Wendy's 2008 Annual Report Download - page 162

(26) Guarantees and Other Commitments and Contingencies
Guarantees and Contingent Liabilities
Our wholly-owned subsidiary, National Propane, retains a less than 1% special limited partner interest in
our former propane business, now known as AmeriGas Eagle Propane, L.P., (“AmeriGas Eagle”). National
Propane agreed that while it remains a special limited partner of AmeriGas Eagle, National Propane would
indemnify the owner of AmeriGas Eagle for any payments the owner makes related to the owner’s obligations
under certain of the debt of AmeriGas Eagle, aggregating approximately $138,000 as of December 28, 2008, if
Amerigas is unable to repay or refinance such debt, but only after recourse by the owner to the assets of
AmeriGas Eagle. National Propane’s principal asset is an intercompany note receivable from Wendy’s/Arby’s in
the amount of $50,000 as of December 28, 2008. We believe it is unlikely that we will be called upon to
make any payments under this indemnity. Prior to 2006, AmeriGas Propane, L.P., (“AmeriGas Propane”),
purchased all of the interests in AmeriGas Eagle other than National Propane’s special limited partner interest.
Either National Propane or AmeriGas Propane may require AmeriGas Eagle to repurchase the special limited
partner interest. However, we believe it is unlikely that either party would require repurchase prior to 2009 as
either AmeriGas Propane would owe us tax indemnification payments if AmeriGas Propane required the
repurchase or we would accelerate payment of deferred taxes of $34,700 as of December 28, 2008, associated
with our sale of the propane business if National Propane required the repurchase. As of December 28, 2008,
we have net operating loss tax carryforwards sufficient to substantially offset these deferred taxes.
RTM, a subsidiary of Wendy’s/Arby’s, guarantees the lease obligations of 10 RTM restaurants formerly
operated by affiliates of RTM as of December 28, 2008, (“Affiliate Lease Guarantees”). The RTM selling
stockholders have indemnified us with respect to the guarantee of the remaining lease obligations. In addition,
RTM remains contingently liable for 15 leases for restaurants sold by RTM prior to our acquisition of RTM in
2005 (the “RTM Acquisition”) if the respective purchasers do not make the required lease payments
(collectively with the Affiliate Lease Guarantees, the “Lease Guarantees”). The Lease Guarantees, which extend
through 2025, including all existing extension or renewal option periods, could aggregate a maximum of
approximately $16,400 and $18,000 as of December 28, 2008 and December 30, 2007, respectively, including
approximately $13,000 and $14,000, respectively, under the Affiliate Lease Guarantees, assuming all scheduled
lease payments have been made by the respective tenants through December 28, 2008 and December 30, 2007,
respectively. The estimated fair value of the Lease Guarantees was $1,506 as of the date of the RTM
Acquisition based on the net present value of the probability adjusted payments which could have been
required to be made by the Company. Such amount was recorded as a liability by the Company in connection
with the RTM Acquisition purchase price allocation. The liability is being amortized to “Other income
(expense), net” based on the decline in the net present value of those probability adjusted payments in excess of
any actual payments made over time. There remains an unamortized carrying amount of $460 and $540
included in “Other liabilities (expense)” as of December 28, 2008, and December 30, 2007, respectively, with
respect to the Lease Guarantees.
In addition, Wendy’s has guaranteed certain leases and other obligations primarily related to restaurant
locations operated by its franchisees amounting to $37,999. These leases extend through 2022, including all
existing extension or renewal option periods. We have not received any notice of default related to these leases
as of December 28, 2008. In the event of default by a franchise owner, Wendy’s generally retains the right to
acquire possession of the related restaurant locations. Wendy’s is contingently liable for certain other leases
which have been assigned to unrelated third parties, who have indemnified Wendy’s against future liabilities
arising under the leases amounting to $107,459. These leases expire on various dates, which extend through
2022, including all existing extension or renewal option periods.
Wendy’s is self-insured for most domestic workers’ compensation, general liability and automotive
liability losses subject to per occurrence and aggregate annual liability limitations, and determines its liability
for claims incurred but not reported for these liabilities on an actuarial basis. Arby’s purchases insurance for
154
WENDY’S/ARBY’S GROUP, INC. AND SUBSIDIARIES
(FORMERLY TRIARC COMPANIES, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(In Thousands Except Per Share Amounts)