Wendy's 2011 Annual Report Download - page 87

THE WENDY’S COMPANY AND SUBSIDIARIES
WENDY’S RESTAURANTS, LLC AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(In Thousands Except Per Share Amounts)
nutritional or safety aspects of beef, poultry, french fries or other products we sell or the effects of food safety events or
disease outbreaks. Our exposure to foreign exchange risk is primarily related to fluctuations in the Canadian dollar
relative to the U.S. dollar for Canadian operations. However, our exposure to Canadian dollar foreign currency risk is
mitigated by the fact that less than 10% of our restaurants are in Canada.
Accounting Standards Not Yet Adopted
In May 2011, the Financial Accounting Standards Board (the “FASB”) issued amendments which provide
additional guidance about how fair value should be determined under existing standards and expands existing
disclosure requirements for certain fair value measurements. The purpose of these amendments is to improve and
converge International Financial Reporting Standards and GAAP. The guidance is effective commencing with our
2012 fiscal year.
In June 2011, as amended in December 2011, the FASB issued an amendment that requires companies to
present comprehensive income in either a single statement or two consecutive statements that report net income and
other comprehensive income. The purpose of this amendment is to increase the prominence of other comprehensive
income in financial statements. The guidance is effective commencing with our 2012 fiscal year. The guidance affects
only the presentation of comprehensive income and does not change the composition or calculation of comprehensive
income.
(2) Discontinued Operations
During January 2011, The Wendy’s Company decided to explore strategic alternatives for the Arby’s brand,
which culminated in the sale of Arby’s, in order to focus on the development of the Wendy’s brand. On July 4, 2011,
Wendy’s Restaurants completed the sale of 100% of the common stock of Arby’s, its wholly owned subsidiary, to
ARG IH Corporation (“Buyer”), a wholly owned subsidiary of ARG Holding Corporation (“Buyer Parent”), for
$130,000 in cash (subject to customary purchase price adjustments) and 18.5% of the common stock of Buyer Parent
(through which Wendy’s Restaurants indirectly retained an 18.5% interest in Arby’s) with a fair value of $19,000.
Buyer and Buyer Parent were formed for purposes of this transaction. The Buyer also assumed approximately
$190,000 of Arby’s debt, consisting primarily of capital lease and sale-leaseback obligations. In accordance with the
sale agreement, The Wendy’s Company made an election under §338(h)(10) of the Internal Revenue Code, which
has the effect of treating the transaction as a sale of assets and resulted in an approximate $230,000 ordinary loss for
income tax purposes. Had this election not been made, the sale of Arby’s common stock would have resulted in a
capital loss for income tax purposes.
Wendy’s Restaurants also entered into a stockholders agreement with Buyer Parent and ARG Investment
Corporation, an entity affiliated with Buyer Parent, which sets forth certain agreements among the parties thereto
concerning, among other things, the governance of Buyer Parent and transfer rights, information rights and
registration rights with respect to the equity securities of Buyer Parent. In addition, Wendy’s Restaurants entered into
a transition services agreement with Buyer, pursuant to which it provided and was reimbursed for continuing
corporate and shared services to Buyer for a limited period of time; such services were completed in the fourth quarter
of 2011.
Information related to Arby’s has been reflected in the accompanying consolidated financial statements as
follows:
• Balance sheets—As a result of our sale of Arby’s on July 4, 2011, there are no remaining Arby’s assets and
liabilities. Arby’s assets and liabilities were included in our consolidated balance sheets as of January 2, 2011
and in accordance with the applicable guidance, we elected not to reclassify them to discontinued operations.
• Statements of operations—Arby’s (loss) income from operations for the period from January 3, 2011
through July 3, 2011 and the years ended January 2, 2011 and January 3, 2010 has been classified as
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