Attached files
| file | filename |
|---|---|
| 10-K - WAR 2009 10-K - Wendy's/Arby's Restaurants, LLC | form10-k_war2009march2010.htm |
| EX-4.6 - EXHIBIT 4.6 - Wendy's/Arby's Restaurants, LLC | exhibit4-6_march2010.htm |
| EX-31.2 - EXHIBIT 31.2 CFO CERT - Wendy's/Arby's Restaurants, LLC | exhibit31-2_march2010.htm |
| EX-32.1 - EXHIBIT 32.1 CEO & CFO CERT - Wendy's/Arby's Restaurants, LLC | exhibit32-1_march2010.htm |
| EX-31.1 - EXHIBIT 31.1 CEO CERT - Wendy's/Arby's Restaurants, LLC | exhibit31-1_march2010.htm |
Report of Independent Registered Public Accounting Firm
To the Partners of
TIMWEN Partnership
We have audited the accompanying balance sheets of TIMWEN Partnership as of January 3, 2010 and December 28, 2008, and the related statements of income and comprehensive income, partners’ equity and cash flows for the years then ended. These financial statements are the responsibility of the partnership’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America and with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of TIMWEN Partnership at January 3, 2010 and December 28, 2008, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
/s/ PricewaterhouseCoopers LLP
Chartered Accountants, Licensed Public Accountants
Toronto, Ontario, Canada
March 3, 2010
TIMWEN Partnership
Balance Sheets
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January 3, 2010
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December 28, 2008
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Assets
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||||||||
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Revenue-producing properties
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$ | 83,077,625 | $ | 87,291,598 | ||||
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Cash and cash equivalents
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74,876 | 5,063,334 | ||||||
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Accounts receivable
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4,988,910 | 3,338,837 | ||||||
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Investment in Grimsby Food Court Ltd.
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2,513,657 | 2,533,133 | ||||||
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Prepaid rent
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637,155 | 609,489 | ||||||
| $ | 91,292,223 | $ | 98,836,391 | |||||
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Liabilities
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||||||||
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Accounts payable and accrued liabilities
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$ | 2,257,466 | $ | 2,521,304 | ||||
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Deferred lease inducements
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3,961,036 | 4,254,108 | ||||||
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Straight-line rent
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5,119,497 | 6,639,115 | ||||||
| 11,337,999 | 13,414,527 | |||||||
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Commitments and contingencies
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||||||||
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Partners’ equity
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79,954,224 | 85,421,864 | ||||||
| $ | 91,292,223 | $ | 98,836,391 | |||||
See accompanying notes to the financial statements.
TIMWEN Partnership
Statements of Income and Comprehensive Income
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Year Ended
January 3, 2010
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Year Ended
December 28, 2008
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Revenues
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Rental income
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$ | 38,471,112 | $ | 37,525,532 | ||||
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Expenses
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Rental expense - net of lease inducements
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5,980,430 | 7,547,976 | ||||||
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Operating expenses
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424,966 | 440,427 | ||||||
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Depreciation and amortization
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4,711,046 | 4,797,801 | ||||||
| 11,116,442 | 12,786,204 | |||||||
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Operating income
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27,354,670 | 24,739,328 | ||||||
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Other income
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||||||||
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Interest income
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23,171 | 181,200 | ||||||
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Equity in income of Grimsby Food Court Ltd.
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140,524 | 110,572 | ||||||
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Other income
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13,995 | 7,766 | ||||||
| 177,690 | 299,538 | |||||||
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Net income and comprehensive income for the year
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$ | 27,532,360 | $ | 25,038,866 | ||||
See accompanying notes to the financial statements.
TIMWEN Partnership
Statements of Partner’s Equity
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Year Ended January 3, 2010
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Year Ended
December 28, 2008
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|||||||||||||||
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Wendy’s
Restaurants
of Canada
Inc.
