Wendy's 2008 Annual Report Download - page 54

whether these losses were other than temporary and concluded that they were not. Should either (1) we
decide to sell any of these investments with unrealized losses or (2) any of the unrealized losses continue
such that we believe they have become other than temporary, we would recognize the losses on the related
investments at that time. All investment gains and losses may vary significantly in future periods
depending upon changes in the value of our investments and the timing of the sales of our available-for-
sale investments.
(b) Our interest income decreased $7.8 million principally due to: (1) lower average outstanding balances of
our interest-bearing investments principally as a result of cash equivalents used in connection with our
Corporate Restructuring, (2) interest income recognized in 2007 at our former asset management segment
and (3) a decrease in interest rates.
Other Than Temporary Losses on Investments
2008 2007 Change
(In Millions)
DFR common stock................................................ $ 68.1 $ — $ 68.1
DFR Notes. . . . .................................................... 21.2 — 21.2
Available-for-sale securities, including CDOs . . ....................... 13.1 9.9 3.2
Cost method investments ........................................... 10.3 — 10.3
$112.7 $9.9 $102.8
•Losses due to the reduction in value of our investments
We account for other than temporary losses under the guidance set forth in SFAS No. 115, “Accounting
for Certain Investments in Debt and Equity Securities” (“SFAS 115”) and other authoritative guidance, which
specify that investments with unrealized losses should be evaluated for holding losses that are a result of
declines in value, due to market fluctuations or the investee’s business environment, and are considered not to
be recoverable. If we determine that the holding losses are not recoverable during the anticipated investment
holding period, then the losses are other than temporary.
Based on a review of our unrealized investment losses in 2008 and 2007, we determined that the decreases
in the fair value of our former investment in the DFR common stock, certain investments held in the Equities
Account and certain cost method investments were other than temporary due to the severity of the decline, the
financial condition of the investee and the prospect for future recovery in the market value of the investment.
Accordingly, we recorded other than temporary losses on investments of $68.1 million for DFR common stock
as discussed in “Introduction and Executive Overview—The Deerfield Sale”, $13.1 million for available-for-sale
securities and $1.8 million for a cost method investment, included in “Cost method investments” above, in
2008. We also recorded other than temporary losses on investments of $9.9 million after a similar evaluation
in 2007.
Any other than temporary losses on our investments are dependent upon the underlying economics and/or
volatility in their value and may or may not recur in future periods.
•Losses due to investment collectability
Due to significant financial weakness in the credit markets, current publicly available information of
DFR, and our ongoing assessment of the likelihood of full repayment of the principal amount of the DFR
Notes, we recorded an allowance for doubtful collectability of $21.2 million on the DFR Notes. This charge is
included in “Other than temporary losses on investments.”
•Losses due to illiquidity
In 2008, $8.5 million of other than temporary losses on investments included in “Cost investments”
above related to the write-down of our entire cost method investment in Jurlique International Pty Ltd, a
privately-held Australian upscale skin care company (“Jurlique”). Based on financial results provided by
Jurlique, which noted significant declines in operations in 2008, its budget for 2009, current economic
conditions, illiquidity of the private company stock, and our internal valuations of Jurlique, we have
determined that our investments in this company will more than likely not be recoverable.
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