Wendy's 2015 Annual Report Download - page 101

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THE WENDY’S COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(In Thousands Except Per Share Amounts)
in borrowings under the Term A Loans and Term B Loans, respectively, to fixed rate interest payments beginning
June 30, 2015 and maturing on December 31, 2017. In May 2015, the Company terminated these interest rate swaps
and paid $7,275, which was recorded against the derivative liability. In addition, the Company incurred $62 in fees to
terminate the interest rate swaps which was included in “Loss on early extinguishment of debt.” See Note 12 for
further information. The unrealized loss on the cash flow hedges at termination of $7,275 is being reclassified on a
straight-line basis from “Accumulated other comprehensive loss” to “Interest expense” beginning June 30, 2015, the
original effective date of the interest rate swaps through December 31, 2017, the original maturity date of the interest
rate swaps. As a result, the year ended January 3, 2016 includes the reclassification of unrealized losses on the cash
flow hedges of $1,487 from “Accumulated other comprehensive loss” to “Interest expense.”
As of December 28, 2014, the fair value of the cash flow hedges of $3,343 was included in “Other liabilities”
and a corresponding offset to “Accumulated other comprehensive loss.” All of the Company’s financial instruments
were in a liability position as of December 28, 2014 and therefore presented gross in the consolidated balance sheet.
There was no hedge ineffectiveness from these cash flows hedges through their termination in May 2015.
Our derivative instruments for the year ended December 29, 2013 also included interest rate swaps designated
as fair value hedges on our 6.20% Senior Notes with notional amounts totaling $225,000 to swap the fixed rate
interest payments on the 6.20% Senior Notes for floating rate interest payments. In connection with the redemption
of the 6.20% Senior Notes on October 24, 2013, we terminated these interest rate swaps and recognized a
$4,063 benefit from the cumulative effect of our fair value hedges, which was included in “Loss on early
extinguishment of debt” for the year ended December 29, 2013. Upon termination of the interest rate swaps, we
received a $5,708 cash payment, which was recorded against the derivative asset and the related derivative interest
receivable. Interest income on the fair value hedges was $4,319 for the year ended December 29, 2013. There was no
ineffectiveness from these fair value hedges through their termination in October 2013.
Non-Recurring Fair Value Measurements
Assets and liabilities remeasured to fair value on a non-recurring basis during the years ended January 3, 2016
and December 28, 2014 resulted in impairment which we have recorded to “Impairment of long-lived assets” in our
consolidated statements of operations.
Total losses for the years ended January 3, 2016 and December 28, 2014 reflect the impact of remeasuring
long-lived assets held and used (including land, buildings, leasehold improvements and favorable lease assets) to fair
value as a result of (1) the Company’s decision to lease and/or sublease the land and/or buildings to franchisees in
connection with the sale or anticipated sale of restaurants and (2) declines in operating performance at
company-owned restaurants. The fair value of long-lived assets held and used presented in the tables below represents
the remaining carrying value and was estimated based on either discounted cash flows of future anticipated lease and
sublease income or current market values.
Total losses for the years ended January 3, 2016 and December 28, 2014 also include the impact of
remeasuring long-lived assets held for sale which primarily include surplus properties. The fair values of long-lived
assets held for sale presented in the tables below represent the remaining carrying value and were estimated based on
current market values. See Note 17 for more information on impairment of our long-lived assets.
Fair Value Measurements
January 3,
2016 Level 1 Level 2 Level 3
2015
Total Losses
Held and used ............................... $10,244 $— $— $10,244 $22,346
Held for sale ................................. 4,328 — — 4,328 2,655
Total ................................... $14,572 $— $— $14,572 $25,001
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