Mail Stop 3720
March 9, 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. 3 to Form S-1
Filed February 27, 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.
Risk Factors, page 11
Our ability to operate our business effectively...transitional
services..., page 22
1. So that investors may realize the magnitude of the risk, state
the
termination dates for material services in the shared services
agreement.
Dilution, page 35
2. Quantify here the dilution to new investors if the underwriters
fully exercise their over-allotment option, or include a cross-
reference here to the disclosure on page 27 in the risk factors
section.
Unaudited Pro Forma Consolidated Financial Information
Unaudited Pro forma Consolidated Balance Sheet, page 40
3. Reference is made to the column "Offering and Repayment" and
your
pro forma adjustments for common stock and capital in excess of
stated value in the amounts of $34 and $594,457, respectively. We
do
not believe that footnote (2) provides adequate disclosure related
to
the nature of the adjustments or the methods and assumptions that
were used to determine the amounts of the pro forma adjustments.
Please revise footnote (2) to include these disclosures.
Notes to the Unaudited Pro Forma Consolidated Financial
Information
Statements of Operations, page 41
4. Refer to footnote 1(a). Please disclose how the amount of this
adjustment was calculated or determined.
5. Refer to footnote 1(b). We note from your disclosure that
several
components comprise the pro forma adjustment to interest expense.
In
this regard, please provide for each component the assumptions
used
in determining the amount. Your disclosure for each component
should
include the interest rate, principal amount of the debt
obligation,
and the period used in your calculation. Also, we note from your
disclosure that the variable interest used in your calculation is
the
interest rate in effect at February 23, 2006. Please note that
all
pro forma adjustments related to the statements of operations
should
be computed assuming the transaction was consummated at the
beginning
of the fiscal year (i.e. January 1, 2006) as required by Rule 11-
02(b)(6) of Regulation S-X. As such, it appears that you have used
an
inappropriate assumption in calculating your pro forma interest
expense adjustment. Please revise.
6. Refer to footnotes 1(c) and 1(d) and footnotes 2(a) and 2(b).
Please disclose in further detail the significant assumptions used
in
determining your pro forma adjustments. Also, please explain in
footnote 1(d) why a statutory tax rate of 35% has been used in
determining the pro forma adjustment if historically the effective
tax rate has been less than 34%.
7. Please explain why $5,292 of affiliated interest expense
continues
to be reflected in the pro forma statement of operations for the
year
ended January 1, 2006, if this pro forma statement of operations
has
been prepared assuming the note payable to Wendy`s of $960 million
and related accrued interest, was repaid at the beginning of the
period. Please advise or revise as appropriate.
Balance Sheet, page 42
8. Refer to footnote 1. We note that the amount used for the
payment
of accrued interest of $14.8 million as described in footnote (1)
does not agree to the amount of the adjustment to the amounts
payable
to Wendy`s in your pro forma balance sheet of $8.8 million. Please
reconcile and revise these disclosures. Please note that pro forma
adjustments related to the pro forma condensed balance sheet shall
be
computed assuming the transaction was consummated at the end of
the
most recent period for which a balance sheet is required (i.e. as
of
January 1, 2006). See Article 11-02(b)(6) of Regulation S-X.
9. Revise to provide footnote disclosure explaining the nature of
the
$(6,249) adjustment made to retained earnings and the $243
adjustment
made to cumulative translation adjustments and other in connection
with the Debt Incurrence and Repayment activities. Also, disclose
the
significant assumptions used to determine these balance sheet
adjustments.
10. Refer to sub footnote (*1) to the "Deferred financing costs"
heading in footnote (1) to your Balance Sheet. Please note that
this
sub footnote (*1) does not appear to have any relevance to
deferred
financing costs. It appears this footnote should be replaced with
the
information included in footnote (3) on page 43. Please revise.
11. Refer to footnote 2. Revise to disclose the assumptions (i.e.
offering price and number of shares) used to determine the amount
of
the "Proceeds from the offering" of $680.0 million. Also we note
from
your disclosure in sub footnote (*1) that the accrued interest
adjustment of $1.9 represents interest to be accrued between March
7,
2006 and April 12, 2006. Please note that all pro forma
adjustments
to the pro forma balance sheet should be computed assuming the
transaction was consummated at the end of the most recent period
for
which a balance sheet is required (i.e. as of January 1, 2006), as
required by Article 11-02(b)(6) of Regulation S-X. Please revise
to
eliminate this adjustment.
