Mail Stop 3561
February 1, 2006
Leon M. McCorkle, Jr.
Executive Vice President,
General Counsel and Secretary
Wendy`s International, Inc.
P.O. Box 256
4288 West Dublin-Granville Road
Dublin, Ohio 43017-0256
Re: Tim Hortons, Inc.
Amendment No. 1 to Form S-1
Filed January 19, 2006
File No. 333-130035
Dear Mr. McCorkle:
We have reviewed your filing and have the following
comments.
Where indicated, we think you should revise your document in
response
to these comments. If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
information so we may better understand your disclosure. After
reviewing this information, we may raise additional comments.
General
1. We note that you have listed eleven underwriters on your cover
page. Tell us in your response letter whether all of the
underwriters listed on the cover page are lead underwriters; if
they
are not, please remove their names from the cover page.
2. Please confirm in your response letter that the NPD report was
not
prepared specifically for this filing. If it was prepared
specifically for this filing, disclose that fact and file NPD`s
consent pursuant to Rule 436.
3. We reissue prior comment 6 and request that you reduce your
reliance upon the unnecessary acronym "QSR" throughout the
prospectus.
4. Your proposed artwork contains extensive text that merely
repeats
disclosures elsewhere in your prospectus. Please revise to reduce
or
eliminate the detailed text appearing with the graphics or photos.
Generally, you should only include text to the extent necessary to
explain the visuals.
Prospectus Summary, page 1
5. Revise to replace the term "outstanding" in the second
paragraph
under "Our Company" with a less promotional term. See prior
comment
5.
Summary Historical Consolidated Financial and Other Data, page 6
Selected Historical Consolidated Financial and Other Data, page 32
6. We note your response to our prior comment number 10, but
continue
to believe that average sales per standard restaurant in the US
should be disclosed in Canadian dollars, your reporting currency.
Note that we will not object to your disclosure of this measure in
both Canadian and US dollars if you believe the presentation of US
dollar amounts is meaningful to potential investors. However, if
this disclosure is provided, we believe it should be accompanied
by
footnote disclosure explaining why you believe it is meaningful to
potential investors.
Risk Factors, page 10
7. Several of your risk factor headings are still so vague or
generic
that they could apply to any other issuer in any industry. See
for
example "Failure to successfully implement our growth strategy
could
harm our business" on page 11, "We are subject to government
regulation..." on page 14 and "We will incur increased costs as a
result of being a public company" on page 19. These are examples
only. Revise the headings so that they specifically relate to
you,
your business or your industry. Also try to avoid using the
phrase
"adversely affect our business" and replace it with meaningful
information about the potential impact of these risks on you and
your
investors.
8. We note your response to our prior comment twelve. Tell us in
your response letter whether, as the initial administrator of the
2006 incentive plan, Wendy`s compensation committee will have the
ability to determine awards to executive officers or directors
during
the nine to eighteen months following the completion of the
offering,
assuming that the spin-off will occur. We may have further
comment.
Management`s Discussion and Analysis of Financial Condition and
Results of Operations, page 42
9. Despite the "significant legal, accounting and other expenses"
mentioned in the risk factor on page 19 entitled "We will incur
increased costs as a result of being a public company," we are
unable
to locate in MD&A a specific discussion of the increased legal and
financial compliance costs you expect to incur as a public
reporting
company. Please consider revising your disclosure under "Results
of
Operations" to address the anticipated impact of these additional
costs on your general and administrative expenses in future
periods,
and quantify the discussion to the extent practicable.
Overview, page 42
10. Your revised disclosure indicates that Wendy`s expects to
spin-
off all of your common shares that it owns to its shareholders
within
nine to eighteen months after this offering. Provide a discussion
of
the possible financial consequences to you, if any, in the event
Wendy`s completes the spin-off. For instance, address whether
Wendy`s would continue to provide you with administrative support
following the spin-off and, if not, disclose the costs that you
expect to incur in establishing your own administrative functions.
Our Relationship with Wendy`s, page 43
11. Once you have finalized the various agreements with Wendy`s,
please provide quantified disclosure of the financial commitments
you
will have to Wendy`s, such as payment for the services that
Wendy`s
will provide you following the offering. Refer to prior comment
25.
12. In the last paragraph under "Overview," you state that you
will
enter into the various separation agreements with Wendy`s
"[i]mmediately prior to the completion of this offering," while
the
second paragraph under "Our Relationship with Wendy`s" indicates
that
you will enter into the agreements "once we become a public
company."
Revise to clarify how soon you will enter into the agreements.
13. Please include in this section your response to prior comment
25
regarding your basis for not expecting significant changes in your
operating results or business trends as a result of becoming an
independent public subsidiary of Wendy`s.
Liquidity and Capital Resources, page 60
14. We note the inclusion of the new paragraph at the top of page
63
in response to prior comment 34. Given that you have
"historically
received significant financing from Wendy`s," as disclosed on page
60, provide an analysis of the impact on you as a result of
ceasing
to borrow money from Wendy`s.
Management, page 87
15. We note your response to our prior comment 44. Please also
disclose whether the executive officers` compensation for duties
related to your business during the last fiscal year was governed
by
employment agreements and with what company the executive
officers
had such agreements.
