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)
|
Large accelerated filer
|
|
x
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|
Accelerated filer
|
|
¨
|
|
|
|
|
|||
Non-accelerated filer
|
|
¨
(Do not check if a smaller reporting company)
|
|
Smaller reporting company
|
|
¨
|
Class
|
|
Outstanding at August 1, 2014
|
Common shares
|
|
132,817,871 shares
|
|
Pages
|
|
|
|
|
|
|
|
|
|
Second quarter ended
|
|
Year-to-date period ended
|
||||||||||||
|
June 29, 2014
|
|
June 30, 2013
|
|
June 29, 2014
|
|
June 30, 2013
|
||||||||
Revenues
|
|
|
|
|
|
|
|
||||||||
Sales (note 13)
|
$
|
613,829
|
|
|
$
|
568,562
|
|
|
$
|
1,154,859
|
|
|
$
|
1,092,449
|
|
Franchise revenues
|
|
|
|
|
|
|
|
||||||||
Rents and royalties
|
224,953
|
|
|
209,289
|
|
|
424,462
|
|
|
396,743
|
|
||||
Franchise fees
|
35,565
|
|
|
22,288
|
|
|
61,428
|
|
|
42,484
|
|
||||
|
260,518
|
|
|
231,577
|
|
|
485,890
|
|
|
439,227
|
|
||||
Total revenues
|
874,347
|
|
|
800,139
|
|
|
1,640,749
|
|
|
1,531,676
|
|
||||
Costs and expenses
|
|
|
|
|
|
|
|
||||||||
Cost of sales
|
527,132
|
|
|
489,092
|
|
|
1,000,715
|
|
|
950,446
|
|
||||
Operating expenses
|
84,411
|
|
|
76,986
|
|
|
165,669
|
|
|
152,719
|
|
||||
Franchise fee costs
|
34,906
|
|
|
23,326
|
|
|
62,589
|
|
|
45,878
|
|
||||
General and administrative expenses
|
40,241
|
|
|
38,038
|
|
|
79,460
|
|
|
76,706
|
|
||||
Equity (income)
|
(3,975
|
)
|
|
(3,916
|
)
|
|
(7,321
|
)
|
|
(7,265
|
)
|
||||
Corporate reorganization expenses
|
—
|
|
|
604
|
|
|
—
|
|
|
10,079
|
|
||||
Other (income) expense, net
|
(735
|
)
|
|
(570
|
)
|
|
1,983
|
|
|
(1,383
|
)
|
||||
Total costs and expenses, net
|
681,980
|
|
|
623,560
|
|
|
1,303,095
|
|
|
1,227,180
|
|
||||
Operating income
|
192,367
|
|
|
176,579
|
|
|
337,654
|
|
|
304,496
|
|
||||
Interest (expense)
|
(18,648
|
)
|
|
(8,922
|
)
|
|
(35,324
|
)
|
|
(17,585
|
)
|
||||
Interest income
|
1,138
|
|
|
791
|
|
|
2,115
|
|
|
1,719
|
|
||||
Income before income taxes
|
174,857
|
|
|
168,448
|
|
|
304,445
|
|
|
288,630
|
|
||||
Income taxes (note 2)
|
49,425
|
|
|
43,886
|
|
|
86,658
|
|
|
77,145
|
|
||||
Net income
|
125,432
|
|
|
124,562
|
|
|
217,787
|
|
|
211,485
|
|
||||
Net income attributable to noncontrolling interests (note 12)
|
1,682
|
|
|
826
|
|
|
3,128
|
|
|
1,578
|
|
||||
Net income attributable to Tim Hortons Inc.
|
$
|
123,750
|
|
|
$
|
123,736
|
|
|
$
|
214,659
|
|
|
$
|
209,907
|
|
Basic earnings per common share attributable to Tim Hortons Inc. (note 3)
|
$
|
0.92
|
|
|
$
|
0.81
|
|
|
$
|
1.58
|
|
|
$
|
1.38
|
|
Diluted earnings per common share attributable to Tim Hortons Inc. (note 3)
|
$
|
0.92
|
|
|
$
|
0.81
|
|
|
$
|
1.57
|
|
|
$
|
1.37
|
|
Weighted average number of common shares outstanding (in thousands) – Basic (note 3)
|
133,899
|
|
|
152,083
|
|
|
136,007
|
|
|
152,597
|
|
||||
Weighted average number of common shares outstanding (in thousands) – Diluted (note 3)
|
134,367
|
|
|
152,637
|
|
|
136,477
|
|
|
153,133
|
|
||||
Dividends per common share
|
$
|
0.32
|
|
|
$
|
0.26
|
|
|
$
|
0.64
|
|
|
$
|
0.52
|
|
|
Second quarter ended
|
|
Year-to-date period ended
|
||||||||||||
|
June 29, 2014
|
|
June 30, 2013
|
|
June 29, 2014
|
|
June 30, 2013
|
||||||||
Net income
|
$
|
125,432
|
|
|
$
|
124,562
|
|
|
$
|
217,787
|
|
|
$
|
211,485
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
||||||||
Translation adjustments (loss) gain
|
(17,765
|
)
|
|
15,205
|
|
|
(2,830
|
)
|
|
23,382
|
|
||||
Unrealized gains (losses) from cash flow hedges (note 9)
|
|
|
|
|
|
|
|
||||||||
(Loss) gain from change in fair value of derivatives
|
(4,968
|
)
|
|
5,307
|
|
|
(5,910
|
)
|
|
8,079
|
|
||||
Amount of net (gain) loss reclassified to earnings during the period
|
(999
|
)
|
|
378
|
|
|
(3,700
|
)
|
|
1,041
|
|
||||
Tax recovery (expense) (note 9)
|
1,763
|
|
|
(1,333
|
)
|
|
1,476
|
|
|
(2,325
|
)
|
||||
Other comprehensive (loss) income
|
(21,969
|
)
|
|
19,557
|
|
|
(10,964
|
)
|
|
30,177
|
|
||||
Comprehensive income
|
103,463
|
|
|
144,119
|
|
|
206,823
|
|
|
241,662
|
|
||||
Comprehensive income attributable to noncontrolling interests
|
1,682
|
|
|
826
|
|
|
3,128
|
|
|
1,578
|
|
||||
Comprehensive income attributable to Tim Hortons Inc.
|
$
|
101,781
|
|
|
$
|
143,293
|
|
|
$
|
203,695
|
|
|
$
|
240,084
|
|
|
As at
|
||||||
|
June 29, 2014
|
|
December 29, 2013
|
||||
Assets
|
|
|
|
||||
Current assets
|
|
|
|
||||
Cash and cash equivalents
|
$
|
25,087
|
|
|
$
|
50,414
|
|
Restricted cash and cash equivalents (note 6)
|
85,926
|
|
|
155,006
|
|
||
Accounts receivable, net
|
220,157
|
|
|
210,664
|
|
||
Notes receivable, net (note 4)
|
7,619
|
|
|
4,631
|
|
||
Deferred income taxes
|
9,985
|
|
|
10,165
|
|
||
Inventories and other, net (note 5)
|
117,776
|
|
|
104,326
|
|
||
Advertising fund restricted assets (note 12)
|
39,078
|
|
|
39,783
|
|
||
Total current assets
|
505,628
|
|
|
574,989
|
|
||
Property and equipment, net
|
1,681,010
|
|
|
1,685,043
|
|
||
Notes receivable, net (note 4)
|
598
|
|
|
4,483
|
|
||
Deferred income taxes
|
11,693
|
|
|
11,018
|
|
||
Equity investments
|
40,372
|
|
|
40,738
|
|
||
Other assets
|
117,452
|
|
|
117,552
|
|
||
Total assets
|
$
|
2,356,753
|
|
|
$
|
2,433,823
|
|
Liabilities and equity
|
|
|
|
||||
Current liabilities
|
|
|
|
||||
Accounts payable (note 6)
|
$
|
171,118
|
|
|
$
|
204,514
|
|
Tim Card obligation (note 6)
|
128,517
|
|
|
184,443
|
|
||
Accrued liabilities (note 6)
|
65,835
|
|
|
89,565
|
|
||
Advertising fund liabilities (note 12)
|
38,782
|
|
|
59,912
|
|
||
Short-term borrowings
|
15,000
|
|
|
30,000
|
|
||
Current portion of long-term obligations
|
18,336
|
|
|
17,782
|
|
||
Total current liabilities
|
437,588
|
|
|
586,216
|
|
||
Long-term obligations
|
|
|
|
||||
Long-term debt (note 7)
|
1,293,035
|
|
|
843,020
|
|
||
Capital leases
|
125,048
|
|
|
121,049
|
|
||
Deferred income taxes
|
8,123
|
|
|
9,929
|
|
||
Other long-term liabilities
|
108,557
|
|
|
112,090
|
|
||
Total long-term obligations
|
1,534,763
|
|
|
1,086,088
|
|
||
Commitments and contingencies (note 10)
|
|
|
|
|
|
||
Equity
|
|
|
|
||||
Equity of Tim Hortons Inc.
|
|
|
|
||||
Common shares ($2.84 stated value per share), Authorized: unlimited shares. Issued: 133,126,058 and 141,329,010 shares, respectively
|
377,442
|
|
|
400,738
|
|
||
Common shares held in Trust, at cost: 329,089 and 293,816 shares, respectively
|
(15,422
|
)
|
|
(12,924
|
)
|
||
Contributed surplus
|
11,914
|
|
|
11,033
|
|
||
Retained earnings
|
131,926
|
|
|
474,409
|
|
||
Accumulated other comprehensive loss
|
(123,066
|
)
|
|
(112,102
|
)
|
||
Total equity of Tim Hortons Inc.