12. Refer to footnote 2 - reference is made to your sub footnote
(*2). Please revise your disclosure to include a description
regarding the nature of the $8.3 million expense and your
rationale
for concluding that these amounts represent a non-capitalizable
expense.
13. Please revise to explain the nature of the adjustments to
retained earnings of $(10,259) and cumulative translation
adjustments
and other of $76 in connection with the Offering and Repayment
activities. Also, disclose the significant assumptions used to
determine the amounts of these adjustments.
Management`s Discussion and Analysis, page 44
General
14. Revise MD&A to include a discussion of the significant terms
of
the shared services agreement that the company has entered into
with
Wendy`s, and disclose the amount of expense that the company
expects
to incur on an annual basis under the terms of this agreement.
Also
disclose the minimum expected amount of variable rate billings.
In
addition, so that investors will have a sense of how your shared
services payment obligations to Wendy`s may impact your liquidity
and
financial condition, disclose from what source you believe you
will
make the payments to Wendy`s, and discuss to what extent your
payment
of these amounts will affect your ability to build your own
infrastructure so that you are able to obtain the same services
from
internal sources.
Liquidity and Capital Resources, page 62
15. Please expand your summary of the credit facilities to include
the specific financial covenants, including quantification of the
specific ratios with which you must comply, so that investors will
have a sense of the degree to which they limit your ability to
incur
additional debt and the extent to which the current facilities
will
be available financing to you in the near term. Also qualify your
statement at the bottom page 62 that "[you] believe [you] could
borrow additional funds" in light of these limitations.
Contractual Obligations, page 66
16. Based on your disclosure within your financial statements, it
appears that your contractual obligations table as of January 1,
2006
has not been updated to reflect the January 1, 2006 contractual
amounts for long-term debt, capital leases, operating leases or
purchase obligations. Please revise to disclose the amounts of
these obligations at January 1, 2006.
Management, page 91
17. Schedule I of the shared services agreement states that you
will
pay Wendy`s Chief Executive Officer and Chief Financial Officer
$210,000 per month for their services. Please disclose this
information in your discussion of your compensation to them as Tim
Hortons` management, and generally describe the executive services
they will provide if those services are being provided in addition
to
their Tim Hortons` positions listed on page 91.
18. We note your disclosure regarding the executive annual
performance plan and that your Chief Executive Officer selects
participants among the officers, after discussion with the board
or
its committee, and "will determine the award opportunities for
each
participant." Please describe how awards to your Chief Executive
Officer will be determined under the executive annual performance
plan.
Consolidated Financial Statements
Consolidated Statements of Operations
19. We note that you have presented "pro forma earnings per share"
for the most recent fiscal year in response to our prior comment
number 24. However, we do not believe your computation, which
includes only the number of shares to be issued in the public
offering, complies with our prior comment or with the guidance
outlined in SAB Topic 1:B:3. As the dividends paid to Wendy`s
during
the past year, including the promissory note for $1,115,904
distributed to Wendy`s in September 2005, and the notes and
accounts
receivable distributed to Wendy`s in the fourth quarter of 2005 of
$332,736, significantly exceed your fiscal 2005 net earnings of
$191,091, your "pro forma earnings per share" computation should
be
revised to include the incremental number of shares, when sold at
the
expected offering price, would be required to fund the capital
withdrawn in excess of your net earnings for the period. The
number
of shares used in this computation will exceed those expected to
be
issued in the offering. Please revise your pro forma earnings per
share computation to comply with the guidance outlined in SAB
Topic
1:B:3.
Note14. Related Party, page F-34
20. We note from your disclosure that in 2005 Wendy`s settled
approximately $210.0 million in notes payable to the company in
Wendy`s shares. In this regard, please tell us where you have
recorded the Wendy`s share on your balance sheet. Also, please
explain how the shares were valued and whether there was any gain
or
loss associated with this transaction. We may have additional
comment, after receipt of your response.
Legality Opinion
21. Since you also are registering the sale of preferred stock
purchase rights, please also include counsel`s opinion as to
whether
the rights are binding obligations of the company. See Item
601(b)(10) of Regulation S-K.
* * *
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.
March 9, 2006
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