Wendy's 2013 Annual Report Download

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2013 Annual Report

Table of contents

  • Page 1
    2013 Annual Report

  • Page 2
    ... Officer Common Stock Listing Robert D. Wright Chief Operations Officer J. Randolph Lewis 5,7 Former Senior Vice President, Supply Chain and Logistics, Walgreen Co. SEC Certifications The certifications of the Company's Chief Executive Officer and Chief Financial Officer required to be filed...

  • Page 3
    ... market value of common equity held by non-affiliates of The Wendy's Company as of June 28, 2013 was approximately $1,657.3 million. As of February 21, 2014, there were 366,161,754 shares of The Wendy's Company common stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE The information required...

  • Page 4
    [THIS PAGE INTENTIONALLY LEFT BLANK]

  • Page 5
    ... and our franchisees; • development costs, including real estate and construction costs; • delays in opening new restaurants or completing remodels of existing restaurants, including risks associated with the Image Activation program; • the timing and impact of acquisitions and dispositions of...

  • Page 6
    ...Company's system optimization initiative, employee termination costs, the timing of payments made and received, the results of negotiations with landlords, the impact of the sale of restaurants on ongoing operations, any tax impact from the sale of restaurants, and the future benefits to the Company...

  • Page 7
    ...'s Restaurant Group, Inc. ("Arby's"), Wendy's/Arby's Group, Inc. changed its name to The Wendy's Company. The Company's principal executive offices are located at One Dave Thomas Blvd., Dublin, Ohio 43017, and its telephone number is (614) 764-3100. We make our annual reports on Form 10-K, quarterly...

  • Page 8
    ... sold as part of the system optimization initiative which is further described in "Acquisitions and Dispositions of Wendy's Restaurants" below. The following table sets forth the number of Wendy's restaurants at the beginning and end of each year from 2011 to 2013: 2013 2012 2011 Restaurants open...

  • Page 9
    ... 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. Quality Assurance Wendy's quality assurance program is designed to verify that the food products...

  • Page 10
    ... 2014 fiscal year. In addition, Wendy's has from time to time acquired the interests of and sold Wendy's restaurants to franchisees not part of the system optimization initiative. Wendy's intends to evaluate strategic acquisitions of franchised restaurants and strategic dispositions of company-owned...

  • Page 11
    ... required under a newly executed Unit Franchise Agreement is currently $40,000 for each restaurant. The technical assistance fee is used to defray some of the costs to Wendy's for training, start-up and transitional services related to new and existing franchisees acquiring company owned restaurants...

  • Page 12
    ... Sub-Franchise Agreement in Canada. Required contributions by company-owned restaurants for advertising and promotional programs are at the same percent of retail sales as franchised restaurants within the Wendy's system. The contribution rate for United States restaurants during 2013 generally was...

  • Page 13
    ... regulate Wendy's franchising activities. The Federal Trade Commission requires that franchisors make extensive disclosure to prospective franchisees before the execution of a franchise agreement. Several states require registration and disclosure in connection with franchise offers and sales and...

  • Page 14
    ... have introduced lower cost, value meal menu options. Our revenues and those of our franchisees may be hurt by this product and price competition. Moreover, new companies, including operators outside the quick-service restaurant industry, may enter our market areas and target our customer base. For...

  • Page 15
    ... may adversely impact our revenues, results of operations, business and financial condition. Changes in commodity costs (including beef, chicken and corn), supply, fuel, utilities, distribution and other operating costs could harm results of operations. Our profitability depends in part on our...

  • Page 16
    ... to our restaurants as a result of negative publicity from social media could result in a decline in sales and operating results at company-owned restaurants or in royalties from sales at franchised restaurants. Growth of our restaurant businesses is dependent on new restaurant openings, which may...

  • Page 17
    The Company's Image Activation program may not positively affect sales at company-owned and participating franchised restaurants or improve our results of operations. Throughout 2014, Wendy's plans to reimage approximately 200 existing company-owned restaurants and open approximately 15 new company-...

  • Page 18
    ... our business and financial results. Wendy's has from time to time acquired the interests of and sold Wendy's restaurants to franchisees not part of the system optimization initiative. Wendy's intends to evaluate strategic acquisitions of franchised restaurants and strategic dispositions of company...

  • Page 19
    ... sales during these periods hurts our operating margins, and can result in restaurant operating losses. For these reasons, a quarter-to-quarter comparison may not be a good indication of Wendy's performance or how it may perform in the future. Wendy's business could be hurt by increased labor costs...

  • Page 20
    ... part, on our continued ability to use our existing trademarks and service marks in order to increase brand awareness and further develop our branded products in both existing and new markets. If our efforts to protect our intellectual property are not adequate, or if any third party misappropriates...

  • Page 21
    ... rules, minimum wage rates, government-mandated health care benefits, tax legislation, federal ethanol policy and accounting standards, may adversely affect our ability to open new restaurants or otherwise hurt our existing and future operations and results. Each Wendy's restaurant is subject to...

  • Page 22
    ...contract terms, it could require us to notify customers, employees or other groups, result in adverse publicity, loss of sales and profits, increase fees payable to third parties, and incur penalties or remediation and other costs that could adversely affect the operation of our business and results...