|
382,794
|
|
|
761,154
|
|
||
Noncontrolling interests (note 12)
|
1,608
|
|
|
365
|
|
||
Total equity
|
384,402
|
|
|
761,519
|
|
||
Total liabilities and equity
|
$
|
2,356,753
|
|
|
$
|
2,433,823
|
|
|
Year-to-date period ended
|
||||||
|
June 29, 2014
|
|
June 30, 2013
|
||||
Cash flows provided from (used in) operating activities
|
|
|
|
||||
Net income
|
$
|
217,787
|
|
|
$
|
211,485
|
|
Adjustments to reconcile net income to net cash provided from operating activities
|
|
|
|
||||
Depreciation and amortization
|
79,774
|
|
|
72,368
|
|
||
Stock-based compensation expense (note 11)
|
886
|
|
|
12,535
|
|
||
Deferred income taxes
|
2,149
|
|
|
(2,539
|
)
|
||
Changes in operating assets and liabilities
|
|
|
|
||||
Restricted cash and cash equivalents
|
69,141
|
|
|
46,356
|
|
||
Accounts receivable
|
(16,667
|
)
|
|
(8,254
|
)
|
||
Inventories and other
|
(13,593
|
)
|
|
(5,218
|
)
|
||
Accounts payable and accrued liabilities
|
(81,678
|
)
|
|
(75,262
|
)
|
||
Taxes
|
(9,230
|
)
|
|
4,144
|
|
||
Settlement of interest rate forwards
|
(4,851
|
)
|
|
—
|
|
||
Deposit with tax authorities
|
(1,721
|
)
|
|
—
|
|
||
Other
|
(14,274
|
)
|
|
2,714
|
|
||
Net cash provided from operating activities
|
227,723
|
|
|
258,329
|
|
||
Cash flows (used in) provided from investing activities
|
|
|
|
||||
Capital expenditures
|
(94,442
|
)
|
|
(88,272
|
)
|
||
Capital expenditures – Advertising fund
|
(4,438
|
)
|
|
(5,224
|
)
|
||
Other investing activities
|
3,038
|
|
|
6,125
|
|
||
Net cash (used in) investing activities
|
(95,842
|
)
|
|
(87,371
|
)
|
||
Cash flows (used in) provided from financing activities
|
|
|
|
||||
Repurchase of common shares
|
(493,476
|
)
|
|
(113,803
|
)
|
||
Dividend payments to common shareholders
|
(86,910
|
)
|
|
(79,348
|
)
|
||
Net proceeds from issuance of debt
|
448,299
|
|
|
—
|
|
||
Short-term (repayments) borrowings, net
|
(15,000
|
)
|
|
—
|
|
||
Principal payments on long-term debt obligations
|
(8,280
|
)
|
|
(8,543
|
)
|
||
Other financing activities
|
(1,980
|
)
|
|
(5,001
|
)
|
||
Net cash (used in) financing activities
|
(157,347
|
)
|
|
(206,695
|
)
|
||
Effect of exchange rate changes on cash
|
139
|
|
|
2,201
|
|
||
(Decrease) in cash and cash equivalents
|
(25,327
|
)
|
|
(33,536
|
)
|
||
Cash and cash equivalents at beginning of period
|
50,414
|
|
|
120,139
|
|
||
Cash and cash equivalents at end of period
|
$
|
25,087
|
|
|
$
|
86,603
|
|
|
|
|
|
||||
Supplemental disclosures of cash flow information:
|
|
|
|
||||
Interest paid
|
$
|
30,712
|
|
|
$
|
17,131
|
|
Income taxes paid
|
$
|
102,946
|
|
|
$
|
77,540
|
|
Non-cash investing and financing activities:
|
|
|
|
||||
Capital lease obligations incurred
|
$
|
14,173
|
|
|
$
|
19,219
|
|
|
Common Shares
|
|
Common Shares Held
in the Trust
|
|
|
|
|
|
AOCI
(1)
|
|
|
|
|
|
|
||||||||||||||||||||||||||
|
|
|
|
|
|
|
Contributed Surplus
|
|
Retained Earnings
|
|
Translation Adjustment
|
|
Cash Flow Hedges
|
|
Total Equity THI
|
|
NCI
(2)
|
|
Total Equity
|
||||||||||||||||||||||
|
Number
|
|
$
|
|
Number
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
||||||||||||||||||||
Balance as at December 30, 2012
|
153,405
|
|
|
$
|
435,033
|
|
|
(317
|
)
|
|
$
|
(13,356
|
)
|
|
$
|
10,970
|
|
|
$
|
893,619
|
|
|
$
|
(135,438
|
)
|
|
$
|
(3,590
|
)
|
|
$
|
1,187,238
|
|
|
$
|
2,853
|
|
|
$
|
1,190,091
|
|
Repurchase of common shares
(3)
|
(12,076
|
)
|
|
(34,295
|
)
|
|
(43
|
)
|
|
(2,453
|
)
|
|
—
|
|
|
(686,243
|
)
|
|
—
|
|
|
—
|
|
|
(722,991
|
)
|
|
—
|
|
|
(722,991
|
)
|
|||||||||
Disbursed or sold from the Trust
(4)
|
—
|
|
|
—
|
|
|
66
|
|
|
2,885
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,885
|
|
|
—
|
|
|
2,885
|
|
|||||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
63
|
|
|
(712
|
)
|
|
—
|
|
|
—
|
|
|
(649
|
)
|
|
—
|
|
|
(649
|
)
|
|||||||||
Other comprehensive income (loss) before reclassifications
(5)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
31,333
|
|
|
(2,407
|
)
|
|
28,926
|
|
|
—
|
|
|
28,926
|
|
|||||||||
Amounts reclassified from AOCI
(5)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,000
|
)
|
|
(2,000
|
)
|
|
—
|
|
|
(2,000
|
)
|
|||||||||
NCI transactions
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(483
|
)
|
|
—
|
|
|
—
|
|
|
(483
|
)
|
|
483
|
|
|
—
|
|
|||||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
424,369
|
|
|
—
|
|
|
—
|
|
|
424,369
|
|
|
4,280
|
|
|
428,649
|
|
|||||||||
Dividends and distributions, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(156,141
|
)
|
|
—
|
|
|
—
|
|
|
(156,141
|
)
|
|
(7,251
|
)
|
|
(163,392
|
)
|
|||||||||
Balance as at December 29, 2013
|
141,329
|
|
|
$
|
400,738
|
|
|
(294
|
)
|
|
$
|
(12,924
|
)
|
|
$
|
11,033
|
|
|
$
|
474,409
|
|
|
$
|
(104,105
|
)
|
|
$
|
(7,997
|
)
|
|
$
|
761,154
|
|
|
$
|
365
|
|
|
$
|
761,519
|
|
Repurchase of common shares
(3)(6)
|
(8,203
|
)
|
|
(23,296
|
)
|
|
(59
|
)
|
|
(3,548
|
)
|
|
—
|
|
|
(470,178
|
)
|
|
—
|
|
|
—
|
|
|
(497,022
|
)
|
|
—
|
|
|
(497,022
|
)
|
|||||||||
Disbursed or sold from the Trust
(4)
|
—
|
|
|
—
|
|
|
24
|
|
|
1,050
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,050
|
|
|
—
|
|
|
1,050
|
|
|||||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
881
|
|
|
215
|
|
|
—
|
|
|
—
|
|
|
1,096
|
|
|
—
|
|
|
1,096
|
|
|||||||||
Other comprehensive income (loss) before reclassifications
(5)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,830
|
)
|
|
(5,705
|
)
|
|
(8,535
|
)
|
|
—
|
|
|
(8,535
|
)
|
|||||||||
Amounts reclassified from AOCI
(5)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,429
|
)
|
|
(2,429
|
)
|
|
—
|
|
|
(2,429
|
)
|
|||||||||
NCI transactions
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(269
|
)
|
|
—
|
|
|
—
|
|
|
(269
|
)
|
|
269
|
|
|
—
|
|
|||||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
214,659
|
|
|
—
|
|
|
—
|
|
|
214,659
|
|
|
3,128
|
|
|
217,787
|
|
|||||||||
Dividends and distributions, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(86,910
|
)
|
|
—
|
|
|
—
|
|
|
(86,910
|
)
|
|
(2,154
|
)
|
|
(89,064
|
)
|
|||||||||
Balance as at June 29, 2014
|
133,126
|
|
|
$
|
377,442
|
|
|
(329
|
)
|
|
$
|
(15,422
|
)
|
|
$
|
11,914
|
|
|
$
|
131,926
|
|
|
$
|
(106,935
|
)
|
|
$
|
(16,131
|
)
|
|
$
|
382,794
|
|
|
$
|
1,608
|
|
|
$
|
384,402
|
|
(1)
|
Accumulated other comprehensive income (“AOCI”).
|
(2)
|
Noncontrolling interests (“NCI”).
|
(3)
|
Amounts reflected in Retained earnings represent consideration in excess of the stated value.
|
(4)
|
Amounts are net of tax.
|
(5)
|
Amounts are net of tax (see note 9).
|
(6)
|
The 2014 share repurchase program, as described in the Company’s Annual Report on Form 10-K for the year ended December 29, 2013 (“Annual Report”), filed with the SEC and the CSA on
February 25, 2014
, commenced on February 28, 2014.
|
|
Second quarter ended
|
|
Year-to-date period ended
|
||||||||||||
|
June 29, 2014
|
|
June 30, 2013
|
|
June 29, 2014
|
|
June 30, 2013
|
||||||||
Net income attributable to Tim Hortons Inc.
|
$
|
123,750
|
|
|
$
|
123,736
|
|
|
$
|
214,659
|
|
|
$
|
209,907
|
|
Weighted average shares outstanding for computation of basic earnings per common share attributable to Tim Hortons Inc. (in thousands)
|
133,899
|
|
|
152,083
|
|
|
136,007
|
|
|
152,597
|
|
||||
Dilutive impact of restricted stock units (“RSUs”) and PSUs (in thousands)
|
260
|
|
|
295
|
|
|
252
|
|
|
286
|
|
||||
Dilutive impact of stock options with tandem stock appreciation rights (“SARs”) (in thousands)
|
208
|
|
|
259
|
|
|
218
|
|
|
250
|
|
||||
Weighted average shares outstanding for computation of diluted earnings per common share attributable to Tim Hortons Inc. (in thousands)
|
134,367
|
|
|
152,637
|
|
|
136,477
|
|
|
153,133
|
|
||||
Basic earnings per common share attributable to Tim Hortons Inc.
|
$
|
0.92
|
|
|
$
|
0.81
|
|
|
$
|
1.58
|
|
|
$
|
1.38
|
|
Diluted earnings per common share attributable to Tim Hortons Inc.
|
$
|
0.92
|
|
|
$
|
0.81
|
|
|
$
|
1.57
|
|
|
$
|
1.37
|
|
|
As at
|
||||||||||||||||||||||
|
June 29, 2014
|
|
December 29, 2013
|
||||||||||||||||||||
|
Gross
|
|
VIEs
(2)
|
|
Total
|
|
Gross
|
|
VIEs
(2)
|
|
Total
|
||||||||||||
Franchise Incentive Program (“FIP”) notes
(1)
|
$
|
15,702
|
|
|
$
|
(12,824
|
)
|
|
$
|
2,878
|
|
|
$
|
16,677
|
|
|
$
|
(13,668
|
)
|
|
$
|
3,009
|
|
Other notes receivable
(3)
|
7,465
|
|
|
(715
|
)
|
|
6,750
|
|
|
8,256
|
|
|
(649
|
)
|
|
7,607
|
|
||||||
Notes receivable
|
$
|
23,167
|
|
|
$
|
(13,539
|
)
|
|
9,628
|
|
|
$
|
24,933
|
|
|
$
|
(14,317
|
)
|
|
10,616
|
|
||
Allowance
|
|
|
|
|
(1,411
|
)
|
|
|
|
|
|
(1,502
|
)
|
||||||||||
Notes receivable, net
|
|
|
|
|
$
|
8,217
|
|
|
|
|
|
|
$
|
9,114
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Current portion, net
|
|
|
|
|
$
|
7,619
|
|
|
|
|
|
|
$
|
4,631
|
|
||||||||
Long-term portion, net
|
|
|
|
|
$
|
598
|
|
|
|
|
|
|
$
|
4,483
|
|
|
As at
|
||||||||||||||||||||||
|
June 29, 2014
|
|
December 29, 2013
|
||||||||||||||||||||
Class and Aging
|
Gross
|
|
VIEs
(2)
|
|
Total
|
|
Gross
|
|
VIEs
(2)
|
|
Total
|
||||||||||||
Current status (FIP notes and other)
|
$
|
8,222
|
|
|
$
|
(1,353
|
)
|
|
$
|
6,869
|
|
|
$
|
9,688
|
|
|
$
|
(2,081
|
)
|
|
$
|
7,607
|
|
Past-due status < 90 days (FIP notes)
|
329
|
|
|
(329
|
)
|
|
—
|
|
|
328
|
|
|
—
|
|
|
328
|
|
||||||
Past-due status > 90 days (FIP notes)
|
14,616
|
|
|
(11,857
|
)
|
|
2,759
|
|
|
14,917
|
|
|
(12,236
|
)
|
|
2,681
|
|
||||||
Notes receivable
|
$
|
23,167
|
|
|
$
|
(13,539
|
)
|
|
$
|
9,628
|
|
|
$
|
24,933
|
|
|
$
|
(14,317
|
)
|
|
$
|
10,616
|
|
Allowance
|
|
|
|
|
(1,411
|
)
|
|
|
|
|
|
(1,502
|
)
|
||||||||||
Notes receivable, net
|
|
|
|
|
$
|
8,217
|
|
|
|
|
|
|
$
|
9,114
|
|
(1)
|
The Company has outstanding FIP arrangements with certain U.S. restaurant owners, which generally provided interest-free financing for the purchase of certain restaurant equipment, furniture, trade fixtures and signage.
