What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-08-11 compared with 2021-05-12 · 338 added, 143 removed, 575 unchanged (46% of the section changed)

57 unchanged sentences

(In Thousands Except Per Share Amounts)

Three Months Ended

2021 March 29,

Three Months Ended Six Months Ended

2021 June 28,

Sales $ 193,525 $ 164,217 $ 382,582 $ 331,015

17 unchanged sentences

Interest expense, net ( 28,204 ) ( 29,085 ) ( 56,990 ) ( 57,610 )

Other income, net 129 1,076

Loss on early extinguishment of debt ( 17,917 ) — ( 17,917 ) —

Other income (expense), net 161 ( 144 ) 290 932

Income before income taxes 80,786 31,432 135,251 52,715

8 unchanged sentences

(In Thousands)

Three Months Ended

2021 March 29,

Three Months Ended Six Months Ended

2021 June 28,

Net income $ 65,724 $ 24,904 $ 107,090 $ 39,345

22 unchanged sentences

Balance at April 4, 2021 $ 47,042 $ 2,901,460 $ 259,879 $ ( 2,640,295 ) $ ( 47,421 ) $ 520,665

Net income — — 65,724 — — 65,724

Other comprehensive income — — — — 3,347 3,347

Cash dividends — — ( 22,123 ) — — ( 22,123 )

Repurchases of common stock — — — ( 27,291 ) — ( 27,291 )

Share-based compensation — 5,882 — — — 5,882

Common stock issued upon exercises of stock options

— 850 — 23,466 — 24,316

Common stock issued upon vesting of restricted shares

— ( 959 ) — 714 — ( 245 )

Other — 41 ( 5 ) 45 — 81

Balance at July 4, 2021 $ 47,042 $ 2,907,274 $ 303,475 $ ( 2,643,361 ) $ ( 44,074 ) $ 570,356

See accompanying notes to condensed consolidated financial statements.

THE WENDY’S COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY—CONTINUED

(In Thousands)

Common Stock Additional

Capital Retained Earnings Common Stock Held in Treasury Accumulated Other Comprehensive Loss Total

Balance at December 29, 2019 $ 47,042 $ 2,874,001 $ 185,725 $ ( 2,536,581 ) $ ( 53,828 ) $ 516,359

12 unchanged sentences

Balance at March 29, 2020 $ 47,042 $ 2,889,836 $ 173,366 $ ( 2,592,834 ) $ ( 66,335 ) $ 451,075

Net income — — 24,904 — — 24,904

Other comprehensive income — — — — 4,149 4,149

Cash dividends — — ( 11,181 ) — — ( 11,181 )

Share-based compensation — 4,787 — — — 4,787

Common stock issued upon exercises of stock options

— ( 902 ) — 11,361 — 10,459

Common stock issued upon vesting of restricted shares

— ( 1,041 ) — 773 — ( 268 )

Other — 19 ( 3 ) 42 — 58

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

See accompanying notes to condensed consolidated financial statements.

2 unchanged sentences

(In Thousands)

Three Months Ended

2021 March 29,

Six Months Ended

2021 June 28,

Cash flows from operating activities:

Net income $ 107,090 $ 39,345

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 62,303 65,760

4 unchanged sentences

Change in operating lease liabilities ( 23,074 ) ( 19,233 )

Net receipt (recognition) of deferred vendor incentives 6,522 ( 2,305 )

Net receipt of deferred vendor incentives 3,332 7,728

System optimization gains, net ( 31,282 ) ( 2,310 )

2 unchanged sentences

Changes in operating assets and liabilities and other, net ( 13,536 ) ( 93,332 )

Net cash provided by (used in) operating activities 85,830 ( 19,369 )

Net cash provided by operating activities 158,751 30,562

Cash flows from investing activities:

3 unchanged sentences

Notes receivable, net 611 138

Net cash used in investing activities ( 5,085 ) ( 12,121 )

Net cash provided by (used in) investing activities 31,952 ( 24,944 )

Cash flows from financing activities:

2 unchanged sentences

Repayments of finance lease liabilities ( 5,777 ) ( 3,707 )

Deferred financing costs ( 20,873 ) ( 2,122 )

Repurchases of common stock ( 83,658 ) ( 45,137 )

2 unchanged sentences

Payments related to tax withholding for share-based compensation ( 3,197 ) ( 3,704 )

Net cash (used in) provided by financing activities ( 91,662 ) 63,404

Net cash (used in) provided by operations before effect of exchange rate changes on cash ( 10,917 ) 31,914

Net cash provided by financing activities 28,929 48,265

Net cash provided by operations before effect of exchange rate changes on cash 219,632 53,883

Effect of exchange rate changes on cash 2,283 ( 3,132 )

Net (decrease) increase in cash, cash equivalents and restricted cash ( 10,094 ) 26,828

Net increase in cash, cash equivalents and restricted cash 221,915 50,751

Cash, cash equivalents and restricted cash at beginning of period 418,241 358,707

15 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 April 4, 2021 and the results of our operations and cash flows for the three months ended April 4, 2021 and March 29, 2020.

The results of operations for the three months ended April 4, 2021 are not necessarily indicative of the results to be expected for the full 2021 fiscal year.

In our opinion, the Financial Statements contain all adjustments of a normal recurring nature necessary to present fairly our financial position as of July 4, 2021, the results of our operations for the three and six months ended July 4, 2021 and June 28, 2020 and cash flows for the six months ended July 4, 2021 and June 28, 2020.

The results of operations for the six months ended July 4, 2021 are not necessarily indicative of the results to be expected for the full 2021 fiscal year.

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 January 3, 2021 (the “Form 10-K”).

7 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-month periods presented herein contain 13 weeks.

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

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

Our significant interim accounting policies include the recognition of advertising funds expense in proportion to advertising funds revenue.

