiosks
|
|
Total
|
|
Full-serve
Standard and
Non-standard
|
|
Self-serve
Kiosks
|
|
Total
|
||||||
Canada
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Restaurants opened
|
30
|
|
|
4
|
|
|
34
|
|
|
40
|
|
|
4
|
|
|
44
|
|
Restaurants closed
|
(2
|
)
|
|
0
|
|
|
(2
|
)
|
|
(5
|
)
|
|
0
|
|
|
(5
|
)
|
Net change
|
28
|
|
|
4
|
|
|
32
|
|
|
35
|
|
|
4
|
|
|
39
|
|
U.S.
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Restaurants opened
|
12
|
|
|
1
|
|
|
13
|
|
|
21
|
|
|
1
|
|
|
22
|
|
Restaurants closed
|
(2
|
)
|
|
(1
|
)
|
|
(3
|
)
|
|
(1
|
)
|
|
0
|
|
|
(1
|
)
|
Net change
|
10
|
|
|
0
|
|
|
10
|
|
|
20
|
|
|
1
|
|
|
21
|
|
International (GCC)
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Restaurants opened
|
4
|
|
|
0
|
|
|
4
|
|
|
7
|
|
|
0
|
|
|
7
|
|
Total Company
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Restaurants opened
|
46
|
|
|
5
|
|
|
51
|
|
|
68
|
|
|
5
|
|
|
73
|
|
Restaurants closed
|
(4
|
)
|
|
(1
|
)
|
|
(5
|
)
|
|
(6
|
)
|
|
0
|
|
|
(6
|
)
|
Net change
|
42
|
|
|
4
|
|
|
46
|
|
|
62
|
|
|
5
|
|
|
67
|
|
|
Year-to-date period ended September 29, 2013
|
|
Year-to-date period ended September 30, 2012
|
||||||||||||||
|
Full-serve
Standard and
Non-standard
|
|
Self-serve
Kiosks
|
|
Total
|
|
Full-serve
Standard and
Non-standard
|
|
Self-serve
Kiosks
|
|
Total
|
||||||
Canada
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Restaurants opened
|
71
|
|
|
8
|
|
|
79
|
|
|
80
|
|
|
5
|
|
|
85
|
|
Restaurants closed
|
(14
|
)
|
|
(1
|
)
|
|
(15
|
)
|
|
(10
|
)
|
|
(5
|
)
|
|
(15
|
)
|
Net change
|
57
|
|
|
7
|
|
|
64
|
|
|
70
|
|
|
0
|
|
|
70
|
|
U.S.
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Restaurants opened
|
24
|
|
|
2
|
|
|
26
|
|
|
33
|
|
|
11
|
|
|
44
|
|
Restaurants closed
|
(9
|
)
|
|
(4
|
)
|
|
(13
|
)
|
|
(2
|
)
|
|
(1
|
)
|
|
(3
|
)
|
Net change
|
15
|
|
|
(2
|
)
|
|
13
|
|
|
31
|
|
|
10
|
|
|
41
|
|
International (GCC)
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Restaurants opened
|
9
|
|
|
0
|
|
|
9
|
|
|
13
|
|
|
0
|
|
|
13
|
|
Total Company
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Restaurants opened
|
104
|
|
|
10
|
|
|
114
|
|
|
126
|
|
|
16
|
|
|
142
|
|
Restaurants closed
|
(23
|
)
|
|
(5
|
)
|
|
(28
|
)
|
|
(12
|
)
|
|
(6
|
)
|
|
(18
|
)
|
Net change
|
81
|
|
|
5
|
|
|
86
|
|
|
114
|
|
|
10
|
|
|
124
|
|
|
As at
|
|||||||
|
September 29,
2013 |
|
December 30,
2012 |
|
September 30,
2012 |
|||
Canada
|
|
|
|
|
|
|||
Company-operated
|
15
|
|
|
18
|
|
|
15
|
|
Franchised – standard and non-standard
|
3,354
|
|
|
3,294
|
|
|
3,231
|
|
Franchised – self-serve kiosk
|
131
|
|
|
124
|
|
|
119
|
|
Total
|
3,500
|
|
|
3,436
|
|
|
3,365
|
|
% Franchised
|
99.6
|
%
|
|
99.5
|
%
|
|
99.6
|
%
|
U.S.