  • Page 23
    ...long-lived assets will be sold or otherwise disposed of significantly before the end of their previously estimated useful life; and • a significant drop in our stock price. Based upon future economic and capital market conditions, as well as the operating performance of our reporting units, future...

  • Page 24
    ... further information regarding the Restated Credit Agreement. Wendy's has a significant amount of debt outstanding. Such indebtedness, along with the other contractual commitments of our subsidiaries, could adversely affect our business, financial condition and results of operations, as well as the...

  • Page 25
    ...of Wendy's to make payments on, or repay or refinance, its debt, including the Restated Credit Agreement, and to fund planned capital expenditures, dividends and other cash needs will depend largely upon its future operating performance. Future performance, to a certain extent, is subject to general...

  • Page 26
    ... members of the Board of Directors and the outcome of corporate actions requiring majority stockholder approval, including mergers, consolidations and the sale of all or substantially all of the Company's assets. They would also be in a position to prevent or cause a change in control of the Company...

  • Page 27
    ... December 29, 2013, Wendy's also owned 138 and leased 276 properties that were either leased or subleased principally to franchisees. Surplus land and buildings are generally held for sale and are not material to our financial condition or results of operations. The Bakery operates two facilities in...

  • Page 28
    ...location of company-owned and franchised restaurants as of December 29, 2013 is set forth below. State Wendy's Company Franchise Alabama ...Alaska ...Arizona ...Arkansas ...California ...Colorado ...Connecticut ...Delaware ...Florida... ...New Hampshire ...New Jersey ...New Mexico ...New York ......

  • Page 29
    ... information, including legal defenses available to us, and given the aforementioned accruals and our insurance coverage, we do not believe that the outcome of these legal and environmental matters will have a material effect on our consolidated financial position or results of operations. Item...

  • Page 30
    ... year, The Wendy's Company paid quarterly cash dividends of $0.05 per share of common stock. During the 2014 first quarter, The Wendy's Company declared a dividend of $0.05 per share to be paid on March 17, 2014 to shareholders of record as of March 3, 2014. Although The Wendy's Company currently...

  • Page 31
    ... shares were valued at the average of the high and low trading prices of our common stock on the vesting or exercise date of such awards. (2) The authorization for the repurchase program expired at the end of the 2013 fiscal year. In January 2014, our Board of Directors authorized a new repurchase...

  • Page 32
    ... of Financial Condition and Results of Operations" and our consolidated financial statements and notes thereto. Year Ended (1) (2) December 29, 2013 December 30, January 1, January 2, 2012 2012 2011 (In Millions, except per share amounts) January 3, 2010 Sales ...Franchise revenues ...Revenues...

  • Page 33
    ... the sale of our investment in Jurlique during 2012. See Note 16 of the Financial Statements and Supplementary Data contained in Item 8 herein for further discussion. (8) (Loss) income from discontinued operations, in all periods presented except 2009, relates to the sale of Arby's and related post...

  • Page 34
    ...Canada. Wendy's operating results are impacted by a number of external factors, including high unemployment, negative general economic trends and intense price competition, as well as increased commodity costs. Increased commodity costs negatively affected our cost of food during 2013, 2012 and 2011...

  • Page 35
    ... during 2013. Costs incurred related to the system optimization initiative, as well as gains or losses recognized on sales of restaurants under the system optimization initiative are recorded to "Facilities action charges, net" in our consolidated statements of operations. During 2013, the Company...

  • Page 36
    ... 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 $19.0 million. We received a $40.1 million dividend from our investment in Arby's in 2013...

  • Page 37
    ... to manage and operate purchasing programs for certain non-perishable goods, equipment and services. Wendy's Restaurants had committed to pay $5.1 million of SSG expenses, which were expensed in 2010 and were to be paid over a 24 month period through March 2012. However, in anticipation of the sale...

  • Page 38
    ...the sale, liquidation or other disposition of our cost investments and the series A senior notes that we received from Deerfield Capital Corp. The Liquidation Services Agreement required The Wendy's Company to pay the Management Company a fee of $0.9 million in two installments in June 2009 and 2010...

  • Page 39
    ...by receiving revenue from third parties' use of such aircraft. Under the terms of the lease agreement, the Company pays annual management and flight crew fees to CitationAir and reimburses CitationAir for maintenance costs and fuel usage related to the corporate aircraft. In return, CitationAir pays...

  • Page 40
    ... results of operations for the years ended December 29, 2013, December 30, 2012 and January 1, 2012 (except company-owned average unit volumes, which are in thousands). 2013 Amount Change 2012 Amount Change 2011 Amount Revenues: Sales ...Franchise revenues ...Costs and expenses: Cost of sales...

  • Page 41
    ...plan in the fourth quarter. See Note 18 of the Financial Statements and Supplementary Data contained in Item 8 herein for further discussion. 2013 2012 2011 Wendy's restaurant statistics: North America same-restaurant sales: Company-owned restaurants ...Franchised restaurants ...Systemwide ...Total...

  • Page 42
    ...'s ...Bakery and other ... $(26.4) (6.1) $(32.5) $79.2 (7.5) $71.7 The decrease in sales in 2013 was primarily due to the impact of Wendy's company-owned restaurants closed or sold, including under our system optimization initiative, during the fourth quarter of 2012 and thereafter, which resulted...