Disaggregation of Revenue

The following tables disaggregate revenue by segment and source:

Wendy’s International Global Real Estate & Development Total

Three Months Ended July 4, 2021

Sales at Company-operated restaurants $ 193,279 $ 246 $ — $ 193,525

Franchise royalty revenue 106,006 13,560 — 119,566

Franchise fees (a) 14,331 1,454 1,310 17,095

Franchise rental income — — 60,868 60,868

Advertising funds revenue 96,227 6,056 — 102,283

Total revenues $ 409,843 $ 21,316 $ 62,178 $ 493,337

THE WENDY’S COMPANY AND SUBSIDIARIES

1 unchanged sentence

(In Thousands Except Per Share Amounts)

Disaggregation of Revenue

The following tables disaggregate revenue by segment and source:

Wendy’s International Global Real Estate & Development Total

Three Months Ended April 4, 2021

Six Months Ended July 4, 2021

Sales at Company-operated restaurants $ 382,336 $ 246 $ — $ 382,582

4 unchanged sentences

Total revenues $ 791,797 $ 39,566 $ 122,177 $ 953,540

Three Months Ended March 29, 2020

Three Months Ended June 28, 2020

Sales at Company-operated restaurants $ 164,217 $ — $ — $ 164,217

4 unchanged sentences

Total revenues $ 331,258 $ 14,003 $ 57,045 $ 402,306

Six Months Ended June 28, 2020

Sales at Company-operated restaurants $ 331,015 $ — $ — $ 331,015

Franchise royalty revenue 172,954 19,593 — 192,547

Franchise fees (a) 10,593 906 779 12,278

Franchise rental income — — 114,713 114,713

Advertising funds revenue 147,737 8,976 — 156,713

Total revenues $ 662,299 $ 29,475 $ 115,492 $ 807,266

_______________

10 unchanged sentences

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

(c) Deferred franchise fees are included in “Accrued expenses and other current liabilities” and “Deferred franchise fees” and totaled $ 8,715 and $ 86,532 as of April 4, 2021, respectively, and $ 8,691 and $ 89,094 as of January 3, 2021, respectively.

(c) Deferred franchise fees are included in “Accrued expenses and other current liabilities” and “Deferred franchise fees” and totaled $ 9,123 and $ 89,286 as of July 4, 2021, respectively, and $ 8,691 and $ 89,094 as of January 3, 2021, respectively.

THE WENDY’S COMPANY AND SUBSIDIARIES

2 unchanged sentences

Significant changes in deferred franchise fees are as follows:

Three Months Ended

2021 March 29,

Six Months Ended

2021 June 28,

Deferred franchise fees at beginning of period $ 97,785 $ 100,689

11 unchanged sentences

(3) Acquisitions

No restaurants were acquired from franchisees during the three months ended April 4, 2021 and March 29, 2020.

No restaurants were acquired from franchisees during the six months ended July 4, 2021 and June 28, 2020.

NPC Quality Burgers, Inc.

16 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 three months ended April 4, 2021, the Company facilitated no Franchise Flips.

During the three months ended March 29, 2020, the Company facilitated three Franchise Flips.

The Company expects to sell 47 Company-operated restaurants in New York (including Manhattan) to franchisees in the second quarter of 2021.

During the six months ended July 4, 2021 and June 28, 2020, the Company facilitated 19 and three Franchise Flips, respectively.

In addition, during the three months ended July 4, 2021, the Company completed the sale of 47 Company-operated restaurants in New York (including Manhattan) to franchisees.

No Company-operated restaurants were sold to franchisees during the six months ended June 28, 2020.

Gains and losses recognized on dispositions are recorded to “System optimization gains, net” in our condensed consolidated statements of operations.

2 unchanged sentences

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

Three Months Ended

2021 March 29,

Post-closing adjustments on sales of restaurants (a) $ 515 $ 345

Gain on sales of other assets, net (b) 1 ( 22 )

Three Months Ended Six Months Ended

2021 June 28,

Number of restaurants sold to franchisees 47 — 47 —

Proceeds from sales of restaurants $ 50,518 $ — $ 50,518 $ —

Net assets sold (a) ( 16,939 ) — ( 16,939 ) —

Goodwill related to sales of restaurants ( 4,847 ) — ( 4,847 ) —

Net unfavorable leases (b) ( 2,939 ) — ( 2,939 ) —

Gain on sales-type leases 7,156 — 7,156 —

Other (c) ( 2,148 ) — ( 2,148 ) —

30,801 — 30,801 —

Post-closing adjustments on sales of restaurants (d) — — 515 345

Gain on sales of restaurants, net 30,801 — 31,316 345

(Loss) gain on sales of other assets, net (e) ( 35 ) 1,987 ( 34 ) 1,965

System optimization gains, net $ 30,766 $ 1,987 $ 31,282 $ 2,310

_______________

(a) 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 months ended April 4, 2021 and March 29, 2020, the Company received net cash proceeds of $ 3 and $ 195 , respectively, primarily from the sale of surplus and other properties.

(a) Net assets sold consist primarily of equipment.

(b) During the three and six months ended July 4, 2021, the Company recorded favorable lease assets of $ 3,799 and unfavorable lease liabilities of $ 6,738 as a result of leasing and/or subleasing land, buildings, and/or leasehold improvements to franchisees, in connection with the sale of the New York Company-operated restaurants (including Manhattan).

(c) The three and six months ended July 4, 2021 include a deferred gain of $ 3,500 as a result of certain contingencies related to the extension of lease terms.

(d) 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.

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

(e) During the three and six months ended July 4, 2021, the Company received net cash proceeds of $ 10 and $ 13 , respectively, primarily from the sale of surplus and other properties.

