Wendy's 2010 Annual Report Download - page 141

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)
(u) Wendy’s/Arby’s Restaurants provides share based compensation with respect to Wendy’s/Arby’s Common Stock
to certain employees. Such compensation cost is allocated by Wendy’s/Arby’s to Wendy’s/Arby’s Restaurants and
is correspondingly recorded as capital contributions from Wendy’s/Arby’s.
(v) Wendy’s/Arby’s Restaurants made payments to Wendy’s/Arby’s under a tax sharing agreement, as discussed in
more detail in Note 13, which were settled in cash with Wendy’s/Arby’s.
(w) Wendy’s/Arby’s Restaurants receives certain management services, including legal, accounting, tax, insurance,
financial and other management services from Wendy’s/Arby’s. In connection with the RTM Acquisition, Arby’s
entered into a management services agreement with Wendy’s/Arby’s effective July 25, 2005 that provides for an
initial annual fixed fee of $4,500 plus annual cost of living adjustments beginning January 1, 2006. Such fees are
included in “General and administrative.” Amounts incurred under such service arrangements, and other
incidental amounts, are settled through Wendy’s/Arby’s Restaurants’ intercompany account with Wendy’s/
Arby’s. As a result of the 2005 agreement with Wendy’s/Arby’s described above, Wendy’s/Arby’s Restaurants’
results of operations may not be indicative of those that would be achieved if they had operated on a stand alone
basis.
In 2008, Wendy’s/Arby’s Restaurants also provided services to Wendy’s/Arby’s. Costs of the services that were
allocated to Wendy’s/Arby’s were based on actual direct costs incurred. The reimbursement of these costs totaled
$6,472 for 2008 and is included as a reduction of “General and administrative.”
(25) Legal and Environmental Matters
We are involved in litigation and claims incidental to our current and prior businesses. As of January 2, 2011,
Wendy’s/Arby’s Restaurants had reserves for all of its legal and environmental matters aggregating $3,739, which are
included in the $3,855 reserved by Wendy’s/Arby’s for all legal and environmental matters. Although the outcome of
these matters cannot be predicted with certainty and some of these matters may be disposed of unfavorably to us,
based on currently available information, including legal defenses available to us, and given the aforementioned
reserves and our insurance coverage, we do not believe that the outcome of these legal and environmental matters will
have a material adverse effect on our consolidated financial position or results of operations.
(26) Advertising Costs and Funds
Since the Wendy’s Merger, the Companies participate in three national advertising funds (the “Advertising
Funds”) established to collect and administer funds contributed for use in advertising and promotional programs.
Contributions to the Advertising Funds are required from both company-owned and franchise restaurants and are
based on a percentage of restaurant sales. In addition to the contributions to the various Advertising Funds, company-
owned and franchise restaurants make additional contributions to other local and regional advertising programs.
Restricted assets and related liabilities of the Advertising Funds at January 2, 2011 and January 3, 2010 are as
follows:
Year End
2010 2009
Cash and cash equivalents ........................................... $23,102 $ 21,856
Accounts and notes receivable ........................................ 42,672 42,195
Other assets ...................................................... 10,779 16,425
Total assets ...................................................... $76,553 $ 80,476
Accounts payable .................................................. $ 3,724 $ 15,299
Accrued expenses and other current liabilities ............................ 76,897 79,121
Member’s deficit .................................................. (4,068) (13,944)
Total liabilities and deficit ........................................... $76,553 $ 80,476
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