  • Page 43
    ... of the costs for the share-based compensation component of the Company's compensation plans, (3) franchise incentives resulting from our Image Activation incentive program and (4) severance expense primarily as a result of the terms of a separation agreement with an executive. These increases were...

  • Page 44
    ... related to other restaurant capital expenditures, including the effect from restaurants acquired from franchisees subsequent to 2011 and (3) $2.9 million related to point-of-sale system hardware purchased during 2012. Facilities Action Charges, Net 2013 Year Ended 2012 2011 System optimization...

  • Page 45
    ...on current market values. Impairment of Goodwill During the fourth quarter of 2013, we performed our annual goodwill impairment test, which resulted in recording an impairment charge of $9.4 million, representing all of the goodwill recorded for our international franchise restaurants reporting unit...

  • Page 46
    ... on the early extinguishment of debt related to the repayment of debt with the proceeds of the 2012 term loan under the Credit Agreement, as follows: Year Ended 2012 Premium payment to redeem/purchase the Senior Notes ...Unaccreted discount on the Senior Notes ...Deferred costs associated with the...

  • Page 47
    ... the net loss of the Japan JV in "Other operating expense, net." In December 2013, Wendy's and the Higa Partners agreed to terminate Wendy's investment in the joint venture and repay their respective share of the Japan JV's outstanding debt and liabilities related to the restaurant closure costs. On...

  • Page 48
    ...above under "Sales" related to the improvements in the North America business. The impact of franchisees purchasing company-owned restaurants under our system optimization initiative will continue to result in increased franchise royalties and rental income. Cost of Sales We expect cost of sales, as...

  • Page 49
    ... due to (1) an increase in accruals for capital expenditures primarily related to our Image Activation program and (2) changes in accounts payable due to the timing of payments between comparable periods. Additionally, the Company received a cash dividend from our investment in Arby's, of which $21...

  • Page 50
    ... stock of $157.6 million during 2011 under a stock repurchase program which expired at the end of 2011; • a net decrease in cash used for long-term debt activities of $49.5 million primarily resulting from the execution of the Credit Agreement and the related purchase/redemption of the Senior...

  • Page 51
    ... cash and cash flows from operations will provide sufficient liquidity to meet operating cash requirements for the next 12 months. Capitalization Year End 2013 Long-term debt, including current portion ...Stockholders' equity ... $1,463.8 1,929.5 $3,393.3 The Wendy's Company's total capitalization...

  • Page 52
    ...value hedges. See Note 11 of the Financial Statements and Supplementary Data contained in Item 8 herein for more information on the interest rate swaps. As a result, Wendy's recognized a loss on the early extinguishment of debt of $7.5 million during the fourth quarter of 2013. During the year ended...

  • Page 53
    ...of 2014 at the same rate as declared in the first quarter of 2014, The Wendy's Company's total cash requirement for dividends for all of 2014 would be approximately $73.2 million based on the number of shares of its common stock outstanding at February 21, 2014. The Wendy's Company currently intends...

  • Page 54
    ... 83.3 million shares with a purchase price of $402.5 million, excluding commissions of $1.5 million. In January 2014, our Board of Directors authorized a new repurchase program for up to $275.0 million of our common stock through the end of fiscal year 2014, when and if market conditions warrant and...

  • Page 55
    ... estimates of future sales growth, gross margins, operating costs, income tax rates, terminal value growth rates, capital expenditures and the weighted average cost of capital (discount rate). Anticipated cash flows used under the income approach are developed every fourth quarter in conjunction...

  • Page 56
    ... of the fair value of our indefinite-lived intangible assets include the anticipated future revenues of company-owned and franchised restaurants and the resulting cash flows. We performed our annual indefinite-lived intangible asset impairment test in the fourth quarter of 2013, which indicated that...

  • Page 57
    ... sale of restaurants ("System Optimization Remeasurement"). Such losses have been included in "Facilities action charges, net" in our consolidated statement of operations for the year ended December 29, 2013. The fair value of these long-lived assets was based upon discounted cash flows of future...

  • Page 58
    ... in managing our exposure to interest rate changes is to limit the impact on our earnings and cash flows. Our practice is to maintain a target, over time and subject to market conditions, of between 35% and 75% of long-term debt including the current portion as fixed, or effectively fixed, rate debt...

  • Page 59
    ... certain food products, such as beef, chicken, corn, pork and cheese, that are affected by changes in commodity prices and, as a result, we are subject to variability in our food costs. QSCC, a purchasing co-op negotiates contracts with approved suppliers on behalf of the Wendy's system in order to...

  • Page 60
    ... potential impact a decrease in interest rates of one percentage point has on the fair value of our $85.0 million fixed-rate debt and not on the Company's financial position or results of operations. As of December 30, 2012, the Company had both fixed and variable interest rate debt outstanding. The...

  • Page 61
    ...Policies ...(2) Facilities Action Charges, Net ...(3) Acquisitions and Dispositions ...(4) Income (Loss) Per Share ...(5) Cash and Receivables ...(6) Investments ...(7) Properties ...(8) Goodwill and Other Intangible Assets ...(9) Accrued Expenses and Other Current Liabilities ...(10) Long-Term Debt...

