What changed in this filing

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Item 1. Financial Statements

2020-11-04 compared with 2020-08-05 · 293 added, 212 removed, 627 unchanged (45% of the section changed)

3 unchanged sentences

(In Thousands Except Par Value)

September 27,

2020 December 29,

52 unchanged sentences

(In Thousands Except Per Share Amounts)

Three Months Ended Six Months Ended

2020 June 30,

2019 June 28,

2020 June 30,

Three Months Ended Nine Months Ended

September 27,

2020 September 29,

2019 September 27,

2020 September 29,

Sales $ 191,946 $ 181,977 $ 522,961 $ 530,724

18 unchanged sentences

Loss on early extinguishment of debt — — — ( 7,150 )

Other (expense) income, net ( 144 ) 2,247 932 4,947

Other income, net 181 2,218 1,113 7,165

Income before income taxes 52,443 53,311 105,158 138,934

31,432 45,739 52,715 85,623

Provision for income taxes ( 12,690 ) ( 7,184 ) ( 26,060 ) ( 28,527 )

7 unchanged sentences

(In Thousands)

Three Months Ended Six Months Ended

2020 June 30,

2019 June 28,

2020 June 30,

Three Months Ended Nine Months Ended

September 27,

2020 September 29,

2019 September 27,

2020 September 29,

Net income $ 39,753 $ 46,127 $ 79,098 $ 110,407

35 unchanged sentences

Balance at June 28, 2020 $ 47,042 $ 2,892,699 $ 187,086 $ ( 2,580,658 ) $ ( 62,186 ) $ 483,983

Net income — — 39,753 — — 39,753

Other comprehensive income

— — — — 3,220 3,220

Cash dividends — — ( 11,202 ) — — ( 11,202 )

Repurchases of common stock — — — ( 1,708 ) — ( 1,708 )

Share-based compensation — 5,786 — — — 5,786

Common stock issued upon exercises of stock options

— 838 — 2,465 — 3,303

Common stock issued upon vesting of restricted shares

— ( 2,600 ) — 918 — ( 1,682 )

Other — 44 ( 2 ) 40 — 82

Balance at September 27, 2020 $ 47,042 $ 2,896,767 $ 215,635 $ ( 2,578,943 ) $ ( 58,966 ) $ 521,535

See accompanying notes to condensed consolidated financial statements.

29 unchanged sentences

Balance at June 30, 2019 $ 47,042 $ 2,883,484 $ 163,249 $ ( 2,393,914 ) $ ( 51,813 ) $ 648,048

Net income — — 46,127 — — 46,127

Other comprehensive loss — — — — ( 2,297 ) ( 2,297 )

Cash dividends — — ( 23,087 ) — — ( 23,087 )

Repurchases of common stock — — — ( 26,462 ) — ( 26,462 )

Share-based compensation — 3,981 — — — 3,981

Common stock issued upon exercises of stock options

— 545 — 4,171 — 4,716

Common stock issued upon vesting of restricted shares

— ( 2,636 ) — 1,147 — ( 1,489 )

Other — 30 ( 7 ) 31 — 54

Balance at September 29, 2019 $ 47,042 $ 2,885,404 $ 186,282 $ ( 2,415,027 ) $ ( 54,110 ) $ 649,591

See accompanying notes to condensed consolidated financial statements.

2 unchanged sentences

(In Thousands)

Six Months Ended

2020 June 30,

Nine Months Ended

September 27,

2020 September 29,

Cash flows from operating activities:

29 unchanged sentences

Payments related to tax withholding for share-based compensation ( 5,409 ) ( 8,447 )

Net cash provided by (used in) financing activities 48,265 ( 130,176 )

Net cash provided by (used in) operations before effect of exchange rate changes on cash

53,883 ( 6,032 )

Net cash used in financing activities ( 115,328 ) ( 183,356 )

Net cash provided by operations before effect of exchange rate changes on cash 49,432 8,442

Effect of exchange rate changes on cash ( 1,715 ) 2,755

Net increase (decrease) in cash, cash equivalents and restricted cash 50,751 ( 2,166 )

Net increase in cash, cash equivalents and restricted cash 47,717 11,197

Cash, cash equivalents and restricted cash at beginning of period 358,707 486,512

3 unchanged sentences

Finance leases 24,617 34,084

September 27,

2020 December 29,

10 unchanged sentences

The accompanying unaudited condensed consolidated financial statements (the “Financial Statements”) of The Wendy’s Company (“The Wendy’s Company” and, together with its subsidiaries, the “Company,” “we,” “us” or “our”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and, therefore, do not include all information and footnotes required by GAAP for complete financial statements.

In our opinion, the Financial Statements contain all adjustments of a normal recurring nature necessary to present fairly our financial position as of June 28, 2020, the results of our operations for the three and six months ended June 28, 2020 and June 30, 2019 and cash flows for the six months ended June 28, 2020 and June 30, 2019.

In our opinion, the Financial Statements contain all adjustments of a normal recurring nature necessary to present fairly our financial position as of September 27, 2020, the results of our operations for the three and nine months ended September 27, 2020 and September 29, 2019 and our cash flows for the nine months ended September 27, 2020 and September 29, 2019.

The Financial Statements should be read in conjunction with the audited consolidated financial statements for The Wendy’s Company and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 29, 2019 (the “Form 10-K”).

The novel coronavirus (COVID-19) pandemic has disrupted and is expected to continue to disrupt our business, which has materially affected and could continue to materially affect our financial condition and results of operations for an extended period of time.

As such, the results of operations for the three and six months ended June 28, 2020 are not necessarily indicative of the results to be expected for the full 2020 fiscal year.

As such, the results of operations for the three and nine months ended September 27, 2020 are not necessarily indicative of the results to be expected for the full 2020 fiscal year.

See Notes 7, 9, 11 and 14 for further information regarding actions taken by the Company in response to the COVID-19 pandemic and certain impacts of the COVID-19 pandemic on our condensed consolidated financial statements.

5 unchanged sentences

We report on a fiscal year consisting of 52 or 53 weeks ending on the Sunday closest to or on December 31.

All three- and six-month periods presented herein contain 13 weeks and 26 weeks, respectively.

All three- and nine-month periods presented herein contain 13 weeks and 39 weeks, respectively.

All references to years and quarters relate to fiscal periods rather than calendar periods.

1 unchanged sentence

(2) New Accounting Standards

New Accounting Standards

Financial Instruments

In August 2020, the Financial Accounting Standards Board (“FASB”) issued an amendment that simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity.

The amendment simplifies accounting for convertible instruments by removing major separation models required under current accounting guidance.

In addition, the amendment removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for the exception, and also simplifies the diluted earnings per share calculation in certain areas.

The amendment is effective commencing with our 2022 fiscal year.

We are currently evaluating the impact of the adoption of this guidance on our condensed consolidated financial statements.

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

New Accounting Standards Adopted

In December 2019, the Financial Accounting Standards Board (“FASB”) issued new guidance to simplify the accounting for income taxes by removing certain exceptions to the general principles and the simplification of areas such as franchise taxes, transactions that result in a step-up in the tax basis of goodwill, separate entity financial statements and interim recognition of enactment of tax laws or tax rate changes.