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

Assets Held for Sale

4 unchanged sentences

_______________

(a) Net restaurant assets held for sale represent the New York Company-operated restaurants we expect to sell in the second quarter of 2021 (including Manhattan as of April 4, 2021) and consist primarily of cash, inventory, property and an estimate of allocable goodwill.

(a) Net restaurant assets held for sale as of January 3, 2021 included New York Company-operated restaurants (excluding Manhattan) and consisted primarily of cash, inventory, property and an estimate of allocable goodwill.

During the three months ended April 4, 2021, the Company also classified its four Manhattan restaurants as held for sale.

(b) Other assets held for sale primarily consist of surplus properties.

Assets held for sale are included in “Prepaid expenses and other current assets.”

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

(5) Reorganization and Realignment Costs

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

Three Months Ended

2021 March 29,

Three Months Ended Six Months Ended

2021 June 28,

Operations and field realignment $ 1,215 $ — $ 1,489 $ —

7 unchanged sentences

restaurant operations.

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

The Operations and Field Realignment Plan also includes contract terminations, including the closure of certain field offices.

The Company expects to incur total costs aggregating approximately $ 6,000 to $ 8,000 related to the Operations and Field Realignment Plan.

During the three months ended April 4, 2021, the Company recognized costs totaling $ 274 , which primarily included severance and related employee costs.

During the three and six months ended July 4, 2021, the Company recognized costs totaling $ 1,215 and $ 1,489 , respectively, which primarily included third-party and other costs.

The Company expects to incur additional costs aggregating approximately $ 1,000 to $ 3,000 , 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 2021.

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

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

Three Months Ended Total

Three Months Ended Six Months Ended Total

Incurred Since Inception

1 unchanged sentence

Third-party and other costs 1,136 1,156 1,223

1,215 1,489 4,669

Share-based compensation (a) — — 621

2 unchanged sentences

(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 April 4, 2021.

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 July 4, 2021.

January 3, 2021 Charges Payments Balance

2 unchanged sentences

$ 2,600 $ 1,489 $ ( 3,080 ) $ 1,009

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

The IT Realignment Plan has reduced certain employee compensation and other related costs that the Company has reinvested 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 elimination of the Chief Digital Experience Officer position and the creation of a Chief Information Officer position, for which the Company completed the hiring process in October 2020.

During the three months ended March 29, 2020, the Company recognized costs totaling $ 3,559 , which primarily included third-party and other costs.

During the three and six months ended June 28, 2020, the Company recognized costs totaling $ 2,847 and $ 6,406 , which primarily included third-party and other costs and severance and related employee costs.

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

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

Three Months Ended Total

Three Months Ended Six Months Ended Total

Incurred Since Inception

2021 March 29,

2021 June 28,

Severance and related employee costs (a) $ ( 8 ) $ 830 $ ( 119 ) $ 975 $ 8,272

5 unchanged sentences

_______________

(a) The three months ended April 4, 2021 includes a reversal of an accrual as a result of a change in estimate.

(a) The three and six months ended July 4, 2021 include a reversal of an accrual as a result of a change in estimate.

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

(b) 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 accruals for the IT Realignment Plan are included in “Accrued expenses and other current liabilities” and “Other liabilities” and totaled $ 689 and $ 41 as of April 4, 2021 and $ 6,744 and $ 237 as of March 29, 2020, respectively.

The accruals for the IT Realignment Plan are included in “Accrued expenses and other current liabilities” and “Other liabilities” and totaled $ 462 and $ 10 as of July 4, 2021 and $ 4,039 and $ 371 as of June 28, 2020, respectively.

The tables below present a rollforward of our accruals for the IT Realignment Plan.

9 unchanged sentences

$ 8,624 $ 6,406 $ ( 10,620 ) $ 4,410

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

General and Administrative ( “ G&A ”) Realignment

2 unchanged sentences

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

During the three months ended March 29, 2020, the Company recognized costs totaling $ 267 , which primarily included severance and related employee costs and share-based compensation.

During the six months ended June 28, 2020, the Company recognized costs totaling $ 331 , which primarily included share-based compensation and severance and related employee costs.

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 Total

Three Months Ended Six Months Ended Total

Incurred Since Inception

2021 March 29,

2021 June 28,

Severance and related employee costs (a) $ ( 22 ) $ ( 6 ) $ ( 53 ) $ 146 $ 24,213

6 unchanged sentences

_______________

(a) The three months ended April 4, 2021 includes a reversal of an accrual as a result of a change in estimate.

(a) The three and six months ended July 4, 2021 and June 28, 2020 include 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.

As of April 4, 2021, the accruals for the G&A realignment plan are included in “Accrued expenses and other current liabilities.” As of March 29, 2020, the accruals for the G&A realignment plan are included in “Accrued expenses and other current liabilities” and “Other liabilities” and totaled and $ 3,781 and $ 408 , respectively.

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

As of July 4, 2021, the accruals for the G&A realignment plan are included in “Accrued expenses and other current liabilities.” As of June 28, 2020, the accruals for the G&A realignment plan are included in “Accrued expenses and other current liabilities” and “Other liabilities” and totaled and $ 2,705 and $ 108 , respectively.

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

11 unchanged sentences

The Company recognizes costs related to acquisitions and dispositions under its system optimization initiative.

During the three months ended April 4, 2021, the Company recognized costs totaling $ 4,678 , which were primarily comprised of the write-off of certain lease assets and lease termination fees associated with the NPC bankruptcy sale process.

See Note 3 for further

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

During the six months ended July 4, 2021, the Company recognized costs totaling $ 5,575 , which were primarily comprised of the write-off of certain lease assets and lease termination fees associated with the NPC bankruptcy sale process.

See Note 3 for further information.

The Company expects to recognize a gain of approximately $ 1,000 related to the write-off of certain NPC-related lease liabilities upon final termination of the leases.

