Tim Hortons Inc. announced its results for the first quarter ended April 4. "Our business achieved strong sales and earnings performance this quarter. Our competitive advantages continue to position our business among the leading companies in our sector, and we look forward to further building upon that position," said Don Schroeder, president and CEO.

Systemwide sales increased 10% on a constant currency basis. During the quarter total revenues were $582.6 million, an increase of 4.8% compared to $555.7 million last year. Higher distribution revenues, and higher rents and royalties due to strong underlying product demand, were partially offset by lower year-over-year revenues from consolidated VIE's and lower revenues from Company-operated restaurants as the company continues to convert these locations to the franchise and owner-operator model.

First quarter operating income grew 14.9% to $127.7 million compared to $111.2 million last year. Solid same-store sales and continued restaurant development, which contributed to higher rents, royalties and distribution income, contributed most to this performance. Costs continued to be well managed during the quarter, with growth in all cost line items below the rate of systemwide sales growth, even considering the approximate 2.0% benefit to costs this quarter from foreign exchange translation. Changes in foreign exchange did not have a significant impact on operating income.

Canadian same-store sales experienced strong growth of 5.2% over the comparable period of 2009. Same-store sales growth benefited from successful menu, marketing and operational programs which led to continued transaction growth, and from previous pricing in place in the system in certain Canadian markets which benefited average cheque.

A total of 20 restaurants were opened in the first quarter. At the end of the first quarter, we had 18 restaurants in Canada co-branded as Cold Stone Creamery locations.

Operating income in the Canadian segment was $132.4 million, up 14.3% compared to $115.8 million in the first quarter of last year. Our strong operating income performance in the Canadian segment benefited from higher systemwide sales, including the solid 5.2% same-store sales growth noted previously, which drove rents, royalties and distribution income.

The U.S. segment increased same-store sales by 3% in the first quarter. Significant contributions from co-branded locations featuring Cold Stone Creamery, and effective marketing programs and menu initiatives, benefited performance in economic conditions that continued to be challenging. As in Canada, the partial timing shift of Easter compared to last year had a slight negative impact on same-store sales growth. A total of 4 restaurants were opened in the first quarter. At the end of the first quarter, we had 66 Tim Hortons restaurants in the U.S. co-branded as Cold Stone Creamery locations.

The U.S. segment had a small operating loss of $0.3 million, an improvement compared to the $0.6 million operating loss from the same period last year. The first quarter is typically the most challenging for our business. Systemwide sales in the U.S. benefited from continued restaurant development, and from continued same-store sales growth. Higher sales led to increased rents and royalties, offset in part by higher general and administrative costs and lower distribution contributions in the segment.

The Company received notice from IAWS Group Ltd., a subsidiary of Aryzta AG, the Company's 50-50 partner under the Maidstone Bakeries joint venture, invoking the buy/sell provisions of the joint venture. As a result, the Company has the option to either sell its interest or acquire IAWS' interest in the joint venture. Aryzta believes that the business of the joint venture will be better served under an alternative ownership structure rather than under the existing joint venture arrangement. The parties have agreed to an extended negotiation period to consider amendments to the ownership structure and the underlying arrangements.
The existing joint venture documentation provides that the Company's supply rights for products extend for seven years after either party's exit from the joint venture, and sourcing commitments extend until early 2016 for donuts and Timbits.

Tim Hortons is the fourth largest publicly-traded restaurant chain in North America based on market capitalization, and the largest in Canada. Operating in the quick service segment of the restaurant industry, Tim Hortons appeals to a broad range of consumer tastes, with a menu that includes premium coffee, flavored cappuccinos, specialty teas, home-style soups, fresh sandwiches, wraps, hot breakfast sandwiches and fresh baked goods, including our trademark donuts. As of April 4th, 2010, Tim Hortons had 3,596 systemwide restaurants, including 3,029 in Canada and 567 in the United States. More information about the Company is available at www.timhortons.com.