In December 2019, the FASB issued new guidance to simplify the accounting for income taxes by removing certain exceptions to the general principles and the simplification of areas such as franchise taxes, transactions that result in a step-up in the tax basis of goodwill, separate entity financial statements and interim recognition of enactment of tax laws or tax rate changes.

The Company early adopted this amendment during the first quarter of 2020.

6 unchanged sentences

The adoption of this guidance did not have a material impact on our condensed consolidated financial statements.

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Goodwill Impairment

6 unchanged sentences

The adoption of this guidance did not have a material impact on our condensed consolidated financial statements.

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Disaggregation of Revenue

1 unchanged sentence

Wendy’s International Global Real Estate & Development Total

Three Months Ended June 28, 2020

Three Months Ended September 27, 2020

Sales at Company-operated restaurants $ 191,946 $ — $ — $ 191,946

4 unchanged sentences

Total revenues $ 374,895 $ 17,264 $ 60,083 $ 452,242

Six Months Ended June 28, 2020

Nine Months Ended September 27, 2020

Sales at Company-operated restaurants $ 522,961 $ — $ — $ 522,961

4 unchanged sentences

Total revenues $ 1,037,194 $ 46,739 $ 175,575 $ 1,259,508

Three Months Ended June 30, 2019

Three Months Ended September 29, 2019

Sales at Company-operated restaurants $ 181,977 $ — $ — $ 181,977

8 unchanged sentences

Wendy’s International Global Real Estate & Development Total

Six Months Ended June 30, 2019

Nine Months Ended September 29, 2019

Sales at Company-operated restaurants $ 530,724 $ — $ — $ 530,724

6 unchanged sentences

The following table provides information about receivables and contract liabilities (deferred franchise fees) from contracts with customers:

September 27,

2020 (a) December 29,

Receivables, which are included in “Accounts and notes receivable, net” (b) (c) $ 86,834 $ 39,188

Receivables, which are included in “Advertising funds restricted assets” (c)

Receivables, which are included in “Accounts and notes receivable, net” (b) $ 44,637 $ 39,188

Receivables, which are included in “Advertising funds restricted assets”

55,682 54,394

Deferred franchise fees (d) 98,563 100,689

Deferred franchise fees (c) 98,045 100,689

_______________

1 unchanged sentence

(b) Includes receivables related to “Sales” and “Franchise royalty revenue and fees.”

(c) The increase in receivables as of June 28, 2020 was primarily due to extending payment terms for royalties and national advertising funds contributions by 45 days beginning in April for a three month period in response to the COVID-19 pandemic.

See Note 7 for further information.

(d) Deferred franchise fees are included in “Accrued expenses and other current liabilities” and “Deferred franchise fees” and totaled $ 9,179 and $ 89,384 as of June 28, 2020, respectively, and $ 8,899 and $ 91,790 as of December 29, 2019, respectively.

(c) Deferred franchise fees are included in “Accrued expenses and other current liabilities” and “Deferred franchise fees” and totaled $ 9,211 and $ 88,834 as of September 27, 2020, respectively, and $ 8,899 and $ 91,790 as of December 29, 2019, respectively.

Significant changes in deferred franchise fees are as follows:

Six Months Ended

2020 June 30,

Nine Months Ended

September 27,

2020 September 29,

Deferred franchise fees at beginning of period $ 100,689 $ 102,205

14 unchanged sentences

(4) Acquisitions

No restaurants were acquired from franchisees during the six months ended June 28, 2020.

During the six months ended June 30, 2019, the Company acquired five restaurants from franchisees for total net cash consideration of $ 5,052 .

The Company did not incur any material acquisition-related costs associated with the acquisitions during the six months ended June 30, 2019 and such transactions were not significant to our condensed consolidated financial statements.

No restaurants were acquired from franchisees during the nine months ended September 27, 2020.

During the nine months ended September 29, 2019, the Company acquired five restaurants from franchisees for total net cash consideration of $ 5,052 .

The Company did not incur any material acquisition-related costs associated with the acquisitions during the nine months ended September 29, 2019 and such transactions were not significant to our condensed consolidated financial statements.

The table below presents the allocation of the total purchase price to the fair value of assets acquired and liabilities assumed for restaurants acquired from franchisees:

Six Months Ended

Nine Months Ended

September 29,

Restaurants acquired from franchisees 5

18 unchanged sentences

While the Company has no plans to reduce its ownership below the approximately 5 % level, the Company expects to continue to optimize the Wendy’s system through Franchise Flips, as well as evaluating strategic acquisitions of franchised restaurants and strategic dispositions of Company-operated restaurants to existing and new franchisees, to further strengthen the franchisee base, drive new restaurant development and accelerate reimages.

During the six months ended June 28, 2020, the Company facilitated three Franchise Flips.

No Franchise Flips were facilitated by the Company during the six months ended June 30, 2019.

During the nine months ended September 27, 2020 and September 29, 2019, the Company facilitated 22 and three Franchise Flips, respectively.

The Company expects to sell 43 Company-operated restaurants in New York to franchisees in the first quarter of 2021.

4 unchanged sentences

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

Three Months Ended Six Months Ended

2020 June 30,

2019 June 28,

2020 June 30,

Three Months Ended Nine Months Ended

September 27,

2020 September 29,

2019 September 27,

2020 September 29,

Post-closing adjustments on sales of restaurants (a) $ 23 $ 1,033 $ 368 $ 1,087

2 unchanged sentences

_______________

(a) The six months ended June 28, 2020 represents the recognition of deferred gains as a result of the resolution of certain contingencies related to the extension of lease terms for restaurants previously sold to franchisees.

(b) During the three and six months ended June 28, 2020, the Company received cash proceeds of $ 4,125 and $ 4,320 , respectively, primarily from the sale of surplus and other properties.

During the three and six months ended June 30, 2019, the Company received cash proceeds of $ 1,240 , primarily from the sale of surplus properties.

(a) The three and nine months ended September 27, 2020 represent the recognition of deferred gains as a result of the resolution of certain contingencies related to the extension of lease terms for restaurants previously sold to franchisees.

The three and nine months ended September 29, 2019 include the recognition of such deferred gains of $ 911 .

(b) During the nine months ended September 27, 2020, the Company received net cash proceeds of $ 3,570 , and during the three and nine months ended September 29, 2019, received cash proceeds of $ 798 and $ 2,038 , respectively, primarily from the sale of surplus and other properties.

Assets Held for Sale

September 27,

2020 December 29,

11 unchanged sentences

The following is a summary of the initiatives included in “Reorganization and realignment costs:”

Three Months Ended Six Months Ended

2020 June 30,

2019 June 28,

2020 June 30,

Three Months Ended Nine Months Ended

September 27,

2020 September 29,

2019 September 27,

2020 September 29,

Operations and field realignment $ 3,021 $ — $ 3,021 $ —

IT realignment 403 — 6,809 —

2 unchanged sentences

Reorganization and realignment costs $ 3,375 $ 403 $ 10,196 $ 4,771

Operations and Field Realignment

In September 2020, the Company initiated a plan to reallocate resources to better support the long-term growth strategies for Company and franchise operations (the “Operations and Field Realignment Plan”).

