Welcome to the Tim Horton’s Second Quarter Results Conference Call and Webcast. (Operator Instructions)Today's Conference Leader is John Barker, Senior Vice President of Corporate Affairs and Investor Relations. Thank you. Mr. Barker, you may begin your conference.

Thank you operator. Good afternoon everybody. Thanks for joining our call. The purpose today is to discuss the second quarter business results for Tim Horton’s, which the Company released earlier today. The news release, all the financial statements, and other investor information is available on www.timhorton-invest.com. The agenda for today's conference call will begin with remarks from our CEO and President, Paul House followed by our Executive Vice President and Chief Financial Officer Cynthia Devine. Paul and Cynthia will discuss their second quarter as a public company. All of their references to currency will be in Canadian dollars. After those remarks we'll open up the call for questions. Looking ahead for just a minute, please note that Tim does plan to release the third quarter sales for the Company on October 5th and third quarter earnings will be released on October 26th. For future reference please note that we do list the key disclosure dates on the Website. Now I'd like to refer you for just a minute to the Safe Harbor Statement that is attached to today's news release. Certain information that we may discuss today regarding future performance, such as financial goals, plans and development is forward looking. Various factors could affect the Company's results and cause those results to differ materially from those expressed in our forward-looking statements. Some of those factors set forth in the Safe Harbor Statements that are attached to the earnings release. And finally some of our comments today may reference non-GAAP financial measures. In the event that we reference previously undisclosed non-GAAP information we will post a reconciliation for the most directly comparable GAAP financial measure on our Website, which is mandated by Reg-G. Now let me turn it over to Paul.

Thanks John. I'm happy to report that we've delivered strong results in our second quarter as a public company. Our same store sales in the quarter came in at 6.1% in Canada and 8.4% in the United States. Both of these results exceed our expectations of 4-5% in Canada and 6-7% in the United States. Driving these results was a strong promotional calendar including caramel theme baked goods in April, iced cappuccino with flavor shots in May, and strawberry themed desserts in June. We also introduced a new chunky chicken salad wrap during May and June. A new hot breakfast sandwich, which is already in the United States and some test markets in Canada is another new product that has had a positive impact. We plan to roll it out in Canada during the fourth quarter. Another benefit to the same store sales is the pricing increase that we took in several regions and several key markets in Canada and the United States in late 2005 and early 2006, which accounted for 2 to 3 points of the percentage increase. We also experienced a couple calendar shifts in the quarter. One had a positive impact and one that had a negative impact. As we mentioned in our first quarter conference call the shift of Easter into April aided March sales but negatively impacted April. We estimate that this shift probably cost us about one point in April but less than a half a point in the quarter. The timing of Canada Day on Saturday, July 1st pushed the majority of the holiday impact into the third quarter as most Canadians observed a Monday July 3rd holiday rather than Friday June 30th benefiting June. On June 7th we held our annual Camp Day for where our franchisees and company stores donate…

Thank you Paul and good afternoon everyone. Before I get started please let me remind you the amounts I will reference in these comments are in Canadian dollars. As Paul mentioned, we continued where we left off in early April with a strong second quarter. The best indicator to evaluate our second quarter performance is the operating income line, as non-operational items such as interest, taxes, and numbers of shares outstanding will skew our pre-tax income – net income in our earnings per share results. With that in mind, our second quarter operating income was $98.5 million or 24.2% of revenue, an 8.3% increase compared to $90.9 million or 24.7% of revenue in the prior year. The dollar increase resulted from strong same store sales and higher equity income. While the slight margin decrease resulted from the slower start up of our new distribution center, a decline in other income related to a $1.7 million gain on an asset sale in 2005 that did not recur this year. Let's take a closer look at some of the key lines on the income statement. Our total revenues increased 10.4% to $406.8 million. This is primarily the result of our same store sales growth I mentioned earlier and the new restaurant development. We opened 30 new restaurants in the quarter compared to 23 in the second quarter of 2005. Cost of sales was $229.3 million. This compares to $208.9 million a 9.7% increase over 2005. This is consistent with our sales growth of 10.4%. This increase also included start up costs associated with our new Guelph Distribution Center. Operating expenses were $43.7 million compared to $41.1 million in the second quarter of 2005, a 6.5% increase. This line item consists primarily of our rent expense and other property related costs. Most of…

Thanks Cynthia, just one thing I'd like to mention is that there is a lot of interest in meeting with the management team between now and the spin-off and Cynthia, with our help, will be starting to set some of those up and analysts and investor meetings and a road show to get more information out on that as soon as we make some final decisions. We are now ready to begin the question and answer session to allow everybody the opportunity to interact with management on the call. We do ask that you would limit yourself to one question per caller on the first round of the q and a and then if you have additional questions please queue up after that. Now operator let's open it up for q and a.

