Wendy's 2011 Annual Report Download - page 52

Liquidity and Capital Resources
The Companies’ discussion below regarding its liquidity and capital resources includes both Wendy’s and
Arby’s. Arby’s cash flows prior to its sale (for the period from January 3, 2011 through July 3, 2011 and for the years
ended January 2, 2011 and January 3, 2010) have been included in, and not separately reported from, our cash flows.
The consolidated statements of cash flows for the year ended January 1, 2012 also includes the effects of the sale of
Arby’s. The following tables included throughout Liquidity and Capital Resources present dollars in millions.
Net Cash Provided by Operating Activities
2011 Compared with 2010
(The Wendy’s Company)
Cash provided by operating activities increased $20.5 million during the year ended January 1, 2012 as
compared to the year ended January 2, 2011, primarily due to the following:
• a $40.6 million favorable impact in accrued expenses and other current liabilities for the comparable periods.
This favorable impact was primarily due to the following: (1) an increase in amounts accrued for
termination, severance and relocation costs associated with the sale of Arby’s and the related plans for the
relocation of the Companies’ Atlanta headquarters and restaurant support center to Ohio, (2) payments to
QSCC in the first quarter of 2010 which were accrued in 2009, (3) a decrease in amounts paid in 2011
versus 2010 under incentive compensation plans for the 2010 and 2009 fiscal years, respectively, and (4) a
decrease in interest payments in 2011 compared to 2010, partially offset by a decrease in accrued interest
expense both primarily due to the redemption of the Wendy’s 6.25% senior notes in the second quarter of
2010 and a $190 million decrease in long-term debt which was assumed by Buyer on July 4, 2011. These
favorable changes were partially offset by a decrease in the current income tax provision due to variations in
taxable income of continuing operations during the same comparable periods;
• a $27.2 million favorable impact in accounts payable resulting from an increase in accounts payable of $11.4
million during 2011 compared to a decrease in accounts payable of $15.8 million during 2010. The changes
for 2011 and 2010 were primarily due to the following: (1) an increase in amounts payable for food
purchases at Wendy’s as a result of higher sales trends in 2011 as compared to 2010, (2) a decrease in
payments for expenses at Arby’s as a result of its sale on July 4, 2011, (3) amounts payable related to the
Wendy’s annual convention held in the 2011 fourth quarter, and (4) a decrease in payments for Wendy’s
kids’ meal promotion items as the management for kids’ meal promotion items sold to franchisees was
transferred to QSCC in the first quarter of 2011;
• a $31.4 million favorable impact in deferred income taxes due to variations in taxable income of continuing
operations during the comparable periods, net foreign tax credits and a reduction in valuation allowances
related to state tax matters; and
• an $8.8 million favorable impact due to the loss on disposal on the sale of Arby’s;
partially offset by a $91.9 million decrease due to the following:
• $55.0 million decrease in impairment of long-lived assets (including a decrease of $41.6 million of
impairment of long-lived assets for Arby’s) as compared to the prior period; and
• $36.9 million decrease in depreciation and amortization primarily as a result of twelve months of
depreciation and amortization for Arby’s in 2010 as compared to five months in 2011 due to the
classification of Arby’s as a discontinued operation in May 2011.
(Wendy’s Restaurants)
Cash provided by operating activities increased $13.9 million during the year ended January 1, 2012 as
compared to the year ended January 2, 2011 primarily due to the following:
• a $43.5 million favorable impact in accrued expenses and other current liabilities for the comparable periods.
This favorable impact was primarily due to the following: (1) an increase in amounts accrued for
termination, severance and relocation costs associated with the sale of Arby’s and the related plans for the
48