The Operations and Field Realignment Plan realigns the Company’s restaurant operations team, including transitioning from separate leaders of Company and franchise operations to a single leader of all U.S.

restaurant operations.

We also expect to incur contract termination charges, including the planned closure of certain field offices.

The Company expects to incur total costs aggregating approximately $ 7,000 to $ 9,000 related to the Operations and Field Realignment Plan.

During the nine months ended September 27, 2020, the Company recognized costs totaling $ 3,021 , which included severance and related employee costs and share-based compensation.

The Company expects to incur additional costs aggregating approximately $ 4,000 to $ 6,000 , comprised primarily of third-party and other costs.

The Company expects to recognize the majority of the remaining costs associated with the Operations and Field Realignment Plan during the remainder of 2020 and 2021.

The following is a summary of the activity recorded as a result of the Operations and Field Realignment Plan:

Three Months Ended

September 27,

Severance and related employee costs $ 2,502

Share-based compensation (a) 519

Total operations and field realignment $ 3,021

_______________

(a) Primarily represents incremental share-based compensation resulting from the modification of stock options in connection with the termination of employees under the Operations and Field Realignment Plan.

The table below presents a rollforward of our accruals for the Operations and Field Realignment Plan, which are included in “Accrued expenses and other current liabilities” as of September 27, 2020.

December 29, 2019 Charges Payments Balance

September 27,

Severance and related employee costs $ — $ 2,502 $ — $ 2,502

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Information Technology ( “ IT ”) Realignment

In December 2019, our Board of Directors approved a plan to realign and reinvest resources in the Company’s IT organization to strengthen its ability to accelerate growth.

The Company is partnering with a third-party global IT consultant on this new structure to leverage their global capabilities, which the Company believes will enable a more seamless integration between its digital and corporate IT assets.

The Company expects that the realignment plan will reduce certain employee compensation and other related costs that the Company intends to reinvest back into IT to drive additional capabilities and capacity across all of its technology platforms.

In December 2019, our Board of Directors approved a plan to realign and reinvest resources in the Company’s IT organization to strengthen its ability to accelerate growth (the “IT Realignment Plan”).

The Company has partnered with a third-party global IT consultant on this new structure to leverage their global capabilities, which will enable a more seamless integration between its digital and corporate IT assets.

The IT Realignment Plan has reduced and will continue to reduce certain employee compensation and other related costs that the Company is reinvesting back into IT to drive additional capabilities and capacity across all of its technology platforms.

Additionally, in June 2020, the Company made changes to its leadership structure that included the creation of a Chief Information Officer position and the elimination of the Chief Digital Experience Officer position.

As a result, the Company now expects to incur total costs aggregating approximately $ 16,000 to $ 17,000 related to the plan.

During the six months ended June 28, 2020, the Company recognized costs totaling $ 6,406 , which primarily included third-party and other costs and severance and related employee costs.

As a result, the Company expects to incur total costs aggregating approximately $ 16,000 to $ 17,000 related to the IT Realignment Plan.

During the nine months ended September 27, 2020, the Company recognized costs totaling $ 6,809 , which primarily included third-party and other costs and severance and related employee costs.

The Company expects to incur additional costs aggregating approximately $ 1,000 , comprised primarily of recruitment and relocation costs.

The Company expects to recognize the majority of the remaining costs associated with the plan during the remainder of 2020.

The Company expects to recognize the majority of the remaining costs associated with the IT Realignment Plan during the remainder of 2020.

Subsequent to September 27, 2020, the Company announced the appointment of its new Chief Information Officer.

The following is a summary of the activity recorded as a result of the IT Realignment Plan:

Three Months Ended Six Months Ended Total

Three Months Ended Nine Months Ended Total

Incurred Since Inception

2020 June 28,

September 27,

2020 September 27,

Severance and related employee costs $ 34 $ 1,009 $ 8,557

5 unchanged sentences

_______________

(a) Primarily represents incremental share-based compensation resulting from the modification of stock options in connection with the termination of employees under our IT realignment plan.

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

The table below presents a rollforward of our accruals for the IT realignment plan, which are included in “Accrued expenses and other current liabilities” and “Other liabilities” and totaled $ 4,039 and $ 371 as of June 28, 2020, respectively.

(a) Primarily represents incremental share-based compensation resulting from the modification of stock options in connection with the termination of employees under the IT Realignment Plan.

The table below presents a rollforward of our accruals for the IT Realignment Plan, which are included in “Accrued expenses and other current liabilities” and “Other liabilities” and totaled $ 2,739 and $ 178 as of September 27, 2020, respectively.

December 29, 2019 Charges Payments Balance

September 27,

Severance and related employee costs $ 7,548 $ 1,009 $ ( 5,640 ) $ 2,917

2 unchanged sentences

$ 8,624 $ 6,809 $ ( 12,516 ) $ 2,917

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

General and Administrative ( “ G&A ”) Realignment

In May 2017, the Company initiated a plan to further reduce its G&A expenses.

Additionally, in May 2019, the Company announced changes to its management and operating structure that included the creation of two new positions, a President, U.S and Chief Commercial Officer and a President, International and Chief Development Officer, and the elimination of the Chief Operations Officer position.

During the six months ended June 28, 2020 and June 30, 2019, the Company recognized costs related to the plan totaling $ 331 and $ 4,299 , respectively, which primarily included severance and related employee costs and share-based compensation.

The Company does not expect to incur any additional material costs under the plan.

In May 2017, the Company initiated a plan to further reduce its G&A expenses (the “G&A Realignment Plan”).

Additionally, in May 2019, the Company announced changes to its management and operating structure that included the creation of two new positions, a President, U.S.

and Chief Commercial Officer and a President, International and Chief Development Officer, and the elimination of the Chief Operations Officer position.

During the nine months ended September 27, 2020 and September 29, 2019, the Company recognized costs related to the G&A Realignment Plan totaling $ 282 and $ 4,695 , respectively, which primarily included share-based compensation for 2020 and severance and related employee costs and share-based compensation for 2019.

The Company does not expect to incur any material additional costs under the G&A Realignment Plan.

The following is a summary of the activity recorded as a result of the G&A Realignment Plan:

Three Months Ended Six Months Ended Total

Three Months Ended Nine Months Ended Total

Incurred Since Inception

2020 June 30,

2019 June 28,

2020 June 30,

September 27,

2020 September 29,

2019 September 27,

2020 September 29,

Severance and related employee costs (a) $ ( 116 ) $ 214 $ 30 $ 2,816 $ 24,268

6 unchanged sentences

_______________

(a) The three and six months ended June 28, 2020 includes a reversal of an accrual as a result of a change in estimate.

(b) Primarily represents incremental share-based compensation resulting from the modification of stock options in connection with the termination of employees under our G&A realignment plan.