  • Page 62
    ... 2010 Plan ...2010 Term Loan ...2012 Lease ...280 BT ...401(k) Plan ...6.20% Senior Notes ...Advertising Funds ...Aircraft Lease Agreement ...Amendment ...AOCI ...Arby's ...ARCOP ...Bakery ...Black-Scholes Model ...Buyer ...Buyer Parent ...CAP ...Company ...Contingent Rent ...Credit Agreement...

  • Page 63
    ...Long-Term Debt Summary of Significant Accounting Policies Summary of Significant Accounting Policies Summary of Significant Accounting Policies Retirement Benefit Plans Summary of Significant Accounting Policies Summary of Significant Accounting Policies Transactions with Related Parties Investments...

  • Page 64
    ..., the financial position of the Company as of December 29, 2013 and December 30, 2012, and the results of its operations and its cash flows for each of the three years in the period ended December 29, 2013, in conformity with accounting principles generally accepted in the United States of America...

  • Page 65
    ... BALANCE SHEETS (In Thousands) December 29, 2013 December 30, 2012 ASSETS Current assets: Cash and cash equivalents ...Accounts and notes receivable ...Inventories ...Prepaid expenses and other current assets ...Deferred income tax benefit ...Advertising funds restricted assets ...Total current...

  • Page 66
    THE WENDY'S COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In Thousands Except Per Share Amounts) Year Ended December 30, 2012 December 29, 2013 January 1, 2012 Revenues: Sales ...Franchise revenues ...Costs and expenses: Cost of sales ...General and administrative ......

  • Page 67
    THE WENDY'S COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Thousands) Year Ended December 30, 2012 December 29, 2013 January 1, 2012 Net income ...Other comprehensive (loss) income, net: Foreign currency translation adjustment ...Change in unrecognized pension loss, ...

  • Page 68
    ... to The Wendy's Company Common Stock Additional Paid-In Capital Accumulated Deficit Common Stock Held in Treasury Accumulated Other Comprehensive Income (Loss) Noncontrolling Interests Total Balance at January 2, 2011 ...Net income ...Other comprehensive loss, net ...Cash dividends ...Repurchases...

  • Page 69
    ... current assets ...Accounts payable ...Accrued expenses and other current liabilities ...Net cash provided by operating activities ...Cash flows from investing activities: Capital expenditures ...Dispositions ...Acquisitions ...Franchise loans, net ...Sale of Arby's, net ...Change in restricted cash...

  • Page 70
    ...'S COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS-CONTINUED (In Thousands) Year Ended December 30, 2012 December 29, 2013 January 1, 2012 Detail of cash flows from operating activities: Impairment: Impairment of long-lived assets ...Impairment of goodwill ...System Optimization...

  • Page 71
    ... Company manages and internally reports its business geographically. The operation and franchising of Wendy's restaurants in North America comprises virtually all of our current operations and represents a single reportable segment. The revenues and operating results of Wendy's restaurants outside...

  • Page 72
    ... Arby's Restaurant Group, Inc. ("Arby's"), are recorded at cost with related realized gains and losses reported as income or loss in the period in which the securities are sold or otherwise disposed. Cash distributions and dividends received that are determined to be returns of capital are recorded...

  • Page 73
    ... sale of restaurants ("System Optimization Remeasurement"). Such losses have been included in "Facilities action charges, net" in our consolidated statement of operations for the year ended December 29, 2013. The fair value of these long-lived assets was based upon discounted cash flows of future...

  • Page 74
    ... fair value of indefinite-lived intangible assets include the anticipated future revenues of company-owned and franchised restaurants and the resulting cash flows. Deferred financing costs are amortized as interest expense over the term of the respective debt using the effective interest rate method...

  • Page 75
    ... recognized as revenue upon the termination of the related commitments to open new franchised restaurants. Rental income from properties owned and leased by the Company and leased or subleased to franchisees is recognized on a straight-line basis over the respective operating lease terms. Favorable...

  • Page 76
    ... amounts related to leases for company-owned restaurants, sold or closed restaurants, leased and/or subleased properties and corporate offices are amortized to "Cost of sales," "Other operating expense, net," "Franchise revenues" and "General and administrative," respectively. When the expected term...

  • Page 77
    ... each new lease agreement, lease renewal and lease amendment, including, but not limited to, property values, market rents, property lives, discount rates and probable term, all of which can impact (1) the classification and accounting for a lease as capital or operating, (2) the Rent Holiday...

  • Page 78
    ... the activity recorded under our system optimization initiative: Year Ended 2013 Gain on sales of restaurants, net ...System Optimization Remeasurement (a) ...Accelerated amortization (b) ...Severance and related employee costs ...Professional fees ...Share-based compensation (c) ...Other ...Total...

  • Page 79
    ... current liabilities." Balance December 30, 2012 Balance December 29, 2013 Charges Payments Severance and employee related costs ...Professional fees ...Other ... $- - - $- $ 9,650 2,389 863 $12,902 $(2,599) (2,252) (603) $(5,454) $7,051 137 260 $7,448 Restaurant Assets Held for Sale Year End...

  • Page 80
    ... below. The Company does not expect to incur additional costs related to the sale of Arby's. Year Ended 2012 2011 Total Incurred Since Inception 2013 Severance, retention and other payroll costs (a) ...Relocation costs (b) ...Consulting and professional fees ...Other ...Share-based compensation...

