Wendy's 2010 Annual Report Download - page 115

WENDY’S/ARBY’S GROUP, INC. AND SUBSIDIARIES
WENDY’S/ARBY’S RESTAURANTS, LLC AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(In Thousands Except Per Share Amounts)
The following table presents the fair values for those assets and liabilities measured at fair value during 2010 and
2009 on a non-recurring basis. Total losses include losses recognized from all non-recurring fair value measurements
during the year ended January 2, 2011 and January 3, 2010. The carrying value of properties presented in the table
below substantially represents the remaining carrying value of land for properties that were impaired related to the
Wendy’s and Arby’s restaurant segments. See Note 17 for more information on the impairment of our long-lived
assets.
January 2,
2011
Fair Value Measurements 2010
Total LossesLevel 1 Level 2 Level 3
Properties ............................................ $1,975 $— $— $1,975 $58,465
Other intangible assets .................................. — — — — 11,012
Wendy’s/Arby’s Restaurants .......................... 1,975 — — 1,975 69,477
Properties ............................................ — — — — —
Wendy’s/Arby’s ................................... $1,975 $— $— $1,975 $69,477
January 3,
2010
Fair Value Measurements 2009
Total LossesLevel 1 Level 2 Level 3
Properties ............................................ $6,625 $— $— $6,625 $72,282
Other intangible assets .................................. — — — — 7,674
Wendy’s/Arby’s Restaurants .......................... 6,625 — — 6,625 79,956
Aircraft .............................................. — — — — 2,176
Wendy’s/Arby’s ................................... $6,625 $— $— $6,625 $82,132
Derivative instruments
The Companies’ primary objective for entering into derivative instruments is to manage their exposure to
changes in interest rates, as well as to maintain an appropriate mix of fixed and variable rate debt.
During the third quarter of 2009, we entered into eight interest rate swaps with notional amounts totaling
$361,000 to swap the fixed rate interest rates on the 6.20% and 6.25% Wendy’s senior notes for floating rates. The
interest rate swaps were designated as fair value hedges of the related debt and qualify to be accounted for under the
short-cut method according to the applicable guidance.
During the first quarter of 2010, we entered into an interest rate swap with a notional amount of $39,000 on
Wendy’s 6.20% senior notes. At its inception, the interest rate swap was designated as an effective fair value hedge
and is tested for effectiveness quarterly.
In connection with the redemption of the Wendy’s 6.25% senior notes, as discussed above in Note 11—Long-
term Debt, we cancelled four interest rate swaps with notional amounts totaling $175,000. Upon cancellation, we
recognized a gain of $1,875 in the second quarter of 2010, which is included in “Interest expense” for the year ended
January 2, 2011.
At January 2, 2011, the fair value of the interest rate swaps on the 6.20% Wendy’s senior notes was $9,623 and
has been included in “Deferred costs and other assets” and as an adjustment to the carrying amount of the 6.20%
Wendy’s senior notes.
At December 28, 2008, Wendy’s/Arby’s also had the following derivative instruments: (1) put options on
equity securities and (2) total return swaps on equity securities. Wendy’s/Arby’s did not designate these derivatives as
hedging instruments, and accordingly, these derivative instruments were recorded at fair value with changes in fair
value recorded in Wendy’s/Arby’s results of operations.
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