Over the past decade, rising household income and an increase in desire for convenience have led to growth in total expenditures for food-away-from-home and the proportion of total food expenditures allocated to spending on food-away-from-home. The growth in real disposable income combined with the increased time commitments of dual income families is expected to continue.

Foodservice sales in Canada grew by 5.0% in 2004 to $46.8 billion and are expected to surpass $50.0 billion in 2006, according to the Canadian Restaurant and Foodservices Association. The quick service restaurant segment represents 30.0% of the total Canadian foodservice industry and its sales are projected to grow 4.1% in 2006. From 2000 to 2004, the Canadian quick service restaurant segment grew at a 4.1% compound annual growth rate.

In the U.S., the quick service restaurant segment is the largest segment of the restaurant industry. According to the 2005 Technomic Information Service Top-500 Chain Restaurant Report, sales at quick service restaurants in the U.S. were approximately US$159.6 billion in 2004, up 7.5% over 2003, and are projected to increase at a 5.4% compound annual growth rate between 2004 and 2009.

The Company’s menu spans a broad range of categories designed to appeal to customers throughout the day, such as premium blend coffee, flavoured cappuccinos, specialty and steeped teas, home-style soups, fresh sandwiches and freshly baked goods, including donuts, bagels, muffins, cookies, croissants and pastries.

The Company’s restaurants sell a wide variety of donuts, as well as Timbits (bite-sized donuts), danishes, cookies, muffins and more. Every month the Company markets a new donut variety as its “product of the month,” such as “melt-in-your-mouth” toffee glazed, caramel cappuccino, triple berry, its chocolate theme and pumpkin spiced glazed donuts.

The Company introduced bagels as a menu item in 1996. Today, according to NPD Canada CREST’s 12 months ended November 30, 2005 report, the Company sells four of every five bagels sold in the quick service restaurant segment in Canada.

The Company originally introduced soup and sandwiches as lunch products in the late 1980s and early 1990s, and launched its branded line called “Tim’s Own” soups and sandwiches in 1998. According to NPD Canada CREST’s 12 months ended November 30, 2005 report, 46.3% of all soup occasions in the Canadian quick service restaurant segment occur at the Company’s system restaurants.

In addition to coffee, other hot beverages the Company’s sell include flavoured cappuccinos, specialty and steeped teas, hot chocolate, “Café Mocha” (hot chocolate, coffee and whipped cream) and “Hot Smoothees” (flavoured caffeine-free hot drinks). The Company’s cold drink offerings range from juices to sodas and iced cappuccinos.

Cost of sales was $834.2 million in fiscal 2005, an increase of $93.0 million, or 12.5% compared to 2004.

Total operating expenses representing primarily rent expense and property costs increased by $15.2 million in fiscal 2005 as compared to 2004, representing an increase of 10.2%.

Interest expense was $18.5 million in fiscal 2005 and $16.3 million in 2004.

Interest income was $4.0 million in fiscal 2005 and $2.8 million in 2004, primarily relating to changes in average cash balances.

In fiscal 2005, comprehensive income was $183.8 million compared to $178.9 million in 2004.