Wendy's 2013 Annual Report Download - page 83

THE WENDY’S COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(In Thousands Except Per Share Amounts)
The table below presents the allocation of the total purchase price to the fair value of assets acquired and
liabilities assumed at the acquisition date.
Total purchase price paid in cash $ 19,181
Identifiable assets acquired and liabilities assumed:
Cash ............................................................. 27
Inventories ........................................................ 163
Properties ......................................................... 12,753
Deferred taxes and other assets ......................................... 190
Acquired territory rights (a) ........................................... 2,640
Favorable ground leases .............................................. 1,147
Capitalized lease obligations ........................................... (948)
Deferred vendor incentives (b) ......................................... (248)
Unfavorable leases ................................................... (531)
Other liabilities ..................................................... (727)
Total identifiable net assets ........................................ 14,466
Goodwill (c) ............................................................... $ 4,715
(a) The acquired territory rights have a weighted average amortization period of 13 years. Due to the anticipated sale
of this territory, we accelerated the amortization through the expected date of sale.
(b) Included in “Other liabilities” at the acquisition date.
(c) Goodwill is partially amortizable for income tax purposes.
The fair values of the identifiable assets acquired were determined using one of the following valuation
approaches: market, income and cost. The selection of a particular method for a given asset depended on the
reliability of available data and the nature of the asset.
Other acquisitions
During the year ended December 29, 2013, Wendy’s acquired one franchised restaurant; such transaction was
not significant. See Note 6 for discussion of the step-acquisition of our investment in a joint venture in Japan.
During the year ended December 30, 2012, Wendy’s acquired two other franchised restaurants along with
certain other equipment and franchise rights. The total net cash consideration for this acquisition was $2,594. The
total consideration was allocated to net tangible and identifiable intangible assets acquired, primarily properties, and
liabilities assumed based on their estimated fair values, with the excess of $485 recognized as goodwill.
During the year ended January 1, 2012, Wendy’s acquired 19 franchised restaurants in five separate
acquisitions. The total consideration for these acquisitions was $12,270, consisting of (1) $11,210 of cash, net of $66
of cash acquired and (2) the issuance of a note payable of $1,060. The total consideration was allocated to net
tangible and identifiable intangible assets acquired, primarily properties, and liabilities assumed based on their
estimated 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 pre-existing
subleases it had with the franchisee. This pre-existing business relationship between parties to a business acquisition is
required to be valued, recognized as income or expense, and excluded from purchase accounting. The termination of
these unfavorable subleases as of the date of acquisition resulted in an expense of $2,689, which was offset by a gain of
$1,659 for the excess of the fair value of the net assets acquired over the consideration paid, both of which are
included in “Other operating expense, net.”
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