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

Three Months Ended Total

Three Months Ended Six Months Ended Total

Incurred Since Inception

2021 March 29, 2020

2021 June 28,

Severance and related employee costs $ 661 $ — $ 661 $ — $ 18,898

7 unchanged sentences

_______________

(a) The three months ended April 4, 2021 includes transaction fees of $ 1,350 associated with the NPC bankruptcy sale process.

(a) The six months ended July 4, 2021 includes transaction fees of $ 1,350 associated with the NPC bankruptcy sale process.

(b) Primarily includes accelerated amortization of previously acquired franchise rights related to the Company-operated restaurants in territories that have been sold to franchisees in connection with our system optimization initiative.

(c) The three months ended April 4, 2021 includes the write-off of lease assets of $ 1,609 and lease termination fees paid of $ 1,480 .

(c) The six months ended July 4, 2021 includes the write-off of lease assets of $ 1,341 and lease termination fees paid of $ 1,480 .

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

(d) 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.

The table below presents a rollforward of our accruals for our system optimization initiative, which are included in “Accrued expenses and other current liabilities.”

The table below presents a rollforward of our accruals for our system optimization initiative, which were included in “Accrued expenses and other current liabilities” as of January 3, 2021.

2021 Charges Payments Balance

Severance and related employee costs $ — $ 661 $ ( 661 ) $ —

Professional fees 1,230 739 ( 1,969 ) —

7 unchanged sentences

Such investments are accounted for using the equity method of accounting, under which our results of operations include our share of the income (loss) of the investees in “Other operating income, net.”

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

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

Three Months Ended

2021 March 29,

Six Months Ended

2021 June 28,

Balance at beginning of period $ 44,574 $ 45,310

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)

(7) Long-Term Debt

5 unchanged sentences

2.775 % Series 2021-1 Class A-2-II Notes, anticipated repayment date 2031

430,875 434,250

Series 2019-1 Class A-2 Notes:

4 unchanged sentences

Series 2018-1 Class A-2 Notes:

4.497 % Series 2015-1 Class A-2-III Notes, anticipated repayment date 2025

3.573 % Series 2018-1 Class A-2-I Notes, repaid in connection with the June 2021 refinancing

3.884 % Series 2018-1 Class A-2-II Notes, anticipated repayment date 2028

458,375 460,750

Series 2015-1 Class A-2 Notes:

4.497 % Series 2015-1 Class A-2-III Notes, repaid in connection with the June 2021 refinancing

Canadian revolving credit facility — 1,962

6 unchanged sentences

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 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 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” and, together with the 2019-1 Class A-1 Notes, the “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.

As of April 4, 2021, the Company had no outstanding borrowings under the 2019-1 Class A-1 Notes or the 2020-1 Class A-1 Notes.

In June 2021, the Master Issuer completed a refinancing transaction with respect to this facility under which the Master Issuer issued fixed rate senior secured notes in the following 2021-1 series:

Class A-2-I with an initial principal amount of $ 450,000 and Class A-2-II with an initial principal amount of $ 650,000 (collectively, the “Series 2021-1 Class A-2 Notes”).

Interest and principal payments on the Series 2021-1 Class A-2 Notes are payable on a quarterly basis.

The legal final maturity date of the Series 2021-1 Class A-2 Notes is in June 2051.

If the Master Issuer has not repaid or refinanced the Series 2021-1 Class A-2 Notes prior to their respective anticipated repayment dates, additional interest will accrue pursuant to the indenture governing the Series 2021-1 Class A-2 Notes.

The net proceeds from the sale of the Series 2021-1 Class A-2 Notes were used to repay in full the Master Issuer’s outstanding Series 2015-1 Class A-2-III Notes and Series 2018-1 Class A-2-I Notes, including the payment of prepayment and transaction costs.

The remaining funds will be used for general corporate purposes, which may include funding for growth initiatives, return of capital to shareholders, or additional debt retirement.

As a result of the refinancing, the Company recorded a loss on early extinguishment of debt of $ 17,917 during the three months ended July 4, 2021, which was comprised of a specified make-whole payment of $ 9,632 and the write-off of certain unamortized deferred financing costs of $ 8,285 .

The Series 2021-1 Class A-2 Notes have scheduled principal payments of $ 5,500 in 2021, $ 11,000 annually from 2022 through 2028, $ 422,750 in 2029, $ 6,500 in 2030 and $ 588,250 in 2031.

In connection with the issuance of the Series 2021-1 Class A-2 Notes, the Master Issuer also entered into a revolving financing facility of Series 2021-1 Variable Funding Senior Secured Notes, Class A-1 (the “Series 2021-1 Class A-1 Notes” and, together with the Series 2021-1 Class A-2 Notes, the “Series 2021-1 Senior Notes”), which allows for the drawing of up to $ 300,000 on a revolving basis using various credit instruments, including a letter of credit facility.

No amounts were borrowed under the Series 2021-1 Class A-1 Notes during the three months ended July 4, 2021.

The Series 2021-1 Class A-1 Notes replaced the Company’s $ 150,000 Series 2019-1 Class A-1 Notes and $ 100,000 Series 2020-1 Class A-1 Notes, which were canceled on the closing date, and the letters of credit outstanding against the Series 2019-1 Class A-1 Notes were transferred to the Series 2021-1 Class A-1 Notes.

THE WENDY’S COMPANY AND SUBSIDIARIES

1 unchanged sentence

(In Thousands Except Per Share Amounts)

The Series 2021-1 Senior Notes are secured by substantially all of the assets of the Master Issuer and certain other limited-purpose, bankruptcy-remote, wholly-owned indirect subsidiaries of the Company that act as guarantors, except for certain real estate assets and subject to certain limitations.

The Series 2021-1 Senior Notes are subject to substantially the same series of covenants and restrictions as the Company’s outstanding Series 2019-1 Class A-2 Notes and Series 2018-1 Class A-2 Notes.

