Wendy's 2008 Annual Report Download - page 116

The fair value of the DFR Notes was based on the present value of the probability weighted average of
expected cash flows from the DFR Notes. The Company believed that this value approximated the fair value of
the DFR Notes as of December 27, 2007 due to the close proximity to the Deerfield Sale date.
The DFR Notes bear interest at the three-month London InterBank Offered Rate (“LIBOR”) (1.47% at
December 28, 2008) plus a factor, initially 5% through December 31, 2009, increasing 0.5% each quarter
from January 1, 2010 through June 30, 2011 and 0.25% each quarter from July 1, 2011 through their
maturity. The DFR Notes are secured by certain equity interests of DFR and certain of its subsidiaries. The
$1,776 original imputed discount on the DFR Notes is being accreted to “Other income (expense), net” in the
accompanying consolidated statements of operations using the interest rate method.
We have received timely cash payment of all four quarterly interest payments due on the DFR Notes to
date. Additionally, in October 2008 we received a $1,070 dividend payment on the convertible preferred stock
which we previously held. Based on the Deerfield Sale agreement, payment of a dividend by DFR on this
preferred stock was dependent on DFR’s board of directors declaring and paying a dividend on DFR’s common
stock. The first dividend to be declared on their common stock following the date of the Deerfield Sale was
declared by DFR and recognized by us in our 2008 third quarter and paid in October 2008. Certain expenses
totaling $6,201 related to the Deerfield Sale, which were a liability of the Company and for which we had an
equal offsetting receivable from DFR as of December 30, 2007, were paid by DFR during the first half of
2008. Accordingly, we did not record valuation reserves on these notes prior to the fourth quarter of 2008.
The dislocation in the sub-prime mortgage sector and continuing weakness in the broader credit markets
has adversely impacted, and may continue to adversely impact, DFR’s cash flows. Due to the significant
continuing weakness in the credit markets and at DFR and based upon current publicly available information,
and our ongoing assessment of the likelihood of full repayment of the principal amount of the DFR Notes,
Company management determined that the likelihood of collectability of the full principal amount of the DFR
Notes had significantly declined and the Company recorded an allowance for doubtful accounts on the DFR
Notes of $21,227 as of December 28, 2008. This charge is included in “Other than temporary losses on
investments” in our Consolidated Statements of Operations (see Note 20).
The DFR Notes, net of unamortized discount and the valuation allowance at December 28, 2008, of
$25,344 and $46,219 at December 28, 2008 and December 27, 2007, respectively, are included in “Non-
current notes receivable” in the accompanying Consolidated Balance Sheets (Note 7).
(5) Income (Loss) Per Share
Basic income (loss) per share is computed by dividing net income (loss) by the weighted average number
of common shares outstanding. In connection with the Wendy’s Merger, Wendy’s/Arby’s stockholders
approved a charter amendment to convert each of the then existing Triarc Class B Common Stock into one
share of Wendy’s/Arby’s Class A Common Stock (the “Conversion”).
Basic income (loss) per share has been computed by dividing the allocated income or loss for the
Company’s Class A Common Stock and the Company’s Class B Common Stock by the weighted average
number of shares of each class. Both factors, as appropriate, are presented in the tables below. Net loss for 2006
was allocated equally among each share of Class A Common Stock and Class B Common Stock, resulting in the
same loss per share for each class. Net income for 2007 was allocated between the Class A Common Stock and
Class B Common Stock based on the actual dividend payment ratio. Net loss for 2008 was allocated equally
among each share of Class A Common Stock and Class B Common Stock up until the date of the Conversion;
subsequent to the Conversion, net loss was only allocated to Class A Common Stock since Class B Common
Stock no longer existed.
Diluted loss per share for 2008 and 2006 was the same as basic loss per share for each share since the
Company reported a loss from continuing operations and, therefore, the effect of all potentially dilutive
securities on the loss from continuing operations per share would have been antidilutive. Diluted income per
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Wendy’s/Arby’s Group, Inc. and Subsidiaries
(Formerly Triarc Companies, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(In Thousands Except Per Share Amounts)