Wendy's 2009 Annual Report Download - page 44

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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 Common Stock and our then outstanding Class B
common stock.
In 2008, in response to unanticipated credit and liquidity events, DFR announced changes to its business
model and significant losses. Based on these events and their negative effect on the market price of DFR
common stock, we concluded that the fair value and, therefore, the carrying value of our investment in the 9.8
million common shares was impaired. As a result, we recorded an other than temporary loss which is included
in “Other than temporary losses on investments,” of $68.1 million during the first quarter of 2008. As a result
of the distribution of the DFR common stock, the income tax loss that resulted from the decline in value of
our investment of $68.1 million was not deductible for income tax purposes and no income tax benefit was
recorded related to this loss.
However, due to significant financial weakness in the credit markets, 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 in the fourth
quarter of 2008. This charge is included in “Other than temporary losses on investments.”
Related Party Transactions
Corporate Restructuring
In 2007, we completed the transition that was announced in April 2007 whereby we closed our New
York headquarters and combined our corporate operations with our restaurant operations in Atlanta, Georgia
(the “Corporate Restructuring”). To facilitate this transition, we had entered into contractual settlements (the
“Contractual Settlements”) with our Chairman, who was also our then Chief Executive Officer, and our Vice
Chairman, who was our then President and Chief Operating Officer, (collectively, the “Former Executives”)
evidencing the termination of their employment agreements and providing for their resignation as executive
officers as of June 29, 2007 (the “Separation Date”). In addition, we sold properties and other assets at our
former New York headquarters in 2007 to an affiliate of the Former Executives and we incurred charges for the
transition severance arrangements of other New York headquarters’ executives and employees who continued to
provide services as employees through the 2008 first quarter. The Corporate Restructuring included the
transfer of substantially all of our senior executive responsibilities to our executive team in Atlanta, Georgia.
Equities Account
Prior to 2007, we invested $75.0 million in brokerage accounts (the “Equities Account”), which was
managed by a management company (the “Management Company”) formed by the Former Executives and a
director, who is our former Vice Chairman (collectively with the Former Executives, the “Principals”). The
Equities Account was invested principally in equity securities, cash equivalents and equity derivatives of a
limited number of publicly-traded companies. In addition, the Equities Account sold securities short and
invested in market put options in order to lessen the impact of significant market downturns.
In June 2009, we and the Management Company entered into a withdrawal agreement (the “Withdrawal
Agreement”) which provided that we would be permitted to withdraw all amounts in the Equities Account on
an accelerated basis (the “Early Withdrawal”) effective no later than June 26, 2009. Prior to the Withdrawal
Agreement and as a result of an investment management agreement with the Management Company, which
was terminated on June 26, 2009, we had not been permitted to withdraw any amounts from the Equities
Account until December 31, 2010, although $47.0 million was released from the Equities Account in 2008
subject to an obligation to return that amount to the Equities Account by a specified date. In consideration for
obtaining such Early Withdrawal right, we agreed to pay the Management Company $5.5 million (the
“Withdrawal Fee”), were not required to return the $47.0 million referred to above and were no longer
obligated to pay investment management and incentive fees to the Management Company. The Equities
Account investments were liquidated in June 2009 for $37.4 million (the “Equities Sale”), of which $31.9
million was received by us, net of the Withdrawal Fee, and for which we realized a gain of $2.3 million in
2009, both included in “Investment expense (income), net.”
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