|
|
|
|
|
|
|||
Company-operated
|
3
|
|
|
4
|
|
|
8
|
|
Franchised – standard and non-standard
|
637
|
|
|
621
|
|
|
573
|
|
Franchised – self-serve kiosks
|
177
|
|
|
179
|
|
|
174
|
|
Total
|
817
|
|
|
804
|
|
|
755
|
|
% Franchised
|
99.6
|
%
|
|
99.5
|
%
|
|
98.9
|
%
|
International (GCC)
|
|
|
|
|
|
|||
Franchised – standard and non-standard
|
33
|
|
|
24
|
|
|
18
|
|
% Franchised
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
Total system
|
|
|
|
|
|
|||
Company-operated
|
18
|
|
|
22
|
|
|
23
|
|
Franchised – standard and non-standard
|
4,024
|
|
|
3,939
|
|
|
3,822
|
|
Franchised – self-serve kiosks
|
308
|
|
|
303
|
|
|
293
|
|
Total
|
4,350
|
|
|
4,264
|
|
|
4,138
|
|
% Franchised
|
99.6
|
%
|
|
99.5
|
%
|
|
99.4
|
%
|
|
Third quarter ended September 29, 2013
|
|
% of
Total Revenues |
|
Third quarter ended September 30, 2012
|
|
% of
Total Revenues |
|
Change
|
|||||||||||
|
|
|
|
|
Dollars
|
|
Percentage
|
|||||||||||||
|
($ in thousands)
|
|||||||||||||||||||
Operating Income (Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Canada
|
$
|
179,597
|
|
|
21.8
|
%
|
|
$
|
171,990
|
|
|
21.4
|
%
|
|
$
|
7,607
|
|
|
4.4
|
%
|
U.S.
(1)
|
2,717
|
|
|
0.3
|
%
|
|
1,458
|
|
|
0.2
|
%
|
|
1,259
|
|
|
86.4
|
%
|
|||
Corporate services
|
(14,325
|
)
|
|
(1.7
|
)%
|
|
(13,000
|
)
|
|
(1.6
|
)%
|
|
(1,325
|
)
|
|
n/m
|
|
|||
Reportable segment operating income
|
167,989
|
|
|
20.4
|
%
|
|
160,448
|
|
|
20.0
|
%
|
|
7,541
|
|
|
4.7
|
%
|
|||
VIEs
(2)
|
1,792
|
|
|
0.2
|
%
|
|
1,776
|
|
|
0.2
|
%
|
|
16
|
|
|
0.9
|
%
|
|||
Corporate reorganization expenses
|
(953
|
)
|
|
(0.1
|
)%
|
|
(8,565
|
)
|
|
(1.1
|
)%
|
|
7,612
|
|
|
n/m
|
|
|||
Consolidated Operating Income
|
$
|
168,828
|
|
|
20.5
|
%
|
|
$
|
153,659
|
|
|
19.2
|
%
|
|
$
|
15,169
|
|
|
9.9
|
%
|
|
Year-to-date period ended September 29, 2013
|
|
% of
Total Revenues |
|
Year-to-date period ended September 30, 2012
|
|
% of
Total Revenues |
|
Change
|
|||||||||||
|
|
|
|
|
Dollars
|
|
Percentage
|
|||||||||||||
|
($ in thousands)
|
|||||||||||||||||||
Operating Income (Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Canada
|
$
|
500,178
|
|
|
21.2
|
%
|
|
$
|
484,576
|
|
|
21.0
|
%
|
|
$
|
15,602
|
|
|
3.2
|
%
|
U.S.
(1)
|
6,214
|
|
|
0.3
|
%
|
|
7,213
|
|
|
0.3
|
%
|
|
(999
|
)
|
|
(13.8
|
)%
|
|||
Corporate services
|
(26,414
|
)
|
|
(1.1
|
)%
|
|
(42,902
|
)
|
|
(1.9
|
)%
|
|
16,488
|
|
|
n/m
|
|
|||
Reportable segment operating income
|
479,978
|
|
|
20.4
|
%
|
|
448,887
|
|
|
19.4
|
%
|
|
31,091
|
|
|
6.9
|
%
|
|||
VIEs
(2)
|
4,378
|
|
|
0.2
|
%
|
|
5,076
|
|
|
0.2
|
%
|
|
(698
|
)
|
|
(13.8
|
)%
|
|||
Corporate reorganization expenses
|
(11,032
|
)
|
|
(0.5
|
)%
|
|
(9,842
|
)
|
|
(0.4
|
)%
|
|
(1,190
|
)
|
|
n/m
|
|
|||
Consolidated Operating Income
|
$
|
473,324
|
|
|
20.1
|
%
|
|
$
|
444,121
|
|
|
19.2
|
%
|
|
$
|
29,203
|
|
|
6.6
|
%
|
(1)
|
Includes an asset impairment charge of
$2.5 million
in the third quarter and year-to-date period of 2013 (
third quarter of 2012
: nil;
year-to-date period of 2012
:
$(0.4) million
).
