Wendy's 2010 Annual Report Download - page 55

The 2010 decrease in depreciation and amortization was primarily related to (1) an adjustment of $6.5 million
in the prior year related to a one-time increase in depreciation as a result of refinements to the Wendy’s purchase price
allocation (including long-lived assets) and (2) a reduction in depreciation related to Wendy’s and Arby’s previously
impaired long-lived assets. These decreases were partially offset by increases in the amortization of software and related
costs capitalized in connection with the establishment of the shared services center.
The 2009 increase was primarily related to the increase in long-lived assets as a result of the Wendy’s Merger.
The 2009 increase was also affected by a one-time increase in depreciation and an increase in the amortization of
capitalized software related to the establishment of the shared services center, both as discussed above. These 2009
increases were partially offset by the reduction in depreciation of Arby’s long-lived assets related to impairment
charges previously recorded.
Goodwill Impairment
We operate in two business segments consisting of two restaurant brands: (1) Wendy’s restaurants and
(2) Arby’s restaurants. Each segment includes reporting units for company-owned restaurants and franchise operations
for purposes of measuring goodwill impairment.
We performed our annual goodwill impairment test in the fourth quarters of each of the fiscal years presented.
In 2008, as a result of the acceleration of the general economic and market downturn, as well as continued decreases
in Arby’s same-store sales, we concluded that the carrying amount of the Arby’s company-owned restaurant reporting
unit exceeded its fair value. Accordingly, we recorded impairment charges of $460.1 million in 2008.
Impairment of Long-Lived Assets
Change
2010 2009
Wendy’s restaurants, primarily properties at underperforming locations ............ $ 2.8 $21.9
Arby’s restaurants, primarily properties at underperforming locations .............. (13.4) 48.5
Total Wendy’s/Arby’s Restaurants ..................................... (10.6) 70.4
Corporate, aircraft ..................................................... (2.1) (7.5)
Total Wendy’s/Arby’s .............................................. $(12.7) $62.9
The increase in charges for impairment of Wendy’s long-lived assets in 2010 was primarily the result of the
deterioration in operating performance of certain Wendy’s company-owned restaurants. The decline in Arby’s
company-owned restaurants impairment was primarily due to the level of impairment charges taken in prior
periods. On a consolidated basis, the decline in Arby’s-related impairment charges more than offset the increase in
Wendy’s-related impairment charges. Wendy’s/Arby’s impairment charges were further impacted by impairment
recorded in 2009 related to one of our corporate aircraft which did not recur in 2010. The aircraft was classified as
held for sale in the 2009 second quarter and sold in July 2009.
The 2009 increase in charges for the impairment of long-lived assets was primarily the result of the
deterioration in operating performance of certain Wendy’s and Arby’s restaurants. As discussed above, Wendy’s/
Arby’s also recorded impairment on one of their corporate aircraft during 2009, but to a lesser extent as compared to
impairment charges recorded in 2008.
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