Acquisitions and Other Dispositions

On June 11, 2012, Wendy’s acquired 30 franchised restaurants in the Austin, Texas area from Pisces Foods, L.P. (“Pisces”) and Near Holdings, L.P., pursuant to the terms of an Asset Purchase Agreement dated as of June 5, 2012 (the “Pisces Acquisition”). The purchase price was $18,956 in cash, including closing adjustments. Wendy’s also agreed to lease the real estate, buildings and improvements related to 23 of the acquired restaurants from Pisces which were considered part of the purchase transaction and to assume ground leases for five of the acquired restaurants and building leases for two of the acquired restaurants. Wendy’s did not incur any material acquisition-related costs associated with the Pisces Acquisition.

The operating results of the 30 franchised restaurants acquired have been included in our unaudited condensed consolidated financial statements beginning on the acquisition date. Such results were not material to our unaudited condensed consolidated financial statements.

The table below presents the preliminary allocation of the total purchase price to the fair value of assets acquired and liabilities assumed at the acquisition date. The amounts remain subject to finalization during the measurement period, not to exceed one year.



Total purchase price paid in cash	$	18,956
Identifiable assets acquired and liabilities assumed:
Cash	58
Inventories	149
Properties	12,485
Deferred taxes and other assets	1,773
Acquired territory rights (a)	18,390
Favorable ground leases	222
Capitalized lease obligations	(14,394		)
Deferred vendor incentives (b)	(332		)
Unfavorable leases	(992		)
Other liabilities	(952		)
Total identifiable net assets	16,407
Goodwill (preliminary) (c)	$	2,549

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(a)	The acquired territory rights have a weighted average amortization period of 13 years.


(b)	Included in “Deferred income.”


(c)	This goodwill is not deductible or amortizable for income tax purposes.

The preliminary fair values of the identifiable assets acquired were determined using one of the valuation approaches: market, income and cost. The selection of a particular method for a given asset depended on the reliability of available data and the nature of the asset.

Summarized below is the change in goodwill during the three months ended September 30, 2012 resulting from changes in the preliminary allocation of the total purchase price to the estimated fair values of identifiable assets acquired and liabilities assumed:



Goodwill as reported at July 1, 2012	$	2,654
Changes in fair values of assets and liabilities:
Properties	498
Deferred taxes and other assets	(146		)
Acquired territory rights	90
Favorable ground leases	(52		)
Capitalized lease obligations	(377		)
Unfavorable leases	169
Other	(287		)
Goodwill as of September 30, 2012	$	2,549

The pro forma revenue and earnings of the combined companies had the acquisition date been January 3, 2011 are as follows:



	Three Months Ended September 30, 2012						Three Months Ended October 2, 2011
	As Reported			As Adjusted			As Reported			As Adjusted
Revenues:
Sales	$	558,335		$	558,335		$	534,525		$	545,707
Franchise revenues	77,973			77,973			76,891			76,442
Total revenues	$	636,308		$	636,308		$	611,416		$	622,149
Operating profit	$	31,183		$	31,183		$	32,390		$	32,813
Net loss	(26,162		)	(26,162		)	(3,966		)	(3,688		)
Net loss attributable to The Wendy’s Company	(26,162		)	(26,162		)	(3,966		)	(3,688		)
Basic and diluted loss per share	$	(.07	)	$	(.07	)	$	(.01	)	$	(.01	)



	Nine Months Ended September 30, 2012						Nine Months Ended October 2, 2011
	As Reported			As Adjusted			As Reported		As Adjusted
Revenues:
Sales	$	1,644,380		$	1,664,256		$	1,588,048	$	1,622,046
Franchise revenues	230,983			230,186			228,292		226,934
Total revenues	$	1,875,363		$	1,894,442		$	1,816,340	$	1,848,980
Operating profit	$	90,490		$	91,566		$	107,841	$	109,714
Net (loss) income	(16,921		)	(16,046		)	5,891		7,347
Net (loss) income attributable to The Wendy’s Company	(19,305		)	(18,430		)	5,891		7,347
Basic and diluted (loss) income per share	$	(.05	)	$	(.05	)	$	.01	$	.02

This As Adjusted data is presented for comparative purposes only and does not purport to be indicative of the Company’s actual results of operations had the Pisces Acquisition actually occurred as of January 3, 2011 or of the Company’s future results of operations. Wendy’s did not have any material non-recurring adjustments associated with the Pisces Acquisition.

Other acquisitions and other dispositions

On July 13, 2012, Wendy’s acquired 24 franchised restaurants in the Albuquerque, New Mexico area from Double Cheese Corporation and Double Cheese Realty Corporation (collectively “Double Cheese”), pursuant to the terms of an Asset Purchase Agreement dated as of July 6, 2012 (the “Double Cheese Acquisition”). The purchase price was $19,129 in cash, including closing adjustments. Wendy’s also agreed to lease the real estate, buildings and improvements related to 12 of the acquired restaurants from Double Cheese which were considered part of the purchase transaction. Wendy’s did not incur any material acquisition-related costs associated with the Double Cheese Acquisition.

The operating results of the 24 franchised restaurants acquired have been included in our unaudited condensed consolidated financial statements beginning on the acquisition date. Such results were not material to our unaudited condensed consolidated financial statements.



Total purchase price paid in cash	$	19,129
Identifiable assets acquired and liabilities assumed:
Cash	27
Inventories	163
Properties	12,783
Other assets	33
Acquired territory rights (a)	5,350
Favorable ground leases	1,147
Capitalized lease obligations	(948		)
Deferred vendor incentives (b)	(249		)
Unfavorable leases	(533		)
Other liabilities	(744		)
Total identifiable net assets	17,029
Goodwill (preliminary) (c)	$	2,100

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(a)	The acquired territory rights have a weighted average amortization period of 12 years.


(b)	Included in “Deferred income.”


(c)	Goodwill is partially amortizable for income tax purposes.

During the first quarter of 2012, the Company also acquired two franchised restaurants along with certain other equipment and franchise rights. The total net cash consideration for this acquisition was $2,594. The total consideration was allocated to net tangible and identifiable intangible assets acquired, primarily properties, and liabilities assumed based on their estimated fair values, with the excess of $485 recognized as goodwill.

During the nine months ended October 2, 2011, the Company acquired nine franchised restaurants in three separate acquisitions. The total consideration for these acquisitions was $7,673, consisting of (1) $6,613 of cash, net of $55 of cash acquired, and (2) the issuance of a note payable of $1,060. The total consideration was allocated to net tangible and identifiable intangible assets acquired, primarily properties, and liabilities assumed based on their estimated fair values, with the excess of $3,689 recognized as goodwill. During the nine months ended October 2, 2011, the Company also assumed the operations and management of four additional franchised restaurants.

During the nine months ended September 30, 2012, the Company received cash proceeds of $6,273 and $400 in promissory notes from dispositions, consisting of (1) $2,293 from the sale of three company-owned restaurants to franchisees, (2) $1,874 from the sale of a restaurant to an unrelated third party, (3) $1,591 resulting from franchisees exercising options to purchase previously subleased properties, (4) $199 from the sale of surplus properties, and (5) $316, as well as $400 in promissory notes related to other dispositions. These sales resulted in a net gain of $974 which is included as a reduction to “Depreciation and amortization.”

During the nine months ended October 2, 2011, the Company received proceeds from dispositions of $2,865 consisting of (1) $1,125 from the sale of three company-owned restaurants to franchisees, (2) $899 from the sale of surplus properties, and (3) $841 related to other dispositions. These sales resulted in a net gain of $744 which is included as a reduction to “Depreciation and amortization.”