(Operator Instructions) Your first question comes from Irene Nattel from RBC Capital Markets.

Hello everyone. As I look at your income statement for the second quarter it seems to me that all the way through the income statement you had very good expense control, notwithstanding some of the incremental costs that you had to incur year-over-year. How should we be thinking about the way that's going to evolve for the rest of the year?

Hi Irene. It's Cynthia. That's a good question. With respect to our costs, I think as we've indicated before, we expect that the costs related to the distribution center would be higher in the balance of the year. In addition to that, I think with the announced spin-off from Wendy's for October 1st we would expect to incur additional costs in the third quarter really associated with that. In terms of quantification of those, at this time we really can't quantify the impact. We're still working through all the details of various costs that we expect to incur.

And as far as the tax rate goes Cynthia, obviously you've had two quarters of some nice tax rates. Should we still be thinking about that 34% for the full year?

I'm not going to give a new number in terms of guidance but what I would say is that, you know, with respect to tax rates both in Canada primarily there have been some reductions federally and in a number of the providences in the tax rate so we would expect to have, you know, a slight benefit from that in the future. You know, because we are consolidated still with Wendy's tax return up until the spin-off for the U.S. business at this time we really don't feel comfortable giving out a revised tax rate until we kind of get away from Wendy's and are a separate stand-alone company.

Thanks Cynthia.

Thanks Irene.

Your next question comes from Mark Kalinowski with Buckingham Research Mark Kalinowski – Buckingham Research: Hi. I just wanted to ask about the past history of the menu price increase, about a 2-3% price increase recently. Is that typical of what you've done in the past years? Is it atypical, etcetera?

Well thanks Mark. No on average since 2000 we've had a price increase of about 2% every second year. So if you worked it out over that period of time it would work out to about 1% over the last six years. Mark Kalinowski – Buckingham Research: Is there a reason why you went with a slightly larger increase this time around?

Yeah, it's because of a number of impacts this year, mainly in the minimum wage area that was initiated in many areas that pushed it up a little higher. Mark Kalinowski – Buckingham Research: Thank you.

Your next question comes from David Harley with Black Hawk Capital. David Harley – Black Hawk Capital: Good afternoon everyone and I just want to ask you about your balance sheet. You've probably been asked this before but you look at it and think that it's under levered by a far deal and I'm just wondering have you looked at this and thought of any plans for your balance sheet, how you might lever it up and where the proceeds might go?

We do look at our balance sheet and we continue to review it, you know, not only internally but we work with outside advisers as well and look at our cap structure. We feel comfortable with the position we're in now. You know, we feel if the opportunity arose we certainly realize we have access capacity available but at this time we feel it's appropriate and we do not have, you now, any need for cash and so there's no need to go to the debt market at this time. David Harley – Black Hawk Capital: When you mentioned opportunities, I know acquisitions could be one of those, could they not?

There are a lot of things out there that could be an opportunity. There is nothing on the horizon like that, but we are constantly looking for all sorts of business initiatives. David Harley – Black Hawk Capital: Just wondering about the distribution centre, a bit of a delay there. I am just wondering if you had to pull back on some of the expenses you put into the quarter, some of the up-front costs related to that?

David, I am not sure of your question. David Harley – Black Hawk Capital: Meaning that, did you pull back in implementing certain cost centers or reduce the number of planned hires, et cetera, that you might have had otherwise in the quarter due to the delay?

No, David, it would actually be the reverse. During the quarter, we did have a lot more costs associated with it and we do not have the full revenue associated with the frozen distribution because we really slowed down the rollout of frozen to make sure that we could service our stores appropriately. Are we fully staffed up? No. We still need to add additional resources, but at the current time, we are staffed appropriately for the volumes that we are doing and in fact have capacity to take those volumes up. David Harley – Black Hawk Capital: I understand that. Thank you very much. I will leave it for there. Thank you.

Your next question comes from Steven Kron with Goldman Sachs.

Good afternoon. A couple of questions on profitability by region. Can you maybe add a little bit color as to how the U.S. looked from a profitability standpoint after turning profitable in the first quarter, whether that kind of sustained? If you had any color on how the New England stores did in the past quarter from a comp standpoint.

