Wendy's 2010 Annual Report Download - page 140

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)
invested in operating companies. During 2009 and 2008, Wendy’s/Arby’s received distributions of $795 and
$2,014, respectively, from the liquidation of certain of the investments owned by 280 BT. The minority portions of
these distributions of $156 and $402 in 2009 and 2008, respectively, were further distributed to 280 BT’s minority
shareholders. No distributions were received in 2010. The ownership percentages as of January 2, 2011 were 80.1%,
11.2% and 8.7% for Wendy’s/Arby’s, the former officers of Wendy’s/Arby’s and other investors, respectively.
On September 29, 2008, J. David Karam, a minority shareholder, director and former president of Cedar
Enterprises, Inc., which directly or through affiliates is a Wendy’s franchisee operator of 146 Wendy’s restaurants as
of January 2, 2011, and 133 as of January 3, 2010 and December 28, 2008, became President of Wendy’s. In
connection with Mr. Karam’s employment, Mr. Karam resigned as a director and president of Cedar Enterprises, Inc.
but retained his minority ownership. After the Wendy’s Merger, the Companies recorded $7,315, $6,240 and $1,801
in royalties and $5,471, $4,633 and $1,339 in advertising fees in 2010, 2009, and 2008, respectively, from Cedar
Enterprises and its affiliates as a franchisee of Wendy’s. Cedar Enterprises, Inc. and its affiliates also received $125,
$175 and $75 in remodeling incentives in 2010, 2009, and 2008 (the period from September 29, 2008 through
December 28, 2008), respectively, from Wendy’s pursuant to a program generally available to Wendy’s franchisees,
and $774 in 2010 related to funding for equipment related to their participation in product development testing.
Mr. Karam was also a minority investor in two other Wendy’s franchisee operators, Emerald Food, Inc. and
Diamond Foods, L.L.C., which, at the time, were operators of 44 and 16 Wendy’s restaurants, respectively.
Mr. Karam disposed of his interests in these companies effective November 5, 2008.
(Wendy’s/Arby’s Restaurants)
The following is a summary of transactions between Wendy’s/Arby’s Restaurants and Wendy’s/Arby’s:
2010 2009 2008
Dividends paid (r) ............................................... $443,700 $115,000 $ —
Cost allocation to restaurant segments (s) .............................. — 34,085 —
Advances paid (t) ................................................ — — 155,000
Capital contributions received (t) .................................... — — (150,177)
Other transactions:
Share-based compensation (u) .................................. 12,790 13,570 8,770
Payments for Federal and state income tax (v) ...................... — 10,417 17,000
Expense (net credit) under management service agreements (w) ......... 5,017 5,017 (1,504)
(r) Wendy’s/Arby’s Restaurants paid cash dividends to Wendy’s/Arby’s which were charged to “Invested
equity.” During the 2010 second quarter, dividends paid to Wendy’s/Arby’s included $325,000 as specifically
permitted under the terms of the Credit Agreement.
(s) For the first quarter of 2009, Wendy’s/Arby’s charged the restaurant segments $34,085 for support services. Prior
to that date, the restaurant segments had directly incurred such costs. These costs are included in “General and
administrative.” During 2009, we settled $20,526 of such support center costs in cash through our intercompany
account with Wendy’s/Arby’s.
On the first day of the second quarter of 2009, we established a shared service center in Atlanta, Georgia. As a
result, support center costs from that date have been directly incurred by Wendy’s/Arby’s Restaurants and were
allocated to the restaurant segments based on budgeted revenues.
(t) During the fourth quarter of 2008, Wendy’s/Arby’s Restaurants advanced an aggregate of $155,000 to Wendy’s/
Arby’s; Wendy’s/Arby’s used such advances principally to fund $150,177 of capital contributions to
Arby’s. Arby’s used a portion of these capital contributions to prepay the prior Arby’s amended term loan in an
aggregate principal amount of $143,200. These advances by Wendy’s/Arby’s Restaurants do not bear interest and
Wendy’s/Arby’s does not currently intend to repay such advances. Accordingly, the $155,000 of advances were
reflected as a reduction of “Invested equity.”
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