|
(2)
|
The notes payable to the Company by VIEs are eliminated on consolidation, which reduces the Notes receivable, net recognized on the Condensed Consolidated Balance Sheet (see note 12).
|
(3)
|
Relates primarily to notes issued to vendors in conjunction with the financing of property sales, and on various equipment and other financing programs.
|
|
As at
|
||||||
|
June 29, 2014
|
|
December 29, 2013
|
||||
Raw materials
|
$
|
25,061
|
|
|
$
|
22,789
|
|
Finished goods
|
78,332
|
|
|
69,348
|
|
||
|
103,393
|
|
|
92,137
|
|
||
Inventory obsolescence provision
|
(1,418
|
)
|
|
(1,754
|
)
|
||
Inventories, net
|
101,975
|
|
|
90,383
|
|
||
Prepaids and other
|
15,801
|
|
|
13,943
|
|
||
Total Inventories and other, net
|
$
|
117,776
|
|
|
$
|
104,326
|
|
NOTE 6
|
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
|
|
As at
|
||||||
|
June 29, 2014
|
|
December 29, 2013
|
||||
Accounts payable
|
$
|
137,112
|
|
|
$
|
142,131
|
|
Construction holdbacks and accruals
|
33,065
|
|
|
57,527
|
|
||
Corporate reorganization accrual
|
941
|
|
|
4,856
|
|
||
Total Accounts payable
|
$
|
171,118
|
|
|
$
|
204,514
|
|
|
As at
|
||||||
|
June 29, 2014
|
|
December 29, 2013
|
||||
Salaries and wages
|
$
|
14,276
|
|
|
$
|
22,553
|
|
Taxes payable
|
5,316
|
|
|
14,542
|
|
||
De-branding accruals
(1)
|
1,947
|
|
|
9,538
|
|
||
Other accrued liabilities
(2)
|
44,296
|
|
|
42,932
|
|
||
Total Accrued liabilities
|
$
|
65,835
|
|
|
$
|
89,565
|
|
(1)
|
Accruals related to Cold Stone Creamery
®
de-branding activity in Tim Hortons locations in Canada.
|
(2)
|
Includes accruals for contingent rent, current portion of the Maidstone Bakeries supply contract, deferred revenues, deposits, the current portion of deferred income taxes, and various equipment and other accruals.
|
NOTE 7
|
LONG TERM DEBT
|
|
As at
|
||||||||||
|
June 29, 2014
|
|
December 29, 2013
|
||||||||
|
Fair value
hierarchy
|
|
Fair value
asset (liability)
(1)
|
|
Fair value
hierarchy
|
|
Fair value
asset (liability)
(1)
|
||||
Derivatives
|
|
|
|
|
|
|
|
||||
Forward currency contracts
(2)
|
Level 2
|
|
$
|
(2,030
|
)
|
|
Level 2
|
|
$
|
4,181
|
|
Interest rate swap
(3)
|
Level 2
|
|
(204
|
)
|
|
Level 2
|
|
(49
|
)
|
||
Interest rate forwards
(4)
|
n/a
|
|
—
|
|
|
Level 2
|
|
285
|
|
||
Total return swaps (“TRS”)
(5)
|
Level 2
|
|
17,147
|
|
|
Level 2
|
|
21,393
|
|
||
Total Derivatives
|
|
|
$
|
14,913
|
|
|
|
|
$
|
25,810
|
|
(1)
|
The Company values its derivatives using valuations that are calibrated to the initial trade prices. Subsequent valuations are based on observable inputs to the valuation model.
|
(2)
|
The fair value of forward currency contracts is determined using prevailing exchange rates.
|
(3)
|
The fair value is estimated using discounted cash flows and market-based observable inputs, including interest rate yield curves and discount rates.
|
(4)
|
The interest rate forwards were settled as part of the issuance of the Series 3 Notes (see note 7).
|
(5)
|
The fair value of the TRS is determined using the Company’s common share closing price on the last business day of the fiscal period, as quoted on the Toronto Stock Exchange.
|
|
As at
|
||||||||||||||||||
|
June 29, 2014
|
|
December 29, 2013
|
||||||||||||||||
|
Fair value
hierarchy
|
|
Fair value
asset (liability)
|
|
Carrying
value
|
|
Fair value
hierarchy
|
|
Fair value
asset (liability)
|
|
Carrying
value
|
||||||||
Bearer deposit notes
(1)
|
Level 2
|
|
$
|
42,520
|
|
|
$
|
42,520
|
|
|
Level 2
|
|
$
|
41,403
|
|
|
$
|
41,403
|
|
Notes receivable, net
(2)
|
Level 3
|
|
$
|
8,217
|
|
|
$
|
8,217
|
|
|
Level 3
|
|
$
|
9,114
|
|
|
$
|
9,114
|
|
Series 1 Notes
(3)
|
Level 2
|
|
$
|
(317,877
|
)
|
|
$
|
(301,022
|
)
|
|
Level 2
|
|
$
|
(315,519
|
)
|
|
$
|
(301,196
|
)
|
Series 2 Notes
(3)
|
Level 2
|
|
$
|
(474,687
|
)
|
|
$
|
(449,898
|
)
|
|
Level 2
|
|
$
|
(445,419
|
)
|
|
$
|
(449,892
|
)
|
Series 3 Notes
(3)
|
Level 2
|
|
$
|
(453,614
|
)
|
|
$
|
(449,880
|
)
|
|
n/a
|
|
$
|
—
|
|
|
$
|
—
|
|
Advertising fund term debt
(4)
|
Level 3
|
|
$
|
(27,673
|
)
|
|
$
|
(27,673
|
)
|
|
Level 3
|
|
$
|
(30,189
|
)
|
|
$
|
(30,189
|
)
|
Other debt
(5)
|
Level 3
|
|
$
|
(138,650
|
)
|
|
$
|
(72,664
|
)
|
|
Level 3
|
|
$
|
(126,548
|
)
|
|
$
|
(69,794
|
)
|
(1)
|
The Company holds these notes as collateral to reduce the carrying costs of the TRS. The interest rate on these notes resets every
90
days; therefore, the fair value of these notes, using a market approach, approximates the carrying value.
|
(2)
|
Management generally estimates the current value of notes receivable, using a cost approach, based primarily on the estimated depreciated replacement cost of the underlying equipment held as collateral.
|
(3)
|
The fair value of the senior unsecured notes, using a market approach, is based on publicly disclosed trades between arm’s length institutions as documented on Bloomberg L.P.
|
(4)
|
Management estimates the fair value of this variable rate debt using a market approach, based on prevailing interest rates plus an applicable margin.
|
(5)
|
Management estimates the fair value of its Other debt, primarily consisting of contributions received related to the construction costs of certain restaurants, using an income approach, by discounting future cash flows using a Company risk-adjusted rate over the remaining term of the debt.
|
|
As at
|
||||||||||||||||||||||||||
|
June 29, 2014
|
|
December 29, 2013
|
||||||||||||||||||||||||
|
Asset
|
|
Liability
|
|
Net
asset
(liability)
|
|
Classification on
Condensed
Consolidated
Balance Sheet
|
|
Asset
|
|
Liability
|
|
Net
asset
(liability)
|
|
Classification on
Condensed
Consolidated
Balance Sheet
|
||||||||||||
Derivatives designated as cash flow hedging instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Forward currency contracts
(1)
|
$
|
919
|
|
|
$
|
(2,142
|
)
|
|
$
|
(1,223
|
)
|
|
Accounts payable, net
|
|
$
|
4,181
|
|
|
$
|
—
|
|
|
$
|
4,181
|
|
|
Accounts receivable, net
|
Interest rate swap
(2)
|
$
|
—
|
|
|
$
|
(204
|
)
|
|
$
|
(204
|
)
|
|
Other long-term liabilities
|
|
$
|
—
|
|
|
$
|
(49
|
)
|
|
$
|
(49
|
)
|
|
Other long-term liabilities
|
Interest rate forwards
(3)
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
n/a
|
|
$
|
285
|
|
|
$
|
—
|
|
|
$
|
285
|
|
|
Accounts receivable, net
|
Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
TRS
(4)
|
$
|
17,160
|
|
|
$
|
(13
|
)
|
|
$
|
17,147
|
|
|
Other assets
|
|
$
|
21,393
|
|
|
$
|
—
|
|
|
$
|
21,393
|
|
|
Other assets
|
Forward currency contracts
(1)
|
$
|
15
|
|
|
$
|
(822
|
)
|
|
$
|
(807
|
)
|
|
Accounts payable, net
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
n/a
|
(1)
|
Notional value as at
June 29, 2014
of $
167.8 million
(
December 29, 2013
: $
154.0 million
), with maturities ranging between June 2014 and April 2015; no associated cash collateral.
|
(2)
|
Notional value as at
June 29, 2014
of $
27.5 million
(
December 29, 2013
:
$30.0 million
), with maturities through fiscal 2019; no associated cash collateral.
|
(3)
|
The interest rate forwards were settled in the first quarter of 2014 (notional amount at
December 29, 2013
:
$90.0 million
).
|
(4)
|
The notional value and associated cash collateral, in the form of bearer deposit notes (see note 8), was $
42.5 million
as at
June 29, 2014
(
December 29, 2013
: $
41.4 million
). The TRS have maturities annually, in May, between fiscal 2015 and fiscal 2021.