In terms of the segment information, we prefer to leave that to the quarter, to the 10-Q that will be out in early August. What we can say about our U.S. performance is that our same-store sales results were very strong. Obviously we feel good about it. We feel good about the progress that we are making, both in all of the United States as well as New England.

We are very pleased. New England is moving along and it is still below where it needs to be. We are adding new stores into the market, and we are still looking very positively at that region.

If I could just ask one last one, as far as the breakfast sandwich goes, that gave a nice lift in the U.S., are you able to parse out and quantify that lift, and something that we might expect to see when rolled out into Canada?

We expect to roll it out in the fourth quarter. In the test markets that we are in, we are experiencing similar sales results that we did in the U.S. prior to the rollout as well. But other than that, can’t quantify it.

Thank you.

Your next question comes from John Glass with CIBC World Markets.

Thank you. I have a question about the revenue growth. I am just trying to understand that dynamic. In the second quarter, revenue grew about 10%. In the first quarter, it was up 15%. The unit openings, unit growth looks to about the same quarter to quarter, and the difference in comp first to second quarter is not that great, so what other component drove the lower revenue growth first and second quarter? Does it have something to do with the frozen distribution? What else?

No, there are other things that go on within revenues, and I think we have talked about this before, particularly on the sales line, you will see fluctuations due to a couple of things, changes in our number of corporate stores. Warehouse will be a part of it, but it did not have to do with frozen, to be honest because we did not have any frozen in our base, and we actually have more frozen in the second quarter. I think we have talked about this before, that sometimes within our revenues, commodity costs such as coffee can have fluctuations that cause growth rates in that line that are different. In the second quarter though we did have some impact, particularly on the sales line, for Tim’s U.S. in terms of foreign exchange. Overall on the total revenue line, it was only about a 0.5% change in total revenues, but on some of the individual line items, it was a little bit more dramatic, particularly on corporate stores because we have a higher number of corporate stores in Tim’s U.S., and the exchange rate, the Canadian dollar strengthened. Really, it is a combination of things. We would have to go back and look at each of those components individually.

But you would say the biggest piece of it was the for-ex with Tim’s U.S.?

On some of the sales line particularly related to corporate store sales.

Thank you.

Your next question comes from Joe Buckley with Bear, Stearns. Joseph Buckley - Bear, Stearns & Co.: Thank you, a couple of questions. Could you just walk through the issues with the distribution center and maybe share with us what kind of cost impact was evident in the second quarter, so we get a sense of what to look for in the back half?

Joe, it is just mainly starting up a whole new piece of technology, really. Some of it is around the technology systems that we are employing at this facility and the other is that we have an introduction of a lot of new people, and promotions of existing people into new positions, so we are really breaking in a whole new team. Just because of some of the bumps that we incur, we have slowed down. Most of those, we feel we have our arms around now at this point in time, but we are going to maintain the pace of introduction of frozen at the slower rate for the near-term, and we will turn it up if we feel more comfortable as we go forward a little further into time. But the problems that we have incurred, some of them were not expected. Most of those were based around some of the systems that we employ, and the new people. I think the important thing we did not disrupt the supply chain to the system. The stores have not felt any of the bumps that we have incurred at the DC, so I think that is the positive thing. We purposely had guarded against that, on the side of being very conservative.

From a quantification standpoint, we are not specifically breaking that out, but what I would say is that the decline year over year in terms of our margin going from 24.7 to 24.2, a big chunk of that is obviously the costs related to the distribution centre, as well as the other income that we talked about. So you can see it in those line items. That is probably as much information at this time that we are going to provide on it.

One more numbers question. You mentioned some changes in the balance sheet. What are you thinking about now for interest expense, interest income for the full year?

It is really essentially -- the $300 million of term debt that we have outstanding is really the interest that we expect to incur interest on that, in addition to the cap leases, so it really is more of a steady state from where we are now. The rate on that is about 5.1% right now, around that, but it does change with the underlying BA rates, if that helps.

Thank you.

Your next question comes from Glen Petraglia with Citigroup.

Good afternoon. One quick question -- if you could comment, Paul, on where you are adding stores in New England. I know Maine is on the docket for that. I am also wondering what guideposts do you folks look at to determine whether you accelerate or decelerate your rate of expansion in New England?

I think you have to segment New England as you did, between Maine and Rhode Island. Some of the new stores, we have opened a couple of new stores in the Rhode Island market and we have some that are due to open, or are just opening, in the New Hampshire market. We are opening stores in Maine as we speak. Obviously the indicator of how fast we go or how slow we go is the sales progression that we make with our existing store base. As it gets momentum, then we will pick the momentum up of openings as well.