|
(2)
|
Includes an asset impairment charge of
$0.4 million
recognized in the third quarter and year-to-date period of 2013 (third quarter and year-to-date period: nil).
|
|
Third quarter ended September 29, 2013
|
|
% of
Total Revenues |
|
Third quarter ended September 30, 2012
|
|
% of
Total Revenues |
|
Change
(1)
|
|||||||||||
|
|
|
|
|
Dollars
|
|
Percentage
|
|||||||||||||
|
($ in thousands)
|
|||||||||||||||||||
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Sales
|
$
|
575,780
|
|
|
69.8
|
%
|
|
$
|
568,541
|
|
|
70.9
|
%
|
|
$
|
7,239
|
|
|
1.3
|
%
|
Franchise revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Rents and royalties
(2)
|
212,114
|
|
|
25.7
|
%
|
|
201,556
|
|
|
25.1
|
%
|
|
10,558
|
|
|
5.2
|
%
|
|||
Franchise fees
|
37,459
|
|
|
4.5
|
%
|
|
31,943
|
|
|
4.0
|
%
|
|
5,516
|
|
|
17.3
|
%
|
|||
|
249,573
|
|
|
30.2
|
%
|
|
233,499
|
|
|
29.1
|
%
|
|
16,074
|
|
|
6.9
|
%
|
|||
Total revenues
|
825,353
|
|
|
100.0
|
%
|
|
802,040
|
|
|
100.0
|
%
|
|
23,313
|
|
|
2.9
|
%
|
|||
Costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Cost of sales
|
501,856
|
|
|
60.8
|
%
|
|
497,617
|
|
|
62.0
|
%
|
|
4,239
|
|
|
0.9
|
%
|
|||
Operating expenses
|
78,307
|
|
|
9.5
|
%
|
|
73,205
|
|
|
9.1
|
%
|
|
5,102
|
|
|
7.0
|
%
|
|||
Franchise fee costs
|
37,865
|
|
|
4.6
|
%
|
|
32,083
|
|
|
4.0
|
%
|
|
5,782
|
|
|
18.0
|
%
|
|||
General and administrative expenses
|
38,787
|
|
|
4.7
|
%
|
|
40,913
|
|
|
5.1
|
%
|
|
(2,126
|
)
|
|
(5.2
|
)%
|
|||
Equity (income)
|
(4,075
|
)
|
|
(0.5
|
)%
|
|
(3,951
|
)
|
|
(0.5
|
)%
|
|
(124
|
)
|
|
3.1
|
%
|
|||
Corporate reorganization expenses
|
953
|
|
|
0.1
|
%
|
|
8,565
|
|
|
1.1
|
%
|
|
(7,612
|
)
|
|
n/m
|
|
|||
Asset impairment
|
2,889
|
|
|
0.4
|
%
|
|
—
|
|
|
—
|
%
|
|
2,889
|
|
|
n/m
|
|
|||
Other (income), net
|
(57
|
)
|
|
—
|
%
|
|
(51
|
)
|
|
—
|
%
|
|
(6
|
)
|
|
11.8
|
%
|
|||
Total costs and expenses, net
|
656,525
|
|
|
79.5
|
%
|
|
648,381
|
|
|
80.8
|
%
|
|
8,144
|
|
|
1.3
|
%
|
|||
Operating income
|
168,828
|
|
|
20.5
|
%
|
|
153,659
|
|
|
19.2
|
%
|
|
15,169
|
|
|
9.9
|
%
|
|||
Interest (expense)
|
(9,406
|
)
|
|
(1.1
|
)%
|
|
(8,509
|
)
|
|
(1.1
|
)%
|
|
(897
|
)
|
|
10.5
|
%
|
|||
Interest income
|
919
|
|
|
0.1
|
%
|
|
760
|
|
|
0.1
|
%
|
|
159
|
|
|
20.9
|
%
|
|||
Income before income taxes
|
160,341
|
|
|
19.4
|
%
|
|
145,910
|
|
|
18.2
|
%
|
|
14,431
|
|
|
9.9
|
%
|
|||
Income taxes
|
45,386
|
|
|
5.5
|
%
|
|
38,956
|
|
|
4.9
|
%
|
|
6,430
|
|
|
16.5
|
%
|
|||
Net income
|
114,955
|
|
|
13.9
|
%
|
|
106,954
|
|
|
13.3
|
%
|
|
8,001
|
|
|
7.5
|
%
|
|||
Net income attributable to noncontrolling interests
|
1,092
|
|
|
0.1
|
%
|
|
1,256
|
|
|
0.2
|
%
|
|
(164
|
)
|
|
(13.1
|
)%
|
|||
Net income attributable to Tim Hortons Inc.