  • Page 81
    ... 30 franchised restaurants in the Austin, Texas area from Pisces Foods, L.P. ("Pisces") and Near Holdings, L.P. (the "Pisces Acquisition"). The purchase price was $18,915 in cash, including closing adjustments. Wendy's also agreed to lease the real estate, buildings and improvements related to...

  • Page 82
    ...considered part of the purchase transaction. Wendy's did not incur any material acquisition-related costs with this acquisition. The operating results of the 24 franchised restaurants acquired have been included in our consolidated financial statements beginning on the acquisition date. Such results...

  • Page 83
    ... fair values, with the excess of $5,620 recognized as goodwill. During the year ended January 1, 2012, the Company also assumed the operations and management of four additional franchised restaurants. In connection with one of the 2011 acquisitions described above, Wendy's terminated certain...

  • Page 84
    ...year ended December 29, 2013, Wendy's received cash proceeds of $18,958 from dispositions not part of the system optimization initiative, consisting of (1) $10,305 primarily from the sale of surplus properties and (2) $8,653 resulting from franchisees exercising options to purchase previously leased...

  • Page 85
    ... FINANCIAL STATEMENTS-CONTINUED (In Thousands Except Per Share Amounts) (5) Cash and Receivables Year End 2013 2012 Cash and cash equivalents Cash ...Cash equivalents ...Restricted cash equivalents Current (a) Collateral supporting letters of credit ...Trust for termination costs for former Wendy...

  • Page 86
    THE WENDY'S COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED (In Thousands Except Per Share Amounts) The following is an analysis of the allowance for doubtful accounts: 2013 Year End 2012 2011 Balance at beginning of year: Current ...Non-current ...Provision for ...

  • Page 87
    ... ended December 29, 2013, December 30, 2012 and January 1, 2012. The summary balance sheet financial information does not distinguish between current and long-term assets and liabilities. Year End 2013 2012 Balance sheet information: Properties ...Cash and cash equivalents ...Accounts receivable...

  • Page 88
    ... ARG Holding Corporation (through which Wendy's Restaurants indirectly retained an 18.5% interest in Arby's) with a fair value of $19,000. See Note 17 for more information on the sale of Arby's. We account for our interest in Arby's as a cost method investment. During 2013, we received a dividend of...

  • Page 89
    ... the year ended December 29, 2013 on certain long-lived assets to reflect their use over shortened estimated useful lives as a result of the reimaging of restaurants as part of our Image Activation program. Also includes $14,911 and $10,273 of accumulated amortization related to capital leases at...

  • Page 90
    ... of the anticipated cash flows associated with the reporting unit. The decline in the fair value of the international franchise restaurants reporting unit resulted from lower than anticipated current and future operating results including lower projected growth rates and profitability levels than...

  • Page 91
    ... amortization on previously acquired franchise rights in territories expected to be sold as a part of our system optimization initiative. (9) Accrued Expenses and Other Current Liabilities Year End 2013 2012 Accrued compensation and related benefits ...Accrued taxes ...Accrued interest ...Accrued...

  • Page 92
    ...balances payable upon maturity. In addition, the Term Loans require prepayments of principal amounts resulting from certain events and excess cash flow on an annual basis from Wendy's as defined under the Restated Credit Agreement. An excess cash flow payment was not required for fiscal 2013 or 2012...

  • Page 93
    ...: Year Ended 2013 Year Ended 2012 Unaccreted discount on Term B Loans ...Deferred costs associated with the Credit Agreement ...Unaccreted fair value adjustment associated with the 6.20% Senior Notes ...Benefit from cumulative effect of the fair value hedges ...Premium payment to redeem/purchase...

  • Page 94
    ... debt: Year End 2013 Cash and cash equivalents ...Accounts and notes receivable (including long-term) ...Inventories ...Properties ...Goodwill ...Other intangible assets ...Other assets (including long-term) ... $ 314,030 60,498 9,054 223,698 708,725 1,206,786 47,881 $2,570,672 (11) Fair Value...

  • Page 95
    ...fair values of the Company's financial instruments at December 29, 2013 and December 30, 2012: December 29, 2013 Carrying Amount Fair Value December 30, 2012 Carrying Amount Fair Value Fair Value Measurements Financial assets Cash equivalents ...Non-current cost method investments (a) ...Cash flow...

  • Page 96
    ... of operations. Total losses for the year ended December 29, 2013 reflect the impact of remeasuring long-lived assets (including land, buildings, leasehold improvements and favorable lease assets) at certain company-owned restaurants to fair value as a result of the Company's decision to lease and...

  • Page 97
    ... current market values. See Note 15 for more information on the impairment of our long-lived assets. Total losses for the year ended December 29, 2013 also include the impact of remeasuring goodwill associated with our international franchise restaurants reporting unit in connection with our annual...

  • Page 98
    ... WENDY'S COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED (In Thousands Except Per Share Amounts) The (provision for) benefit from income taxes from continuing operations is set forth below: 2013 Year Ended 2012 2011 Current: U.S. Federal ...State ...Foreign ...Current...

  • Page 99
    ... to capital losses utilized to offset 2011 capital gains, primarily as a result of the reorganization of our business entity structure outside of the U.S. and a $4,565 reduction related to expiring capital losses. During the first quarter of 2013, the Company finalized its long-term investment plan...