Is the goal to move out in concentric circles from where you are today, or are you going to be looking to go into new markets where the brand is not necessarily developed? Obviously it has been a slow ramp thus far.

In New England, yes. We are going to adjacent markets. That is what we are doing in New York, that is what we are doing in Ohio, that is what we are doing in Michigan. As we penetrate a particular city, we would look at the adjacent city as the next opportunity and in a lot of cases, we are already doing legwork in adjacent cities, so that when we are ready, we have some sites selected that we can move into that marketplace with.

Then Cynthia, one real quick one -- should we be thinking that the affiliated interest expense line essentially goes to zero from here on out?

Yes.

Okay.

Your next question comes from Rachael Rothman with Merrill Lynch.

Two quick ones, if I could. If not, I will get back in at the end of the line. Could you give us some EBITDA, DA, and cap-ex for the quarter?

I can give you DA, it is about $17.2 million. At this time, cap-ex, I think we would rather wait for the Q and give cap-ex at that time, completed our financials.

Could you just talk a little bit about the shift in the timing of the distribution of the frozen goods? It looks like it is going to be moved back a few quarters. From a margin perspective, what impacts should we expect that to have over the balance of the year?

That was similar, I think, to Irene’s question at the beginning. I do not have much else to say other than what I said to Irene, in that we expected to have some costs. We are not going to quantify it at this time. We are still going through the process of ramping it up and getting product out the door, so we feel that giving a number out at this time would not be appropriate.

The timing previously has been to begin in the back-half of this year, is that correct?

No, the timing previously we had -- originally we had wanted to begin frozen distribution in the first quarter of 2006, and that we thought that we would have approximately 65% of the Ontario stores completed by the end of 2006, with the balance of our planned number, which is 85% of the Ontario stores, we expected that to be completed by the first quarter of 2007. Now what we are saying is that we expect to hit the 65% target by the first quarter of 2007 and that we expect to be fully rolled out in accordance with our original guidelines of 85% of Ontario by mid- to late- 2007.

Thank you.

Your next question comes from Turan Quettawala from Scotia Capital.

Good afternoon. In terms of the restaurant build-out, you have had about 50 new restaurants year to date. Is the guidance for about 180 to 200 still intact for the year?

Yes. As we had outlined on the road show, 140 to 150 in Canada, and 40 to 50 in the U.S. -- we are still on track for that.

Thank you.

Your next question comes from Bruce Beck with [Brukshile] Securities.

Good afternoon. I am sure this question is premature, but I wanted to raise it today, anyhow -- it is probably premature until the release of the remaining shares from Wendy’s, but there has been some discussions in the media about the advantages and costs of moving the domicile of Tim Horton’s from the U.S. where it is right now to Canada, to make the security a little more appealing or attractive to index funds and pension funds. Are there plans on the part of management, once the release of the remaining shares from Wendy’s hit the market, to do a cost-analysis for shareholder value of the tax penalties from leaving the States versus the potential advantages? If so, can you speak just preliminarily about what your methodology will be moving forward to do that analysis, and whether or not, if and when it will be made public to investors?

This is not something that management is looking at at this time. We are not contemplating any re-domiciling of the company.

You have a follow-up question from Irene Nattel with RBC Capital Markets.

Just coming back to the test market of the breakfast sandwich here in Canada, breakfast is clearly a very strong day-part for you here. In the early tests, are you finding a high degree of cannibalization or are you finding that you are actually getting some new sales and new traffic?

We are getting new sales and new traffic, Irene. Even the cannibalization that you do get, it is a positive cannibalization because you are cannibalizing something that is a lower ticket item on the menu.

That’s great. Thanks, Paul.

You have a follow-up question from David Harley with Blackmont Capital.

In terms of your program for the new card in Canada, the payment card, would that be combined with loyalty cards of some sort?

We are looking at all aspects of it. We are looking at the technology available and what the vendors can provide to us, but if not in the first phase, yes, in the second phase. The first thing is to get a card in, and then a loyalty card after that, or maybe concurrently.

Are there plans for financial products of any sort with your branding affiliated with those?

Not at this point. We are really just thinking about it for the business as it currently exists.

Finally, just with regard to the previous gentleman's question about domicile change, I note in the paper there was a comment, I think, Cynthia, you said that there would be a tax liability should there be a shift from the U.S. to Canada. Are you willing to quantify that at this time or do we have to wait?

No, it is not something that we are contemplating at this time. As we talked about the timing of the IPO and that, we are a U.S.-domiciled company. To migrate a company back to Canada can have tax ramifications.