|
$
|
113,863
|
|
|
13.8
|
%
|
|
$
|
105,698
|
|
|
13.2
|
%
|
|
$
|
8,165
|
|
|
7.7
|
%
|
|
Year-to-date period ended September 29, 2013
|
|
% of
Total Revenues |
|
Year-to-date period ended September 30, 2012
|
|
% of
Total Revenues |
|
Change
(1)
|
|||||||||||
|
|
|
|
|
Dollars
|
|
Percentage
|
|||||||||||||
|
($ in thousands)
|
|||||||||||||||||||
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Sales
|
$
|
1,668,229
|
|
|
70.8
|
%
|
|
$
|
1,655,615
|
|
|
71.7
|
%
|
|
$
|
12,614
|
|
|
0.8
|
%
|
Franchise revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Rents and royalties
(2)
|
608,857
|
|
|
25.8
|
%
|
|
580,715
|
|
|
25.2
|
%
|
|
28,142
|
|
|
4.8
|
%
|
|||
Franchise fees
|
79,943
|
|
|
3.4
|
%
|
|
72,575
|
|
|
3.1
|
%
|
|
7,368
|
|
|
10.2
|
%
|
|||
|
688,800
|
|
|
29.2
|
%
|
|
653,290
|
|
|
28.3
|
%
|
|
35,510
|
|
|
5.4
|
%
|
|||
Total revenues
|
2,357,029
|
|
|
100.0
|
%
|
|
2,308,905
|
|
|
100.0
|
%
|
|
48,124
|
|
|
2.1
|
%
|
|||
Costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Cost of sales
|
1,452,302
|
|
|
61.6
|
%
|
|
1,455,437
|
|
|
63.0
|
%
|
|
(3,135
|
)
|
|
(0.2
|
)%
|
|||
Operating expenses
|
231,026
|
|
|
9.8
|
%
|
|
211,444
|
|
|
9.2
|
%
|
|
19,582
|
|
|
9.3
|
%
|
|||
Franchise fee costs
|
83,743
|
|
|
3.6
|
%
|
|
77,159
|
|
|
3.3
|
%
|
|
6,584
|
|
|
8.5
|
%
|
|||
General and administrative expenses
|
115,493
|
|
|
4.9
|
%
|
|
122,608
|
|
|
5.3
|
%
|
|
(7,115
|
)
|
|
(5.8
|
)%
|
|||
Equity (income)
|
(11,340
|
)
|
|
(0.5
|
)%
|
|
(11,056
|
)
|
|
(0.5
|
)%
|
|
(284
|
)
|
|
2.6
|
%
|
|||
Corporate reorganization expenses
|
11,032
|
|
|
0.5
|
%
|
|
9,842
|
|
|
0.4
|
%
|
|
1,190
|
|
|
n/m
|
|
|||
Asset impairment
|
2,889
|
|
|
0.1
|
%
|
|
(372
|
)
|
|
—
|
%
|
|
3,261
|
|
|
n/m
|
|
|||
Other (income), net
|
(1,440
|
)
|
|
(0.1
|
)%
|
|
(278
|
)
|
|
—
|
%
|
|
(1,162
|
)
|
|
n/m
|
|
|||
Total costs and expenses, net
|
1,883,705
|
|
|
79.9
|
%
|
|
1,864,784
|
|
|
80.8
|
%
|
|
18,921
|
|
|
1.0
|
%
|
|||
Operating income
|
473,324
|
|
|
20.1
|
%
|
|
444,121
|
|
|
19.2
|
%
|
|
29,203
|
|
|
6.6
|
%
|
|||
Interest (expense)
|
(26,991
|
)
|
|
(1.1
|
)%
|
|
(25,057
|
)
|
|
(1.1
|
)%
|
|
(1,934
|
)
|
|
7.7
|
%
|
|||
Interest income
|
2,638
|
|
|
0.1
|
%
|
|
2,194
|
|
|
0.1
|
%
|
|
444
|
|
|
20.2
|
%
|
|||
Income before income taxes
|
448,971
|
|
|
19.0
|
%
|
|
421,258
|
|
|
18.2
|
%
|
|
27,713
|
|
|
6.6
|
%
|
|||
Income taxes
|
122,531
|
|
|
5.2
|
%
|
|
115,088
|
|
|
5.0
|
%
|
|
7,443
|
|
|
6.5
|
%
|
|||
Net income
|
326,440
|
|
|
13.8
|
%
|
|
306,170
|
|
|
13.3
|
%
|
|
20,270
|
|
|
6.6
|
%
|
|||
Net income attributable to noncontrolling interests
|
2,670
|
|
|
0.1
|
%
|
|
3,626
|
|
|
0.2
|
%
|
|
(956
|
)
|
|
(26.4
|
)%
|
|||
Net income attributable to Tim Hortons Inc.