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Barhav
Developments Limited
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Total
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Total
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Partners’ equity - beginning of year
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$ | 42,710,932 | $ | 42,710,932 | $ | 85,421,864 | $ | 90,382,998 | ||||||||
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Distributions to partners
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(16,500,000 | ) | (16,500,000 | ) | (33,000,000 | ) | (30,000,000 | ) | ||||||||
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Net income for the year
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13,766,180 | 13,766,180 | 27,532,360 | 25,038,866 | ||||||||||||
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Partners’ equity - end of year
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$ | 39,977,112 | $ | 39,977,112 | $ | 79,954,224 | $ | 85,421,864 | ||||||||
See accompanying notes to the financial statements.
TIMWEN Partnership
Statements of Cash Flows
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Year Ended
January 3, 2010 |
Year Ended
December 28, 2008 |
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Cash provided by (used in)
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Operating activities
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Net income for the year
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$ | 27,532,360 | $ | 25,038,866 | ||||
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Add: Items not affecting cash
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Depreciation and amortization
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4,711,046 | 4,797,801 | ||||||
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Straight-line rent
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(1,519,618 | ) | 123,949 | |||||
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Amortization of deferred lease inducements
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(293,072 | ) | (293,073 | ) | ||||
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Share of income from investment in Grimsby - net of distributions
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19,476 | 69,423 | ||||||
| 30,450,192 | 29,736,966 | |||||||
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Changes in non-cash working capital items
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||||||||
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Accounts receivable
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(1,650,073 | ) | 1,990,900 | |||||
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Prepaid rent
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(27,666 | ) | (7,524 | ) | ||||
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Accounts payable and accrued liabilities
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(263,838 | ) | 39,669 | |||||
| 28,508,615 | 31,760,011 | |||||||
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Investing activities
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Expenditures for revenue-producing properties
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(497,073 | ) | (752,231 | ) | ||||
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Financing activities
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Distributions to partners
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(33,000,000 | ) | (30,000,000 | ) | ||||
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Change in cash and cash equivalents during the year
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(4,988,458 | ) | 1,007,780 | |||||
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Cash and cash equivalents - beginning of year
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5,063,334 | 4,055,554 | ||||||
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Cash and cash equivalents - end of year
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$ | 74,876 | $ | 5,063,334 | ||||
See accompanying notes to the financial statements.
TIMWEN Partnership
Notes to Financial Statements
January 3, 2010 and December 28, 2008
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1
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Nature of operations
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The TIMWEN Partnership is comprised of Barhav Developments Limited (a wholly owned subsidiary of TDL Group Corp. Ltd. (TDL)) and Wendy’s Restaurants of Canada Inc. (WROC), and was formed in 1995. The partnership develops and leases restaurant facilities in Canada to WROC, WROC franchisees and TDL.
Fiscal year
The partnership’s fiscal year ends on the Sunday nearest to December 31. The 2009 and 2008 fiscal years consisted of 53 weeks and 52 weeks, respectively.
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2
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Summary of significant accounting policies partnership accounts
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The accompanying financial statements include only the assets and liabilities of the business carried on under the name of TIMWEN Partnership and do not include the other assets, liabilities, revenues and expenses of the partners. No provision for income taxes has been made in these financial statements since earnings of the partnership are taxable in the hands of the partners.
Basis of presentation
The partnership prepares its financial statements in accordance with accounting principles generally accepted in the United States of America (US GAAP). In the opinion of management, the partnership’s financial statements and accompanying notes to the financial statements contain all adjustments (all of which are normal and recurring in nature, other than the item described in Note 3) necessary to state fairly the partnership’s financial position as of January 3, 2010 and December 28, 2008, its results of operations, comprehensive income, and cash flows for the years ended January 3, 2010 and December 28, 2008.
The functional currency of the partnership is the local currency in which it operates, which is the Canadian dollar, as the majority of the partnership’s operations and cash flows are based in Canada and the partnership’s operations are primarily managed in Canadian dollars. As a result, the partnership’s reporting currency is the Canadian dollar.
Cash and cash equivalents
Cash and cash equivalents include balances with banks. Cash equivalents are short-term, highly liquid investments with maturities of three months or less and consist principally of cash in bank money market accounts.