The accruals for our G&A realignment plan are included in “Accrued expenses and other current liabilities” and “Other liabilities” and totaled $ 2,705 and $ 108 as of June 28, 2020, respectively, and $ 4,835 and $ 607 as of June 30, 2019, respectively.

The tables below present a rollforward of our accruals for the plan.

(a) The three and nine months ended September 27, 2020 includes a reversal of an accrual as a result of a change in estimate.

(b) Primarily represents incremental share-based compensation resulting from the modification of stock options in connection with the termination of employees under the G&A Realignment Plan.

The accruals for the G&A realignment plan are included in “Accrued expenses and other current liabilities” and “Other liabilities” and totaled $ 1,705 and $ 18 as of September 27, 2020, respectively, and $ 3,491 and $ 507 as of September 29, 2019, respectively.

The tables below present a rollforward of our accruals for the G&A Realignment Plan.

2019 Charges Payments Balance

September 27,

Severance and related employee costs $ 5,276 $ 30 $ ( 3,627 ) $ 1,679

2 unchanged sentences

$ 5,359 $ 82 $ ( 3,718 ) $ 1,723

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

2018 Charges Payments Balance

September 29,

Severance and related employee costs $ 7,241 $ 2,816 $ ( 6,216 ) $ 3,841

2 unchanged sentences

$ 7,324 $ 3,582 $ ( 6,908 ) $ 3,998

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

System Optimization Initiative

2 unchanged sentences

(7) Cash and Receivables

September 27,

2020 December 29, 2019

13 unchanged sentences

(a) Included in “Advertising funds restricted assets.”

June 28, 2020 December 29, 2019

September 27, 2020 December 29, 2019

Gross Allowance for Doubtful Accounts Net Gross Allowance for Doubtful Accounts Net

8 unchanged sentences

_______________

(a) Includes income tax refund receivables of $ 5,933 and $ 13,555 as of June 28, 2020 and December 29, 2019, respectively.

(a) Includes income tax refund receivables of $ 7,089 and $ 13,555 as of September 27, 2020 and December 29, 2019, respectively.

Additionally, 2019 includes receivables of $ 25,350 related to insurance coverage for the financial institutions class action.

(b) During the nine months ended September 27, 2020, rent receivables increased by $ 7,291 .

This increase was primarily due to actions taken by the Company in response to the COVID-19 pandemic, which included offering to defer base rent payments on properties owned by Wendy’s and leased to franchisees by 50%, and offering to pass along any deferrals that were obtained on properties leased by Wendy’s and subleased to franchisees by up to 100%, beginning in May for a three month period, which are being repaid over a 12 month period beginning in August 2020.

THE WENDY’S COMPANY AND SUBSIDIARIES

1 unchanged sentence

(In Thousands Except Per Share Amounts)

(b) During the six months ended June 28, 2020, royalty receivables increased by $ 47,740 and rent receivables increased by $ 6,111 .

These increases were primarily due to actions taken by the Company in response to the COVID-19 pandemic, which included (1) extending payment terms for royalties by 45 days beginning in April for a three month period and (2) offering to defer base rent payments on properties owned by Wendy’s and leased to franchisees by 50%, and offering to pass along any deferrals that were obtained on properties leased by Wendy’s and subleased to franchisees by up to 100%, beginning in May for a three month period, which will be repaid over 12 months beginning in August.

(c) Includes the current portion of sales-type and direct financing lease receivables of $ 3,780 and $ 3,146 as of June 28, 2020 and December 29, 2019, respectively.

(c) Includes the current portion of sales-type and direct financing lease receivables of $ 4,054 and $ 3,146 as of September 27, 2020 and December 29, 2019, respectively.

Included a note receivable from a U.S.

franchisee totaling $ 1,000 as of December 29, 2019.

The note was repaid during the six months ended June 28, 2020.

(d) Includes a note receivable from a franchisee in India, of which $ 150 and $ 1,000 are included in current notes receivable as of June 28, 2020 and December 29, 2019, respectively, and $ 1,010 is included in non-current notes receivable as of June 28, 2020.

As of June 28, 2020 and December 29, 2019, the Company had a reserve of $ 985 on the loan outstanding to the franchisee in India.

Includes a note receivable from a franchisee in Indonesia, of which $ 1,367 and $ 1,262 are included in current notes receivable and $ 1,065 and $ 1,617 are included in non-current notes receivable as of June 28, 2020 and December 29, 2019, respectively.

Includes notes receivable related to a joint venture for the operation of Wendy’s restaurants in Brazil (the “Brazil JV”), of which $ 11,975 and $ 15,920 are included in current notes receivable as of June 28, 2020 and December 29, 2019, respectively, and $ 4,350 is included in non-current notes receivable as of June 28, 2020.

As of June 28, 2020 and December 29, 2019, the Company had reserves of $ 4,520 and $ 5,720 , respectively, on the loans outstanding related to the Brazil JV.

The note was repaid during the nine months ended September 27, 2020.

(d) Includes a note receivable from a franchisee in India totaling $ 985 and $ 1,000 as of September 27, 2020 and December 29, 2019, respectively, which is included in non-current notes receivable as of September 27, 2020 and is included in current notes receivable as of December 29, 2019.

As of September 27, 2020 and December 29, 2019, the Company had a reserve of $ 985 on the loan outstanding to the franchisee in India.

Includes a note receivable from a franchisee in Indonesia, of which $ 1,643 and $ 1,262 are included in current notes receivable and $ 842 and $ 1,617 are included in non-current notes receivable as of September 27, 2020 and December 29, 2019, respectively.

Includes notes receivable related to a joint venture for the operation of Wendy’s restaurants in Brazil (the “Brazil JV”), of which $ 11,975 and $ 15,920 are included in current notes receivable as of September 27, 2020 and December 29, 2019, respectively, and $ 4,350 is included in non-current notes receivable as of September 27, 2020.

As of September 27, 2020 and December 29, 2019, the Company had reserves of $ 4,520 and $ 5,720 , respectively, on the loans outstanding related to the Brazil JV.

(e) Included in “Other assets.”

3 unchanged sentences

Receivables are considered delinquent once they are contractually past due under the terms of the underlying agreements.

As of June 28, 2020, there were no material receivables more than one year past due.

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

As of September 27, 2020, there were no material receivables more than one year past due.

The following is an analysis of the allowance for doubtful accounts:

Accounts Receivable Notes Receivable Total

Six Months Ended June 28, 2020

Nine Months Ended September 27, 2020

Balance at December 29, 2019 $ 3,314 $ 6,705 $ 10,019

1 unchanged sentence

Uncollectible accounts written off, net of recoveries ( 93 ) ( 1,192 ) ( 1,285 )

Balance at June 28, 2020 $ 4,404 $ 5,505 $ 9,909

Six Months Ended June 30, 2019

Balance at September 27, 2020 $ 3,920 $ 5,505 $ 9,425

Nine Months Ended September 29, 2019

Balance at December 30, 2018 $ 4,940 $ 2,000 $ 6,940

1 unchanged sentence

Uncollectible accounts written off, net of recoveries ( 220 ) 11 ( 209 )

Balance at June 30, 2019 $ 4,047 $ 3,850 $ 7,897

Balance at September 29, 2019 $ 3,176 $ 4,100 $ 7,276

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

(8) Investments

5 unchanged sentences

Presented below is activity related to our investment in TimWen and the Brazil JV included in our condensed consolidated financial statements:

Six Months Ended

2020 June 30,

Nine Months Ended

September 27,

2020 September 29,

Balance at beginning of period $ 45,310 $ 47,021

7 unchanged sentences

(a) Purchase price adjustments that impacted the carrying value of the Company’s investment in TimWen are being amortized over the average original aggregate life of 21 years.