|
$
|
323,770
|
|
|
13.7
|
%
|
|
$
|
302,544
|
|
|
13.1
|
%
|
|
$
|
21,226
|
|
|
7.0
|
%
|
(1)
|
The financial results of our U.S. segment are denominated in U.S. dollars and translated into Canadian dollars for consolidated reporting purposes. The change in the value of the Canadian dollar relative to the U.S. dollar year-over-year did not have a significant impact on any component of net income in the third quarter or year-to-date period of 2013. The exchange rates were as follows:
|
|
As at
|
||||||||||||||||||||||
|
September 29, 2013
|
|
June 30, 2013
|
|
December 30, 2012
|
|
September 30, 2012
|
|
July 1, 2012
|
|
January 1, 2012
|
||||||||||||
US $1.00
|
$
|
1.0303
|
|
|
$
|
1.0518
|
|
|
$
|
0.9965
|
|
|
$
|
0.9832
|
|
|
$
|
1.0181
|
|
|
$
|
1.0170
|
|
(2)
|
Rents and royalties revenues includes rents and royalties derived from our franchised restaurant sales, and advertising levies of
$2.9 million
and
$1.7 million
in the third quarters of
2013
and
2012
, respectively, and
$8.0 million
and
$3.3 million
in the year-to-date periods of
2013
and
2012
, respectively, 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”). 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:
|
|
Third quarter ended
|
|
Year-to-date period ended
|
||||||||||||
|
September 29, 2013
|
|
September 30, 2012
|
|
September 29, 2013
|
|
September 30, 2012
|
||||||||
Franchised restaurant sales
|
(in thousands)
|
||||||||||||||
Canada
(Canadian dollars)
|
$
|
1,591,829
|
|
|
$
|
1,519,879
|
|
|
$
|
4,571,097
|
|
|
$
|
4,399,236
|
|
U.S.
(U.S. dollars)
|
$
|
146,518
|
|
|
$
|
130,910
|
|
|
$
|
429,185
|
|
|
$
|
390,512
|
|
|
Third quarter ended
|
|
Year-to-date period ended
|
||||||||
|
September 29,
2013 |
|
September 30,
2012 |
|
September 29,
2013 |
|
September 30,
2012 |
||||
|
Average
|
|
Average
|
||||||||
Company-operated restaurants
|
19
|
|
|
25
|
|
|
19
|
|
|
22
|
|
|
Third quarter ended
|
|
Year-to-date period ended
|
|
As at
|
||||||||||||
|
September 29,
2013 |
|
September 30,
2012 |
|
September 29,
2013 |
|
September 30,
2012 |
|
September 29,
2013 |
|
December 30,
2012 |
||||||
|
Average
|
|
Average
|
|
|
|
|
|
|||||||||
Canada
|
117
|
|
|
118
|
|
|
117
|
|
|
119
|
|
|
118
|
|
|
131
|
|
U.S.
