This excerpt taken from the WEN 10-K filed Apr 3, 2006.
Acquisition of Indiana Restaurants
On December 22, 2005, the Company completed the acquisition of the operating assets, net of liabilities assumed, of 15 restaurants (the “Indiana Restaurants”) in the Indianapolis and South Bend, Indiana markets from entities controlled by a franchisee (the “Indiana Restaurant Acquisition”) for total estimated consideration of $4,572,000. The total estimated consideration was comprised of (1) $3,083,000 in cash, (2) the assumption of $1,202,000 of debt, (3) $125,000 of related estimated expenses and (4) the estimated liability for a post-closing adjustment of $162,000. The total consideration represents $146,000 for the settlement loss from unfavorable franchise rights (see discussion of accounting for settlement loss above under “Acquisition of RTM”) and $4,426,000 for the aggregate purchase price. In connection with the Indiana Restaurant Acquisition, the Company entered into new twenty-year leases for seven of the restaurants with entities affiliated with the seller with rental payments in 2006 under these leases expected to be $618,000.
The preliminary allocation of the purchase price of the Indiana Restaurants to the assets acquired and liabilities assumed is reflected in the table at the end of this footnote under “Purchase Price Allocations of Acquisitions.” The Indiana Restaurant Acquisition resulted in goodwill of $2,371,000 that will be fully deductible for income tax purposes and has been assigned entirely to the Company's restaurant segment. The only identifiable asset as determined in accordance with a preliminary independent appraisal relates to reacquired rights under franchise agreements of $375,000, which will be amortized over 20 years.
The results of operations and cash flows of the Indiana Restaurants subsequent to the December 22, 2005 date of the Indiana Restaurant Acquisition have been included in the accompanying consolidated statements of operations and cash flows for the year ended January 1, 2006, as applicable, but are not included in 2003 and 2004. In this regard, net sales related to the Indiana Restaurants commencing with the Company's acquisition on December 22, 2005 were $265,000. Royalties and franchise and related fees earned by the Company from the Indiana Restaurants were $378,000 and $429,000 in 2003 and 2004, respectively, and were $382,000 in 2005 through December 22, 2005. Following the Indiana Restaurant Acquisition, royalties and franchise and related fees from the Indiana Restaurants of $9,000 were eliminated in consolidation.