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

(9) Long-Term Debt

Long-term debt consisted of the following:

September 27,

2020 December 29,

12 unchanged sentences

475,000 478,750

Series 2019-1 Class A-1 Variable Funding Senior Secured Notes 120,000 —

Canadian revolving credit facility 4,108 —

5 unchanged sentences

Total long-term debt $ 2,226,243 $ 2,257,561

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Wendy’s Funding, LLC, a limited-purpose, bankruptcy-remote, wholly-owned indirect subsidiary of The Wendy’s Company, is the master issuer (the “Master Issuer”) of outstanding senior secured notes under a securitized financing facility that was entered into in June 2015.

Under this facility, in June 2019, the Master Issuer also issued outstanding Series 2019-1 Variable Funding Senior Secured Notes, Class A-1 (the “2019-1 Class A-1 Notes”), which allow for the borrowing of up to $ 150,000 from time to time on a revolving basis using various credit instruments, including a letter of credit facility.

In March 2020, the Company drew down $ 120,000 under the 2019-1 Class A-1 Notes.

As a result, as of June 28, 2020, the Company had outstanding borrowings of $ 120,000 under the 2019-1 Class A-1 Notes.

Subsequent to June 28, 2020, the Company repaid the $ 120,000 outstanding balance under the 2019-1 Class A-1 Notes.

Under this facility, in June 2019, the Master Issuer issued outstanding Series 2019-1 Variable Funding Senior Secured Notes, Class A-1 (the “2019-1 Class A-1 Notes”), which allow for the borrowing of up to $ 150,000 from time to time on a revolving basis using various credit instruments, including a letter of credit facility.

In March 2020, the Company drew down $ 120,000 under the 2019-1 Class A-1 Notes, which the Company fully repaid in July 2020.

As a result, as of September 27, 2020, the Company had no outstanding borrowings under the 2019-1 Class A-1 Notes.

In June 2020, the Master Issuer also issued outstanding Series 2020-1 Variable Funding Senior Secured Notes, Class A-1 (the “2020-1 Class A-1 Notes”), which allow for the borrowing of up to $ 100,000 from time to time on a revolving basis using various credit instruments.

The Company had no outstanding borrowings under the Series 2020-1 Class A-1 Notes as of June 28, 2020.

The borrowing under the 2019-1 Class A-1 Notes in March 2020 and the issuance of the 2020-1 Class A-1 Notes in June 2020 were taken as precautionary measures to provide enhanced financial flexibility considering the uncertain market conditions arising from the COVID-19 pandemic.

The Company had no outstanding borrowings under the Series 2020-1 Class A-1 Notes as of September 27, 2020.

The drawdown of the 2019-1 Class A-1 Notes in March 2020 and the issuance of the 2020-1 Class A-1 Notes in June 2020 were taken as precautionary measures to provide enhanced financial flexibility considering the uncertain market conditions arising from the COVID-19 pandemic.

The 2019-1 Class A-1 Notes and the 2020-1 Class A-1 Notes (collectively, the “Class A-1 Notes”) accrue interest at a variable interest rate based on (i) the prime rate, (ii) overnight federal funds rates, (iii) the London interbank offered rate (“LIBOR”) for U.S.

1 unchanged sentence

There is a commitment fee on the unused portions of the Class A-1 Notes, which ranges from 0.40 % to 0.75 % based on utilization for the 2019-1 Class A-1 Notes, and is 1.50 % for the 2020-1 Class A-1 Notes.

As of June 28, 2020, $ 26,040 of letters of credit were outstanding against the 2019-1 Class A-1 Notes, which relate primarily to interest reserves required under the indenture governing the 2019-1 Class A-1 Notes.

During the three and six months ended June 28, 2020, the Company incurred debt issuance costs of $ 2,122 in connection with the issuance of the 2020-1 Class A-1 Notes.

As of September 27, 2020, $ 26,040 of letters of credit were outstanding against the 2019-1 Class A-1 Notes, which relate primarily to interest reserves required under the indenture governing the 2019-1 Class A-1 Notes.

During the nine months ended September 27, 2020, the Company incurred debt issuance costs of $ 2,122 in connection with the issuance of the 2020-1 Class A-1 Notes.

The debt issuance costs are being amortized to “Interest expense, net” utilizing the effective interest rate method.

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Other Long-Term Debt

A Canadian subsidiary of Wendy’s has a revolving credit facility of C$ 6,000 , which bears interest at the Bank of Montreal Prime Rate.

The debt is guaranteed by Wendy’s.

Borrowings under the facility are guaranteed by Wendy’s.

In March 2020, the Company drew down C$ 5,500 under the revolving credit facility.

As a result, as of June 28, 2020, the Company had outstanding borrowings of C$ 5,500 under the revolving credit facility.

As a result, as of September 27, 2020, the Company had outstanding borrowings of C$ 5,500 under the revolving credit facility.

advertising fund has a revolving line of credit of $ 25,000 , which was established to support the advertising fund operations and bears interest at LIBOR plus 2.15 %.

In February 2020, the Company drew down $ 4,397 under the revolving line of credit, which the Company repaid in February 2020.

In March 2020, the Company drew down $ 25,000 under the revolving line of credit.

As a result, as of June 28, 2020, the Company had outstanding borrowings of $ 25,000 under the revolving line of credit, which is included in “Advertising funds restricted liabilities.” Subsequent to June 28, 2020, the Company renewed the revolving line of credit, which is now guaranteed by Wendy’s.

Borrowings under the line of credit are guaranteed by Wendy’s.

In February 2020, the Company drew down $ 4,397 under the revolving line of credit, which the Company fully repaid in February 2020.

In March 2020, the Company drew down $ 25,000 under the revolving line of credit, which the Company fully repaid in September 2020.

As a result, as of September 27, 2020, the Company had no outstanding borrowings under the revolving line of credit.

The increased borrowings were taken as precautionary measures to provide enhanced financial flexibility considering the uncertain market conditions arising from the COVID-19 pandemic.

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

(10) Fair Value Measurements

9 unchanged sentences

The inputs into the determination of fair value require significant management judgment or estimation.

