Wendy's 2008 Annual Report Download - page 59

Facilities Relocation and Corporate Restructuring
2007 2006 Change
(In Millions)
General corporate .................................................... $84.8 $3.2 $81.6
Restaurants ......................................................... 0.6 0.1 0.5
$85.4 $3.3 $82.1
The charge of $85.4 million in 2007 consisted of general corporate charges of $84.8 million and a $0.6
million additional charge for employee relocation costs in connection with combining our then existing
restaurant operations with those of RTM following the RTM Acquisition. The general corporate charges of
$84.8 million were principally related to the Corporate Restructuring discussed above under “Introduction and
Executive Overview—Other Items” and consist of (1) the payment entitlements under the Contractual
Settlements of $72.8 million, including the additional $1.6 million total payments described below, of which
$3.5 million is included in “General and administrative” expenses as incentive compensation, (2) severance for
two other former executives of $12.9 million, excluding incentive compensation that is due to them for their
2007 period of employment with the Company, both including applicable employer payroll taxes, (3) severance
and consulting fees of $1.8 million with respect to other New York headquarters’ executives and employees
and (4) a loss of approximately $0.8 million on properties and other assets at our former New York
headquarters, principally reflecting assets for which the fair value was less than the book value, sold during
2007 to the Management Company. Under the terms of the Contractual Settlements, our Chairman, who is
also our former Chief Executive Officer, was entitled to a payment consisting of cash and investments which
had a fair value of $50.3 million as of July 1, 2007 ($47.4 million upon distribution on December 30, 2007)
and our Vice Chairman, who is also our former President and Chief Operating Officer, was entitled to a
payment consisting of cash and investments which had a fair value of $25.1 million as of July 1, 2007 ($23.7
million upon distribution on December 30, 2007), both subject to applicable withholding taxes, during the
2007 fourth quarter. We had funded the severance payment obligations to the Former Executives, net of
estimated withholding taxes, by the transfer of cash and investments to rabbi trusts (the “2007 Trusts”), in the
second quarter of 2007. The $4.3 million decline in value of the assets in the 2007 Trusts reduced our general
corporate charges since it resulted in a corresponding reduction of the payment obligations under the
Contractual Settlements. Funding the 2007 Trusts net of estimated withholding taxes provided us with
additional operating liquidity, but reduced the amounts that otherwise would have been held in the 2007
Trusts for the benefit of the Former Executives. Accordingly, the former Chief Executive Officer and former
President and Chief Operating Officer were paid $1.1 million and $0.5 million, respectively, representing an
interest component on the amounts that otherwise would have been included in the 2007 Trusts. The charges
of $3.3 million in 2006 included $3.2 million of general corporate expense principally representing a fee
related to our decision in 2006 to terminate the lease of an office facility in Rye Brook, New York rather than
continue our efforts to sublease the facility.
Gain on Sale of Consolidated Business
The gain on sale of consolidated business of $40.2 million in 2007 related to the Deerfield Sale discussed
above under “Introduction and Executive Overview—Deerfield Sale.”
Interest Expense
Interest expense decreased $52.8 million, or 46.2%, principally reflecting a $54.2 million decrease in
interest expense on debt securities sold with an obligation to purchase or under agreements to repurchase due
to the effective redemption of our investment in the Opportunities Fund as of September 29, 2006, (the
“Redemption”). We no longer consolidate the Opportunities Fund subsequent to the Redemption.
Accordingly, interest expense and related net investment income are no longer affected by the significant
leverage associated with the Opportunities Fund.
Loss on Early Extinguishments of Debt
There were no early extinguishments of debt in 2007. The loss on early extinguishments of debt of $14.1
million in 2006 consisted of (1) $13.1 million which resulted from the conversion or effective conversion of an
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