During the three and six months ended July 4, 2021, the Company incurred debt issuance costs of $ 20,873 in connection with the issuance of the Series 2021-1 Senior Notes.

The debt issuance costs will be amortized to “Interest expense, net” through the anticipated repayment dates of the Series 2021-1 Senior Notes utilizing the effective interest rate method.

Other Long-Term Debt

2 unchanged sentences

In March 2020, the Company drew down C$ 5,500 under the revolving credit facility, which the Company fully repaid through repayments of C$ 3,000 in the fourth quarter of 2020 and C$ 2,500 in the first quarter of 2021.

As a result, as of April 4, 2021, the Company had no outstanding borrowings under the Canadian revolving credit facility.

As a result, as of July 4, 2021, the Company had no outstanding borrowings under the Canadian revolving credit facility.

(8) 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

10 unchanged sentences

Series 2019-1 Class A-2-II Notes (a) 425,250 466,669 434,250 469,555 Level 2

Series 2018-1 Class A-2-I Notes (a) — — 436,500 450,381 Level 2

Series 2018-1 Class A-2-II Notes (a) 458,375 489,407 460,750 491,021 Level 2

Series 2015-1 Class A-2-III Notes (a) — — 473,750 481,851 Level 2

7 unchanged sentences

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

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Non-Recurring Fair Value Measurements

2 unchanged sentences

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Total impairment losses may also include the impact of remeasuring long-lived assets held for sale.

13 unchanged sentences

The Company records impairment charges as a result of (1) the deterioration in operating performance of certain Company-operated restaurants, (2) the Company’s decision to lease and/or sublease properties to franchisees in connection with the sale or anticipated sale of Company-operated restaurants, including any subsequent lease modifications, and (3) closing Company-operated restaurants and classifying such surplus properties as held for sale.

Impairment charges during the three months ended March 29, 2020 were primarily due to the expected deterioration in operating performance of certain Company-operated restaurants as a result of the COVID-19 pandemic.

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.

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

2021 March 29,

Three Months Ended Six Months Ended

2021 June 28,

Company-operated restaurants $ 488 $ — $ 934 $ 4,395

2 unchanged sentences

$ 630 $ 117 $ 1,265 $ 4,704

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

(10) Income Taxes

The Company’s effective tax rate for the three months ended April 4, 2021 and March 29, 2020 was 24.1 % and 32.1 %, respectively.

The Company’s effective tax rate for the three months ended July 4, 2021 and June 28, 2020 was 18.6 % and 20.8 %, respectively.

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

federal statutory rate of 21 % primarily due to (1) an increase related to the tax effects of our foreign operations and (2) an increase for state income taxes, including discrete changes to state deferred taxes.

These increases were partially offset by a reduction for the benefit of share-based compensation.

There were no significant changes to the unrecognized tax benefits or related interest and penalties for the three months ended April 4, 2021.

federal statutory rate of 21 % for the three months ended July 4, 2021 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 July 4, 2021 and June 28, 2020 was 20.8 % and 25.4 %, respectively.

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

federal statutory rate of 21 % for the six months ended July 4, 2021 primarily due to a reduction for the benefit of share-based compensation, partially offset by an increase due to state income taxes, including discrete changes to state deferred taxes.

There were no significant changes to the unrecognized tax benefits or related interest and penalties for the three and six months ended July 4, 2021.

During the next twelve months, we believe it is reasonably possible the Company will reduce unrecognized tax benefits by up to $ 2,016 due primarily to the lapse of statutes of limitations and expected settlements.

The current portion of refundable income taxes was $ 1,740 and $ 5,399 as of April 4, 2021 and January 3, 2021, respectively, and is included in “Accounts and notes receivable, net.” There were no long-term refundable income taxes as of April 4, 2021 and January 3, 2021.

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 $ 4,528 and $ 5,399 as of July 4, 2021 and January 3, 2021, respectively, and is included in “Accounts and notes receivable, net.” There were no long-term refundable income taxes as of July 4, 2021 and January 3, 2021.

(11) Net Income Per Share

The calculation of basic and diluted net income per share was as follows:

Three Months Ended

2021 March 29,

Three Months Ended Six Months Ended

2021 June 28,

Net income $ 65,724 $ 24,904 $ 107,090 $ 39,345

2 unchanged sentences

Dilutive effect of stock options and restricted shares

3,526 4,051 3,459 4,262

Weighted average diluted shares outstanding 225,400 227,174 226,063 227,591

2 unchanged sentences

Diluted $ .29 $ .11 $ .47 $ .17

Basic net income per share for the three months ended April 4, 2021 and March 29, 2020 was computed by dividing net income amounts by the weighted average number of shares of common stock outstanding.

Diluted net income per share for the three months ended April 4, 2021 and March 29, 2020 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 1,870 and 2,667 for the three months ended April 4, 2021 and March 29, 2020, respectively, from our diluted net income per share calculation as they would have had anti-dilutive effects.

Basic net income per share for the three and six months ended July 4, 2021 and June 28, 2020 was computed by dividing net income amounts by the weighted average number of shares of common stock outstanding.

Diluted net income per share for the three and six months ended July 4, 2021 and June 28, 2020 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 1,825 and 1,847 for the three and six months ended July 4, 2021, respectively, and 2,636 and 2,652 for the three and six months ended June 28, 2020, respectively, from our diluted net income per share calculation as they would have had anti-dilutive effects.

(12) Stockholders’ Equity

During the first quarter of 2021 and 2020, the Company paid dividends per share of $ .09 and $ .12 , respectively.

During the first and second quarter of 2021, the Company paid dividends per share of $ .09 and $ .10 , respectively.

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

Repurchases of Common Stock

2 unchanged sentences

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.

The Company resumed share repurchases

The Company resumed share repurchases in August 2020.