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Financial Instruments

The following table presents the carrying amounts and estimated fair values of the Company’s financial instruments:

September 27,

2020 December 29,

11 unchanged sentences

475,000 486,543 478,750 490,531 Level 2

Series 2019-1 Class A-1 Notes (b) 120,000 116,100 — — Level 2

advertising fund revolving line of credit 25,000 25,000 — — Level 2

Canadian revolving credit facility 4,108 4,108 — — Level 2

1 unchanged sentence

_______________

(a) The fair values of our investments are not significant and are based on our review of information provided by the investment managers or investees which was based on (1) valuations performed by the investment managers or investees, (2) quoted market or broker/dealer prices for similar investments and (3) quoted market or broker/dealer prices adjusted by the investment managers for legal or contractual restrictions, risk of nonperformance or lack of marketability, depending upon the underlying investments.

During the three months ended June 28, 2020, the Company impaired a miscellaneous investment due to the deterioration in operating performance of the underlying assets.

Subsequent to June 28, 2020, the Company sold its remaining interest in this investment.

(a) The fair values of our investments were not significant and were based on our review of information provided by the investment managers or investees, which was based on (1) valuations performed by the investment managers or investees, (2) quoted market or broker/dealer prices for similar investments and (3) quoted market or broker/dealer prices adjusted by the investment managers for legal or contractual restrictions, risk of nonperformance or lack of marketability, depending upon the underlying investments.

In June 2020, the Company impaired a miscellaneous investment due to the deterioration in operating performance of the underlying assets.

In July 2020, the Company sold its remaining interest in this investment.

(b) The fair values were based on quoted market prices in markets that are not considered active markets.

The carrying amounts of cash, accounts payable, accrued expenses and lines of credit approximate fair value due to the short-term nature of those items.

The carrying amounts of cash, accounts payable and accrued expenses approximate fair value due to the short-term nature of those items.

The carrying amounts of accounts and notes receivable, net (both current and non-current) approximate fair value due to the effect of the related allowance for doubtful accounts.

Our cash equivalents are the only financial assets measured and recorded at fair value on a recurring basis.

Non-Recurring Fair Value Measurements

Assets and liabilities remeasured to fair value on a non-recurring basis resulted in impairment that we have recorded to “Impairment of long-lived assets” in our condensed consolidated statements of operations.

Total impairment losses may reflect the impact of remeasuring long-lived assets held and used (including land, buildings, leasehold improvements, favorable lease assets and ROU assets) to fair value as a result of (1) declines in operating performance at Company-operated restaurants and (2) the Company’s decision to lease and/or sublease the land and/or buildings to franchisees in connection with the sale or anticipated sale of restaurants, including any subsequent lease modifications.

The fair values of long-lived assets held and used presented in the tables below represent the remaining carrying value and were estimated based on either discounted cash flows of future anticipated lease and sublease income or discounted cash flows of future anticipated Company-operated restaurant performance.

THE WENDY’S COMPANY AND SUBSIDIARIES

1 unchanged sentence

(In Thousands Except Per Share Amounts)

Non-Recurring Fair Value Measurements

Total impairment losses may reflect the impact of remeasuring long-lived assets held and used (including land, buildings, leasehold improvements, favorable lease assets and right-of-use assets) to fair value as a result of (1) declines in operating performance at Company-operated restaurants and (2) the Company’s decision to lease and/or sublease the land and/or buildings to franchisees in connection with the sale or anticipated sale of restaurants, including any subsequent lease modifications.

Total impairment losses may also include the impact of remeasuring long-lived assets held for sale, which primarily include surplus properties.

2 unchanged sentences

Fair Value Measurements

September 27,

2020 Level 1 Level 2 Level 3

8 unchanged sentences

(11) Impairment of Long-Lived Assets

During the six months ended June 28, 2020 and June 30, 2019, the Company recorded impairment charges as a result of (1) the deterioration of operating performance of certain Company-operated restaurants and (2) closing Company-operated restaurants and classifying such surplus properties as held for sale.

Impairment charges during the six months ended June 28, 2020 were primarily due to the expected deterioration in operating performance of certain Company-operated restaurants as a result of the COVID-19 pandemic.

During the nine months ended September 27, 2020 and September 29, 2019, the Company recorded impairment charges as a result of (1) the deterioration of operating performance of certain Company-operated restaurants and (2) closing Company-operated restaurants and classifying such surplus properties as held for sale.

Impairment charges during the nine months ended September 27, 2020 were primarily incurred in the first quarter of 2020 due to the expected deterioration in operating performance of certain Company-operated restaurants as a result of the COVID-19 pandemic.

Additional impairment charges may be recognized by the Company in the event of further deterioration in operating performance of Company-operated restaurants.

The following is a summary of impairment losses recorded, which represent the excess of the carrying amount over the fair value of the affected assets and are included in “Impairment of long-lived assets:”

Three Months Ended Six Months Ended

2020 June 30,

2019 June 28,

2020 June 30,

Three Months Ended Nine Months Ended

September 27,

2020 September 29,

2019 September 27,

2020 September 29,

Company-operated restaurants $ — $ — $ 4,395 $ 287

1 unchanged sentence

$ 23 $ — $ 4,727 $ 1,684

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

(12) Income Taxes

The Company’s effective tax rate for the three months ended June 28, 2020 and June 30, 2019 was 20.8 % and 29.2 %, respectively.

The Company’s effective tax rate for the three months ended September 27, 2020 and September 29, 2019 was 24.2 % and 13.5 %, respectively.

The Company’s effective tax rate varied from the U.S.

federal statutory rate of 21 % primarily due to a reduction for the benefit of share-based compensation, partially offset by an increase due to state income taxes.

The Company’s effective tax rate for the six months ended June 28, 2020 and June 30, 2019 was 25.4 % and 24.9 %, respectively.

federal statutory rate of 21 % primarily due an increase for state income taxes, partially offset by (1) a reduction for the benefit of share-based compensation and (2) a reduction in unrecognized tax benefits due to a lapse of statute of limitations during the three months ended September 29, 2019.

The Company’s effective tax rate for the nine months ended September 27, 2020 and September 29, 2019 was 24.8 % and 20.5 %, respectively.

The Company’s effective tax rate varied from the U.S.

federal statutory rate of 21 % primarily due to (1) a reduction for the benefit of share-based compensation, (2) an increase due to state income taxes and (3) an increase for tax on our foreign operations.

There were no significant changes to the unrecognized tax benefits or related interest and penalties for the three and six months ended June 28, 2020.

federal statutory rate of 21 % primarily due to an increase for state income taxes, partially offset by (1) a reduction for the benefit of share-based compensation and (2) a reduction in unrecognized tax benefits due to a lapse of statute of limitations during the nine months ended September 29, 2019.

There were no significant changes to the unrecognized tax benefits or related interest and penalties for the three and nine months ended September 27, 2020.

During the next twelve months, we believe it is reasonably possible the Company will reduce unrecognized tax benefits by up to $ 1,344 due primarily to the lapse of statutes of limitations and expected settlements.

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

The current portion of refundable income taxes was $ 5,933 and $ 13,555 as of June 28, 2020 and December 29, 2019, respectively, and is included in “Accounts and notes receivable, net” in the condensed consolidated balance sheets.

There were no long-term refundable income taxes as of June 28, 2020 and December 29, 2019.

