Wendy's 2008 Annual Report Download - page 163

most domestic workers’ compensation, general liability and automotive liability losses subject to per occurrence
and aggregate annual liability limitations, and also determines its liability for claims incurred but not reported
for these liabilities on an actuarial basis. Wendy’s and Arby’s are self-insured for health care claims for eligible
participating employees subject to certain deductibles and limitations, and determines its liability for health
care claims incurred but not reported based on historical claims runoff data.
Wendy’s provided loan guarantees to various lenders on behalf of franchisees entering into pooled debt
facility arrangements for new store development and equipment financing. In accordance with FIN 45,
“Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others”, Wendy’s has accrued a liability for the fair value of these guarantees, the calculation
for which was based upon a weighed average risk percentage established at the inception of each program.
Wendy’s potential recourse for the aggregate amount of these loans amounted to $19,059 as of December 28,
2008. During 2008, Wendy’s recourse obligation associated with defaulted loans was not considered material,
and Wendy’s did not enter into any new loan guarantees during 2008 (See Note 13).
Wendy’s and Arby’s have outstanding letters of credit of $18,573 and $7,799, respectively, with various
parties at December 28, 2008; however, management does not expect any material loss to result from these
letters of credit because we do not believe performance will be required.
Purchase and Capital Commitments
Wendy’s/Arby’s Beverage Agreements
Wendy’s and Arby’s have entered into beverage agreements, with the Coca-Cola Company and PepsiCo,
Inc., respectively to provide fountain beverage products and certain marketing support funding to the
Company and its franchisees. These agreements require minimum purchases of fountain beverage syrup
(“Syrup”), by the Company and its franchisees at certain preferred prices until the total contractual gallon
volume usage has been reached. In connection with these contracts, the Company and its franchise associations
(on behalf of the Company’s franchisees) received certain upfront fees at the inception of the contract which are
being amortized based on Syrup usage over the contract term. In addition, these agreements provide various
annual fees paid to us, based on the vendor’s expectation of annual Company Syrup usage, which are amortized
over annual usage as a reduction of “Cost of Sales” costs in our Consolidated Statements of Operations. Any
unamortized amounts are included in “Deferred income”, and usage that exceeds estimated amounts are
included in “Accounts receivable”, both in the accompanying Consolidated Balance Sheets.
Beverage purchases made by the Company under these various agreements during 2008 and 2007 were
approximately $13,908 and $7,524, respectively. Future purchases by the Company under these beverage
commitments are estimated to be approximately $33,781 per year over the next five years. Based on current
preferred prices and the current ratio of sales at Company-owned restaurants to franchised restaurants, the total
remaining Company beverage commitment is approximately $266,329 over the remaining life of the contracts.
As of December 28, 2008, $3,542 is due from beverage vendors and included in “Accounts receivable” for the
excess Syrup usage in 2008 over originally estimated annual amounts, and $16,086 included in “Deferred
income” relating to the unamortized upfront fees received at the inception of these beverage contracts.
Wendy’s Food Purchase Commitments
Wendy’s has entered into various long-term contractual agreements with a number of its food suppliers.
The range of prices and volume of purchases under the agreements may vary according to the Company’s
demand for the products and fluctuations in market rates. These agreements help the Company secure pricing
and product availability. A majority of these contracts provide for termination of the contract upon 90 day
notice, and therefore, the Company does not believe that termination of these agreements, which aggregate
approximately $139,075 would have a significant impact on the Company’s financial positions or results of
operations.
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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)