|
|
|
|
Second quarter ended June 29, 2014
|
|
Second quarter ended June 30, 2013
|
||||||||||||||||||||
Derivatives designated as cash flow
hedging instruments
(1)
|
Classification on
Condensed
Consolidated
Statement of
Operations
|
|
Amount of
gain (loss)
recognized
in OCI
(2)
|
|
Amount of net
(gain) loss
reclassified
to earnings
|
|
Total effect
on OCI
(2)
|
|
Amount of
gain (loss)
recognized
in OCI
(2)
|
|
Amount of net
(gain) loss
reclassified
to earnings
|
|
Total effect
on OCI
(2)
|
||||||||||||
Forward currency contracts
|
Cost of sales
|
|
$
|
(4,921
|
)
|
|
$
|
(1,716
|
)
|
|
$
|
(6,637
|
)
|
|
$
|
4,851
|
|
|
$
|
144
|
|
|
$
|
4,995
|
|
Interest rate swap
(3)
|
Interest (expense)
|
|
(47
|
)
|
|
50
|
|
|
3
|
|
|
456
|
|
|
61
|
|
|
517
|
|
||||||
Interest rate forwards
(4)
|
Interest (expense)
|
|
—
|
|
|
667
|
|
|
667
|
|
|
—
|
|
|
173
|
|
|
173
|
|
||||||
Total
|
|
|
(4,968
|
)
|
|
(999
|
)
|
|
(5,967
|
)
|
|
5,307
|
|
|
378
|
|
|
5,685
|
|
||||||
Income tax effect
|
Income taxes
|
|
1,321
|
|
|
442
|
|
|
1,763
|
|
|
(1,279
|
)
|
|
(54
|
)
|
|
(1,333
|
)
|
||||||
Net of income taxes
|
|
|
$
|
(3,647
|
)
|
|
$
|
(557
|
)
|
|
$
|
(4,204
|
)
|
|
$
|
4,028
|
|
|
$
|
324
|
|
|
$
|
4,352
|
|
|
|
|
Year-to-date period ended June 29, 2014
|
|
Year-to-date period ended June 30, 2013
|
||||||||||||||||||||
Derivatives designated as cash flow
hedging instruments (1) |
Classification on
Condensed Consolidated Statement of Operations |
|
Amount of
gain (loss) recognized in OCI (2) |
|
Amount of net
(gain) loss reclassified to earnings |
|
Total effect
on OCI (2) |
|
Amount of
gain (loss) recognized in OCI (2) |
|
Amount of net
(gain) loss reclassified to earnings |
|
Total effect
on OCI (2) |
||||||||||||
Forward currency contracts
|
Cost of sales
|
|
$
|
(516
|
)
|
|
$
|
(4,888
|
)
|
|
$
|
(5,404
|
)
|
|
$
|
8,124
|
|
|
$
|
615
|
|
|
$
|
8,739
|
|
Interest rate swap
(3)
|
Interest (expense)
|
|
(258
|
)
|
|
103
|
|
|
(155
|
)
|
|
(45
|
)
|
|
80
|
|
|
35
|
|
||||||
Interest rate forwards
(4)
|
Interest (expense)
|
|
(5,136
|
)
|
|
1,085
|
|
|
(4,051
|
)
|
|
—
|
|
|
346
|
|
|
346
|
|
||||||
Total
|
|
|
(5,910
|
)
|
|
(3,700
|
)
|
|
(9,610
|
)
|
|
8,079
|
|
|
1,041
|
|
|
9,120
|
|
||||||
Income tax effect
|
Income taxes
|
|
205
|
|
|
1,271
|
|
|
1,476
|
|
|
(2,141
|
)
|
|
(184
|
)
|
|
(2,325
|
)
|
||||||
Net of income taxes
|
|
|
$
|
(5,705
|
)
|
|
$
|
(2,429
|
)
|
|
$
|
(8,134
|
)
|
|
$
|
5,938
|
|
|
$
|
857
|
|
|
$
|
6,795
|
|
(1)
|
Excludes amounts related to ineffectiveness, as they were not significant.
|
(2)
|
Other comprehensive income (“OCI”).
|
(3)
|
The Ad Fund entered into an amortizing interest rate swap to fix a portion of the interest expense on its term debt.
|
(4)
|
The Company entered into and settled interest rate forwards relating to the issuance of its long-term debt.
|
Derivatives not designated as cash flow hedging instruments
|
Classification on Condensed Consolidated
Statement of Operations
|
|
Second quarter ended
|
|
Year-to-date period ended
|
||||||||||||
|
June 29, 2014
|
|
June 30, 2013
|
|
June 29, 2014
|
|
June 30, 2013
|
||||||||||
TRS
|
General and administrative expenses
|
|
$
|
1,998
|
|
|
$
|
(1,482
|
)
|
|
$
|
4,246
|
|
|
$
|
(8,235
|
)
|
Forward currency contracts
|
Cost of sales
|
|
167
|
|
|
(69
|
)
|
|
167
|
|
|
(349
|
)
|
||||
Forward currency contracts
|
Other (income) expense
|
|
640
|
|
|
—
|
|
|
640
|
|
|
—
|
|
||||
Total loss (gain), net
|
|
|
$
|
2,805
|
|
|
$
|
(1,551
|
)
|
|
$
|
5,053
|
|
|
$
|
(8,584
|
)
|
|
Second quarter ended
|
|
Year-to-date period ended
|
||||||||||||
|
June 29, 2014
|
|
June 30, 2013
|
|
June 29, 2014
|
|
June 30, 2013
|
||||||||
RSUs and PSUs
|
$
|
1,386
|
|
|
$
|
2,478
|
|
|
$
|
2,656
|
|
|
$
|
3,580
|
|
Stock options and tandem SARs
|
(362
|
)
|
|
2,264
|
|
|
(1,864
|
)
|
|
7,339
|
|
||||
Deferred share units (“DSUs”)
|
108
|
|
|
406
|
|
|
94
|
|
|
1,616
|
|
||||
Total stock-based compensation expense
|
$
|
1,132
|
|
|
$
|
5,148
|
|
|
$
|
886
|
|
|
$
|
12,535
|
|
TRS loss (gain)
(1)
|
$
|
1,998
|
|
|
$
|
(1,482
|
)
|
|
$
|
4,246
|
|
|
$
|
(8,235
|
)
|
(1)
|
The Company has entered into TRS contracts as economic hedges, covering
1,027,000
of the Company’s underlying common shares (June 30, 2013:
1,008,000
), which represents a portion of its outstanding stock options with tandem SARs, and substantially all of its cash obligation related to DSUs. See note 9 for the revaluation of the TRS contracts.
|
|
Second quarter ended
|
||||||||||||||||||||||
|
June 29, 2014
|
|
June 30, 2013
|
||||||||||||||||||||
|
Restaurant
VIEs
(1)
|
|
Advertising
fund VIEs
(2)
|
|
Total
VIEs
|
|
Restaurant
VIEs
(1)
|
|
Advertising
fund VIEs
(2)
|
|
Total
VIEs
|
||||||||||||
Sales
|
$
|
94,328
|
|
|
$
|
—
|
|
|
$
|
94,328
|
|
|
$
|
93,464
|
|
|
$
|
—
|
|
|
$
|
93,464
|
|
Advertising levies
|
—
|
|
|
2,906
|
|
|
2,906
|
|
|
—
|
|
|
2,569
|
|
|
2,569
|
|
||||||
Total revenues
|
94,328
|
|
|
2,906
|
|
|
97,234
|
|
|
93,464
|
|
|
2,569
|
|
|
96,033
|
|
||||||
Cost of sales
|
92,242
|
|
|
—
|
|
|
92,242
|
|
|
92,480
|
|
|
—
|
|
|
92,480
|
|
||||||
Operating expenses
|
—
|
|
|
2,704
|
|
|
2,704
|
|
|
—
|
|
|
2,293
|
|
|
2,293
|
|
||||||
Operating income
|
2,086
|
|
|
202
|
|
|
2,288
|
|
|
984
|
|
|
276
|
|
|
1,260
|
|
||||||
Interest expense
|
33
|
|
|
202
|
|
|
235
|
|
|
—
|
|
|
276
|
|
|
276
|
|
||||||
Income before taxes
|
2,053
|
|
|
—
|
|
|
2,053
|
|
|
984
|
|
|
—
|
|
|
984
|
|
||||||
Income taxes
|
371
|
|
|
—
|
|
|
371
|
|
|
158
|
|
|
—
|
|
|
158
|
|
||||||
Net income attributable to noncontrolling interests
|
$
|
1,682
|
|
|
$
|
—
|
|
|
$
|
1,682
|
|
|
$
|
826
|
|
|
$
|
—
|
|
|
$
|
826
|
|
|
Year-to-date period ended
|
||||||||||||||||||||||
|
June 29, 2014
|
|
June 30, 2013
|
||||||||||||||||||||
|
Restaurant
VIEs
(1)
|
|
Advertising
fund VIEs
(2)
|
|
Total
VIEs
|
|
Restaurant
VIEs
(1)
|
|
Advertising
fund VIEs
(2)
|
|
Total
VIEs
|
||||||||||||
Sales
|
$
|
177,709
|
|
|
$
|
—
|
|
|
$
|
177,709
|
|
|
$
|
180,224
|
|
|
$
|
—
|
|
|
$
|
180,224
|
|
Advertising levies
|
—
|
|
|
5,898
|
|
|
5,898
|
|
|
—
|
|
|
5,100
|
|
|
5,100
|
|
||||||
Total revenues
|
177,709
|
|
|
5,898
|
|
|
183,607
|
|
|
180,224
|
|
|
5,100
|
|
|
185,324
|
|
||||||
Cost of sales
|
173,855
|
|
|
—
|
|
|
173,855
|
|
|
178,346
|
|
|
—
|
|
|
178,346
|
|
||||||
Operating expenses
|
—
|
|
|
5,466
|
|
|
5,466
|
|
|
—
|
|
|
4,392
|
|
|
4,392
|
|
||||||
Operating income
|
3,854
|
|
|
432
|
|
|
4,286
|
|
|
1,878
|
|
|
708
|
|
|
2,586
|
|
||||||
Interest expense
|
33
|
|
|
432
|
|
|
465
|
|
|
—
|
|
|
708
|
|
|
708
|
|
||||||
Income before taxes
|
3,821
|
|
|
—
|
|
|
3,821
|
|
|
1,878
|
|
|
—
|
|
|
1,878
|
|
||||||
Income taxes
|
693
|
|
|
—
|
|
|
693
|
|
|
300
|
|
|
—
|
|
|
300
|
|
||||||
Net income attributable to noncontrolling interests
|
$
|
3,128
|
|
|
$
|
—
|
|
|
$
|
3,128
|
|
|
$
|
1,578
|
|
|
$
|
—
|
|
|
$
|
1,578
|
|
(1)
|
Includes rents, royalties, advertising expenses and product purchases from the Company which are eliminated upon the consolidation of these VIEs.
|
(2)
|
The advertising levies, depreciation, interest costs, capital expenditures and financing associated with the Ad Fund’s program to acquire and install LCD screens, media engines, drive-thru menu boards and ancillary equipment for our restaurants (the “Expanded Menu Board Program”) are presented on a gross basis. Generally, the advertising levies that are not related to the Expanded Menu Board Program are netted with advertising and marketing expenses incurred by the advertising funds in operating expenses, as these contributions are designated for specific purposes. The Company acts as an agent with regard to these contributions.