The current portion of refundable income taxes was $ 7,089 and $ 13,555 as of September 27, 2020 and December 29, 2019, respectively, and is included in “Accounts and notes receivable, net” in the condensed consolidated balance sheets.

There were no long-term refundable income taxes as of September 27, 2020 and December 29, 2019.

(13) Net Income Per Share

1 unchanged sentence

The weighted average number of shares used to calculate basic and diluted net income per share were as follows:

Three Months Ended Six Months Ended

2020 June 30,

2019 June 28,

2020 June 30,

Three Months Ended Nine Months Ended

September 27,

2020 September 29,

2019 September 27,

2020 September 29,

Common stock:

3 unchanged sentences

Weighted average diluted shares outstanding 228,317 235,718 227,833 235,901

Diluted net income per share for the three and six months ended June 28, 2020 and June 30, 2019 was computed by dividing net income by the weighted average number of basic shares outstanding plus the potential common share effect of dilutive stock options and restricted shares.

We excluded potential common shares of 2,636 and 2,652 for the three and six months ended June 28, 2020, respectively, and 2,049 and 2,104 for the three and six months ended June 30, 2019, respectively, from our diluted net income per share calculation as they would have had anti-dilutive effects.

Diluted net income per share for the three and nine months ended September 27, 2020 and September 29, 2019 was computed by dividing net income by the weighted average number of basic shares outstanding plus the potential common share effect of dilutive stock options and restricted shares.

We excluded potential common shares of 1,049 and 2,117 for the three and nine months ended September 27, 2020, respectively, and 3,257 and 2,488 for the three and nine months ended September 29, 2019, respectively, from our diluted net income per share calculation as they would have had anti-dilutive effects.

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

(14) Stockholders’ Equity

During the first and second quarter of 2020, the Company paid dividends per share of $ .12 and $ .05 , respectively.

During each of the first and second quarters of 2019, the Company paid dividends per share of $ .10 .

During the first, second, and third quarter of 2020, the Company paid dividends per share of $ .12 , $ .05 and $ .05 , respectively.

During each of the first three quarters of 2019, the Company paid dividends per share of $ .10 .

Repurchases of Common Stock

In February 2020, our Board of Directors authorized a repurchase program for up to $ 100,000 of our common stock through February 28, 2021, when and if market conditions warranted and to the extent legally permissible.

In July 2020, the Company’s Board of Directors approved an extension of the February 2020 authorization by one year, through February 28, 2022, when and if market and economic conditions warrant and to the extent legally permissible.

During the six months ended June 28, 2020, the Company repurchased 779 shares under the February 2020 repurchase authorization with an aggregate purchase price of $ 14,537 , excluding commissions of $ 11 .

As of June 28, 2020, the Company had $ 85,463 of availability remaining under its February 2020 authorization.

As previously announced, beginning in March 2020, the Company temporarily suspended all share repurchase activity under the February 2020 authorization in connection with the Company’s response to the COVID-19 pandemic.

The Company now intends to resume share repurchases in 2020, subject to market conditions and prevailing economic factors.

The Company resumed share repurchases in August 2020.

During the nine months ended September 27, 2020, the Company repurchased 860 shares under the February 2020 repurchase authorization with an aggregate purchase price of $ 16,244 , of which $ 178 was accrued at September 27, 2020, and excluding commissions of $ 12 .

As of September 27, 2020, the Company had $ 83,756 of availability remaining under its February 2020 authorization.

Subsequent to September 27, 2020 through October 28, 2020, the Company repurchased 86 shares under the February 2020 authorization with an aggregate purchase price of $ 2,041 , excluding commissions of $ 1 .

In February 2019, our Board of Directors authorized a repurchase program for up to $ 225,000 of our common stock through March 1, 2020, when and if market conditions warranted and to the extent legally permissible.

1 unchanged sentence

Under the 2019 ASR Agreement, the Company paid the financial institution an initial purchase price of $ 100,000 in cash and received an initial delivery of 4,051 shares of common stock, representing an estimated 85 % of the total shares expected to be delivered under the 2019 ASR Agreement.

In February 2020, the Company completed the 2019 ASR Agreement and received an additional 628 shares of common stock.

The total number of shares of common stock ultimately purchased by the Company under the 2019 ASR Agreement was based on the average of the daily volume-weighted average prices of the common stock during the term of

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

the 2019 ASR Agreement, less an agreed upon discount.

In February 2020, the Company completed the 2019 ASR Agreement and received an additional 628 shares of common stock at an average purchase price of $ 23.89 .

In total, 4,679 shares were delivered under the 2019 ASR Agreement at an average purchase price of $ 21.37 per share.

In addition to the shares repurchased in connection with the 2019 ASR Agreement, during the six months ended June 28, 2020, the Company repurchased 1,312 shares with an aggregate purchase price of $ 28,770 , excluding commissions of $ 18 , under the February 2019 authorization.

In addition to the shares repurchased in connection with the 2019 ASR Agreement, during the nine months ended September 27, 2020, the Company repurchased 1,312 shares with an aggregate purchase price of $ 28,770 , excluding commissions of $ 18 , under the February 2019 authorization.

After taking into consideration these repurchases, with the completion of the 2019 ASR Agreement in February 2020, the Company completed its February 2019 authorization.

During the six months ended June 30, 2019, the Company repurchased 2,824 shares with an aggregate purchase price of $ 49,721 , of which $ 807 was accrued at June 30, 2019, and excluding commissions of $ 40 , under the February 2019 authorization and the Company’s previous November 2018 authorization to repurchase up to $ 220,000 of our common stock.

During the nine months ended September 29, 2019, the Company repurchased 4,153 shares with an aggregate purchase price of $ 76,165 , of which $ 1,102 was accrued at September 29, 2019, and excluding commissions of $ 58 , under the February 2019 authorization and the Company’s previous November 2018 authorization to repurchase up to $ 220,000 of our common stock.

Accumulated Other Comprehensive Loss

The following table provides a rollforward of accumulated other comprehensive loss:

Six Months Ended

2020 June 30,

Nine Months Ended

September 27,

2020 September 29,

Balance at beginning of period $ ( 53,828 ) $ ( 61,673 )

2 unchanged sentences

Balance at end of period $ ( 58,966 ) $ ( 54,110 )

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Nature of Leases

1 unchanged sentence

In addition, the Company owns sites and leases sites from third parties, which it leases and/or subleases to franchisees.

At June 28, 2020, Wendy’s and its franchisees operated 6,806 Wendy’s restaurants.

At September 27, 2020, Wendy’s and its franchisees operated 6,814 Wendy’s restaurants.

Of the 360 Company-operated Wendy’s restaurants, Wendy’s owned the land and building for 142 restaurants, owned the building and held long-term land leases for 147 restaurants and held leases covering the land and building for 71 restaurants.

1 unchanged sentence

The Company also leases restaurant, office and transportation equipment.

