Wendy's 2011 Annual Report Download - page 38

Wendy’s. In order to facilitate the orderly transition of the 2010 purchasing function for operations in the U.S. and
Canada, Wendy’s transferred certain contracts, assets and certain Wendy’s purchasing employees to QSCC in 2010.
Pursuant to the terms of the Wendy’s Co-op, Wendy’s paid $15.5 million to QSCC over an 18 month period
through May 2011 in order to provide funding for start-up costs, operating expenses and cash reserves. The payments
by Wendy’s under the Wendy’s Co-op were expensed in 2009 and included in “General and administrative.”
Wendy’s made payments of $0.3 million and $15.2 million in 2011 and 2010, respectively. In connection with the
ongoing operations of QSCC during 2010, QSCC reimbursed Wendy’s $0.9 million for amounts Wendy’s had paid
primarily for payroll-related expenses for certain Canadian QSCC purchasing employees.
Since the third quarter of 2010, all QSCC members (including Wendy’s) pay sourcing fees to third party
vendors on products which are sourced through QSCC. Such sourcing fees are remitted by these vendors to QSCC
and are the primary means of funding QSCC’s operations. Should QSCC’s sourcing fees exceed its expected needs,
QSCC’s board of directors may return some or all of the excess to its members in the form of a patronage dividend.
Wendy’s recorded the anticipated cash portion of its share of patronage dividends of $2.0 million and $0.3 million in
2011 and 2010, respectively, which are included as a reduction of “Cost of sales.”
Effective January 4, 2010, QSCC subleased approximately 9,333 square feet of office space from Wendy’s.
Effective January 1, 2011, Wendy’s and QSCC entered into a sublease amendment which increased the office space
subleased to QSCC to 14,333 square feet for a one year period for a revised annual base rental of approximately $0.2
million with five one-year renewal options. On July 5, 2011, QSCC renewed the lease for a one year period ending
December 31, 2012.
Strategic Sourcing Group Agreement
On April 5, 2010, QSCC and the Arby’s independent purchasing cooperative (“ARCOP”) in consultation with
Wendy’s Restaurants, established Strategic Sourcing Group Co-op, LLC (“SSG”). SSG was formed to manage and
operate purchasing programs for certain non-perishable goods, equipment, and services. Wendy’s Restaurants had
committed to pay approximately $5.1 million of SSG expenses, which were expensed in 2010 and included in
“General and administrative,” and were to be paid over a 24 month period through March 2012. However, in
anticipation of the sale of Arby’s, effective April 2011, SSG was dissolved and its activities were transferred to QSCC
and ARCOP and the remaining accrued commitment of $2.3 million was reversed and credited to “General and
administrative.”
(The Wendy’s Company)
Equities Account
On June 10, 2009, The Wendy’s Company and a management company (the “Management Company”) which
was formed by our Chairman, who was our former Chief Executive Officer, our Vice Chairman, who was our former
President and Chief Operating Officer, and a director, who was our former Vice Chairman, entered into a withdrawal
agreement (the “Withdrawal Agreement”) which provided that The Wendy’s Company would be permitted to
withdraw all amounts in brokerage accounts (the “Equities Account”) which were managed by the Management
Company on an accelerated basis (the “Early Withdrawal”) effective no later than June 26, 2009. Prior to the
Withdrawal Agreement and as a result of an investment management agreement with the Management Company,
which was terminated on June 26, 2009, The Wendy’s Company had not been permitted to withdraw any amounts
from the Equities Account until December 31, 2010, although $47.0 million was released from the Equities Account
in 2008 subject to an obligation to return that amount to the Equities Account by a specified date. In consideration
for obtaining such Early Withdrawal right, The Wendy’s Company agreed to pay the Management Company $5.5
million (the “Withdrawal Fee”), was not required to return the $47.0 million referred to above and was no longer
obligated to pay investment management and incentive fees to the Management Company. The Equities Account
investments were liquidated in June 2009 for $37.4 million, of which $31.9 million was received by The Wendy’s
Company, net of the Withdrawal Fee, and for which The Wendy’s Company realized a gain of $2.3 million in 2009.
The Withdrawal Fee and the gain on the liquidation of the investments were included in “Investment income
(expense), net.”
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