|
|
As at
|
||||||||||||||
|
June 29, 2014
|
|
December 29, 2013
|
||||||||||||
|
Restaurant
VIEs
(1)
|
|
Advertising
fund VIEs
|
|
Restaurant
VIEs
(1)
|
|
Advertising
fund VIEs
|
||||||||
Cash and cash equivalents
|
$
|
7,733
|
|
|
$
|
—
|
|
|
$
|
7,773
|
|
|
$
|
—
|
|
Advertising fund restricted assets – current
|
—
|
|
|
39,078
|
|
|
—
|
|
|
39,783
|
|
||||
Other current assets
|
7,060
|
|
|
—
|
|
|
7,155
|
|
|
—
|
|
||||
Property and equipment, net
|
19,638
|
|
|
65,661
|
|
|
20,471
|
|
|
70,485
|
|
||||
Other long-term assets
|
119
|
|
|
960
|
|
|
370
|
|
|
1,271
|
|
||||
Total assets
|
$
|
34,550
|
|
|
$
|
105,699
|
|
|
$
|
35,769
|
|
|
$
|
111,539
|
|
Notes payable to Tim Hortons Inc. – current
(2)(3)
|
$
|
12,996
|
|
|
$
|
23,040
|
|
|
$
|
13,689
|
|
|
$
|
3,040
|
|
Advertising fund liabilities – current
|
—
|
|
|
38,782
|
|
|
—
|
|
|
59,913
|
|
||||
Other current liabilities
(4)
|
11,313
|
|
|
5,268
|
|
|
11,706
|
|
|
5,253
|
|
||||
Notes payable to Tim Hortons Inc. – long-term
(2)(3)
|
543
|
|
|
13,680
|
|
|
628
|
|
|
15,200
|
|
||||
Long-term debt
(4)
|
—
|
|
|
22,641
|
|
|
—
|
|
|
25,157
|
|
||||
Other long-term liabilities
|
8,090
|
|
|
2,288
|
|
|
9,381
|
|
|
2,976
|
|
||||
Total liabilities
|
32,942
|
|
|
105,699
|
|
|
35,404
|
|
|
111,539
|
|
||||
Equity of VIEs
|
1,608
|
|
|
—
|
|
|
365
|
|
|
—
|
|
||||
Total liabilities and equity
|
$
|
34,550
|
|
|
$
|
105,699
|
|
|
$
|
35,769
|
|
|
$
|
111,539
|
|
(1)
|
The Company consolidated
328
Non-owned restaurants as at
June 29, 2014
(
December 29, 2013
:
331
).
|
(2)
|
Various assets and liabilities are eliminated upon the consolidation of the Restaurant VIEs, the most significant of which are the FIP Notes payable to the Company, which reduces the Notes receivable, net reported on the Condensed Consolidated Balance Sheet (see note 4).
|
(3)
|
The Notes payable to the Company by the Advertising Fund VIEs, which are funded by the Restricted cash and cash equivalents related to our Tim Card program, are eliminated upon consolidation of the Ad Fund. The Ad Fund drew $
20.0 million
in the year-to-date period ended
June 29, 2014
(year-to-date period ended
June 30, 2013
: $
nil
) for purposes of the Expanded Menu Board Program.
|
(4)
|
Includes
$27.7 million
of Advertising fund VIEs debt with a Canadian financial institution relating to the Expanded Menu Board Program (
December 29, 2013
:
$30.2 million
), of which
$5.0 million
is recognized in Other current liabilities (
December 29, 2013
:
$5.0 million
) with the remainder recognized as Long-term debt.
|
|
Second quarter ended
|
|
Year-to-date period ended
|
||||||||||||
|
June 29, 2014
|
|
June 30, 2013
|
|
June 29, 2014
|
|
June 30, 2013
|
||||||||
Revenues
(1)
|
|
|
|
|
|
|
|
||||||||
Canada
|
$
|
721,599
|
|
|
$
|
657,682
|
|
|
$
|
1,344,784
|
|
|
$
|
1,251,355
|
|
U.S.
|
51,878
|
|
|
41,220
|
|
|
103,053
|
|
|
85,668
|
|
||||
Corporate services
|
3,636
|
|
|
5,204
|
|
|
9,305
|
|
|
9,329
|
|
||||
Total reportable segments
|
777,113
|
|
|
704,106
|
|
|
1,457,142
|
|
|
1,346,352
|
|
||||
VIEs
|
97,234
|
|
|
96,033
|
|
|
183,607
|
|
|
185,324
|
|
||||
Total
|
$
|
874,347
|
|
|
$
|
800,139
|
|
|
$
|
1,640,749
|
|
|
$
|
1,531,676
|
|
Operating Income (Loss)
|
|
|
|
|
|
|
|
||||||||
Canada
|
$
|
188,866
|
|
|
$
|
174,760
|
|
|
$
|
342,332
|
|
|
$
|
320,581
|
|
U.S.
|
9,254
|
|
|
2,587
|
|
|
13,611
|
|
|
3,497
|
|
||||
Corporate services
|
(8,041
|
)
|
|
(1,424
|
)
|
|
(22,575
|
)
|
|
(12,089
|
)
|
||||
Total reportable segments
|
190,079
|
|
|
175,923
|
|
|
333,368
|
|
|
311,989
|
|
||||
VIEs
|
2,288
|
|
|
1,260
|
|
|
4,286
|
|
|
2,586
|
|
||||
Corporate reorganization expenses
|
—
|
|
|
(604
|
)
|
|
—
|
|
|
(10,079
|
)
|
||||
Consolidated Operating Income
|
192,367
|
|
|
176,579
|
|
|
337,654
|
|
|
304,496
|
|
||||
Interest, Net
|
(17,510
|
)
|
|
(8,131
|
)
|
|
(33,209
|
)
|
|
(15,866
|
)
|
||||
Income before income taxes
|
$
|
174,857
|
|
|
$
|
168,448
|
|
|
$
|
304,445
|
|
|
$
|
288,630
|
|
(1)
|
There are no inter-segment revenues included in the above table.
|
|
Second quarter ended
|
|
Year-to-date period ended
|
||||||||||||
|
June 29, 2014
|
|
June 30, 2013
|
|
June 29, 2014
|
|
June 30, 2013
|
||||||||
Sales
|
|
|
|
|
|
|
|
||||||||
Distribution sales
|
$
|
511,762
|
|
|
$
|
468,597
|
|
|
$
|
964,115
|
|
|
$
|
899,748
|
|
Company-operated restaurant sales
|
7,739
|
|
|
6,501
|
|
|
13,035
|
|
|
12,477
|
|
||||
Sales from VIEs
|
94,328
|
|
|
93,464
|
|
|
177,709
|
|
|
180,224
|
|
||||
Total Sales
|
$
|
613,829
|
|
|
$
|
568,562
|
|
|
$
|
1,154,859
|
|
|
$
|
1,092,449
|
|
|
Second quarter ended
|
|
Year-to-date ended
|
||||||||||||
($ in millions, except per share data)
|
June 29, 2014
|
|
June 30, 2013
|
|
June 29, 2014
|
|
June 30, 2013
|
||||||||
Systemwide sales growth
(1)
|
6.5
|
%
|
|
5.0
|
%
|
|
5.8
|
%
|
|
4.1
|
%
|
||||
Same-store sales growth
(2)
|
|
|
|
|
|
|
|
||||||||
Canada
|
2.6
|
%
|
|
1.5
|
%
|
|
2.1
|
%
|
|
0.6
|
%
|
||||
U.S.
|
5.9
|
%
|
|
1.4
|
%
|
|
3.9
|
%
|
|
0.5
|
%
|
||||
Systemwide restaurants
|
4,546
|
|
|
4,304
|
|
|
4,546
|
|
|
4,304
|
|
||||
Revenues
|
$
|
874.3
|
|
|
$
|
800.1
|
|
|
$
|
1,640.7
|
|
|
$
|
1,531.7
|
|
Operating income
|
$
|
192.4
|
|
|
$
|
176.6
|
|
|
$
|
337.7
|
|
|
$
|
304.5
|
|
Adjusted operating income
(3)
|
$
|
192.4
|
|
|
$
|
177.2
|
|
|
$
|
337.7
|
|
|
$
|
314.6
|
|
Net income attributable to Tim Hortons Inc.
|
$
|
123.8
|
|
|
$
|
123.7
|
|
|
$
|
214.7
|
|
|
$
|
209.9
|
|
Diluted EPS
|
$
|
0.92
|
|
|
$
|
0.81
|
|
|
$
|
1.57
|
|
|
$
|
1.37
|
|
Weighted average number of common shares outstanding – Diluted (in millions)
|
134.4
|
|
|
152.6
|
|
|
136.5
|
|
|
153.1
|
|
(1)
|
Total systemwide sales growth is determined using a constant exchange rate to exclude the effects of foreign currency translation. Foreign currency sales are converted into Canadian dollar amounts using the average exchange rate of the base year for the period covered. Systemwide sales growth excludes sales from our Republic of Ireland and United Kingdom licensed locations. Systemwide sales growth in Canadian dollars, including the effects of foreign currency translation, was
7.2%
and
5.1%
for the
second quarters of 2014 and 2013, respectively
, and
6.6%
and
4.2%
for the
year-to-date periods of 2014 and 2013, respectively
.
|
(2)
|
Same-store sales growth represents the average growth in retail sales at restaurants (franchised and Company-operated restaurants) operating systemwide that have been open for 13 or more months.
|
(3)
|
Adjusted operating income is a non-GAAP measure. See below for reconciliation of adjusting items used to calculate adjusted operating income. Management uses adjusted operating income to assist in the evaluation of year-over-year performance and believes that it will be helpful to investors to better evaluate underlying operational growth rates. This non-GAAP measure is not intended to replace the presentation of our financial results in accordance with GAAP. The Company’s use of the term adjusted operating income may differ from similar measures reported by other companies. Adjusted operating income should not be considered a measure of income generated by our business. The reconciliation of operating income, a GAAP measure, to adjusted operating income, a non-GAAP measure, is set forth in the table below:
|
|
Second quarter ended
|
|
Year-to-date periods ended
|
||||||||||||||||||||||||||
|
June 29, 2014
|
|
June 30, 2013
|
|
Change
|
|
June 29, 2014
|
|
June 30, 2013
|
|
Change
|
||||||||||||||||||
|
|
|
$
|
|
%
|
|
|
|
$
|
|
%
|
||||||||||||||||||
|
($ in millions)
|
||||||||||||||||||||||||||||
Operating income
|
$
|
192.4
|
|
|
$
|
176.6
|
|
|
$
|
15.8
|
|
|
8.9
|
%
|
|
$
|
337.7
|
|
|
$
|
304.5
|
|
|
$
|
33.2
|
|
|
10.9
|
%
|
Add: Corporate reorganization expenses
|
—
|
|
|
0.6
|
|
|
(0.6
|
)
|
|
n/m
|
|
|
—
|
|
|
10.1
|
|
|
(10.1
|
)
|
|
n/m
|
|
||||||
Adjusted operating income
|
$
|
192.4
|
|
|
$
|
177.2
|
|
|
$
|
15.2
|
|
|
8.6
|
%
|
|
$
|
337.7
|
|
|
$
|
314.6
|
|
|
$
|
23.1
|
|
|
7.3
|
%
|
|
Second quarter ended June 29, 2014
|
|
Second quarter ended June 30, 2013
|
||||||||||||||
|
Full-serve
Standard and
Non-standard
|
|
Self-serve
Kiosks
|
|
Total
|
|
Full-serve
Standard and
Non-standard
|
|
Self-serve
Kiosks
|
|
Total
|
||||||
Canada
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Restaurants opened
|
26
|
|
|
3
|
|
|
29
|
|
|
19
|
|
|
2
|
|
|
21
|
|
Restaurants closed
|
(9
|
)
|
|
—
|
|
|
(9
|
)
|
|
(5
|
)
|
|
(1
|
)
|
|
(6
|
)
|
Net change
|
17
|
|
|
3
|
|
|
20
|
|
|
14
|
|
|
1
|
|
|
15
|
|
U.S.