In addition, in May 2021, the Board of Directors approved an increase of $ 50,000 to the February 2020 authorization, resulting in an aggregate authorization of $ 150,000 that continues to expire on February 28, 2022.

During the six months ended July 4, 2021, the Company repurchased 3,956 shares under the February 2020 repurchase authorization with an aggregate purchase price of $ 83,320 , of which $ 440 was accrued at July 4, 2021, and excluding commissions of $ 55 .

As of July 4, 2021, the Company had $ 34,396 of availability remaining under its February 2020 authorization.

Subsequent to July 4, 2021 through August 4, 2021, the Company repurchased 193 shares under the February 2020 authorization with an aggregate purchase price of $ 4,396 , excluding commissions of $ 2 .

In addition, in August 2021, the Board of Directors approved an increase of $ 70,000 to the February 2020 authorization, resulting in an aggregate authorization of $ 220,000 that continues to

THE WENDY’S COMPANY AND SUBSIDIARIES

1 unchanged sentence

(In Thousands Except Per Share Amounts)

in August 2020.

During the three months ended April 4, 2021, the Company repurchased 2,763 shares under the February 2020 repurchase authorization with an aggregate purchase price of $ 56,046 , of which $ 1,196 was accrued at April 4, 2021, and excluding commissions of $ 38 .

As of April 4, 2021, the Company had $ 11,670 of availability remaining under its February 2020 authorization.

Subsequent to April 4, 2021 through May 5, 2021, the Company repurchased 529 shares under the February 2020 authorization with an aggregate purchase price of $ 11,670 , excluding commissions of $ 7 .

The Company has $ 50,000 of availability remaining under the authorization as of May 12, 2021.

expire on February 28, 2022.

The Company has availability of $ 100,000 remaining under the authorization as of August 11, 2021.

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.

4 unchanged sentences

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 three months ended March 29, 2020, the Company repurchased 2,091 shares with an aggregate purchase price of $ 43,307 , excluding commissions of $ 29 , under the February 2020 authorization and the February 2019 authorization.

In addition to the shares repurchased in connection with the 2019 ASR Agreement, during the six months ended June 28, 2020, the Company repurchased 2,091 shares with an aggregate purchase price of $ 43,307 , excluding commissions of $ 29 , under the February 2020 authorization and 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.

1 unchanged sentence

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

Three Months Ended

2021 March 29,

Six Months Ended

2021 June 28,

Balance at beginning of period $ ( 49,641 ) $ ( 53,828 )

5 unchanged sentences

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

At April 4, 2021, Wendy’s and its franchisees operated 6,838 Wendy’s restaurants.

At July 4, 2021, Wendy’s and its franchisees operated 6,866 Wendy’s restaurants.

Of the 315 Company-operated Wendy’s restaurants, Wendy’s owned the land and building for 138 restaurants, owned the building and held long-term land leases for 120 restaurants and held leases covering the land and building for 57 restaurants.

6 unchanged sentences

The components of lease cost are as follows:

Three Months Ended

2021 March 29,

Three Months Ended Six Months Ended

2021 June 28,

Finance lease cost:

8 unchanged sentences

_______________

(a) Includes expenses for executory costs of $ 10,063 and $ 9,743 for the three months ended April 4, 2021 and March 29, 2020, respectively, for which the Company is reimbursed by sublessees.

(b) The three months ended April 4, 2021 and March 29, 2020 include $ 32,552 and $ 29,291 , respectively, recorded to “Franchise rental expense” for leased properties that are subsequently leased to franchisees and $ 6,681 and $ 6,833 , respectively, recorded to “Cost of sales” for leases for Company-operated restaurants.

(a) Includes expenses for executory costs of $ 10,087 and $ 9,457 for the three months ended July 4, 2021 and June 28, 2020, respectively, and $ 20,150 and $ 19,200 for the six months ended July 4, 2021 and June 28, 2020, respectively, for which the Company is reimbursed by sublessees.

(b) Includes $ 34,063 and $ 31,263 for the three months ended July 4, 2021 and June 28, 2020, respectively, and $ 66,615 and $ 60,554 for the six months ended July 4, 2021 and June 28, 2020, respectively, recorded to “Franchise rental expense” for leased properties that are subsequently leased to franchisees.

Also includes $ 6,111 and $ 6,831 for the three months ended July 4, 2021 and June 28, 2020, respectively, and $ 12,792 and $ 13,664 for the six months ended July 4, 2021 and June 28, 2020, respectively, recorded to “Cost of sales” for leases for Company-operated restaurants.

The following table includes supplemental cash flow and non-cash information related to leases:

Six Months Ended

2021 June 28,

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from finance leases $ 20,957 $ 18,853

Operating cash flows from operating leases 46,879 40,582

Financing cash flows from finance leases 5,777 3,707

Right-of-use assets obtained in exchange for lease obligations:

Finance lease liabilities 30,863 12,962

Operating lease liabilities 4,577 13,380

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

The following table includes supplemental information related to leases:

2021 January 3,

Weighted-average remaining lease term (years):

Finance leases 16.0 16.2

Operating leases 14.3 14.6

Weighted average discount rate:

Finance leases 9.29 % 9.54 %

Operating leases 5.03 % 5.06 %

Supplemental balance sheet information:

Finance lease assets, gross $ 264,824 $ 261,308

Accumulated amortization ( 58,238 ) ( 55,155 )

Finance lease assets 206,586 206,153

Operating lease assets 791,924 821,480

The following table illustrates the Company’s future minimum rental payments for non-cancelable leases as of July 4, 2021:

Leases Operating

Fiscal Year Company-Operated Franchise

and Other Company-Operated Franchise

2021 (a) (b) $ 2,229 $ 25,786 $ 6,989 $ 36,993

2022 3,476 51,490 14,240 74,000

2023 3,422 53,175 14,401 73,794

2024 3,489 53,608 14,462 73,761

2025 3,564 54,098 14,357 73,455

Thereafter 42,705 671,835 133,387 733,429

Total minimum payments $ 58,885 $ 909,992 $ 197,836 $ 1,065,432

Less interest

( 21,909 ) ( 410,813 ) ( 57,308 ) ( 322,106 )

Present value of minimum lease payments (c) (d) $ 36,976 $ 499,179 $ 140,528 $ 743,326

_______________

(a) Represents future minimum rental payments for non-cancelable leases for the remainder of 2021.

