Wendy's 2008 Annual Report Download - page 45

•Tightening of the overall credit markets and higher borrowing costs in the lending markets
typically used to finance new unit development and remodels. These tightened credit conditions
could negatively impact the renewal of franchisee licenses as well as the ability of a franchisee to
meet its commitments under development, rental and franchise license agreements.
We experience these trends directly to the extent they affect the operations of our Company-owned
restaurants and indirectly to the extent they affect sales by our franchisees and, accordingly, the royalties and
franchise fees we receive from them.
Merger with Wendy’s International, Inc.
On September 29, 2008, we completed the Wendy’s Merger in an all-stock transaction in which Wendy’s
shareholders received a fixed ratio of 4.25 shares of Wendy’s/Arby’s Class A Common Stock for each share of
Wendy’s common stock owned. We expect that the Wendy’s Merger will better position the Company to
deliver long-term value to our stockholders through enhanced operational efficiencies, improved product
offerings, and shared services. Wendy’s operates, develops and franchises a system of distinctive quick service
restaurants specializing in hamburgers. At September 28, 2008, there were 6,625 Wendy’s restaurants in
operation in the United States and in 21 other countries and U.S. territories. Of these restaurants, 1,404 were
operated by Wendy’s and 5,221 by Wendy’s franchisees.
In the Wendy’s Merger, 376.8 million shares of Wendy’s/Arby’s common stock, formerly Triarc Class A
Common Stock, were issued to Wendy’s shareholders. The equity consideration is based on the 4.25 conversion
factor of the Wendy’s outstanding shares at a value of $6.57 per share which represents the average closing
market price of Triarc Class A Common Stock two days before and after the merger announcement date of
April 24, 2008. In addition, immediately prior to the Wendy’s Merger, our Class B Common Stock was
converted into Class A Common Stock on a one-for-one basis (the “Conversion”).
Outstanding Wendy’s stock options were converted upon completion of the Wendy’s Merger into stock
options with respect to Wendy’s/Arby’s common stock, based on the 4.25:1 exchange ratio.
Our consolidated financial statements include the accounts of Wendy’s subsequent to September 29,
2008.
The Deerfield Sale
On December 21, 2007, we completed the sale of our majority capital interest in Deerfield resulting in
non-cash proceeds aggregating $134.6 million, consisting of 9.6 million shares of convertible preferred stock of
DFR (“the DFR Preferred Stock”) with a then estimated fair value of $88.4 million and $48.0 million
principal amount of series A senior secured notes of DFR due in December 2012 (the “DFR Notes”) with a
then estimated fair value of $46.2 million. We also retained ownership of 0.2 million common shares in DFR
as part of a pro rata distribution to the members of Deerfield prior to the Deerfield Sale. The Deerfield Sale
resulted in a pretax gain of $40.2 million which was recorded in the fourth quarter of 2007. At December 30,
2007, the carrying value of the DFR Preferred Stock was $70.4 million, net of a deferred gain of $6.9 million
for our then remaining interest in Deerfield.
The DFR Notes bear interest at the three-month LIBOR (1.47% at December 28, 2008) plus a factor,
initially 5% through December 31, 2009, increasing 0.5% each quarter from January 1, 2010 through June
30, 2011 and 0.25% each quarter from July 1, 2011 through their maturity. The DFR Notes are secured by
certain equity interests of DFR and certain of its subsidiaries.
Conversion of Convertible Preferred Stock and Dividend of DFR Common Stock
On March 11, 2008, DFR stockholders approved the one-for-one conversion of all its outstanding
convertible preferred stock into DFR common stock which converted the 9.6 million preferred shares we held
into a like number of shares of common stock. On March 11, 2008, our Board of Directors approved the
distribution of our 9.8 million shares of DFR common stock, which also included the 0.2 million common
shares of DFR discussed above, to our stockholders. The dividend, which was valued at $14.5 million, was paid
on April 4, 2008 to holders of record of our Class A common stock (the “Class A Common Stock”) and our
Class B common stock (the “Class B Common Stock”) on March 29, 2008.
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