Wendy's 2014 Annual Report Download - page 37

facilitates continuity of supply and provides consolidated purchasing efficiencies while monitoring and seeking to
minimize possible obsolete inventory throughout the Wendy’s supply chain in the U.S. and Canada.
Wendy’s and its franchisees pay sourcing fees to third-party vendors on certain products sourced by QSCC.
Such sourcing fees are remitted by these vendors to QSCC and are the primary means of funding QSCC’s operations.
Should QSCC’s sourcing fees exceed its expected needs, QSCC’s board of directors may return some or all of the
excess to its members in the form of a patronage dividend. Wendy’s recorded its share of patronage dividends of
$1.5 million, $3.3 million and $2.5 million in 2014, 2013 and 2012, respectively, which are included as a reduction
of “Cost of sales.”
Effective January 1, 2011, Wendy’s leased 14,333 square feet of office space to QSCC for an annual base rental
of $0.2 million. There is currently one one-year renewal option remaining under this lease.
Noncontrolling Interests in Jurl Holdings, LLC
On February 2, 2012, Jurl Holdings, LLC (“Jurl”), a 99.7% owned subsidiary completed the sale of our
investment in Jurlique International Pty Ltd. (“Jurlique”), an Australian manufacturer of skin care products, for
which we received proceeds of $27.3 million, net of the amount held in escrow. 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$28.5 million. During 2012, we recorded a gain on sale of this investment of
$27.4 million, which included a loss of $2.9 million on the settlement of the derivative transaction discussed above.
The gain was included in “Investment income, net” in our consolidated statement of operations.
In 2012, we reflected net income attributable to noncontrolling interests of $2.4 million, net of an income tax
benefit of $1.3 million, in connection with the equity and profit interests discussed below. 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 $3.7 million in 2012 to Jurl’s minority shareholders, including approximately $2.3 million to the
Former Executives.
Sublease of New York Office Space
In July 2008 and July 2007, The Wendy’s Company entered into agreements under which a management
company formed by the Former Executives and a director, who was our former Vice Chairman (the “Management
Company”) subleased (the “Subleases”) office space on two of the floors of the Company’s former New York
headquarters. During the second quarter of 2010, The Wendy’s Company and the Management Company entered
into an amendment to the sublease, effective April 1, 2010, pursuant to which the Management Company’s early
termination right was canceled in exchange for a reduction in rent. Under the terms of the amended sublease, which
expired in May 2012, the Management Company paid rent to The Wendy’s Company in an amount that covered
substantially all of the Company’s rent obligations under the prime lease for the subleased space.
TASCO Aircraft Lease Agreements
In June 2009, The Wendy’s Company and TASCO, LLC (an affiliate of the Management Company)
(“TASCO”) entered into an aircraft lease agreement (the “Aircraft Lease Agreement”) to lease a company-owned
aircraft. On June 29, 2011, The Wendy’s Company and TASCO entered into an agreement to extend the Aircraft
Lease Agreement for an additional one year period (expiring on June 30, 2012) and an increased monthly rent of
$13,000. On June 30, 2012, The Wendy’s Company and TASCO entered into an extension of that lease agreement
that extended the lease term to July 31, 2012 and effective as of August 1, 2012, entered into an amended and
restated aircraft lease agreement (the “2012 Lease”) that expired on January 5, 2014. Under the 2012 Lease, all
expenses related to the ownership, maintenance and operation of the aircraft were paid by TASCO, subject to certain
limitations and termination rights. The 2012 Lease expired without any limitation or termination provisions being
invoked. The Wendy’s Company did not extend or renew the 2012 Lease.
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