Acquisitions and Purchase Accounting

12 Months Ended

Dec. 27, 2016

Business Combinations [Abstract]

Acquisitions and Purchase Accounting

Acquisitions and Purchase Accounting

2016 Acquisitions

In January 2016, NPCQB acquired three Wendy’s restaurants, including fee-owned properties, from a Wendy’s franchisee for approximately $8.0 million. During fiscal 2016, the Company sold two of the fee-owned properties for $4.0 million and leased them back and sold and leased back the remaining fee-owned property for $2.6 million in January 2017.

On July 25, 2016, NPCQB completed the acquisition of 39 Wendy’s restaurants, including four restaurants that were recently constructed, from a subsidiary of The Wendy’s Company (“Wendy’s”) for approximately $36.2 million, including amounts for working capital and development fees. The units are located in the Raleigh-Durham, North Carolina metropolitan area.

The asset acquisitions were funded with cash on hand. The acquisitions were accounted for using the purchase method of accounting. As a result of these acquisitions, purchase accounting adjustments were made to the underlying assets based upon the valuations. The total purchase price, net of cash acquired, was allocated as follows (in thousands):

Facilities and equipment	$	24,376
Franchise rights	17,385
Goodwill	1,500
Other	927
Total purchase price	$	44,188

All of the goodwill recognized will be deductible for income tax purposes. The weighted average amortization period assigned to the acquired franchise rights was approximately 19 years.

Pro Forma Impact of 2016 Wendy’s Acquisitions

The pro forma impact of these Wendy’s asset acquisitions on the results of operations is included in the table below for periods prior to the acquisition dates in which the acquisitions were not previously consolidated (in thousands). The pro forma results of operations are not necessarily indicative of the results that would have occurred had the acquisitions been consummated at the beginning of the periods presented, nor are they necessarily indicative of future operating results.

	52 Weeks Ended
	December 27, 2016		December 29, 2015
Total sales	$	1,273,509	$	1,287,072
Net income	9,613		7,256

The Consolidated Statements of Operations for the 52 weeks ended December 27, 2016 included total sales of $31.9 million related to the Wendy’s units acquired during 2016. It is impracticable to disclose earnings for the post-acquisition period for these acquired units as earnings of such units are not tracked on an individual basis.

2014 Acquisition

Effective July 14, 2014, NPCQB completed the acquisition of 56 Wendy’s restaurants, including 20 fee-owned properties, from a Wendy’s franchisee for $56.8 million, including an adjustment for working capital. This acquisition was funded with $40.0 million of incremental term loan borrowings, borrowings from the Company’s revolving credit facility and cash on hand. The units are located in North Carolina and Virginia.

The acquisition was accounted for using the purchase method of accounting. As a result of this acquisition, purchase accounting adjustments were made to the underlying assets based upon the valuation. The purchase price, net of cash acquired, was allocated as follows (in thousands):

Assets held for sale	$	5,121
Facilities and equipment	32,511
Franchise rights	16,570
Goodwill	1,998
Favorable leases	873
Other	(232		)
Total purchase price	$	56,841

All of the goodwill recognized will be deductible for income tax purposes. The weighted average amortization period assigned to the acquired franchise rights was approximately 16 years.

Subsequent to the closing, the Company sold 13 fee-owned properties (11 of the fee-owned properties acquired in the acquisition and two formerly leased properties acquired post acquisition for $1.7 million) for $24.2 million and leased them back over an initial lease term of 20 years with fourfive-year renewal options.