Wendy's 2012 Annual Report Download - page 76

THE WENDY’S COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(In Thousands Except Per Share Amounts)
limitations and favorable settlements. The benefit from income taxes for the year ended December 30, 2012 includes
approximately $580 of employment credits realized by the Company for 2011 through the date of the sale of Arby’s
and reversals of accruals for uncertain tax positions discussed above, partially offset by taxes on income from
discontinued operations. Loss on disposal of discontinued operations, net of income taxes, for the year ended
December 30, 2012, includes the after tax effect of amounts paid to the prior owner of an Arby’s location that was
transferred to Wendy’s Restaurants during 2012, as contemplated in the sale agreement, and as such, had no impact
on the total purchase price.
Included in income from discontinued operations before income taxes for the year ended January 1, 2012 are
(1) Arby’s income from operations for the period from January 3, 2011 through July 3, 2011 of $4,279, (2) $(2,112)
for certain sales and use tax liabilities pursuant to the indemnification provisions of the sale agreement, (3) incentive
compensation of $(704) as a result of the completion of the Arby’s sale, (4) the reversal of previously recognized
compensation costs of $529 due to the modification of the terms of stock awards which had been issued to Arby’s
employees and (5) $(300) for other Arby’s related costs.
The Company recorded a pre-tax loss on disposal of Arby’s of $5,227 during the year ended January 1, 2012,
which included the effect of the valuation of our indirect retained interest ($19,000), transaction closing costs
($11,500), and post closing purchase price adjustments primarily related to working capital ($14,800). The Company
recognized income tax expense associated with the loss on disposal of $3,572 during the year ended January 1, 2012.
This income tax expense was comprised of (1) an income tax benefit of $1,952 on the pre-tax loss on disposal and
(2) income tax expense of $5,524 due to a permanent difference between the book and tax basis of Arby’s goodwill.
(3) Acquisitions and Dispositions
On June 11, 2012, Wendy’s acquired 30 franchised restaurants in the Austin, Texas area from Pisces Foods,
L.P. (“Pisces”) and Near Holdings, L.P. (the “Pisces Acquisition”). The purchase price was $18,915 in cash, including
closing adjustments. Wendy’s also agreed to lease the real estate, buildings and improvements related to 23 of the
acquired restaurants from Pisces which were considered part of the purchase transaction and to assume ground leases
for five of the acquired restaurants and building leases for two of the acquired restaurants. Wendy’s did not incur any
material acquisition-related costs associated with the Pisces Acquisition.
The operating results of the 30 franchised restaurants acquired have been included in our consolidated financial
statements beginning on the acquisition date. Such results were not material to our consolidated financial statements.
The table below presents the preliminary allocation of the total purchase price to the fair value of assets acquired
and liabilities assumed at the acquisition date. The amounts remain subject to finalization during the measurement
period, not to exceed one year.
Total purchase price paid in cash ........................................................ $18,915
Identifiable assets acquired and liabilities assumed:
Cash ...................................................................... 55
Inventories ................................................................. 149
Properties .................................................................. 12,485
Deferred taxes and other assets .................................................. 1,773
Acquired territory rights (a) .................................................... 18,390
Favorable ground leases ....................................................... 222
Capitalized lease obligations .................................................... (14,394)
Deferred vendor incentives (b) .................................................. (382)
Unfavorable leases ........................................................... (992)
Other liabilities ............................................................. (952)
Total identifiable net assets ................................................ 16,354
Goodwill (preliminary) (c) ............................................................. $ 2,561
(a) The acquired territory rights have a weighted average amortization period of 13 years.
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