Wendy's 2015 Annual Report Download - page 81

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THE WENDY’S COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(In Thousands Except Per Share Amounts)
commencing with our 2016 fiscal year. We are currently evaluating the impact of the adoption of this amendment on
our consolidated financial statements.
(2) Discontinued Operations
Sale of the Bakery
On May 31, 2015, Wendy’s completed the sale of 100% of its membership interest in the Bakery to East Balt
US, LLC (the “Buyer”) for $78,500 in cash (subject to customary purchase price adjustments). The Company also
assigned certain capital leases for transportation equipment to the Buyer but retained the related obligation. Pursuant
to the sale agreement, the Company was obligated to continue to provide health insurance benefits to the Bakery’s
employees at the Company’s expense through December 31, 2015. The Company recorded a pre-tax gain on the
disposal of the Bakery of $25,529 during the year ended January 3, 2016, which included transaction closing costs
and a reduction of goodwill. The Company recognized income tax expense associated with the gain on disposal of
$14,860 during the year ended January 3, 2016, which included the impact of the disposal of non-deductible
goodwill.
In conjunction with the Bakery sale, Wendy’s entered into a transition services agreement with the Buyer,
pursuant to which Wendy’s will provide certain continuing corporate and shared services to the Buyer through
March 31, 2016 for no additional consideration. A purchasing cooperative, Quality Supply Chain Co-op, Inc.,
established by Wendy’s and its franchisees, agreed to continue to source sandwich buns from the Bakery, for a specified
time period following the sale of the Bakery. As a result, Wendy’s paid the Buyer $8,358 for the purchase of sandwich
buns during the period from June 1, 2015 through January 3, 2016, which has been recorded to “Cost of sales.”
Information related to the Bakery has been reflected in the accompanying consolidated financial statements as
follows:
• Balance sheets — As a result of our sale of the Bakery on May 31, 2015, there are no remaining Bakery assets
and liabilities. The Bakery’s assets and liabilities as of December 28, 2014 have been presented as
discontinued operations.
• Statements of operations — The Bakery’s results of operations for the period from December 29, 2014
through May 31, 2015 and the years ended December 28, 2014 and December 29, 2013 have been
presented as discontinued operations. In addition, the gain on disposal of the Bakery has been included in
“Net income (loss) from discontinued operations” for the year ended January 3, 2016.
• Statements of cash flows — The Bakery’s cash flows prior to its sale (for the period from December 29, 2014
through May 31, 2015 and for the years ended December 28, 2014 and December 29, 2013) have been
included in, and not separately reported from, our consolidated cash flows. The consolidated statement of
cash flows for the year ended January 3, 2016 also includes the effects of the sale of the Bakery.
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