|
228
|
|
|
198
|
|
|
233
|
|
|
191
|
|
|
227
|
|
|
234
|
|
Total
|
345
|
|
|
316
|
|
|
350
|
|
|
310
|
|
|
345
|
|
|
365
|
|
|
Year-to-date period ended
|
||||||
|
September 29, 2013
|
|
September 30, 2012
|
||||
|
(in millions)
|
||||||
Capital expenditures
(1)
|
|
|
|
||||
New restaurants
|
$
|
59.7
|
|
|
$
|
64.1
|
|
Existing restaurants
(2)
|
59.3
|
|
|
33.0
|
|
||
Other capital expenditures
|
13.8
|
|
|
15.7
|
|
||
Total capital expenditures, excluding Ad Fund
|
$
|
132.7
|
|
|
$
|
112.8
|
|
Ad Fund
(3)
|
9.6
|
|
|
46.2
|
|
||
Total capital expenditures, including Ad Fund
|
$
|
142.3
|
|
|
$
|
159.0
|
|
(1)
|
Reflected on a cash basis, which can be impacted by the timing of payments compared to the actual date of acquisition.
|
(2)
|
Related primarily to renovations and restaurant replacements.
|
(3)
|
Related to the Expanded Menu Board Program, which is being funded by the Ad Fund.
|
(a)
|
The Company, under the supervision and with the participation of its management, including its Chief Executive Officer and Chief Financial Officer, performed an evaluation of the Company’s disclosure controls and procedures, as contemplated by Securities Exchange Act Rule 13a-15. Disclosure controls and procedures include those designed to ensure that information required to be disclosed is accumulated and communicated to the Company’s management as appropriate to allow timely decisions regarding disclosure. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded, as of the end of the period covered by this report, that such disclosure controls and procedures were effective.
|
(b)
|
There was no change in the Company’s internal control over financial reporting during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
|
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
Number of
Shares that May
Yet be Purchased
Under the Plans
or Programs
(3)
|
||||
Monthly Period #7 (July 1, 2013 – August 4, 2013)
|
331,176
|
|
|
58.37
|
|
|
331,176
|
|
|
12,820,900
|
|
Monthly Period #8 (August 5, 2013 – September 1, 2013)
|
280,800
|
|
|
59.46
|
|
|
280,800
|
|
|
12,540,100
|
|
Monthly Period #9 (September 2, 2013 – September 29, 2013)
|
1,583,000
|
|
|
58.37
|
|
|
1,583,000
|
|
|
10,957,100
|
|
Total
|
2,194,976
|
|
|
58.51
|
|
|
2,194,976
|
|
|
10,957,100
|
|
(1)
|
Based on settlement date.
|
(2)
|
Inclusive of commissions paid to the broker to repurchase the common shares.
|
(3)
|
On February 21, 2013, we announced we obtained regulatory approval from the TSX to commence a new share repurchase program (“2013 Program”), not to exceed the regulatory maximum of 15,239,531 shares, representing 10% of our public float as of February 14, 2013, as defined under the TSX rules, or $250.0 million in the aggregate. On August 8, 2013, the Company obtained regulatory approval to amend the 2013 Program to remove the former maximum dollar cap of $250.0 million. The 2013 Program began on February 26, 2013 and will expire on February 25, 2014, or earlier if the 10.0% share maximum is reached. Common shares purchased pursuant to the 2013 Program will be cancelled. The 2013 Program may be terminated by us at any time, subject to compliance with regulatory requirements. As such, there can be no assurance regarding the total number of shares or the equivalent dollar value of shares that may be repurchased under the 2013 Program.
|
(a)
|
Index to Exhibits on page
48
.
|
|
|
|
|
TIM HORTONS INC. (Registrant)
|
|
|
|
||
Date:
|
November 7, 2013
|
|
/s/ CYNTHIA J. DEVINE
|
|
|
|
|
|
Cynthia J. Devine
|
|
|
|
|
Chief Financial Officer
|
Exhibit
|
|
Description
|
|
Where found
|
|
|
|
||
*10(a)
|
|
Nonqualified Stock Option Award Agreement, dated August 13, 2013, between Tim Hortons Inc. and Marc Caira
|
|
Filed herewith.
|
|
|
|
||
*10(b)
|
|
Restricted Stock Unit Award Agreement, dated August 13, 2013, between Tim Hortons Inc. and Marc Caira
|
|
Filed herewith.
|
|
|
|
||
31(a)
|
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
|
|
Filed herewith.
|
|
|
|
||
31(b)
|
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
|
|
Filed herewith.
|
|
|
|
||
32(a)
|
|
Section 1350 Certification of Chief Executive Officer
|
|
Filed herewith.
