Wendy's 2014 Annual Report Download - page 111

THE WENDY’S COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(In Thousands Except Per Share Amounts)
Wendy’s Canadian subsidiary has established a lease guarantee program to promote new franchisee unit
development for up to an aggregate of C$5,000 for periods of up to five years. Franchisees pay the Canadian
subsidiary a nominal fee for the guarantee. As of December 28, 2014, the Canadian subsidiary had guaranteed $6
under this program.
Insurance
Wendy’s is self-insured for most workers’ compensation losses and purchases insurance for general liability and
automotive liability losses, all subject to a $500 per occurrence retention or deductible limit. Wendy’s determines its
liability for claims incurred but not reported for the insurance liabilities on an actuarial basis. Wendy’s is self-insured
for health care claims for eligible participating employees subject to certain deductibles and limitations and determines
its liability for health care claims incurred but not reported based on historical claims runoff data.
Letters of Credit
As of December 28, 2014, the Company had outstanding letters of credit with various parties including for the
Image Activation financing program described above, totaling $17,060, of which $16,843 were cash collateralized.
The related cash collateral is classified as restricted cash and included in “Prepaid expenses and other current assets” in
the consolidated balance sheet. See Note 5 and Note 10 for further information. We do not expect any material loss
to result from these letters of credit.
Purchase and Capital Commitments
Beverage Agreement
The Company has an agreement with a beverage vendor, which provides fountain beverage products and
certain marketing support funding to the Company and its franchisees. This agreement requires minimum purchases
of fountain syrup (“Syrup”) by the Company and its franchisees at certain agreed upon prices until the total
contractual gallon volume usage is reached. This agreement also provides for an annual advance to be paid to the
Company based on the vendor’s expectation of the Company’s annual Syrup usage, which is amortized over actual
usage during the year. The Company estimates future annual purchases to be approximately $11,600 in 2015, $6,400
in 2016 and $5,200 per year during the following three years. Based on current pricing and the current ratio of usage
at company-owned restaurants to franchised restaurants, our total beverage purchase requirements under the
agreement is estimated to be approximately $45,600 over the remaining life of the contract, which expires the later of
reaching the minimum usage requirement or January 1, 2023.
Beverage purchases made by the Company under this agreement during 2014 and 2013 were $13,918 and
$16,289, respectively. As of December 28, 2014, $2,543 is due to the beverage vendor and is included in “Accounts
payable,” principally for annual estimated payments that exceeded usage, under this agreement.
Capital Expenditure Commitments
As of December 28, 2014, the Company had $45,409 of outstanding commitments, included in “Accounts
payable,” for capital expenditures expected to be paid in 2015.
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