Wendy's 2013 Annual Report Download - page 95

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THE WENDY’S COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(In Thousands Except Per Share Amounts)
Financial Instruments
The following table presents the carrying amounts and estimated fair values of the Company’s financial
instruments at December 29, 2013 and December 30, 2012:
December 29,
2013
December 30,
2012
Carrying
Amount Fair Value
Carrying
Amount Fair Value Fair Value Measurements
Financial assets
Cash equivalents ............... $405,874 $405,874 $ 264,925 $ 264,925 Level 1
Non-current cost method
investments (a) .............. 3,387 130,433 23,913 50,761 Level 3
Cash flow hedges (b) ........... 1,212 1,212 — — Level 2
Fair value hedges (b) ............ — — 8,169 8,169 Level 2
Financial liabilities
Term A Loans, due in 2018 (c) . . . 570,625 569,555 — — Level 2
Term B Loans, due in 2019 (c) . . . 767,452 767,452 1,114,826 1,130,434 Level 2
6.20% Senior Notes, repaid in
October 2013 (c) ............ — — 225,940 240,750 Level 2
7% debentures, due in 2025 (c) . . . 84,666 98,250 83,496 99,900 Level 2
Capital lease obligations (d) ...... 40,732 38,716 32,594 33,299 Level 3
Guarantees of franchisee loans
obligations (e) ............... 884 884 940 940 Level 3
(a) The fair value of our indirect investment in Arby’s is based on applying a multiple to Arby’s earnings before
income taxes, depreciation and amortization per its current unaudited financial information. See Note 6 for more
information related to the indirect investment in Arby’s and the reduction of the carrying value of our investment
during 2013 in connection with the receipt of a dividend. The fair values of our remaining investments were
based on our review of information provided by the investment managers or investees which was based on
(1) valuations performed by the investment managers or investees, (2) quoted market or broker/dealer prices for
similar investments and (3) quoted market or broker/dealer prices adjusted by the investment managers for legal
or contractual restrictions, risk of nonperformance or lack of marketability, depending upon the underlying
investments.
(b) The fair values were developed using market observable data for all significant inputs.
(c) The fair values were based on quoted market prices in markets that are not considered active markets.
(d) The fair values were determined by discounting the future scheduled principal payments using an interest rate
assuming the same original issuance spread over a current U.S. Treasury bond yield for securities with similar
durations.
(e) Wendy’s has provided loan guarantees to various lenders on behalf of franchisees entering into debt arrangements
for new restaurant development and equipment financing. In addition during 2012, Wendy’s provided a
guarantee to a lender for a franchisee in connection with the refinancing of the franchisee’s debt. We have
accrued a liability for the fair value of these guarantees, the calculation of which was based upon a weighted
average risk percentage established at inception adjusted for a history of defaults.
The carrying amounts of cash, accounts payable and accrued expenses approximated fair value due to the
short-term nature of those items. The carrying amounts of accounts and notes receivable (both current and
non-current) approximated fair value due to the effect of the related allowance for doubtful accounts. Our derivative
instruments, cash and cash equivalents and guarantees are the only financial assets and liabilities measured and
recorded at fair value on a recurring basis.
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