|
|
|
|
||
32(b)
|
|
Section 1350 Certification of Chief Financial Officer
|
|
Filed herewith.
|
|
|
|
||
99
|
|
Safe Harbor under the Private Securities Litigation Reform Act 1995 and Canadian securities laws
|
|
Filed herewith.
|
|
|
|
||
101.INS
|
|
XBRL Instance Document.
|
|
Filed herewith.
|
|
|
|
||
101.SCH
|
|
XBRL Taxonomy Extension Schema Document.
|
|
Filed herewith.
|
|
|
|
||
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
|
Filed herewith.
|
|
|
|
||
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
|
Filed herewith.
|
|
|
|
||
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document.
|
|
Filed herewith.
|
|
|
|
||
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
|
Filed herewith.
|
|
TIM HORTONS INC.
|
|
|
|
|
|
by
|
|
|
|
|
|
/s/ Jill Aebker
|
|
|
|
|
|
Name:
|
Jill Aebker
|
|
|
|
|
Title:
|
EVP, General Counsel and Secretary
|
1.
|
Award
.
|
1.1
|
The Company (or in the case of a Grantee employed by a Subsidiary (the “Employer”), the Employer) hereby grants to the Grantee in respect of employment services provided by the Grantee an award of the above-noted number of Restricted Stock Units (the “Award”) with an equal number of related Dividend Equivalent Rights (as defined in the Plan). Subject to Section 6 hereof, each Restricted Stock Unit represents the right to receive, at the absolute discretion of the Company, (i) one (1) Share (as defined in the Plan) from the Company, (ii) cash delivered to a broker to acquire one (1) Share on the Grantee’s behalf, or (iii) one (1) Share delivered by the Trustee (as defined in Section 7), in any case at the time and in the manner set forth in Section 7 hereof.
|
1.2
|
Each Dividend Equivalent Right represents the right to receive the equivalent of all of the cash dividends that would be payable with respect to the Share represented by the Restricted Stock Unit to which the Dividend Equivalent Right relates. With respect to each Dividend Equivalent Right, any amount related to cash dividends shall be converted into additional Restricted Stock Units based on the Fair Market Value of a Share on the date such dividend is made. Any additional Restricted Stock Units granted pursuant to this Section shall be subject to the same terms and conditions applicable to the Restricted Stock Unit to which the Dividend Equivalent Right relates, including, without limitation, the restrictions on transfer, forfeiture, vesting and payment provisions contained in Sections 2 through 7, inclusive, of this Agreement. In the event that a Restricted Stock Unit is forfeited pursuant to Section 6 hereof, the related Dividend Equivalent Right shall also be forfeited. Fractional Restricted Stock Units may be generated upon the automatic settlement of Dividend Equivalent Rights into additional Restricted Stock Units and upon the vesting of a portion of a Restricted Stock Unit award (see Section 3). These fractional Restricted Stock Units continue to accrue additional Dividend Equivalent Rights and accumulate until the fractional interest is of sufficient value to acquire an additional Restricted Stock Unit as a result of the settlement of future Dividend Equivalent Rights, subject to adjustment upon the vesting of a portion of the underlying Restricted Stock Unit award (see Section 3). The Committee shall determine appropriate administration for the tracking and settlement of Dividend Equivalent Rights, including with respect to fractional interests, and the Committee’s determination in this regard shall be final and binding upon all Parties.
|
1.3
|
This Agreement shall be construed in accordance and consistent with, and is subject to, the provisions of the Plan (the provisions of which are hereby incorporated by reference), as well as any and all determinations, policies, instructions, interpretations, rules, etc., of the Committee in connection with the Plan. Except as otherwise expressly set forth herein, the capitalized terms used in this Agreement shall have the same definitions as set forth in the Plan.
|
2.
|
Restrictions on Transfer
.
|
3.
|
Vesting
.
|
4.1
|
Death, Disability or Termination in Connection with Certain Dispositions
. If Grantee’s employment terminates as a result of Grantee’s death or becoming Disabled (as defined in the Plan), or if the Grantee is terminated without Cause in connection with the sale or disposition of a Subsidiary, in each case if such termination occurs on or after the Date of Grant, all Restricted Stock Units which have not become vested in accordance with Section 3 or 5 hereof shall vest as of the Termination Date.
|
4.2
|
Retirement.