  • Page 100
    ...'S COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED (In Thousands Except Per Share Amounts) The reconciliation of income tax computed at the U.S. Federal statutory rate to reported income tax is set forth below: 2013 Year Ended 2012 2011 Income tax (provision) benefit...

  • Page 101
    ...The Wendy's Company paid dividends per share of $0.18, $0.10 and $0.08, respectively. Treasury Stock There were 470,424 shares of common stock issued at the beginning and end of 2013, 2012 and 2011. Treasury stock activity for 2013, 2012 and 2011 was as follows: 2013 Treasury Stock 2012 2011 Number...

  • Page 102
    ..., the Company repurchased 30,983 shares with an aggregate purchase price of $157,014, excluding commissions of $542. In January 2014, our Board of Directors authorized a new repurchase program for up to $275,000 of our common stock through the end of fiscal year 2014, when and if market conditions...

  • Page 103
    ...for future grants under the 2010 Plan. During the periods presented in the consolidated financial statements, the Company settled all stock option exercises and the vesting of restricted shares and performance shares with treasury shares. Stock Options The Company's current outstanding stock options...

  • Page 104
    ... agreements for two senior executives in 2011 as a result of the sale of Arby's and related announcements that the Company's Atlanta restaurant support center would be relocated to Ohio. There was no other share-based compensation expense recorded during 2012 and 2011 for performance condition...

  • Page 105
    ... the termination provisions of the employment agreements for two senior executives in 2011 as a result of the sale of Arby's discussed above. The following table summarizes activity of performance shares during 2013: Performance Condition Awards Weighted Average Grant Date Fair Shares Value Market...

  • Page 106
    ... Total share-based compensation expense and the related income tax benefit recognized in the Company's consolidated statements of operations were as follows: 2013 Year Ended 2012 2011 Stock options (a) ...Restricted Shares ...Performance Shares: Performance Condition Shares ...Market Condition...

  • Page 107
    ... 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...

  • Page 108
    ...of cash flows for the years ended December 29, 2013 and December 30, 2012 include the effect of certain post-closing Arby's related transactions. Our consolidated statements of operations for periods through July 3, 2011 (prior to the sale of Arby's) include certain indirect corporate overhead costs...

  • Page 109
    ... the sale of Arby's, Wendy's Restaurants transferred the liabilities related to the Eligible Arby's Employees to The Wendy's Company. The measurement date used by The Wendy's Company in determining amounts related to its defined benefit plans is the same as the Company's fiscal year end. The balance...

  • Page 110
    ... with the Wendy's merger, amounts due under supplemental executive retirement plans (the "SERP") were funded into a restricted account. As of January 1, 2011, participation in the SERP was frozen to new entrants and future contributions, and existing participants' balances only earn annual interest...

  • Page 111
    ...-term debt" or "Current portion of long-term debt," as applicable. Properties leased by the Company to third parties under operating leases as of December 29, 2013 and December 30, 2012 include: Year End 2013 2012 Land ...Buildings and improvements ...Office, restaurant and transportation equipment...

  • Page 112
    ...COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED (In Thousands Except Per Share Amounts) Franchisee Image Activation Financing Program In addition to the Image Activation incentive programs described above, Wendy's has executed an agreement to partner with a third-party...

  • Page 113
    ... between the Company and its related parties, which are included in continuing operations: 2013 Year Ended 2012 2011 Transactions with Purchasing Cooperatives: Wendy's Co-Op (a) ...SSG agreement (b) ...Lease income (c) ...Transactions with the Management Company: Use of company-owned aircraft...

  • Page 114
    ... in 2009 for payments to QSCC required over an 18 month period through May 2011 in order to provide funding for start-up costs, operating expenses and cash reserves. Wendy's made such payments of $305 in 2011. All QSCC members (including Wendy's) pay sourcing fees to third-party vendors on products...

  • Page 115
    ... the sale, liquidation or other disposition of our cost investments and the series A senior notes that we received from Deerfield Capital Corp. The Liquidation Services Agreement required The Wendy's Company to pay the Management Company a fee of $900 in two installments in June 2009 and 2010, which...

  • Page 116
    ... 2013, 2012, and 2011, respectively, which has been included as a reduction to "General and administrative." Other Related Party Transactions During the third quarter of 2012, Matthew Peltz was appointed to the ARG Holding Corporation Board of Directors. He is not currently receiving compensation...

  • Page 117
    ... regional advertising programs. Restricted assets and related liabilities of the Advertising Funds at December 29, 2013 and December 30, 2012 were as follows: Year End 2013 2012 Cash and cash equivalents ...Accounts and notes receivable ...Other assets ...Total assets ...Accounts payable ...Accrued...

  • Page 118
    ...the Company's fiscal quarters in 2013 and 2012 contained 13 weeks. March 31 (a) 2013 Quarter Ended June 30 (a) September 29 (a) December 29 (a) Revenues ...Cost of sales ...Operating profit ...Income (loss) from continuing operations ...Net loss from discontinued operations ...Net loss attributable...

  • Page 119
    ...Employment (HIRE) credit had been omitted from the fiscal year 2011 year-end provision. A tax benefit of approximately $2,800 (of which $580 related to Arby's which was sold by Wendy's Restaurants in July 2011 and has been included in discontinued operations) was recorded in 2012 in order to correct...

