Wendy's 2010 Annual Report Download - page 57

The increase in investment income primarily related to (1) the recognition of income on the DFR Notes as
discussed above in “Introduction and Executive Overview—Deerfield,” and (2) an early withdrawal fee incurred in
2009 that did not recur in 2010. These increases were partially offset by net investment gains recognized in the prior
year that did not recur in 2010. As of January 2, 2011, our remaining investments include a joint venture investment
and certain cost investments.
Our 2009 net gains included realized gains on available-for-sale securities and cost method investments and
unrealized and realized gains on derivative instruments. The change in our recognized net gains in 2009 was primarily
due to: (1) $2.8 million of net unrealized and realized losses on swap derivatives held in 2008, (2) $2.3 million of net
gains that were realized upon the Equities Sale, and (3) a $2.2 million decrease in net realized losses on available for
sale securities held in 2008, as offset by (1) a $9.0 million decrease in net unrealized and realized gains on securities
sold short which were held in 2008, (2) $1.2 million of realized losses on securities sold short in 2009, (3) $0.8
million decrease in unrealized gains on put and call option derivatives that were sold in 2009, and (4) $0.8 million
decrease in gains from the sale of cost method investments. The Withdrawal Fee relates to the fee paid to the
Management Company for the Equities Sale as discussed in “Introduction and Executive Overview—Related Party
Transactions—Equities Account.”
Other Than Temporary Losses on Investments
(Wendy’s/Arby’s)
Change
2010 2009
Cost method investments ........................................... $(3.1) $ (7.2)
Available-for-sale securities, including CDOs ............................ (0.8) (12.3)
DFR common stock ............................................... — (68.1)
DFR Notes ..................................................... — (21.2)
$(3.9) $(108.8)
We did not recognize any other than temporary losses on our remaining investments during 2010. As such the
2010 change reflects 2009 other than temporary losses on investments which did not recur in 2010. Due to market
conditions and other factors present during 2009 and 2008, we recorded other than temporary losses of $3.9 million
and $112.7 million, respectively. The following discussion highlights the activity related to changes in other than
temporary losses on investments in 2009 as compared to 2008.
• Losses due to the reduction in value of our investments
Based on a review of our unrealized investment losses, we determined that the decreases in the fair value
of certain of our investments in 2009 and 2008 were other than temporary due to the severity of the
decline, the financial condition of the investee and the prospect for future recovery in the market value of
the investment. Accordingly, we recorded other than temporary losses on certain common stock, certain
available-for-sale securities, and certain cost method investments.
The 2009 decrease in losses due to the reduction in value of our investments was principally impacted by
the non-recurring 2008 loss on our DFR common stock discussed in “Introduction and Executive
Overview—Deerfield.” In addition, 2009 losses on certain available-for-sale securities were not as
significant due primarily to the Equities Sale in June 2009. Losses in 2009 related to cost method
investments were not as significant due to improved market conditions as compared to 2008.
• Losses due to investment collectability
The 2009 decrease in losses due to investment collectability was impacted by the non-recurring allowance
for doubtful collectability on the DFR Notes recorded in 2008, discussed above in “Introduction and
Executive Overview—Deerfield.”
• Losses due to illiquidity
The 2009 decrease in losses due to illiquidity was due to the 2008 write-down of $8.5 million on our
then entire cost method investment in Jurlique International Pty Ltd, a privately-held Australian upscale
skin care company (“Jurlique”) that did not recur in 2009.
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