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Restaurants opened
|
1
|
|
|
—
|
|
|
1
|
|
|
5
|
|
|
—
|
|
|
5
|
|
Restaurants closed
|
(5
|
)
|
|
—
|
|
|
(5
|
)
|
|
(3
|
)
|
|
(3
|
)
|
|
(6
|
)
|
Net change
|
(4
|
)
|
|
—
|
|
|
(4
|
)
|
|
2
|
|
|
(3
|
)
|
|
(1
|
)
|
International (GCC)
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Restaurants opened
|
6
|
|
|
—
|
|
|
6
|
|
|
2
|
|
|
—
|
|
|
2
|
|
Total Company
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Restaurants opened
|
33
|
|
|
3
|
|
|
36
|
|
|
26
|
|
|
2
|
|
|
28
|
|
Restaurants closed
|
(14
|
)
|
|
—
|
|
|
(14
|
)
|
|
(8
|
)
|
|
(4
|
)
|
|
(12
|
)
|
Net change
|
19
|
|
|
3
|
|
|
22
|
|
|
18
|
|
|
(2
|
)
|
|
16
|
|
|
Year-to-date period ended June 29, 2014
|
|
Year-to-date period ended June 30, 2013
|
||||||||||||||
|
Full-serve
Standard and
Non-standard
|
|
Self-serve
Kiosks
|
|
Total
|
|
Full-serve
Standard and
Non-standard
|
|
Self-serve
Kiosks
|
|
Total
|
||||||
Canada
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Restaurants opened
|
45
|
|
|
7
|
|
|
52
|
|
|
41
|
|
|
4
|
|
|
45
|
|
Restaurants closed
|
(10
|
)
|
|
—
|
|
|
(10
|
)
|
|
(12
|
)
|
|
(1
|
)
|
|
(13
|
)
|
Net change
|
35
|
|
|
7
|
|
|
42
|
|
|
29
|
|
|
3
|
|
|
32
|
|
U.S.
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Restaurants opened
|
12
|
|
|
—
|
|
|
12
|
|
|
12
|
|
|
1
|
|
|
13
|
|
Restaurants closed
|
(5
|
)
|
|
—
|
|
|
(5
|
)
|
|
(7
|
)
|
|
(3
|
)
|
|
(10
|
)
|
Net change
|
7
|
|
|
—
|
|
|
7
|
|
|
5
|
|
|
(2
|
)
|
|
3
|
|
International (GCC)
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Restaurants opened
|
12
|
|
|
—
|
|
|
12
|
|
|
5
|
|
|
—
|
|
|
5
|
|
Total Company
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Restaurants opened
|
69
|
|
|
7
|
|
|
76
|
|
|
58
|
|
|
5
|
|
|
63
|
|
Restaurants closed
|
(15
|
)
|
|
—
|
|
|
(15
|
)
|
|
(19
|
)
|
|
(4
|
)
|
|
(23
|
)
|
Net change
|
54
|
|
|
7
|
|
|
61
|
|
|
39
|
|
|
1
|
|
|
40
|
|
|
As at
|
|||||||
|
June 29, 2014
|
|
December 29, 2013
|
|
June 30, 2013
|
|||
Canada
|
|
|
|
|
|
|||
Company-operated
|
15
|
|
|
14
|
|
|
17
|
|
Franchised – standard and non-standard
|
3,473
|
|
|
3,440
|
|
|
3,324
|
|
Franchised – self-serve kiosk
|
142
|
|
|
134
|
|
|
127
|
|
Total
|
3,630
|
|
|
3,588
|
|
|
3,468
|
|
% Franchised
|
99.6
|
%
|
|
99.6
|
%
|
|
99.5
|
%
|
U.S.
|
|
|
|
|
|
|||
Company-operated
|
3
|
|
|
2
|
|
|
3
|
|
Franchised – standard and non-standard
|
682
|
|
|
676
|
|
|
627
|
|
Franchised – self-serve kiosks
|
181
|
|
|
181
|
|
|
177
|
|
Total
|
866
|
|
|
859
|
|
|
807
|
|
% Franchised
|
99.7
|
%
|
|
99.8
|
%
|
|
99.6
|
%
|
International (GCC)
|
|
|
|
|
|
|||
Franchised – standard and non-standard
|
50
|
|
|
38
|
|
|
29
|
|
% Franchised
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
Total system
|
|
|
|
|
|
|||
Company-operated
|
18
|
|
|
16
|
|
|
20
|
|
Franchised – standard and non-standard
|
4,205
|
|
|
4,154
|
|
|
3,980
|
|
Franchised – self-serve kiosks
|
323
|
|
|
315
|
|
|
304
|
|
Total
|
4,546
|
|
|
4,485
|
|
|
4,304
|
|
% Franchised
|
99.6
|
%
|
|
99.6
|
%
|
|
99.5
|
%
|
|
Second quarter ended
|
|
Year-to-date period ended
|
||||||||||||||||||||||||||
|
June 29, 2014
|
|
June 30, 2013
|
|
Change
|
|
June 29, 2014
|
|
June 30, 2013
|
|
Change
|
||||||||||||||||||
|
|
|
$
|
|
%
|
|
|
|
$
|
|
%
|
||||||||||||||||||
|
($ in millions)
|
||||||||||||||||||||||||||||
Canada
|
$
|
188.9
|
|
|
$
|
174.8
|
|
|
$
|
14.1
|
|
|
8.1
|
%
|
|
$
|
342.3
|
|
|
$
|
320.6
|
|
|
$
|
21.8
|
|
|
6.8
|
%
|
U.S.
|
$
|
9.3
|
|
|
$
|
2.6
|
|
|
$
|
6.7
|
|
|
n/m
|
|
|
$
|
13.6
|
|
|
$
|
3.5
|
|
|
$
|
10.1
|
|
|
n/m
|
|
Corporate services
|
$
|
(8.0
|
)
|
|
$
|
(1.4
|
)
|
|
$
|
(6.6
|
)
|
|
n/m
|
|
|
$
|
(22.6
|
)
|
|
$
|
(12.1
|
)
|
|
$
|
(10.5
|
)
|
|
n/m
|
|
|
Second quarter ended
|
|
Year-to-date period ended
|
||||||||||||||||||||||||||
|
June 29, 2014
|
|
June 30, 2013
|
|
Change
(1)
|
|
June 29, 2014
|
|
June 30, 2013
|
|
Change
(1)
|
||||||||||||||||||
|
|
|
$
|
|
%
|
|
|
$
|
|
%
|
|||||||||||||||||||
|
($ in millions)
|
||||||||||||||||||||||||||||
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Sales
|
$
|
613.8
|
|
|
$
|
568.6
|
|
|
$
|
45.3
|
|
|
8.0
|
%
|
|
$
|
1,154.9
|
|
|
$
|
1,092.4
|
|
|
$
|
62.4
|
|
|
5.7
|
%
|
Franchise revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Rents and royalties
(2)
|
225.0
|
|
|
209.3
|
|
|
15.7
|
|
|
7.5
|
%
|
|
424.5
|
|
|
396.7
|
|
|
27.7
|
|
|
7.0
|
%
|
||||||
Franchise fees
|
35.6
|
|
|
22.3
|
|
|
13.3
|
|
|
59.6
|
%
|
|
61.4
|
|
|
42.5
|
|
|
18.9
|
|
|
44.6
|
%
|
||||||
Total revenues
|
874.3
|
|
|
800.1
|
|
|
74.2
|
|
|
9.3
|
%
|
|
1,640.7
|
|
|
1,531.7
|
|
|
109.1
|
|
|
7.1
|
%
|
||||||
Costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Cost of sales
|
527.1
|
|
|
489.1
|
|
|
38.0
|
|
|
7.8
|
%
|
|
1,000.7
|
|
|
950.4
|
|
|
50.3
|
|
|
5.3
|
%
|
||||||
Operating expenses
|
84.4
|
|
|
77.0
|
|
|
7.4
|
|
|
9.6
|
%
|
|
165.7
|
|
|
152.7
|
|
|
13.0
|
|
|
8.5
|
%
|
||||||
Franchise fee costs
|
34.9
|
|
|
23.3
|
|
|
11.6
|
|
|
49.6
|
%
|
|
62.6
|
|
|
45.9
|
|
|
16.7
|
|
|
36.4
|
%
|
||||||
General and administrative expenses
|
40.2
|
|
|
38.0
|
|
|
2.2
|
|
|
5.8
|
%
|
|
79.5
|
|
|
76.7
|
|
|
2.8
|
|
|
3.6
|
%
|
||||||
Equity (income)
|
(4.0
|
)
|
|
(3.9
|
)
|
|
(0.1
|
)
|
|
1.5
|
%
|
|
(7.3
|
)
|
|
(7.3
|
)
|
|
(0.1
|
)
|
|
0.8
|
%
|
||||||
Corporate reorganization expenses
|
—
|
|
|
0.6
|
|
|
(0.6
|
)
|
|
n/m
|
|
|
—
|
|
|
10.1
|
|
|
(10.1
|
)
|
|
n/m
|
|
||||||
Other expense (income), net
|
(0.7
|
)
|
|
(0.6
|
)
|
|
(0.2
|
)
|
|
28.9
|
%
|
|
2.0
|
|
|
(1.4
|
)
|
|
3.4
|
|
|
n/m
|
|
||||||
Total costs and expenses
|
682.0
|
|
|
623.6
|
|
|
58.4
|
|
|
9.4
|
%
|
|
1,303.1
|
|
|
1,227.2
|
|
|
75.9
|
|
|
6.2
|
%
|
||||||
Operating income
|
$
|
192.4
|
|
|
$
|
176.6
|
|
|
$
|
15.8
|
|
|
8.9
|
%
|
|
$
|
337.7
|
|
|
$
|
304.5
|
|
|
$
|
33.2
|
|
|
10.9
|
%
|
Operating income %
|
22.0
|
%
|
|
22.1
|
%
|
|
|
|
|
|
|
20.6
|
%
|
|
19.9
|
%
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Interest (expense)
|
(18.6
|
)
|
|
(8.9
|
)
|
|
(9.7
|
)
|
|
n/m
|
|
|
(35.3
|
)
|
|
(17.6
|
)
|
|
(17.7
|
)
|
|
n/m
|
|
||||||
Income tax rate
|
28.3
|
%
|
|
26.1
|
%
|
|
|
|
|
|
|
28.5
|
%
|
|
26.7
|
%
|
|
|
|
|
|
(1)
|
The financial results of our U.S. segment are denominated in U.S. dollars and translated into Canadian dollars for consolidated reporting purposes. While foreign currency translation, primarily related to the Canadian dollar relative to the U.S. dollar, impacted individual revenue and expense items in the
second quarter of 2014
and the
year-to-date period of 2014
, it did not have a significant impact on operating income.
|
(2)
|
Rents and royalties revenues includes rents and royalties derived from our franchised restaurant sales, and certain advertising levies primarily associated with the Tim Hortons Advertising and Promotion Fund (Canada) Inc.’s (“Ad Fund”) program to acquire LCD screens, media engines, drive-thru menu boards and ancillary equipment for our restaurants (“Expanded Menu Board Program”) (see Item 1. Financial Statements—Note 12 Variable Interest Entities). Franchised restaurant sales are reported to us by our restaurant owners, and are not included in our Condensed Consolidated Financial Statements, other than consolidated Non-owned restaurants. Franchised restaurant sales do, however, result in royalties and rental revenues, which are included in our franchise revenues, as well as distribution sales. The reported franchised restaurant sales (including consolidated Non-owned restaurants) were:
|
|
Second quarter ended
|
|
Year-to-date period ended
|
||||||||||||
|
June 29, 2014
|
|
June 30, 2013
|
|
June 29, 2014
|
|
June 30, 2013
|
||||||||
Franchised restaurant sales
|
(in millions)
|
||||||||||||||
Canada
(Canadian dollars)
|
$
|
1,660.4
|
|
|
$
|
1,570.8
|
|
|
$
|
3,134.2
|
|
|
$
|
2,979.3
|
|
U.S.