  • Page 120
    ... originated in the purchase accounting for the Wendy's merger on September 29, 2008, it was unable to definitively conclude that the differences related to purchase accounting and/or to what prior period the errors were attributable. As a result, an increase to deferred tax benefit and a decrease in...

  • Page 121
    THE WENDY'S COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED (In Thousands Except Per Share Amounts) The effect of the corrections on the consolidated statements of operations for 2012 and 2011 is summarized in the following table: Year Ended 2012 Previously Reported ...

  • Page 122
    ... correction related to the Canada income tax provision. The effect of the corrections on the consolidated statements of cash flows for 2012 and 2011 is summarized in the following table: Year Ended 2012 Previously Reported Adjustments Excluded Effect of Change Previously Reported 2011 If Adjustments...

  • Page 123
    ... that information required to be disclosed by the Company in such reports is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Management's Report on Internal Control...

  • Page 124
    ... accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's consolidated financial statements and financial statement schedule as of and for the year ended December 29, 2013 and our report dated February 27, 2014, expressed an unqualified opinion on...

  • Page 125
    ... Index to Financial Statements (Item 8). 2. Financial Statement Schedules: Schedule I - Condensed Balance Sheets (Parent Company Only) - as of December 29, 2013 and December 30, 2012; Condensed Statements of Operations (Parent Company Only) - for the fiscal years ended December 29, 2013, December 30...

  • Page 126
    ...Arby's Group, Inc. and Wendy's/Arby's Restaurants, LLC Current Reports on Form 8-K filed on July 8, 2011 (SEC file nos. 001-02207 and 333-161613, respectively). Asset Purchase Agreement by and among Wendy's International, Inc., Pisces Foods, L.P., Near Holdings, L.P., David Near and Jason Near dated...

  • Page 127
    ...).** Form of Long Term Performance Unit Award Agreement for 2011 under the Wendy's/Arby's Group, Inc. 2010 Omnibus Award Plan, incorporated herein by reference to Exhibit 10.1 to The Wendy's Company and Wendy's Restaurants, LLC Form 10-Q for the quarter ended July 3, 2011 (SEC file nos. 001-02207...

  • Page 128
    ...4, 2010 (SEC file no. 001-02207).** Form of Non-Employee Director Restricted Stock Award Agreement for 2013 under the Wendy's/Arby's Group, Inc. 2010 Omnibus Award Plan, incorporated herein by reference to Exhibit 10.5 of The Wendy's Company Form 10-Q for the quarter ended June 30, 2013 (SEC file no...

  • Page 129
    ...'s/Arby's Group, Inc. 2009 Directors' Deferred Compensation Plan, incorporated herein by reference to Exhibit 10.6 of The Wendy's Company Form 10-Q for the quarter ended June 30, 2013 (SEC file no. 001-02207).** Amended and Restated Credit Agreement, dated May 16, 2013, among Wendy's International...

  • Page 130
    ....5 to Triarc's Current Report on Form 8-K filed on August 10, 2007 (SEC file no. 001-02207). Aircraft Lease Agreement dated June 10, 2009 between Wendy's/Arby's Group, Inc. and TASCO, LLC, incorporated herein by reference to Exhibit 10.4 to Wendy's/Arby's Group's Current Report on Form 8-K filed on...

  • Page 131
    ..., between DWG Corporation and DWG Acquisition Group, L.P., incorporated herein by reference to Exhibit 10.36 to Wendy's/Arby's Group's Annual Report on Form 10-K for the fiscal year ended December 28, 2008 (SEC file no. 001-02207). Letter Agreement dated August 6, 2007, between Triarc Companies, Inc...

  • Page 132
    ...for the quarter ended June 30, 2013 (SEC file no. 001-02207).** Employment Letter between The Wendy's Company and Robert Wright dated as of November 1, 2013.* ** Form of Indemnification Agreement, between Wendy's/Arby's Group, Inc. and certain officers, directors, and employees thereof, incorporated...

  • Page 133
    ... NO. DESCRIPTION 10.84 Form of Indemnification Agreement between Arby's Restaurant Group, Inc. and certain directors, officers and employees thereof, incorporated herein by reference to Exhibit 10.40 to Triarc's Annual Report on Form 10-K for the fiscal year ended December 30, 2007 (SEC file no...

  • Page 134
    ... Executive Officer) Senior Vice President and Chief Financial Officer (Principal Financial Officer) Senior Vice President and Chief Accounting Officer (Principal Accounting Officer) Chairman and Director Vice Chairman and Director Director Director Director Director Director Director Director...

  • Page 135
    SCHEDULE I THE WENDY'S COMPANY (PARENT COMPANY ONLY) CONDENSED BALANCE SHEETS (In Thousands) December 29, 2013 December 30, 2012 ASSETS Current assets: Cash and cash equivalents ...Amounts due from subsidiaries ...Other current assets ...Total current assets ...Investments in consolidated ...

  • Page 136
    SCHEDULE I (Continued) THE WENDY'S COMPANY (PARENT COMPANY ONLY) CONDENSED STATEMENTS OF OPERATIONS (In Thousands) December 29, 2013 Year Ended December 30, 2012 January 1, 2012 Income: Equity in income from continuing operations of subsidiaries ...Costs and expenses: General and administrative ......