(b) In addition to the 2021 future minimum rental payments, the Company expects to pay $ 2,175 primarily during 2021 related to rent deferrals obtained due to the COVID-19 pandemic.

The related payable is included in “Accrued expenses and other current liabilities.”

(c) The present value of minimum finance lease payments of $ 14,547 and $ 521,608 are included in “Current portion of finance lease liabilities” and “Long-term finance lease liabilities,” respectively.

(d) The present value of minimum operating lease payments of $ 45,269 and $ 838,585 are included in “Current portion of operating lease liabilities” and “Long-term operating lease liabilities,” respectively.

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

2021 March 29,

Three Months Ended Six Months Ended

2021 June 28,

Sales-type and direct-financing leases:

Selling profit $ 1,627 $ 569 $ 3,539 $ 1,197

Interest income 7,489 7,248

Interest income (a) 7,586 7,260 15,075 14,508

Operating lease income 44,356 43,052 88,478 87,004

Variable lease income 16,512 13,805 31,266 27,709

Franchise rental income (a) $ 58,876 $ 57,856

Franchise rental income (b) $ 60,868 $ 56,857 $ 119,744 $ 114,713

_______________

(a) The three months ended April 4, 2021 and March 29, 2020 include sublease income of $ 43,250 and $ 42,042 , respectively, of which $ 9,874 and $ 9,709 , respectively, represents lessees’ variable payments to the Company for executory costs.

(a) Included in “Interest expense, net.”

(b) Includes sublease income of $ 45,245 and $ 41,489 for the three months ended July 4, 2021 and June 28, 2020, respectively, and $ 88,495 and $ 83,531 for the six months ended July 4, 2021 and June 28, 2020, respectively.

Sublease income includes lessees’ variable payments to the Company for executory costs of $ 10,195 and $ 9,450 for the three months ended July 4, 2021 and June 28, 2020, respectively, and $ 20,069 and $ 19,159 for the six months ended July 4, 2021 and June 28, 2020, respectively.

The following table illustrates the Company’s future minimum rental receipts for non-cancelable leases and subleases as of July 4, 2021:

Sales-Type and

Direct Financing Leases Operating

Fiscal Year Subleases Owned Properties Subleases Owned Properties

2021 (a) (b) $ 16,720 $ 2,040 $ 57,923 $ 27,709

2022 33,942 2,612 116,647 56,397

2023 35,003 2,658 117,448 56,707

2024 37,004 2,669 117,667 57,816

2025 35,907 2,787 117,156 58,421

Thereafter 474,723 35,676 1,172,618 750,148

Total future minimum receipts 633,299 48,442 $ 1,699,459 $ 1,007,198

Unearned interest income ( 346,389 ) ( 26,004 )

Net investment in sales-type and direct financing leases (c) $ 286,910 $ 22,438

_______________

(a) Represents future minimum rental receipts for non-cancelable leases for the remainder of 2021.

(b) In addition to the 2021 future minimum rental receipts, the Company expects to collect $ 1,088 primarily during 2021 related to its offer to franchisees to defer base rent payments in response to the COVID-19 pandemic.

The related receivable is included in “Accounts and notes receivable, net.”

(c) The present value of minimum direct financing rental receipts of $ 6,654 and $ 302,694 are included in “Accounts and notes receivable, net” and “Net investment in sales-type and direct financing leases,” respectively.

The present value of minimum direct financing rental receipts includes a net investment in unguaranteed residual assets of $ 521 .

THE WENDY’S COMPANY AND SUBSIDIARIES

1 unchanged sentence

(In Thousands Except Per Share Amounts)

Properties owned by the Company and leased to franchisees and other third parties under operating leases include:

2021 January 3,

Land $ 280,879 $ 279,956

Buildings and improvements 307,834 309,605

Restaurant equipment 1,701 1,701

590,414 591,262

Accumulated depreciation and amortization ( 176,125 ) ( 170,722 )

$ 414,289 $ 420,540

(14) 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 three months ended April 4, 2021 and March 29, 2020, Wendy’s paid TimWen $ 4,026 and $ 3,855 , respectively, under these lease agreements.

In addition, TimWen paid Wendy’s a management fee under the TimWen joint venture agreement of $ 54 and $ 51 during the three months ended April 4, 2021 and March 29, 2020, respectively, which has been included as a reduction to “General and administrative.”

During the six months ended July 4, 2021 and June 28, 2020, Wendy’s paid TimWen $ 8,817 and $ 7,408 , respectively, under these lease agreements.

In addition, TimWen paid Wendy’s a management fee under the TimWen joint venture agreement of $ 110 and $ 101 during the six months ended July 4, 2021 and June 28, 2020, respectively, which has been included as a reduction to “General and administrative.”

Transactions with Yellow Cab

2 unchanged sentences

Peter May, our Vice Chairman, as well as Mr.

Matthew Peltz, a director of the Company, hold indirect, minority ownership interests in operating companies managed by Yellow Cab Holdings, LLC (“Yellow Cab”), a Wendy’s franchisee, that as of April 4, 2021 owned and operated 78 Wendy’s restaurants (including Wendy’s restaurants acquired from NPC during the first quarter of 2021 as described below).

