System Optimization (Gains) Losses, Net (Tables)

12 Months Ended

Dec. 29, 2019



	Year End
	December 29, 2019			December 30, 2018
Land	$	375,109		$	377,277
Buildings and improvements	508,602			507,219
Leasehold improvements	405,158			403,896
Office, restaurant and transportation equipment	279,799			266,030
	1,568,668			1,554,422
Accumulated depreciation and amortization	(591,668		)	(531,155		)
	$	977,000		$	1,023,267

System Optimization

Property, Plant and Equipment

Summary of Disposition Activity

The following is a summary of the disposition activity recorded as a result of our system optimization initiative:



	Year Ended
	2019		2018			2017
Number of restaurants sold to franchisees	—		3			—

Proceeds from sales of restaurants	$	—	$	1,436		$	—
Net assets sold (a)	—		(1,370		)	—
Goodwill related to sales of restaurants	—		(208		)	—
Net favorable leases	—		220			—
Other	—		11			—
	—		89			—
Post-closing adjustments on sales of restaurants (b)	1,087		445			2,541
Gain on sales of restaurants, net	1,087		534			2,541
Gain (loss) on sales of other assets, net (c)	196		(71		)	2,018
Loss on DavCo and NPC Transactions	—		—			(43,635		)
System optimization gains (losses), net	$	1,283	$	463		$	(39,076	)

_______________


(a)	Net assets sold consisted primarily of equipment.

(b)

2019, 2018 and 2017 include the recognition of deferred gains of $911, $1,029 and $312, respectively, as a result of the resolution of certain contingencies related to the extension of lease terms for restaurants previously sold to franchisees. 2018 and 2017 also include cash proceeds, net of payments, of $6 and $294, respectively, related to post-closing reconciliations with franchisees. Additionally, 2017 includes the recognition of a deferred gain of $1,822 (C$2,300) resulting from the release of a guarantee provided by Wendy’s to a lender on behalf of a franchisee in connection with the sale of eight Canadian restaurants to the franchisee during 2014.

(c)

During 2019, 2018 and 2017, Wendy’s received cash proceeds of $3,448, $1,781 and $10,534, respectively, primarily from the sale of surplus properties. 2017 also includes the recognition of a deferred gain of $375 related to the sale of a share in an aircraft.

Summary of DavCo and NPC Transactions

The following is a summary of the activity recorded as a result of the DavCo and NPC Transactions:



	Year Ended
	2017
Acquisition (a)
Total consideration paid	$	86,788
Identifiable assets and liabilities assumed:
Net assets held for sale	70,688
Finance lease assets	49,360
Deferred taxes	27,830
Finance lease obligations	(97,797		)
Net unfavorable leases (b)	(22,330		)
Other liabilities (c)	(6,924		)
Total identifiable net assets	20,827
Goodwill (d)	$	65,961

Disposition
Proceeds	$	70,688
Net assets sold	(70,688		)
Goodwill (d)	(65,961		)
Net favorable leases (e)	24,034
Other (f)	(1,708		)
Loss on DavCo and NPC Transactions	$	(43,635	)

_______________

(a)

The fair values of the identifiable intangible assets and taxes related to the acquisition were provisional amounts as of December 31, 2017, pending final purchase accounting adjustments. The Company finalized the purchase price allocation during 2018 with no differences from the provisional amounts previously reported. The Company utilized management estimates and consultation with an independent third-party valuation firm to assist in the valuation process.


(b)	Includes favorable lease assets of $1,229 and unfavorable lease liabilities of $23,559.


(c)	Includes a supplemental purchase price liability recorded to “Accrued expenses and other current liabilities” of $6,269, which was settled during 2018 upon the resolution of certain lease-related matters.


(d)	Includes tax deductible goodwill of $21,795.


(e)	The Company recorded favorable lease assets of $30,068 and unfavorable lease liabilities of $6,034 as a result of subleasing land, buildings and leasehold improvements to NPC.


(f)	Includes cash payments for selling and other costs associated with the transaction.