  • Page 137
    ... I (Continued) THE WENDY'S COMPANY (PARENT COMPANY ONLY) CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (In Thousands) December 29, 2013 Year Ended December 30, 2012 January 1, 2012 Net income ...Other comprehensive (loss) income, net: Foreign currency translation adjustment ...Change in unrecognized...

  • Page 138
    ... costs ...Deferred income tax ...Tax sharing receivable from subsidiaries, net ...Dividends from subsidiaries ...Other, net ...Changes in operating assets and liabilities: Other current assets ...Other current liabilities ...Net cash provided by operating activities ...Cash flows from investing...

  • Page 139
    ...Arby's Group, Inc. and Wendy's/Arby's Restaurants, LLC Current Reports on Form 8-K filed on July 8, 2011 (SEC file nos. 001-02207 and 333-161613, respectively). Asset Purchase Agreement by and among Wendy's International, Inc., Pisces Foods, L.P., Near Holdings, L.P., David Near and Jason Near dated...

  • Page 140
    ... Wendy's Company and Wendy's Restaurants, LLC Form 10-Q for the quarter ended October 2, 2011 (SEC file nos. 001-02207 and 333-161613, respectively).** Form of Restricted Stock Unit Award Agreement for 2013 (ratable vesting) under the Wendy's/Arby's Group, Inc. 2010 Omnibus Award Plan, incorporated...

  • Page 141
    ... Form 10-Q for the quarter ended June 30, 2013 (SEC file no. 001-02207).** Form of Restricted Stock Award Agreement under the Wendy's/Arby's Group, Inc. 2010 Omnibus Award Plan, incorporated herein by reference to Exhibit 10.16 of The Wendy's Company and Wendy's Restaurants, LLC Form 10-K for the...

  • Page 142
    ...'s/Arby's Group, Inc. 2009 Directors' Deferred Compensation Plan, incorporated herein by reference to Exhibit 10.6 of The Wendy's Company Form 10-Q for the quarter ended June 30, 2013 (SEC file no. 001-02207).** Amended and Restated Credit Agreement, dated May 16, 2013, among Wendy's International...

  • Page 143
    ... the quarter ended July 4, 2010 (SEC file no. 001-02207). Amendment No. 2 to Aircraft Lease Agreement dated June 29, 2011 between Wendy's/Arby's Group, Inc. and TASCO, LLC, incorporated herein by reference to Exhibit 10.2 to The Wendy's Company Form 10-Q for the quarter ended July 3, 2011 (SEC file...

  • Page 144
    ..., between DWG Corporation and DWG Acquisition Group, L.P., incorporated herein by reference to Exhibit 10.36 to Wendy's/Arby's Group's Annual Report on Form 10-K for the fiscal year ended December 28, 2008 (SEC file no. 001-02207). Letter Agreement dated August 6, 2007, between Triarc Companies, Inc...

  • Page 145
    ... the quarter ended October 2, 2011 (SEC file nos. 001-02207 and 333-161613, respectively).** Form of Indemnification Agreement between Arby's Restaurant Group, Inc. and certain directors, officers and employees thereof, incorporated herein by reference to Exhibit 10.40 to Triarc's Annual Report on...

  • Page 146
    ... Officer of The Wendy's Company pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, furnished as an exhibit to this Form 10-K.* Audited Financial Statements...

  • Page 147
    ... Holdings LLC (6) Citrus Acquisition Corporation Adams Packing Association, Inc. (1) Now known as Wendy's International, LLC. (2) 50% owned by Wendy's Restaurants of Canada Inc. (3) Now known as The New Bakery Company, LLC. (4) Now known as Wendy's Old Fashioned Hamburgers of New York, LLC. (5) Now...

  • Page 148
    ..., 2014, relating to the consolidated financial statements and financial statement schedule of The Wendy's Company, and the effectiveness of The Wendy's Company's internal control over financial reporting, appearing in this Annual Report on Form 10-K of The Wendy's Company for the year ended December...

  • Page 149
    ... of The Wendy's Company, of our report dated February 26, 2014 relating to the financial statements of TIMWEN Partnership, which appears in this Annual Report on Form 10-K of The Wendy's Company. /s/ PricewaterhouseCoopers LLP Chartered Professional Accountants, Licensed Public Accountants Oakville...

  • Page 150
    ...not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of...

  • Page 151
    ...not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of...

  • Page 152
    ... all material respects, the financial condition and results of operations of the Company. Date: February 27, 2014 /S/ EMIL J. BROLICK Emil J. Brolick President and Chief Executive Officer Date: February 27, 2014 /S/ TODD A. PENEGOR Todd A. Penegor Senior Vice President and Chief Financial Officer

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  • Page 155
    ... points in the graph are the last trading days of our 2008, 2009, 2010, 2011, 2012 and 2013 fiscal years. The returns set forth below assume an initial investment of $100 and that all dividends were reinvested when received. COMPARISON OF 5 -YEAR CUMULATIVE TOTAL RETURN* (The Wendy's Company...

  • Page 156
    ... one-of-a-kind Flagship Restaurant in Dublin, Ohio on December 16, 2013. The restaurant features a life-sized bronze statue of Founder Dave Thomas and a unique community room showcasing Wendy's memorabilia, including items from the original Wendy's restaurant which opened in downtown Columbus, Ohio...