If Grantee’s employment terminates as a result of the Grantee’s Retirement, and if such termination occurs on or after the Date of Grant, any unvested Restricted Stock Units will remain outstanding and will continue to vest in accordance with the vesting schedule described in Section 3 of this Agreement. For the purposes of this Agreement, “Retirement” means a termination of employment after having completed three consecutive years of full-time employment with the Company, and termination other than (either before or after the end of such three-year period): (A) for a reason set forth in Section 4.1 hereof, (B) for Cause, or (C) by voluntary termination by the Grantee or without Cause termination by the Company, unless the Company and Grantee mutually agree that such termination shall be considered a “Retirement”; provided that if an Award is subject to Section 409A of the Code, a termination of employment must also constitute a “separation from service” within the meaning of Section 409A of the Code in order for the foregoing to apply.
|
4.3
|
Trading Policies and Transfer of Shares.
For a period of six (6) months following a termination of employment, whether under Section 4, 5, or 6 of this Agreement, Grantee shall continue to be subject to the Company’s insider trading and window trading policies and must follow all pre-clearance procedures, and all other requirements, included in those policies. In the case of Retirement, a termination due to Disability, or death, Grantee or Grantee’s estate or legal representative, as the case may be, shall take all reasonable steps to transfer all Shares received under this Agreement (and all other Shares that have vested and are maintained by the Plan Administrator (as defined in Section 7) in a brokerage account for the benefit of Grantee) from the Plan Administrator within five (5) years following the Grantee’s termination of employment. For terminations arising for any reason other than death, Disability or Retirement, Grantee shall transfer all Shares received under this Agreement (and all other Shares that have vested and are maintained by the Plan Administrator in a brokerage account for the benefit of Grantee) from the Plan Administrator within one (1) year following the Grantee’s termination of employment.
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4.4
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Termination
. For purposes of this Agreement, the word “terminate” or “termination” in connection with the Grantee’s employment shall mean the Grantee ceasing to perform services for the Company or such Subsidiary, as the case may be, without regard to: (i) whether such Grantee continues thereafter to receive any payment from the Company or such Subsidiary, as the case may be, in respect of the termination of such Grantee’s employment, including, without limitation, any continuation of salary or other compensation in lieu of notice of such termination, or (ii) whether or not Grantee is entitled or claims to be entitled at law to greater notice of such termination or greater compensation in lieu thereof than has been received by such Grantee. In addition, to the extent necessary to comply with the requirements of Section 409A of the Code, any reference to the Grantee’s Termination shall mean the Grantee’s “separation from service” as defined by Section 409A of the Code.
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5.
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Effect of Change in Control
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6.
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Forfeiture of Award
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7.
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Satisfaction of Award
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8.
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No Right to Continued Employment
.
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9.
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Withholding of Taxes
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10.
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Grantee Bound by the Plan
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11.
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Modification of Agreement
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12.
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Severability
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13.
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Governing Law
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14.
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Successors in Interest and Assigns
.
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15.
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Language
.
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16.
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Resolution of Disputes
.
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17.
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Entire Agreement
.
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18.
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Headings
.
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19.
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Counterparts
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20.
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Compliance with Section 409A
.
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21.
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Recoupment Policy upon Restatement of Financial Results
.
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TIM HORTONS INC.
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by
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/s/ Jill Aebker
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Name:
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Jill Aebker
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Title:
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EVP, General Counsel and Secretary
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1.
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I have reviewed this quarterly report on Form 10-Q of Tim Hortons Inc.;
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2.
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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;
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3.
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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;
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4.
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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:
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a)
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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;
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b)
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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;
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c)
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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
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d)
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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
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5.
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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):
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a)
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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
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b)
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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.
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/s/ MARC CAIRA
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Name:
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Marc Caira
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Title:
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Chief Executive Officer
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1.
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I have reviewed this quarterly report on Form 10-Q of Tim Hortons Inc.;
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2.
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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;
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3.
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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;
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4.
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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:
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a)
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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;
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b)
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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;
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c)
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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
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d)
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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
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5.
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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):
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a)
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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
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b)
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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.
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/s/ CYNTHIA J. DEVINE
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Name:
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Cynthia J. Devine
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Title:
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Chief Financial Officer
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(i)
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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
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(ii)
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the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Issuer.
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/s/ MARC CAIRA
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Name:
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Marc Caira
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*
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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.
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(i)
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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
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(ii)
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the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Issuer.
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/s/ CYNTHIA J. DEVINE
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Name:
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Cynthia J. Devine
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*
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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.
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