During the three months ended April 4, 2021, the Company recognized $ 1,659 in royalty, advertising fund, lease and other income from Yellow Cab and related entities.

As of April 4, 2021, $ 1,025 was due from Yellow Cab for such income, which is included in “Accounts and notes receivable, net” and “Advertising funds restricted assets.”

Matthew Peltz, a director of the Company, hold indirect, minority ownership interests in operating companies managed by Yellow Cab Holdings, LLC (“Yellow Cab”), a Wendy’s franchisee, that as of July 4, 2021 owned and operated 78 Wendy’s restaurants (including Wendy’s restaurants acquired from NPC during the first quarter of 2021 as described below).

During the six months ended July 4, 2021, the Company recognized $ 4,353 in royalty, advertising fund, lease and other income from Yellow Cab and related entities.

As of July 4, 2021, $ 883 was due from Yellow Cab for such income, which is included in “Accounts and notes receivable, net” and “Advertising funds restricted assets.”

In November 2020, the Company submitted a consortium bid together with a group of pre-qualified franchisees (of which Yellow Cab was a member) to acquire the Wendy’s restaurants owned by NPC, the Company’s largest franchisee, which filed for chapter 11 bankruptcy in July 2020.

7 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 $ 87,477 as of April 4, 2021.

These leases extend through 2045.

We have had no judgments against us as guarantor of these leases as of April 4, 2021.

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

The liability recorded for our probable exposure associated with these lease guarantees was not material as of April 4, 2021.

Letters of Credit

As of April 4, 2021, the Company had outstanding letters of credit with various parties totaling $ 26,571 .

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.

We have had no judgments against us as guarantor of these leases as of July 4, 2021.

In the event of default by a franchise

THE WENDY’S COMPANY AND SUBSIDIARIES

1 unchanged sentence

(In Thousands Except Per Share Amounts)

owner, Wendy’s generally retains the right to acquire possession of the related restaurant locations.

The liability recorded for our probable exposure associated with these lease guarantees was not material as of July 4, 2021.

Letters of Credit

As of July 4, 2021, the Company had outstanding letters of credit with various parties totaling $ 26,579 .

Substantially all of the outstanding letters of credit include amounts outstanding against the 2021-1 Class A-1 Notes.

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

(16) Legal and Environmental Matters

1 unchanged sentence

We provide accruals for such litigation and claims when payment is probable and reasonably estimable.

We believe we have adequate accruals for continuing operations for all of our legal and environmental matters.

We believe we have adequate accruals for all of our legal and environmental matters.

We cannot estimate the aggregate possible range of loss for our existing litigation and claims for various reasons, including, but not limited to, many proceedings being in preliminary stages, with various motions either yet to be submitted or pending, discovery yet to occur and/or significant factual matters unresolved.

2 unchanged sentences

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

As of April 4, 2021, there were no material developments in those legal proceedings.

Except as set forth below, there were no material developments in those legal proceedings as of July 4, 2021.

In a Form 8-K filed with the Securities and Exchange Commission on June 28, 2021 (the “Form 8-K”), the Company provided an update on the proposed settlement of the previously-disclosed shareholder derivative action arising out of the criminal cyberattacks that targeted the point of sale systems of certain Wendy’s franchisees in 2015 and 2016 (the “Derivative Lawsuit”).

As described in the Form 8-K, on February 14, 2019, the Company entered into a Stipulation and Agreement of Settlement (the “Settlement”) to resolve the Derivative Lawsuit.

On January 24, 2020, the United States District Court for the Southern District of Ohio (the “Court”) issued an order granting preliminary approval of the Settlement, which consists of certain corporate governance undertakings and the payment of plaintiffs’ attorneys’ fees and expenses up to $ 950 .

Pursuant to an order issued by the Court on June 3, 2021, a hearing to determine whether the Court should issue a final order approving the Settlement has been scheduled for September 2, 2021.

If the Settlement is approved by the Court, the Derivative Lawsuit will be dismissed with prejudice subject to any appeal, and the Company expects the monetary terms of the Settlement to be covered by applicable insurance.

(17) Segment Information

Revenues by segment were as follows:

Three Months Ended

2021 March 29,

Three Months Ended Six Months Ended

2021 June 28,

$ 409,843 $ 331,258 $ 791,797 $ 662,299

2 unchanged sentences

Total revenues $ 493,337 $ 402,306 $ 953,540 $ 807,266

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

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

Three Months Ended

2021 March 29,

Three Months Ended Six Months Ended

2021 June 28,

(a) $ 126,650 $ 93,136 $ 238,737 $ 174,964

10 unchanged sentences

Interest expense, net ( 28,204 ) ( 29,085 ) ( 56,990 ) ( 57,610 )

Other income, net 129 1,076

Loss on early extinguishment of debt ( 17,917 ) — ( 17,917 ) —

Other income (expense), net 161 ( 144 ) 290 932

Income before income taxes $ 80,786 $ 31,432 $ 135,251 $ 52,715

_______________

(a) For the three months ended April 4, 2021, includes advertising funds expense of $ 3,534 related to the expected Company funding of incremental advertising during 2021.

(a) Includes advertising funds expense of $ 3,990 and $ 7,524 for the three and six months ended July 4, 2021, respectively, and $ 2,185 for the three and six months ended June 28, 2020 related to the Company funding of incremental advertising.

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

(18) New Accounting Standards

In July 2021, the Financial Accounting Standards Board issued an amendment that addresses an issue related to a lessor’s accounting for certain leases with variable lease payments that could result in the recognition of a selling loss at lease commencement even if the lessor expects the arrangement to be profitable overall.

The amendment specifies lessors should classify and account for such a lease with variable lease payments as an operating lease, dependent upon meeting certain criteria, for which a selling profit or loss is not recognized.

The amendment is effective commencing with our 2022 fiscal year.

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

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