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Company as Lessee

The components of lease cost are as follows:

Three Months Ended Six Months Ended

2020 June 30,

2019 June 28,

2020 June 30,

Three Months Ended Nine Months Ended

September 27,

2020 September 29,

2019 September 27,

2020 September 29,

Finance lease cost:

8 unchanged sentences

_______________

(a) Includes expenses for executory costs of $ 9,457 and $ 9,779 for the three months ended June 28, 2020 and June 30, 2019, respectively, and $ 19,200 and $ 19,303 for the six months ended June 28, 2020 and June 30, 2019, respectively, for which the Company is reimbursed by sublessees.

(b) Includes $ 31,263 and $ 28,022 for the three months ended June 28, 2020 and June 30, 2019, respectively, and $ 60,554 and $ 60,473 for the six months ended June 28, 2020 and June 30, 2019, respectively, recorded to “Franchise rental expense” for leased properties that are subsequently leased to franchisees.

Also includes $ 6,831 and $ 7,007 for the three months ended June 28, 2020 and June 30, 2019, respectively, and $ 13,664 and $ 13,600 for the six months ended June 28, 2020 and June 30, 2019, respectively, recorded to “Cost of sales” for leases for Company-operated restaurants.

(a) Includes expenses for executory costs of $ 9,326 and $ 9,908 for the three months ended September 27, 2020 and September 29, 2019, respectively, and $ 28,526 and $ 29,211 for the nine months ended September 27, 2020 and September 29, 2019, respectively, for which the Company is reimbursed by sublessees.

(b) Includes $ 32,421 and $ 32,342 for the three months ended September 27, 2020 and September 29, 2019, respectively, and $ 92,975 and $ 92,815 for the nine months ended September 27, 2020 and September 29, 2019, respectively, recorded to “Franchise rental expense” for leased properties that are subsequently leased to franchisees.

Also includes $ 6,651 and $ 6,892 for the three months ended September 27, 2020 and September 29, 2019, respectively, and $ 20,315 and $ 20,492 for the nine months ended September 27, 2020 and September 29, 2019, respectively, recorded to “Cost of sales” for leases for Company-operated restaurants.

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Company as Lessor

The components of lease income are as follows:

Three Months Ended Six Months Ended

2020 June 30,

2019 June 28,

2020 June 30,

Three Months Ended Nine Months Ended

September 27,

2020 September 29,

2019 September 27,

2020 September 29,

Sales-type and direct-financing leases:

Selling profit $ 569 $ 37 $ 1,197 $ 1,971

Selling profit (loss) $ 182 $ ( 97 ) $ 1,379 $ 1,874

Interest income 7,296 7,240 21,804 19,045

3 unchanged sentences

_______________

(a) Includes sublease income of $ 41,489 and $ 42,921 for the three months ended June 28, 2020 and June 30, 2019, respectively, and $ 83,531 and $ 85,942 for the six months ended June 28, 2020 and June 30, 2019, respectively.

Sublease income includes lessees’ variable payments to the Company for executory costs of $ 9,450 and $ 9,779 for the three months ended June 28, 2020 and June 30, 2019, respectively, and $ 19,159 and $ 19,211 for the six months ended June 28, 2020 and June 30, 2019, respectively.

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

(a) Includes sublease income of $ 43,122 and $ 44,821 for the three months ended September 27, 2020 and September 29, 2019, respectively, and $ 126,653 and $ 130,763 for the nine months ended September 27, 2020 and September 29, 2019, respectively.

Sublease income includes lessees’ variable payments to the Company for executory costs of $ 9,379 and $ 9,683 for the three months ended September 27, 2020 and September 29, 2019, respectively, and $ 28,538 and $ 28,894 for the nine months ended September 27, 2020 and September 29, 2019, respectively.

(16) Transactions with Related Parties

2 unchanged sentences

A wholly-owned subsidiary of Wendy’s leases restaurant facilities from TimWen, which are then subleased to franchisees for the operation of Wendy’s/Tim Hortons combo units in Canada.

During the six months ended June 28, 2020 and June 30, 2019, Wendy’s paid TimWen $ 7,408 and $ 8,140 , respectively, under these lease agreements.

In addition, TimWen paid Wendy’s a management fee under the TimWen joint venture agreement of $ 101 and $ 103 during the six months ended June 28, 2020 and June 30, 2019, respectively, which has been included as a reduction to “General and administrative.”

During the nine months ended September 27, 2020 and September 29, 2019, Wendy’s paid TimWen $ 11,970 and $ 12,710 , respectively, under these lease agreements.

In addition, TimWen paid Wendy’s a management fee under the TimWen joint venture agreement of $ 152 and $ 155 during the nine months ended September 27, 2020 and September 29, 2019, respectively, which has been included as a reduction to “General and administrative.”

(17) Guarantees and Other Commitments and Contingencies

2 unchanged sentences

Lease Guarantees

Wendy’s has guaranteed the performance of certain leases and other obligations, primarily from former Company-operated restaurant locations now operated by franchisees, amounting to $ 74,538 as of June 28, 2020.

These leases extend through 2045.

We have not received any notice of default related to these leases as of June 28, 2020.

We have not received any notice of default related to these leases as of September 27, 2020.

In the event of default by a franchise owner, Wendy’s generally retains the right to acquire possession of the related restaurant locations.

Letters of Credit

As of June 28, 2020, the Company had outstanding letters of credit with various parties totaling $ 26,374 .

As of September 27, 2020, the Company had outstanding letters of credit with various parties totaling $ 26,381 .

Substantially all of the outstanding letters of credit include amounts outstanding against the 2019-1 Class A-1 Notes.

We do not expect any material loss to result from these letters of credit.

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

(18) Legal and Environmental Matters

5 unchanged sentences

We previously described certain legal proceedings in the Form 10-K.

As of June 28, 2020, there were no material developments in those legal proceedings.

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

As of September 27, 2020, there were no material developments in those legal proceedings.

(19) Segment Information

Revenues by segment were as follows:

Three Months Ended Six Months Ended

2020 June 30,

2019 June 28,

2020 June 30,

Three Months Ended Nine Months Ended

September 27,

2020 September 29,

2019 September 27,

2020 September 29,

$ 374,895 $ 359,353 $ 1,037,194 $ 1,051,994

3 unchanged sentences

The following table reconciles profit by segment to the Company’s consolidated income before income taxes:

Three Months Ended Six Months Ended

2020 June 30,

2019 June 28,

2020 June 30,

Three Months Ended Nine Months Ended

September 27,

2020 September 29,

2019 September 27,

2020 September 29,

(a) $ 108,297 $ 98,342 $ 283,261 $ 290,969

11 unchanged sentences

Loss on early extinguishment of debt — — — ( 7,150 )

Other (expense) income, net ( 144 ) 2,247 932 4,947

Other income, net 181 2,218 1,113 7,165

Income before income taxes $ 52,443 $ 53,311 $ 105,158 $ 138,934

(a) For the three and six months ended June 28, 2020, includes advertising funds expense of $ 2,185 related to the expected Company funding of incremental advertising during 2020.

_______________

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

(a) For the three and nine months ended September 27, 2020, includes advertising funds expense of $ 6,153 and $ 8,338 , respectively, related to the expected Company funding of incremental advertising during 2020.

(b) Includes corporate overhead costs, such as employee compensation and related benefits.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements