Wendy's 2012 Annual Report Download - page 84

THE WENDY’S COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(In Thousands Except Per Share Amounts)
In 2012, Wendy’s (1) provided a guarantee to certain lenders to the Japan JV for which our joint venture
partners have agreed, should it become necessary, to reimburse and otherwise indemnify us for their 51% share of the
guarantee and (2) agreed to reimburse and otherwise indemnify our joint venture partners for our 49% share of the
guarantee by our joint venture partners of a line of credit granted by a different lender to the Japan JV to fund
working capital requirements. As of December 30, 2012, our portion of these contingent obligations totaled
approximately $3,000 based upon then current rates of exchange. The fair value of our guarantees is immaterial.
In early 2013, the joint venture partners agreed on a plan to finance anticipated future cash requirements of the
Japan JV. As determined by the amount of future capital contributions by each of the partners, Wendy’s may become
the majority owner of the Japan JV. The Japan JV and the effect of the noncontrolling interest in the Japan JV would
then be included in the Wendy’s consolidated financial statements from the date that Wendy’s became the majority
owner, or otherwise assumed day-to-day control of the Japan JV’s operations.
Our obligations, including the funding of anticipated future cash requirements of the Japan JV of
approximately $3,000, could total up to approximately $8,000 if our joint venture partners are unable to perform
their reimbursement and indemnity obligations to us.
Indirect Investment in Arby’s
In connection with the sale of Arby’s, Wendy’s Restaurants obtained an 18.5% equity interest in Buyer Parent
(through which Wendy’s Restaurants indirectly retained an 18.5% interest in Arby’s) with a fair value of $19,000. See
Note 2 for more information on the sale of Arby’s. We account for our interest in Arby’s as a cost method investment.
During 2012, we received a $4,625 dividend from our investment in Arby’s which was included in “Investment
income, net.”
Sale of Investment in Jurlique International Pty Ltd.
Jurl Holdings, LLC (“Jurl”), a 99.7% owned subsidiary, held our approximately 11% cost method investment
in Jurlique International Pty Ltd. (“Jurlique”), an Australian manufacturer of skin care products. Prior to 2009, we
had determined that all of our then remaining $8,500 investment in Jurlique was impaired. On February 2, 2012,
Jurl completed the sale of our investment in Jurlique for which we received proceeds of $27,287, net of the amount
held in escrow. The amount held in escrow as of December 30, 2012 was $3,372, which was adjusted for foreign
currency translation and was included in “Deferred costs and other assets.” In connection with the anticipated
proceeds of the sale and in order to protect ourselves from a decrease in the Australian dollar through the closing date,
we entered into a foreign currency related derivative transaction for an equivalent notional amount in U.S. dollars of
the expected proceeds of A$28,500. We recorded a gain on sale of this investment of $27,407, which included a loss
of $2,913 on the settlement of the derivative transaction discussed above. The gain was included in “Investment
income, net” in our consolidated statement of operations.
We have reflected net income attributable to noncontrolling interests of $2,384, net of an income tax benefit of
$1,283, for the year ended December 30, 2012 in connection with the equity and profit interests discussed below.
The net assets and liabilities of the subsidiary that held the investment were not material to the consolidated financial
statements. Therefore, the noncontrolling interest in those assets and liabilities was not previously reported separately.
As a result of this sale and distributions to the minority shareholders, there are no remaining noncontrolling interests
in this consolidated subsidiary.
Prior to 2009 when our predecessor entity was a diversified company active in investments, we had provided
our Chairman, who was also our then Chief Executive Officer, and our Vice Chairman, who was our then President
and Chief Operating Officer (the “Former Executives”), and certain other former employees, equity and profit
interests in Jurl. In connection with the gain on sale of Jurlique, we distributed, based on the related agreement,
approximately $3,667 to Jurl’s minority shareholders, including approximately $2,296 to the Former Executives.
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