Wendy's 2013 Annual Report Download - page 37

Related Party Transactions
Supply Chain Relationship Agreement
During the fourth quarter of 2009, Wendy’s entered into a purchasing co-op relationship agreement (the
“Wendy’s Co-op”) with its franchisees to establish Quality Supply Chain Co-op, Inc. (“QSCC”). QSCC manages, for
the Wendy’s system in the U.S. and Canada, contracts for the purchase and distribution of food, proprietary paper,
operating supplies and equipment under national contracts with pricing based upon total system volume. 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.
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 $3.3 million, $2.5 million and $2.0 million in 2013, 2012 and 2011, respectively, which are
included as a reduction of “Cost of sales.”
Effective January 1, 2011, Wendy’s leased 14,333 square feet of office space to QSCC for an annual base rental
of $0.2 million. There are currently two one-year renewal options remaining under this lease.
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 $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 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.”
Noncontrolling Interests in Jurl Holdings, LLC
On February 2, 2012, Jurl Holdings, LLC (“Jurl”), a 99.7% owned subsidiary completed the sale of our
investment in Jurlique International Pty Ltd. (“Jurlique”), an Australian manufacturer of skin care products, for
which we received proceeds of $27.3 million, net of the amount held in escrow. In connection with the anticipated
proceeds of the sale and in order to protect ourselves from a decrease in the Australian dollar through the closing date,
we entered into a foreign currency related derivative transaction for an equivalent notional amount in U.S. dollars of
the expected proceeds of A$28.5 million. During 2012, we recorded a gain on sale of this investment of
$27.4 million, which included a loss of $2.9 million on the settlement of the derivative transaction discussed above.
The gain was included in “Investment income, net” in our consolidated statement of operations. During 2013, we
collected $1.2 million of the escrow. We determined that $0.8 million of the remaining escrow would not be received
and recorded the reduction of our escrow receivable to “Investment income, net.” The remaining escrow of
$1.0 million as of December 29, 2013, which was adjusted for foreign currency translation and included in “Deferred
costs and other assets,” is considered collectible.
We have reflected net income attributable to noncontrolling interests of $2.4 million, net of an income tax
benefit of $1.3 million, for the year ended December 30, 2012 in connection with the equity and profit interests
discussed below. The net assets and liabilities of the subsidiary that held the investment were not material to the
consolidated financial statements. Therefore, the noncontrolling interest in those assets and liabilities was not
previously reported separately. As a result of this sale and distributions to the minority shareholders, there are no
remaining noncontrolling interests in this consolidated subsidiary.
Prior to 2009 when our predecessor entity was a diversified company active in investments, we had provided our
Chairman, who was also our then Chief Executive Officer, and our Vice Chairman, who was our then President and
Chief Operating Officer (the “Former Executives”), and certain other former employees, equity and profit interests in
Jurl. In connection with the gain on sale of Jurlique, we distributed, based on the related agreement, approximately
$3.7 million to Jurl’s minority shareholders, including approximately $2.3 million to the Former Executives.
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