Acquisitions and Dispositions

Acquisitions

During the year ended December 28, 2014, Wendy’s acquired 45 franchised restaurants for total net cash consideration of $53,954. The total consideration was allocated to net tangible and identifiable intangible assets acquired, primarily properties of $19,857 and franchise rights of $6,650, based on their estimated fair values. Of these restaurants, 18 were acquired in the fourth quarter and immediately sold to a franchisee. As a result, no intangible assets or goodwill were recognized on this acquisition. The Company retained the land, building and leasehold improvements, which have been leased to the franchisee. Three of the franchised restaurants were acquired during the second quarter of 2014 and the fair value of the assets acquired exceeded the total consideration, resulting in income of $349 after post-closing adjustments which is included in “Other operating expense, net.” The remaining franchised restaurants acquired during 2014 resulted in an excess of consideration over the estimated fair value of assets acquired of $11,455 which was recognized as goodwill.

During the year ended December 29, 2013, Wendy’s acquired one franchised restaurant; such transaction was not significant. See Note 6 for discussion of the step-acquisition of our investment in a joint venture in Japan.

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 were included in our consolidated financial statements beginning on the acquisition date through the subsequent sale during the fourth quarter of 2013 to a franchisee in connection with our system optimization initiative. Such results were not material to our consolidated financial statements.

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



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	(382		)
Unfavorable leases	(992		)
Other liabilities	(952		)
Total identifiable net assets	16,354
Goodwill (b)	$	2,561

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(a)	The acquired territory rights had a weighted average amortization period of 13 years. Due to the subsequent sale of this territory, we accelerated the amortization through the date of sale.


(b)	This goodwill was not deductible or amortizable for income tax purposes. In addition, the goodwill was disposed of as a result of the subsequent sale of this territory.

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.

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 were included in our consolidated financial statements beginning on the acquisition date through the subsequent sale during the first quarter of 2014 to a franchisee in connection with our system optimization initiative. 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	(248		)
Unfavorable leases	(531		)
Other liabilities	(727		)
Total identifiable net assets	14,466
Goodwill (b)	$	4,715

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(a)	The acquired territory rights had a weighted average amortization period of 13 years. Due to the sale of this territory, we accelerated the amortization through the date of sale.


(b)	This goodwill was partially amortizable for income tax purposes. In addition, the goodwill was disposed of as a result of the subsequent sale of this territory.

During the year ended December 30, 2012, Wendy’s 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.

Dispositions

During the year ended December 28, 2014, Wendy’s received cash proceeds of $53,553 from dispositions, which were not included in the system optimization initiative, consisting of (1) $36,238 from the sale of 52 company-owned restaurants to franchisees, including the 18 restaurants acquired in the fourth quarter mentioned above, (2) $8,699 primarily from the sale of surplus properties and (3) $8,616 from the sale of company-owned aircraft. These sales resulted in a net gain of $21,948 which is included in “Other operating expense, net,” and a reduction to goodwill of $3,344 related to the sale of company-owned restaurants. In connection with certain sales of the company-owned restaurants, we received notes receivable of $3,934 from franchisees. As a result we have deferred the gains on such sales totaling $5,116, which will be recognized when the notes are repaid. The deferred gains on these dispositions are included in “Accrued expenses and other current liabilities.”

During the year ended December 29, 2013, Wendy’s received cash proceeds of $18,958 from dispositions not included in the system optimization initiative, consisting of (1) $10,305 primarily from the sale of surplus properties and (2) $8,653 resulting from franchisees exercising options to purchase previously leased properties. These sales resulted in a net gain of $4,705 which is included in “Other operating expense, net.”

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.

See Note 2 for discussion of restaurant dispositions in connection with our system optimization initiative.