Wendy's 2013 Annual Report Download - page 78

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THE WENDY’S COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(In Thousands Except Per Share Amounts)
System Optimization Initiative
In July 2013, the Company announced a system optimization initiative, as part of its brand transformation,
which includes a plan to sell approximately 425 company-owned restaurants to franchisees by the end of the first
quarter of 2014. This initiative also includes the consolidation of regional and divisional territories which has been
completed as of the beginning of the 2014 fiscal year. As a result of the system optimization initiative, the Company
has recorded losses on remeasuring long-lived assets to fair value upon determination that the assets will be leased
and/or subleased to franchisees in connection with the sale or anticipated sale of restaurants. The Company does not
anticipate significant changes to such System Optimization Remeasurement through the completion of the initiative,
although such changes could occur if actual future rental payments differ substantially from estimated payments.
Costs incurred related to the system optimization initiative, as well as gains or losses recognized on sales of restaurants
under the system optimization initiative are recorded to “Facilities action charges, net” in our consolidated statements
of operations. The Company’s estimate for costs to be incurred under the system optimization initiative during 2014
totals approximately $8,900 and includes: (1) accelerated amortization of previously acquired franchise rights in a
territory being sold of $500, (2) severance and employee related costs of $3,300, (3) professional fees of $2,300 and
(4) share-based compensation of $2,800. The Company cannot reasonably estimate the gains or losses resulting from
future sales of restaurants.
The following is a summary of the activity recorded under our system optimization initiative:
Year Ended
2013
Gain on sales of restaurants, net ............................................... $(46,667)
System Optimization Remeasurement (a) ........................................ 20,506
Accelerated amortization (b) .................................................. 16,907
Severance and related employee costs ........................................... 9,650
Professional fees ........................................................... 2,389
Share-based compensation (c) ................................................. 1,253
Other ................................................................... 863
Total system optimization initiative ........................................ $ 4,901
(a) Includes remeasurement of land, buildings, leasehold improvements and favorable lease assets at all
company-owned restaurants included in our system optimization initiative. See Note 11 for more information
on non-recurring fair value measurements.
(b) Includes accelerated amortization of previously acquired franchise rights related to company-owned restaurants
in territories that are being sold in connection with our system optimization initiative.
(c) Represents incremental share-based compensation resulting from the modification of stock options and
performance-based awards in connection with the termination of employees under our system optimization
initiative.
Gain on Sales of Restaurants, Net
Year Ended
2013
Number of restaurants sold to franchisees ........................................ 244
Proceeds from sales of restaurants .............................................. $130,154
Net assets sold (a) .......................................................... (60,895)
Goodwill related to sales of restaurants .......................................... (20,578)
Net unfavorable lease liabilities (b).............................................. (57)
Other .................................................................... (1,957)
Gain on sales of restaurants, net ............................................ $ 46,667
(a) Net assets sold consisted primarily of cash, inventory and equipment.
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