Wendy's 2013 Annual Report Download - page 114

THE WENDY’S COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(In Thousands Except Per Share Amounts)
QSCC’s supply chain management facilitates continuity of supply and provides consolidated purchasing
efficiencies while monitoring and seeking to minimize possible obsolete inventory throughout the Wendy’s
supply chain in the U.S. and Canada. Pursuant to the terms of the Wendy’s Co-op, Wendy’s expensed $15,500
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 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 its
share of patronage dividends of $3,291, $2,464 and $2,033 in 2013, 2012 and 2011, respectively, which are
included as a reduction of “Cost of sales.”
(b) 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 $5,145 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 of Arby’s, effective April 2011, SSG
was dissolved and its activities were transferred to QSCC and ARCOP and the remaining accrued commitment
of $2,275 was reversed and credited to “General and administrative.”
(c) Effective January 1, 2011, Wendy’s leased 14,333 square feet of office space to QSCC for an annual base rental
of $176. There are currently two one-year renewal options remaining under this lease. During the period from
April 2010 to April 2011, SSG leased 2,300 square feet of office space from a subsidiary of Wendy’s Restaurants.
The Wendy’s Company received $188, $191 and $180 of lease income from QSCC during 2013, 2012 and
2011, respectively, and $23 of lease income from SSG during 2011, both of which have been recorded as
reductions of “General and administrative.”
Transactions with the Management Company
(d) In June 2009, The Wendy’s Company and TASCO, LLC (an affiliate of a management company formed by the
Former Executives and a director, who was our former Vice Chairman (the “Management Company”))
(“TASCO”) entered into an aircraft lease agreement (the “Aircraft Lease Agreement”) to lease a company-owned
aircraft. The Aircraft Lease Agreement originally provided that The Wendy’s Company would lease such
company-owned aircraft to TASCO from July 1, 2009 until June 30, 2010. On June 24, 2010, The Wendy’s
Company and TASCO renewed the Aircraft Lease Agreement for an additional one year period (expiring on
June 30, 2011). Under the Aircraft Lease Agreement, TASCO paid $10 per month for such aircraft plus
substantially all operating costs of the aircraft including all costs of fuel, inspection, servicing and certain storage,
as well as operational and flight crew costs relating to the operation of the aircraft, and all transit maintenance
costs and other maintenance costs required as a result of TASCO’s usage of the aircraft. The Wendy’s Company
continued to be responsible for calendar-based maintenance and any extraordinary and unscheduled repairs
and/or maintenance for the aircraft, as well as insurance and other costs.
On June 29, 2011, The Wendy’s Company and TASCO entered into an agreement to extend the Aircraft Lease
Agreement for an additional one year period (expiring on June 30, 2012) and an increased monthly rent of $13.
On June 30, 2012, The Wendy’s Company and TASCO entered into an extension of that lease agreement that
extended the lease term to July 31, 2012 and effective as of August 1, 2012, entered into an amended and
restated aircraft lease agreement (the “2012 Lease”) that expired on January 5, 2014. Under the 2012 Lease, all
expenses related to the ownership, maintenance and operation of the aircraft were paid by TASCO, subject to
certain limitations and termination rights. The 2012 Lease expired without any limitation or termination
provisions being invoked. The Wendy’s Company did not extend or renew the 2012 Lease. Under the previous
Aircraft Lease Agreement, the Company recorded lease income of $92 and $138 during 2012 and 2011,
respectively, as a reduction of “General and administrative.”
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