Revenue-producing properties
Revenue-producing properties are stated at acquisition cost, less accumulated depreciation and amortization. Acquisition cost is comprised of land acquisition and building construction costs including interest expense on land acquisition and building construction costs during the period of
TIMWEN Partnership
Notes to Financial Statements
January 3, 2010 and December 28, 2008
construction. Depreciation and amortization are provided for on the straight-line basis over the estimated useful lives of the assets at the following rates:
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Buildings
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Up to 40 years
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Leasehold improvements
and deferred design and
construction costs and other
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The lesser of the useful life
of the asset or the
lease term
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Construction-in-progress
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Stated at cost and is not amortized
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Long-lived Assets
Long-lived assets are analyzed for impairment at the individual restaurant level, which represent the lowest level of independent cash flows for the business. They are tested for impairment whenever an event or circumstance occurs that indicates impairment may exist including a current expectation that, more likely than not, a long-lived asset will be sold or otherwise disposed of prior to its estimated useful life. There were no such events noted in the current or prior year.
Leases
The partnership’s leases are classified as either operating leases or capital leases for financial reporting purposes. When determining the lease term for operating and capital leases, the partnership includes option periods for which failure to renew the lease imposes an economic penalty in such an amount that a renewal appears, at the inception of the lease, to be reasonably assured. The primary penalty to which the partnership is subject is the economic detriment associated with the existence of leasehold improvements that might be impaired if the partnership chooses not to exercise the available renewal options.
For operating leases, minimum lease payments, including minimum scheduled rent increases, are recognized as rent expense on a straight-line basis (straight-line rent) over the applicable lease terms and any periods during which the partnership has use of the property but is not charged rent by a landlord. See Note 3 for a description of an out of period adjustment for straight-line rent in 2009. Lease terms are generally for 20 years and, in most cases, provide for rent escalations and renewal options.
Investment in Grimsby Food Court Ltd.
The Investment in Grimsby Food Court Ltd. is accounted for as an equity investment. The investment is analyzed for other than temporary impairment where evidence exists there is an inability to recover the carrying amount of the investment or inability to sustain an earnings capacity that would justify the carrying amount of the investment. No such indicator was noted in the current or prior year.
Deferred lease inducements
Lease inducements are leasehold improvements paid by landlords and are recorded as a liability and amortized as a reduction in rent expense. They are deferred and amortized on a straight-line basis over the lease term to a maximum of 20 years.
TIMWEN Partnership
Notes to Financial Statements
January 3, 2010 and December 28, 2008
Revenue recognition
Rental revenue is based on a percentage of sales volume and is recognized as earned.
Income taxes
The accompanying financial statements do not include a provision for taxes as they are the responsibility of the respective partners.
Use of estimates
The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period. Actual results could differ from those estimates.
FASB accounting standards codification
In June 2009, the FASB issued the FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles (the Codification), which authorized the Codification as the sole source for authoritative US GAAP, and any accounting literature that is not in the Codification will be considered non-authoritative. We have commenced utilizing the Codification as our sole source of authoritative US GAAP for our 2009 financial statements.
Newly adopted accounting pronouncements
In May 2009, the FASB issued guidance that defines the periods after the balance sheet date during which a reporting entity’s management should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements, and the disclosures an entity should make about events or transactions that occurred after the balance sheet date (collectively, subsequent events). The subsequent events guidance is effective for interim and annual periods ending after June 15, 2009, and we have applied the guidance effective with our 2009 financial statements.
In accordance with guidance that defines Subsequent Events reporting, the partnership has evaluated events subsequent to January 3, 2010 and up to March 3, 2010, which corresponds with the date these financial statements were issued (or available to be issued).
Effective December 29, 2008, the partnership adopted provisions which clarified the accounting for certain transactions and impairment considerations involving equity-method investments. The adoption of these provisions did not impact the partnership’s financial statements or associated note disclosure in 2009.
In June 2009, the FASB issued guidelines on the consolidation of variable interest entities which alters how a company determines when an entity that is insufficiently capitalized or not controlled
TIMWEN Partnership
Notes to Financial Statements
January 3, 2010 and December 28, 2008
through voting interests should be consolidated. A company has to determine whether it should provide consolidated reporting of an entity based upon the entity’s purpose and design and the parent company’s ability to direct the entity’s actions. The guidance is effective commencing for the partnership’s 2010 fiscal year. The partnership is currently assessing the potential impact the adoption of this standard may have on its financial statements.
