Discontinued Operations

3 Months Ended

Apr. 03, 2016

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

Discontinued Operations

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.

In conjunction with the Bakery sale, Wendy’s entered into a transition services agreement with the Buyer, pursuant to which Wendy’s provided 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. (“QSCC”), 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 $2,602 for the purchase of sandwich buns during the three months ended April 3, 2016, which has been recorded to “Cost of sales.”

Information related to the Bakery has been reflected in the accompanying condensed 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.

• Statements of operations - The Bakery’s results of operations for the three months ended March 29, 2015 have been presented as discontinued operations.

• Statements of cash flows - The Bakery’s cash flows for the three months ended March 29, 2015 have been included in, and not separately reported from, our consolidated cash flows.

The following table presents the Bakery’s results of operations which have been included in discontinued operations:

	Three Months Ended
	March 29, 2015
Revenues (a)	$	14,477
Cost of sales (b)	1,839
	16,316
General and administrative	(614		)
Depreciation and amortization (c)	(1,335		)
Other expense, net (d)	(22		)
Income from discontinued operations before income taxes	14,345
Provision for income taxes	(4,988		)
Net income from discontinued operations	$	9,357

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(a) Includes sales of sandwich buns and related products previously reported in “Sales” as well as rental income.

(b) Amount includes a reduction to cost of sales of $12,486, as further described in the Form 10-K, resulting from the reversal of a liability recorded during 2013 associated with the Bakery’s withdrawal from a multiemployer pension plan.

(c) Included in “Depreciation and amortization” in our condensed consolidated statements of cash flows for the periods presented.

(d) Includes net losses on sales of other assets.  During the three months ended March 29, 2015, the Bakery received cash proceeds of $9 resulting in net losses on sales of other assets of $8.

The Bakery’s capital expenditures were $587 for the three months endedMarch 29, 2015, which are included in “Capital expenditures” in our condensed consolidated statements of cash flows.