(U.S. dollars)
|
$
|
163.8
|
|
|
$
|
145.5
|
|
|
$
|
312.1
|
|
|
$
|
282.7
|
|
|
Second quarter ended
|
|
Year-to-date period ended
|
|
As at
|
||||||||||||
|
June 29, 2014
|
|
June 30, 2013
|
|
June 29, 2014
|
|
June 30, 2013
|
|
June 29, 2014
|
|
December 29, 2013
|
||||||
|
Average
|
|
Average
|
|
|
|
|
|
|||||||||
Canada
|
106
|
|
|
114
|
|
|
106
|
|
|
118
|
|
|
105
|
|
|
106
|
|
U.S.
|
225
|
|
|
233
|
|
|
224
|
|
|
235
|
|
|
223
|
|
|
225
|
|
Total
|
331
|
|
|
347
|
|
|
330
|
|
|
353
|
|
|
328
|
|
|
331
|
|
|
Year-to-date periods ended
|
||||||
|
June 29, 2014
|
|
June 30, 2013
|
||||
|
(in millions)
|
||||||
Capital expenditures
(1)
|
|
|
|
||||
New restaurants
|
$
|
34.6
|
|
|
$
|
38.9
|
|
Existing restaurants
(2)
|
51.3
|
|
|
36.6
|
|
||
Other capital expenditures
(3)
|
8.6
|
|
|
12.7
|
|
||
Total capital expenditures
|
$
|
94.4
|
|
|
$
|
88.3
|
|
(1)
|
Reflected on a cash basis, which can be impacted by the timing of payments compared to the actual date of acquisition.
|
(2)
|
The increase in capital expenditures related to existing restaurants was primarily driven by an increase in renovations completed in the fourth quarter of 2013, but paid in the first quarter of 2014.
|
(3)
|
Related primarily to our distribution facilities, and other corporate needs.
|
|
Year-to-date periods ended
|
||||||
|
June 29, 2014
|
|
June 30, 2013
|
||||
|
(in millions)
|
||||||
Canada
|
$
|
75.6
|
|
|
$
|
60.4
|
|
U.S.
|
12.2
|
|
|
23.1
|
|
||
Corporate Services
|
6.6
|
|
|
4.7
|
|
||
Total capital expenditures
|
$
|
94.4
|
|
|
$
|
88.3
|
|
(a)
|
The Company, under the supervision and with the participation of its management, including its Chief Executive Officer and Chief Financial Officer, performed an evaluation of the Company’s disclosure controls and procedures, as contemplated by Securities Exchange Act Rule 13a-15. Disclosure controls and procedures include those designed to ensure that information required to be disclosed is accumulated and communicated to the Company’s management as appropriate to allow timely decisions regarding disclosure. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded, as of the end of the period covered by this report, that such disclosure controls and procedures were effective.
|
(b)
|
There has been no change in our internal control over financial reporting during the last fiscal quarter which has been identified in connection with Management’s evaluation required by Rules 13a-15(d) or 15d-15(d) under the Exchange Act, as amended, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
|
Period
|
(a)
Total Number
of Shares
Purchased
(1)
|
|
(b)
Average Price
Paid per
Share (Cdn.)
(2)
|
|
(c)
Total Number
of Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs
|
|
(d)
Maximum
Approximate
Dollar Value of
Shares that
May Yet be Purchased
Under the
2014 Program
(Cdn)
(3)
|
|||||
Monthly Period #4 (March 31, 2014 – May 4, 2014)
|
2,010,350
|
|
|
60.95
|
|
|
2,010,350
|
|
|
$
|
206,167,975
|
|
Monthly Period #5 (May 5, 2014 – June 1, 2014)
|
816,857
|
|
|
59.67
|
|
|
753,500
|
|
|
161,262,622
|
|
|
Monthly Period #6 (June 2, 2014 – June 29, 2014)
|
383,800
|
|
|
59.10
|
|
|
383,800
|
|
|
138,581,690
|
|
|
Total
|
3,211,007
|
|
|
60.40
|
|
|
3,147,650
|
|
|
$
|
138,581,690
|
|
(1)
|
Based on settlement date.
|
(2)
|
Inclusive of commissions paid to the broker to repurchase the common shares.
|
(3)
|
On February 20, 2014, we announced we obtained regulatory approval from the Toronto Stock Exchange (“TSX”) to commence a new share repurchase program (“2014 Program”), authorizing the repurchase of $440.0 million in common shares, not to exceed the regulatory maximum of 13,726,219 shares, representing 10% of our public float as defined under the TSX rules. The 2014 Program commenced February 28, 2014 and is due to terminate on February 27, 2015, or earlier if the $440.0 million or 10% share maximum is reached. Common shares purchased pursuant to the 2014 Program will be cancelled. The 2014 Program may be terminated by us at any time, subject to compliance with regulatory requirements. As such, there can be no assurance regarding the total number of shares or the equivalent dollar value of shares that may be repurchased under the 2014 Program.
|
|
|
|
|
TIM HORTONS INC. (Registrant)
|
|
|
|
||
Date:
|
August 6, 2014
|
|
/s/ CYNTHIA J. DEVINE
|
|
|
|
|
|
Cynthia J. Devine
|
|
|
|
|
Chief Financial Officer
|
Exhibit
|
|
Description
|
|
Where found
|
|
|
|
|
|
*10(a)
|
|
Form of Restricted Stock Unit Award Agreement (2014 Award)
|
|
Filed herewith.
|
|
|
|
|
|
*10(b)
|
|
Form of Performance Stock Unit Award Agreement (2014 Award)
|
|
Filed herewith.
|
|
|
|
|
|
*10(c)
|
|
Form of Nonqualified Stock Option Award Agreement (2014 Award)
|
|
Filed herewith.
|
|
|
|
|
|
*10(d)
|
|
Form of Amended and Restated Deferred Stock Unit Award Agreement (Canadian)
|
|
Filed herewith.
|
|
|
|
|
|
*10(e)
|
|
Form of Amended and Restated Deferred Stock Unit Award Agreement (U.S.)
|
|
Filed herewith.
|
|
|
|
|
|
31(a)
|
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
|
|
Filed herewith.
|
|
|
|
||
31(b)
|
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
|
|
Filed herewith.
|
|
|
|||
32(a)
|
|
Section 1350 Certification of Chief Executive Officer
|
|
Filed herewith.
|
|
|
|
||
32(b)
|
|
Section 1350 Certification of Chief Financial Officer
|
|
Filed herewith.
|
|
|
|
||
99
|
|
Safe Harbor under the Private Securities Litigation Reform Act 1995 and Canadian securities laws
|
|
Filed herewith.
|
|
|
|
||
101.INS
|
|
XBRL Instance Document.
|
|
Filed herewith.
|
|
|
|
||
101.SCH
|
|
XBRL Taxonomy Extension Schema Document.
|
|
Filed herewith.
|
|
|
|
||
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
|
Filed herewith.
|
|
|
|
||
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
|
Filed herewith.
|
|
|
|
||
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document.
|
|
Filed herewith.
|
|
|
|
||
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
|
Filed herewith.
|
Vest Schedule – RSUs
|
|
Vest Date
|
Vest Quantity
|
March 1, 2015
|
1/3
|
March 1, 2016
|
1/3
|
March 1, 2017
|
1/3
|
1.
|
Award
.
|
1.1
|
The Company (or in the case of a Grantee employed by a Subsidiary {(the “Employer”)}, the Employer) hereby grants to the Grantee in respect of employment services provided by the Grantee the Award with an equal number of related Dividend Equivalent Rights. For greater certainty, the Award granted hereunder is in respect of services rendered by the Grantee in the calendar year in which the Date of Grant occurs. In no event may the Award be allocated to the Grantee for or in respect of services rendered in any period prior to the commencement of the calendar year in which the Award is granted. Subject to Section 6 hereof, each Restricted Stock Unit represents the right to receive, at the absolute discretion of the Company, (i) one (1) Share from the Company, (ii) cash delivered to a broker to acquire one (1) Share on the Grantee’s behalf, or (iii) one (1) Share delivered by the Trustee (as defined in Section 7), in any case at the time and in the manner set forth in Section 7 hereof.
|
1.2
|
Each Dividend Equivalent Right represents the right to receive the equivalent of all of the cash dividends that would be payable with respect to the Share represented by the Restricted Stock Unit to which the Dividend Equivalent Right relates. With respect to each Dividend Equivalent Right, any amount related to cash dividends shall be converted into additional Restricted Stock Units based on the Fair Market Value of a Share on the date such dividend is made. Any additional Restricted Stock Units granted pursuant to this Section shall be subject to the same terms and conditions applicable to the Restricted Stock Unit to which the Dividend Equivalent Right relates, including, without limitation, the restrictions on transfer, forfeiture, vesting and payment provisions contained in Sections 2 through 7, inclusive, of this Agreement. In the event that a Restricted Stock Unit is forfeited pursuant to Section 6 hereof, the related Dividend Equivalent Right shall also be forfeited. Fractional Restricted Stock Units may be generated upon the automatic settlement of Dividend Equivalent Rights into additional Restricted Stock Units and upon the vesting of a portion of a Restricted Stock Unit award (see Section 3). These fractional Restricted Stock Units continue to accrue additional Dividend Equivalent Rights and accumulate until the fractional interest is of sufficient value to acquire an additional Restricted Stock Unit as a result of the settlement of future Dividend Equivalent Rights, subject to adjustment upon the vesting of a portion of the underlying Restricted Stock Unit award (see Section 3). The Committee shall determine appropriate administration for the tracking and settlement of Dividend Equivalent Rights, including with respect to fractional interests,
|
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, 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
|
4.3
|
Trading Policies and Transfer of Shares.