3 Straight-line rent – out of period adjustment
In 2009 the partnership recorded an adjustment related to the calculation of straight-line rent, which is included in “Rental expense – net of lease inducements” in the Statement of Income and Comprehensive Income. Correcting this error increased net income and comprehensive income by $1,600,000 related to years prior to 2009.
Since this error was not material to any of the prior years’ or current year’s financial statements, the partnership recorded the correction of this error in the 2009 financial statements.
4 Revenue-producing properties
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January 3, 2010
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December 28, 2008
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Cost
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Accumulated
depreciation
and
amortization
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Net
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Net
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Land
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$ | 21,231,151 | $ | - | $ | 21,231,151 | $ | 21,231,151 | ||||||||
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Buildings
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34,415,853 | 13,063,076 | 21,352,777 | 22,525,773 | ||||||||||||
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Leasehold improvements
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66,626,531 | 27,672,261 | 38,954,270 | 41,687,926 | ||||||||||||
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Deferred design, construction costs and other
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2,354,402 | 846,772 | 1,507,630 | 1,636,676 | ||||||||||||
| 124,627,937 | 41,582,109 | 83,045,828 | 87,081,526 | |||||||||||||
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Construction-in-progress
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31,797 | - | 31,797 | 210,072 | ||||||||||||
| $ | 124,659,734 | $ | 41,582,109 | $ | 83,077,625 | $ | 87,291,598 | |||||||||
TIMWEN Partnership
Notes to Financial Statements
January 3, 2010 and December 28, 2008
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5
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Related party transactions and balances
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During the year, the partnership had the following transactions with the related parties:
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January 3, 2010
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December 28, 2008
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Rental income
|
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TDL
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$ | 23,690,191 | $ | 22,971,003 | ||||
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WROC
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14,780,921 | 14,554,529 | ||||||
| $ | 38,471,112 | $ | 37,525,532 | |||||
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Amounts included in accounts receivable
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TDL
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$ | 2,544,608 | $ | 1,946,320 | ||||
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WROC
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2,444,302 | 1,392,517 | ||||||
| $ | 4,988,910 | $ | 3,338,837 | |||||
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Management fee
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TDL - included in revenue-producing properties
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$ | 159,950 | $ | 182,800 | ||||
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WROC - included in operating expenses
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$ | 273,313 | $ | 254,500 | ||||
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Related party rental expense
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TDL
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$ | 241,257 | $ | 236,256 | ||||
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Amounts included in accounts payable
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TDL
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$ | 522,733 | $ | 852,726 | ||||
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WROC
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- | 173,478 | ||||||
| $ | 522,733 | $ | 1,026,204 | |||||
These transactions are in the normal course of operations.
The amounts due from the partners, which have arisen as a result of the above transactions, are non-interest bearing and due on demand.
TIMWEN Partnership
Notes to Financial Statements
January 3, 2010 and December 28, 2008
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6
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Deferred lease inducements
|
|
January 3, 2010
|
December 28, 2008
|
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Cost
|
Accumulated
amortization
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Net
|
Net
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Deferred lease inducements
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$ | 6,679,525 | $ | 2,718,489 | $ | 3,961,036 | $ | 4,254,108 | ||||||||
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7
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Leases
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Minimum lease payments under long-term operating lease agreements for various properties are as follows:
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2010
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$ | 7,346,000 | ||
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2011
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7,212,000 | |||
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2012
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6,559,000 | |||
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2013
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7,117,000 | |||
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2014
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6,826,000 | |||
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2015 and thereafter
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80,579,000 | |||
| $ | 115,639,000 | |||
All leased locations are subleased to WROC or to TDL at amounts based on restaurant revenues.
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8
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Financial instruments
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Due to their short-term maturities, the carrying value of the partnership’s cash and cash equivalents, accounts receivable as well as accounts payable and accrued liabilities approximate their estimated fair value.
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9
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Commitments and contingencies
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The partnership is party to various legal actions and complaints arising in the ordinary course of business. It is the opinion of the partnership’s management that the ultimate resolution of such matters will not materially affect the partnership’s financial condition or earnings.