Wendy's 2015 Annual Report Download - page 99

THE WENDY’S COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(In Thousands Except Per Share Amounts)
(b) Wendy’s 7% debentures are unsecured and were reduced to fair value in connection with the Wendy’s merger
based on their outstanding principal of $100,000 and an effective interest rate of 8.6%. The fair value
adjustment is being accreted and the related charge included in “Interest expense” until the debentures mature.
These debentures contain covenants that restrict the incurrence of indebtedness secured by liens and certain
capitalized lease transactions. Wendy’s was in compliance with these covenants as of January 3, 2016.
(c) During the second quarter of 2015, the Company early adopted an amendment requiring debt issuance costs to
be presented in the balance sheet as a direct reduction of the related debt liability rather than as an asset. The
adoption of this guidance resulted in the reclassification of debt issuance costs of $8,243 from “Other assets” to
“Long-term debt” in our consolidated balance sheet as of December 28, 2014. See Note 1 for further
information.
Wendy’s U.S. advertising fund has a revolving line of credit of $25,000. Neither the Company, nor Wendy’s, is
the guarantor of the debt. The advertising fund facility was established to fund the advertising fund operations. The
full amount of the line was available under this line of credit as of January 3, 2016.
At January 3, 2016, one of Wendy’s Canadian subsidiaries had a revolving credit facility of C$6,000 which
bears interest at the Bank of Montreal Prime Rate. The debt is guaranteed by Wendy’s. The full amount of the line
was available under this line of credit as of January 3, 2016.
The following is a summary of the Company’s assets pledged as collateral for certain debt:
Year End
2015
Cash and cash equivalents ................................................... $ 43,535
Accounts and notes receivable (including long-term) .............................. 45,545
Inventories .............................................................. 2,758
Properties ............................................................... 140,157
Other intangible assets ..................................................... 1,126,859
Restricted cash and other assets (including long-term) ............................. 29,425
$1,388,279
(13) Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. Valuation techniques under the accounting
guidance related to fair value measurements are based on observable and unobservable inputs. Observable inputs
reflect readily obtainable data from independent sources, while unobservable inputs reflect our market assumptions.
These inputs are classified into the following hierarchy:
Level 1 Inputs - Quoted prices for identical assets or liabilities in active markets.
Level 2 Inputs - Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or
similar assets or liabilities in markets that are not active; and model-derived valuations whose inputs are
observable or whose significant value drivers are observable.
Level 3 Inputs - Pricing inputs are unobservable for the assets or liabilities and include situations where there is
little, if any, market activity for the assets or liabilities. The inputs into the determination of fair value require
significant management judgment or estimation.
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