For a period of six (6) months following a termination of employment, whether under Section 4, 5, or 6 of this Agreement, Grantee shall continue to be subject to the Company’s insider trading and window trading policies and must follow all pre-clearance procedures, and all other requirements, included in those policies. In the case of Retirement, a termination due to Disability, or death, Grantee or Grantee’s estate or legal representative, as the case may be, shall take all reasonable steps to transfer all Shares received under this Agreement (and all other Shares that have vested and are maintained by the Plan Administrator (as defined in Section 7) in a brokerage account for the benefit of Grantee) from the Plan Administrator within five (5) years following the Grantee’s termination of employment. For terminations arising for any reason other than death, Disability or Retirement, Grantee shall transfer all Shares received under this Agreement (and all other Shares that have vested and are maintained by the Plan Administrator in a brokerage account for the benefit of Grantee) from the Plan Administrator within one (1) year following the Grantee’s termination of employment.
|
4.4
|
Termination
. For purposes of this Agreement, the word “terminate” or “termination” in connection with the Grantee’s employment shall mean the Grantee ceasing to perform services for the Company or such Subsidiary, as the case may be, without regard to: (i) whether such Grantee continues thereafter to receive any payment from the Company or such Subsidiary, as the case may be, in respect of the termination of such Grantee’s employment, including, without limitation, any continuation of salary or other compensation in lieu of notice of such termination, or (ii) whether or not Grantee is entitled or claims to be entitled at law to greater notice of such termination or greater compensation in lieu thereof than has been received by such Grantee. In addition, to the extent necessary to comply with the requirements of Section 409A of the Code, any reference to the Grantee’s Termination shall mean the Grantee’s “separation from service” as defined by Section 409A of the Code.
|
5.
|
Effect of Change in Control
.
|
6.
|
Forfeiture of Award
.
|
7.
|
Satisfaction of Award
.
|
8.
|
No Right to Continued Employment
.
|
9.
|
Withholding of Taxes
.
|
10.
|
Grantee Bound by the Plan
.
|
11.
|
Modification of Agreement
.
|
12.
|
Severability
.
|
13.
|
Governing Law
.
|
14.
|
Successors in Interest and Assigns
.
|
15.
|
Language
.
|
16.
|
Resolution of Disputes
.
|
17.
|
Entire Agreement
.
|
18.
|
Headings
.
|
19.
|
Counterparts
.
|
20.
|
Compliance with Section 409A
.
|
21.
|
Recoupment Policy upon Restatement of Financial Results
.
|
|
|
TIM HORTONS INC.
|
|
|
by
|
|
|||
|
Name:
|
|
||
|
Title:
|
|
|
|
[
____________________(“Employer”)
|
|
|
by
|
|
|||
|
Name:
|
|
||
|
Title: ]
|
|
1.
|
Award
.
|
1.1
|
The Company (or in the case of a Grantee employed by a Subsidiary {(the “Employer”)}, the Employer) hereby grants to the Grantee in respect of employment services provided by the Grantee the Award with an equal number of related Dividend Equivalent Rights. For greater certainty, the Award granted hereunder is in respect of services rendered by the Grantee in the calendar year in which the Date of Grant occurs. In no event may the Award be allocated to the Grantee for or in respect of services rendered in any period prior to the commencement of the calendar year in which the Award is granted. Subject to Section 6 hereof, each Performance Stock Unit represents the right to receive, at the absolute discretion of the Company, (i) one (1) Share from the Company, (ii) cash delivered to a broker to acquire one (1) Share on the Grantee’s behalf, or (iii) one (1) Share delivered by the Trustee (as defined in Section 7), in any case at the time and in the manner set forth in Section 7 hereof.
|
1.2
|
Each Dividend Equivalent Right represents the right to receive the equivalent of all of the cash dividends that would be payable with respect to the Share represented by the Performance Stock Unit to which the Dividend Equivalent Right relates. With respect to each Dividend Equivalent Right, any amount related to cash dividends shall be converted into additional Performance Stock Units based on the Fair Market Value of a Share on the date such dividend is made. Any additional Performance Stock Units granted pursuant to this Section shall be subject to the same terms and conditions applicable to the Performance Stock Unit to which the Dividend Equivalent Right relates, including, without limitation, the restrictions on transfer, forfeiture, vesting and payment provisions contained in Sections 2 through 7, inclusive, of this Agreement. In the event that a Performance Stock Unit is forfeited pursuant to Section 6 hereof, the related Dividend Equivalent Right shall also be forfeited. Fractional Performance Stock Units may be generated upon the automatic settlement of Dividend Equivalent Rights into additional Performance Stock Units and upon the vesting of a portion of a Performance Stock Unit award (see Section 3). These fractional Performance Stock Units continue to accrue additional Dividend Equivalent Rights and accumulate until the fractional interest is of sufficient value to acquire an additional Performance Stock Unit as a result of the settlement of future Dividend Equivalent Rights, subject to adjustment upon the vesting of a portion of the underlying Performance Stock Unit award (see Section 3). The Committee shall determine appropriate administration for the tracking and settlement of Dividend Equivalent Rights, including with respect to fractional interests, and the Committee’s determination in this regard shall be final and binding upon all Parties.
|
1.3
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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.
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2.
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Restrictions on Transfer
.
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3.
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Performance Criteria and Vesting
.
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4.1
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Death, Disability or Termination in Connection with Certain Dispositions
. If Grantee’s employment terminates as a result of Grantee’s death or becoming Disabled, or if the Grantee is terminated without Cause in connection with the sale or disposition of a Subsidiary, in each case if such termination occurs on or after the Date of Grant, all Performance Stock Units which have not become vested in accordance with Section 3 or 5 hereof shall vest as of the Termination Date.
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4.2
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Retirement.
If Grantee’s employment terminates as a result of the Grantee’s Retirement, and if such termination occurs on or after the Date of Grant, any unvested Performance Stock Units will remain outstanding and will continue to vest in accordance with the vesting schedule described in Section 3 of this Agreement. For the purposes of this Agreement, “Retirement” means a termination of employment after attaining age 60 with at least ten (10) years of service (as defined in the Company’s qualified retirement plans) and other than by (A) death; (B) Disability; (C) for Cause; or (D) a voluntary termination by the Grantee or without Cause termination by the Company, unless the Company and Grantee mutually agree that such termination shall be considered a “Retirement;” provided that if an Award is subject to Section 409A of the Code, a termination of employment must also constitute a “separation from
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4.3
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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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Name:
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Title:
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[ _____________________(“Employer”)
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by
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Name:
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Title: ]
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1
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Award.
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2
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Restrictions on Transfer.
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3
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Vesting.
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4
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Effect of Change of Shares Subject to the Plan.
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5
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Distributions.
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6
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Payment.
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7
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No Right to Continued Service.
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8
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Residency of Grantee.
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9
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Grantee Bound by the Plan.
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10
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Modification of Agreement.
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11
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Notice.
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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.
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15
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Resolution of Disputes.
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16
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Entire Agreement.
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17
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Headings.
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18
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Counterparts.
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19
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Compliance with Section 409A.
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Grant Date
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Cash Value (Cdn.$) on
Grant Date |
# and Type of DSUs*
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Director Residency
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Total of DSUs as of <>:
<>
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•
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Grants and settlements of DSUs shall be determined in accordance with the Equity Grant and Settlement Policy (the "
Policy
") approved and adopted by the Human Resource and Compensation Committee of the Board of Directors of the Company, as may be amended from time to time.
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•
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No interest or other compensation shall accrue as a result of the delay between the date of the Board meeting and the actual DSU grant date as set forth in the Policy.
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•
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Consistent with Section 6 of the Agreement, DSUs are payable and will be settled in Canadian dollars.
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1
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Award.
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2
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Restrictions on Transfer.
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3
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Vesting.
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4
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Effect of Change of Shares Subject to the Plan.
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5
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Distributions.
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6
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Payment.
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7
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No Right to Continued Service.
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8
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Residency of Grantee.
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9
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Grantee Bound by the Plan.
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10
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Modification of Agreement.
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11
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Notice.
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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.
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15
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Resolution of Disputes.
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16
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Entire Agreement.
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17
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Headings.
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18
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Counterparts.
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19
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Compliance with Section 409A.
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Grant Date
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Cash Value (Cdn.$) on
Grant Date |
# and Type of DSUs*
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Director Residency
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Total DSUs as of <>: <> |
•
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Grants and settlements of DSUs shall be determined in accordance with the Equity Grant and Settlement Policy (the "
Policy
") approved and adopted by the Human Resource and Compensation Committee of the Board of Directors of the Company, as may be amended from time to time.
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•
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No interest or other compensation shall accrue as a result of the delay between the date of the Board meeting and the actual DSU grant date as set forth in the Policy.
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•
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Consistent with Section 6 of the Agreement, DSUs are payable and will be settled in Canadian dollars. For a director subject to U.S. taxation in respect of his or her DSUs, the Canadian dollars will be translated into U.S. dollars as of the date of separation of service, unless the director provides notice to the Company that he or she would like to receive Canadian dollars; provided, however, that additional deferrals under the U.S. Non-Employee Director Deferred Compensation Plan (for DSUs granted in respect of 2009 and prior years' services) or in accordance with
Appendix A
of the Plan (for all other awards) can be made only in U.S. dollars.
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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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•
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There can be no assurance that the Company will be able to achieve new restaurant or same-store sales growth objectives, that new restaurants will be profitable or that strategic initiatives will be successfully implemented. Early in the development of new markets, the opening of new restaurants may negatively impact the same-store sales growth and profitability of existing restaurants in the market. When the Company enters new markets, it may be necessary to extend or provide relief and support programs for restaurant owners which could increase costs and thus decrease net income.
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•
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The Company may enter markets where its brand is not well known and where it has little or no operating experience. New markets may have different competitive conditions, consumer tastes or discretionary spending patterns than existing markets and/or higher construction, occupancy, and operating costs for restaurants. As a result, new restaurants in those
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•
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The Company may rationalize and close underperforming restaurants in order to improve overall profitability. Such closures may be accompanied by impairment charges, closure costs, and/or valuation allowances that may have a negative impact on earnings.
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•
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The success of any restaurant depends in substantial part on its location. There can be no assurance that current locations will continue to be attractive as demographic patterns or economic conditions change. If the Company cannot obtain desirable locations for restaurants at reasonable prices, then the Company’s ability to affect its growth strategy will be adversely affected.
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•
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The Company has vertically integrated manufacturing, warehouse and distribution capabilities which may, at times, result in delays or difficulties.
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•
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The Company intends to evaluate potential mergers, acquisitions, joint-venture investments, alliances, vertical integration opportunities and divestitures, which are subject to many of the same risks that also affect new store development as well as various other risks. There can be no assurance that the Company will be able to complete desirable transactions.
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•
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The Company may continue to pursue strategic alliances (including co-branding) with third parties but there can be no assurance that new strategic partners can be found, that current strategic alliances can be maintained or that significant value will be recognized through such strategic alliances. Furthermore, such relationships as well as the expansion of the Company’s current business through other similar initiatives may expose it to additional risks that may adversely affect the Company’s brand and business.
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•
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The Company’s financial outlook and long-range targets are based on the successful implementation, execution and guest acceptance of the Company’s strategic plans and initiatives. Accordingly, the failure of any of these criteria could cause the Company to fall short of achieving its financial objectives and long-range aspirational goals.
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