Would you -- if that was true, could you consider another financial instrument that would allow you to get around the domicile?

I really cannot contemplate anything at this time. It is just not appropriate at this time.

Thank you.

You have a follow-up question from Rachael Rothman with Merrill Lynch.

Thank you. Cynthia, could you just tell us what the $29.6 million in amounts receivable is on the balance sheet from Wendy’s?

Those are related to certain tax receivables.

…along with the spin or at the timing of the spin?

Yes, it will. We trust them.

I just did not know if it was an ongoing agreement, part of the shared services or something that would continue.

Frankly, it will be resolved after year end.

Thank you.

You have a follow-up question from Joe Buckley with Bear, Stearns. Joseph Buckley - Bear, Stearns & Co.: I just had a question on the franchise fee line in the income statement. It was up over 50%. Then, related to that, the franchise fee costs, you actually ran a slight loss on that for the quarter, both second quarters. I am just curious on the dynamics on that as well.

You are asking in our franchising business, that we show a slight loss? Joseph Buckley - Bear, Stearns & Co.: The franchise fee line, specifically.

Yes. Joseph Buckley - Bear, Stearns & Co.: First of all, the franchise fee income, the franchise revenue line is up 50%, and then the costs exceed that.

Franchise fees are really the fees we collect from new unit sales. Again, as we talked about before, we had 30 openings in the second quarter versus 23 in the second quarter of 2005. In addition to that, we had a slight mix shift towards standard stores versus non-standard, so again, the franchise fee associated with a standard store opening is higher than a non-standard, but then the costs went up 36.5%. Typically, on our franchising, that is not a huge source of income for us. Selling a franchise to a franchisee, the cost of it essentially covers the underlying cost of the equipment and the training costs associated with starting up the franchise. It really is not a key source of income for us. The ongoing revenue stream is really our source of income on a new franchise store. Joseph Buckley - Bear, Stearns & Co.: Is that unusual for that to be an actual loss, though, or is it?

No, it is not unusual for it to be a loss. Joseph Buckley - Bear, Stearns & Co.: Okay.

Again, it depends on the training costs and if there are a lot of stores in different geographies, travel and training, so it is not unusual for it to be a loss.

If you look at it even a year ago, it was that way.

(Operator Instructions) You have a follow-up question from Turan Quettawala with Scotia Capital.

Could you quantify the expense on the vesting of the Wendy’s shares? The RSU’s, sorry.

Yes, the accelerated vesting, the vesting of the RSU’s was approximately $1.5 million in the quarter. In addition to that, we had excess expenses in 2006 versus 2005, because we had only received the first grant for RSU’s in May of 2005, so we had a little bit of a lapping issue in that we did not have them for the full second quarter of 2005.

Thank you. One more, if I may -- on the average check, has the introduction of the flavor shots had any discernible impact on the average check?

The flavor shots? That is something that is difficult to track, in terms of -- I mean, we feel good about how it is doing with respect to the Ice Cap and we know it is an add-on. In addition to that, you can put it in hot coffee. That is a very difficult thing to quantify, whether it has had a discernible difference in same-store sales growth. We think that it is the combination of all of the innovation that we bring that really drives the same-store sales growth.

You have a follow-up question from Bruce Beck with Bruckshile Securities.

Just to follow up on the discussion we had about the breakfast sandwich introduction in the fourth quarter in Canada, two questions. One is will it be done on a trial market basis in selected markets, or will it be done at all your outlets? Two, assuming that you have the same success that you have had in the U.S. trials, when can we expect it to be a permanent menu item across the entire Canadian system?

We are going to start rolling it out in the fourth quarter and it will be a permanent item on the menu in 2007. It will be in all stores that are capable of serving the product, which will be probably 95% of our current store base.

Just a follow-up, if I can -- will any new franchises be required to provide the facilities to provide the product as well?

Where the size of the facility will allow it, yes, certainly. It will be a regular menu item. It has had very good success. It is a great product, well-accepted by the consumer and it is going to certainly be part of our ongoing menu.

Thank you.

At this time, there are no further questions.

Okay, Operator, Mr. House is going to make a closing comment.

I want to thank everyone. We have had a wonderful quarter and we look forward to meeting a lot of you as we go out traveling around to talk to you about the upcoming spin. Thank you for all your cooperation and we will see you in the near future.

We will go ahead and hang up from this call. Those who would like to join the Wendy’s call at approximately 4:00 p.m., if they can re-dial in for that, we would appreciate it.