Wendy's 2009 Annual Report Download - page 94

the same price and terms as those shares purchased by third-party investors pursuant to an initial public
offering of DFR prior to 2007. Subsequently, certain of DFR Stock Purchasers, but not the Company, acquired
additional shares at various prices in open-market transactions. The Company, through the date of the
Deerfield Sale, was the investment manager of DFR and, subsequent to the Deerfield Sale, maintains one seat
on its Board of Directors. Prior to 2007, the Company received restricted investments consisting of 404 of
DFR restricted shares (“DFR Restricted Shares”) and options to purchase an additional 1,346 shares of stock of
DFR, which represented compensation granted in consideration of the Company’s management of DFR. The
restricted stock and options vested one-third each in 2005 through 2007. In addition, during 2007 the
Company received 21 shares of common stock of DFR. In March 2007, the Company granted an aggregate 97
of the vested DFR Restricted Shares owned by the Company as restricted stock to additional then employees of
the Company. The shares vest ratably over a three-year period. In connection with the March 2007 award, the
Company recorded the $1,500 fair market value of DFR shares as of the date of grant as “Deferred costs and
other assets.” With the exception of the March 2007 grant of the vested DFR Restricted Shares to employees,
all of the DFR Restricted Shares were distributed to the members of Deerfield immediately prior to the
Deerfield Sale. In December 2007, pursuant to agreements with certain former executives, the Company
distributed its original investment in the 1,000 shares of common stock of DFR to the former executives. In
connection with this distribution, the Company realized a $2,872 loss on its investment in DFR common
shares which is included in “Other income (expense), net.”
On December 21, 2007, the Company sold its 63.6% capital interest in Deerfield to DFR. The Deerfield
Sale resulted in non-cash proceeds to the Company aggregating approximately $134,608 consisting of (1)
9,629 preferred shares (the “Preferred Stock”) of a subsidiary of DFR with a then estimated fair value of
$88,398 at the time of the Deerfield sale and (2) $47,986 principal amount of series A Senior Secured Notes of
DFR due in December 2012 with an estimated fair value of $46,210 at the date of the Deerfield Sale.
The Deerfield Sale resulted in an approximate pretax gain of $40,193, net of approximately $2,320 of
related fees and expenses and net of the then remaining $6,945 unrecognized gain on the sale which could not
be recognized due to the Company’s then continuing interest in DFR, as further described below, and is
included in “Gain on sale of consolidated businesses.” The gain at the date of sale excluded approximately
$7,651 that the Company could not recognize because of its then approximate 16% continuing interest in
DFR through its ownership in the Preferred Stock, on an as-if converted basis, and common stock of DFR it
already owned. As a result of a subsequent distribution of 1,000 DFR shares previously owned by the Company
in 2007, our ownership decreased to approximately 15% and the Company recognized approximately $706 of
the originally deferred gain. The fees and expenses include approximately $825 representing a portion of the
additional fees which are attributable to the Company’s utilization of personnel from a management company
formed by our Chairman, who is our former Chief Executive Officer, and our Vice Chairman, who is our
former President and Chief Operating Officer, and a director, who is our former Vice Chairman (the
“Management Company”) in connection with the provision of services under a two-year transition services
agreement (the “Services Agreement”).
The remaining aggregate 206 unrestricted DFR common shares, representing the portion of the DFR
Restricted Shares and other common stock of DFR distributed to us in connection with the Deerfield Sale, and
the Preferred Stock received in connection with the Deerfield Sale held by the Company represented an
ownership percentage in DFR of 14.7% as of December 30, 2007, on an as-if fully converted basis. Certain
former officers of Wendy’s/Arby’s had an approximate 1.5% ownership interest in DFR as of December 30,
2007. We accounted for the DFR Preferred Stock as an available-for-sale debt security due to their mandatory
redemption requirement.
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 Preferred Stock we held into a like
number of shares of common stock. On March 11, 2008, our Board of Directors approved the distribution of
our 9,835 shares of DFR common stock, which also included the 206 common shares of DFR distributed to us
in connection with the Deerfield Sale to our stockholders. The distribution in the form of a dividend, which
87
Wendy’s/Arby’s Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(In Thousands Except Per Share Amounts)