Index to Consolidated Financial Statements
Consolidated Statements of Operations, page F-3
16. We note your response to our prior comment number 48, but do
not
believe you have fully addressed our comment. In this regard,
based
on the fact that your rental income exceeds 10% of total revenues,
please revise to separately disclose in your consolidated
statements
of operations the amount of rental income earned and the
associated
cost of sales during each period presented as required by Rule 5-
03(b)(1) and (2) of Regulations S-X. Please note that we do not
believe including these disclosures in the notes to your financial
statements satisfies the requirements outlined in Rule 5-03 of
Regulation S-X.
17. Also, as your sales revenues include the sale of coffee, dry
goods and equipment to your franchisees, as well as the sales of
product from Tim Horton`s restaurants which are operated by the
Company or its consolidated franchisees, please revise the notes
to
your financial statements to include disclosure of the revenues
derived from the sale of each of your principal products and
services
during all periods presented in accordance with paragraph 37 of
SFAS
No.131. Please note that we do not believe that sales of products
to
your franchisees and sales of product from Tim Horton`s
restaurants
represent "groups of similar products and services" as described
in
paragraph 37 of SFAS No.131. Also, if you believe it is
impracticable
to provide these disclosures, tell us and disclose your basis for
this conclusion.
18. In addition, as revenue generated from initial franchise fees
appear to exceed fifteen percent of your aggregate franchise
revenues
during all periods presented, and these revenues have been
declining
as a percentage of your total revenues during the past three
years,
please revise your consolidated statements of operations or the
notes
to your financial statements to disclose the amount of revenue
derived from initial franchise fees during all periods presented.
Also, if the decline in these fees is expected to continue, this
matter should also be disclosed. Refer to the guidance outlined in
paragraph 22 of SFAS No. 45.
Note 1. Summary of Significant Accounting Policies
Basis of presentation, page F-8
19. We note your response to our prior comments 52 and 54. Please
revise your disclosure to clarify that "Tim Hortons Inc. is
essentially a shell investment corporation which holds investments
and obligations that could readily be carried on the books of
Wendy`s
International." Also disclose in this section the fact that "the
functional currency of each of the company`s subsidiaries and
legal
entities is the local currency in which each subsidiary operates,
which is either Canadian or the U.S. dollar". This will provide
an
all inclusive summarization in one section of the basis of
presentation as it relates to your functional and reporting
currency.
Franchise operations, page F-11
20. We note your response to our prior comment 53 and your revised
disclosure. Please also provide a similar disclosure in your
interim
condensed consolidated financial statements as required by
paragraph
23 of SFAS No. 45.
Derivative instruments, page F-13
21. We note from your revised disclosure on page F-13 under the
heading "Derivative instruments" that your forward currency
contracts
to sell Canadian dollars and buy U.S. dollars of $77.3 million and
$38.8 million as of December 28, 2003 and January 2, 2005,
respectively matured at various dates through January 2005 and
June
2005, respectively. In this regard please explain in a note to
your
consolidated financial statements and interim condensed
consolidated
financial statements your accounting associated with the maturity
of
these highly effective cash flow hedges and disclose any related
gain
or loss. Additionally, revise your consolidated and condensed
consolidated financial statements to include the disclosure
required
by paragraph 45(b) (2) and 47 of SFAS No. 133.
22. We also note your revised consolidated and condensed
consolidated
statements of comprehensive income on page F-7 and F-40. It is
unclear how the amounts of "Unrealized gain/(loss) on foreign
currency contracts" on page F-7 and F-40 reconcile to the
associated
amounts disclosed on page F-13 under the heading " Derivative
instruments" and on page F-44 under the heading " Foreign Currency
Derivatives." Please reconcile or revise accordingly.
Condensed Consolidate Statements of Cash Flows, page F-37
23. We note your response to our prior comment 70 and your revised
disclosure. The revision on page F-37 discloses a distribution of
note to Wendy`s of $1,116.0 thousand rather than $1,116.0 million.
Please revise accordingly.
Other
24. Please address our comments with respect to the Company`s
audited
financial statements in the interim financial statements where
applicable.
25. We note your responses to various prior comment numbers
included
in our letter dated December 30, 2005, in which you indicate that
responsive changes will be made in a future amendment to the
registration statement. Please ensure that the requested
disclosures
are provided in a future amendment prior to the planned
effectiveness
of your Form S-1 registration statement. Please note that we may
have
further comment upon our review of your revised disclosures.
* * *
As appropriate, please amend your registration statement in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendment that keys your responses to our
comments and provides any requested information. Detailed cover
letters greatly facilitate our review. Please understand that we
may
have additional comments after reviewing your amendment and
responses
to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing to be certain that the
filing includes all information required under the Securities Act
of
1933 and that they have provided all information investors require
for an informed investment decision. Since the company and its
management are in possession of all facts relating to a company`s
disclosure, they are responsible for the accuracy and adequacy of
the
disclosures they have made.
You may contact Jeffrey Jaramillo, Staff Accountant, at 202-551-
3212,
or Linda Cverkel, Accountant Branch Chief, at 202-551-3813, if you
have questions regarding comments on the financial statements and
related matters. Please contact Cheryl Grant, Staff Attorney, at
202-551-3359, Michele M. Anderson, Legal Branch Chief, at 202-551-
3833, or me, at 202-551-3750, with any other questions.
Sincerely,
Max A. Webb
Assistant Director
cc: via facsimile 202-955-7614
J. Steven Patterson, Esq.
Akin Gump Strauss Hauer & Feld LLP
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Mr. McCorkle
Wendy's International, Inc.
February 1, 2006
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