Acquisitions and 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. (the “Pisces Acquisition”). The purchase price was $18,915 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 consolidated financial statements beginning on the acquisition date. Such results were not material to our 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	$	18,915
Identifiable assets acquired and liabilities assumed:
Cash	55
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)	(382		)
Unfavorable leases	(992		)
Other liabilities	(952		)
Total identifiable net assets	16,354
Goodwill (preliminary) (c)	$	2,561

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


(b)	Included in “Other liabilities.”


(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 following 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.

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



	Year Ended 2012				Year Ended 2011
	As Reported		As Adjusted		As Reported		As Adjusted
Revenues:
Sales	$	2,198,323	$	2,218,199	$	2,126,544	$	2,171,509
Franchise revenues	306,919		306,122		304,814		303,003
Total revenues	2,505,242		2,524,321		2,431,358		2,474,512
Operating profit	122,747		123,823		137,121		139,695
Net income	9,467		10,342		9,875		11,834
Net income attributable to The Wendy’s Company	7,083		7,958		9,875		11,834
Basic and diluted net income per share	$	0.02	$	0.02	$	0.02	$	0.03

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

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 (“Double Cheese”). The purchase price was $19,181 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 with this acquisition.

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

The table below presents the allocation of the total purchase price to the fair value of assets acquired and liabilities assumed at the acquisition date.



Total purchase price paid in cash	$	19,181
Identifiable assets acquired and liabilities assumed:
Cash	27
Inventories	163
Properties	12,753
Deferred taxes and other assets	190
Acquired territory rights (a)	2,640
Favorable ground leases	1,147
Capitalized lease obligations	(948		)
Deferred vendor incentives (b)	(248		)
Unfavorable leases	(531		)
Other liabilities	(727		)
Total identifiable net assets	14,466
Goodwill (c)	$	4,715

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


(b)	Included in “Other liabilities.”


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

The fair values of the identifiable assets acquired were determined using one of the following 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.

In addition, during the year ended December 30, 2012, Wendy’s acquired two other 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 year ended January 1, 2012, Wendy’s acquired 19 franchised restaurants in five separate acquisitions. The total consideration for these acquisitions was $12,270, consisting of (1) $11,210 of cash, net of $66 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 $5,620 recognized as goodwill. During the year ended January 1, 2012, the Company also assumed the operations and management of four additional franchised restaurants.

In connection with one of the 2011 acquisitions described above, Wendy’s terminated certain pre-existing subleases it had with the franchisee. This pre-existing business relationship between parties to a business acquisition is required to be valued, recognized as income or expense, and excluded from purchase accounting. The termination of these unfavorable subleases as of the date of acquisition resulted in an expense of $2,689, which was offset by a gain of $1,659 for the excess of the fair value of the net assets acquired over the consideration paid, both of which are included in “Other operating expense, net.”

Dispositions

During the year ended December 30, 2012, Wendy’s received cash proceeds of $21,023 from dispositions, consisting of (1) $14,059 from the sale of 30 company-owned restaurants to franchisees, (2) $1,874 from the sale of a restaurant to an unrelated third party, (3) $3,550 resulting from franchisees exercising options to purchase previously subleased properties, (4) $941 related to the sale of surplus properties and (5) $599 related to other dispositions. These sales resulted in a net loss of $22 which is included as an addition to “Depreciation and amortization.”

During the year ended January 1, 2012, Wendy’s received proceeds from dispositions of $6,113, consisting of (1) $3,275 from the sale of five company-owned restaurants to franchisees, (2) $1,075 from the sale of land, building and equipment related to the exercise of a purchase option by a franchisee, (3) $909 from the sale of surplus properties and (4) $854 related to other dispositions. These sales resulted in a net gain of $885, which is included as a reduction to “Depreciation and amortization.”

During the year ended January 2, 2011, Wendy’s received proceeds from dispositions of $3,405, consisting of (1) $1,231 from the sale of land and a building related to the exercise of a purchase option by a franchisee, (2) $1,123 from the sale of surplus properties, (3) $821 from the sale of two company-owned restaurants and (4) $230 related to other dispositions. These sales resulted in a net gain of $1,411, which is included as a reduction to “Depreciation and amortization.”

Other acquisitions and dispositions by the Company for 2011 and 2010 and by Arby’s for 2010 and through the date of its sale were not significant.