What changed in this filing

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Item 1. Financial Statements

2021-11-10 compared with 2021-08-11 · 252 added, 200 removed, 713 unchanged (39% of the section changed)

57 unchanged sentences

(In Thousands Except Per Share Amounts)

Three Months Ended Six Months Ended

2021 June 28,

Three Months Ended Nine Months Ended

2021 September 27,

2020 October 3,

2021 September 27,

Sales $ 171,078 $ 191,946 $ 553,660 $ 522,961

18 unchanged sentences

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

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

Other income, net 171 181 461 1,113

Income before income taxes 54,366 52,443 189,617 105,158

8 unchanged sentences

(In Thousands)

Three Months Ended Six Months Ended

2021 June 28,

Three Months Ended Nine Months Ended

2021 September 27,

2020 October 3,

2021 September 27,

Net income $ 41,171 $ 39,753 $ 148,261 $ 79,098

Other comprehensive income (loss):

Other comprehensive (loss) income:

Foreign currency translation adjustment ( 4,659 ) 3,220 908 ( 5,138 )

Other comprehensive income (loss) 3,347 4,149 5,567 ( 8,358 )

Other comprehensive (loss) income ( 4,659 ) 3,220 908 ( 5,138 )

Comprehensive income

29 unchanged sentences

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

Net income — — 41,171 — — 41,171

Other comprehensive loss — — — — ( 4,659 ) ( 4,659 )

Cash dividends — — ( 26,684 ) — — ( 26,684 )

Repurchases of common stock — — — ( 43,857 ) — ( 43,857 )

Share-based compensation — 5,702 — — — 5,702

Common stock issued upon exercises of stock options

— 351 — 1,465 — 1,816

Common stock issued upon vesting of restricted shares

— ( 1,835 ) — 642 — ( 1,193 )

Other — 60 ( 6 ) 48 — 102

Balance at October 3, 2021 $ 47,042 $ 2,911,552 $ 317,956 $ ( 2,685,063 ) $ ( 48,733 ) $ 542,754

See accompanying notes to condensed consolidated financial statements.

28 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.

2 unchanged sentences

(In Thousands)

Six Months Ended

2021 June 28,

Nine Months Ended

2021 September 27,

Cash flows from operating activities:

17 unchanged sentences

Dispositions 52,657 3,570

Proceeds from sale of investments — 169

Notes receivable, net 907 138

9 unchanged sentences

Payments related to tax withholding for share-based compensation ( 4,390 ) ( 5,409 )

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

Net cash used in financing activities ( 57,481 ) ( 115,328 )

Net cash provided by operations before effect of exchange rate changes on cash 234,234 49,432

18 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 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.

In our opinion, the Financial Statements contain all adjustments of a normal recurring nature necessary to present fairly our financial position as of October 3, 2021, the results of our operations for the three and nine months ended October 3, 2021 and September 27, 2020 and cash flows for the nine months ended October 3, 2021 and September 27, 2020.

The results of operations for the nine months ended October 3, 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- 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, quarters and months relate to fiscal periods rather than calendar periods.

3 unchanged sentences

Wendy’s International Global Real Estate & Development Total

Three Months Ended July 4, 2021

Three Months Ended October 3, 2021

Sales at Company-operated restaurants $ 169,961 $ 1,117 $ — $ 171,078

8 unchanged sentences

Wendy’s International Global Real Estate & Development Total

Six Months Ended July 4, 2021

Nine Months Ended October 3, 2021

Sales at Company-operated restaurants $ 552,297 $ 1,363 $ — $ 553,660

4 unchanged sentences

Total revenues $ 1,175,601 $ 62,240 $ 185,954 $ 1,423,795

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

16 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 $ 9,123 and $ 89,286 as of July 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 $ 8,971 and $ 90,086 as of October 3, 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:

Six Months Ended

2021 June 28,

Nine Months Ended

2021 September 27,

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

11 unchanged sentences

(3) Acquisitions

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

No restaurants were acquired from franchisees during the nine months ended October 3, 2021 and September 27, 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 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.

During the nine months ended October 3, 2021 and September 27, 2020, the Company facilitated 34 and 22 Franchise Flips, respectively.

In addition, during the nine months ended October 3, 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 nine months ended September 27, 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 Six Months Ended

2021 June 28,

Three Months Ended Nine Months Ended

2021 September 27,

2020 October 3,

2021 September 27,

Number of restaurants sold to franchisees — — 47 —

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

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

Proceeds from sales of restaurants (a) $ — $ — $ 50,518 $ —

Net assets sold (b) — — ( 16,939 ) —

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

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

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

Gain on sales-type leases — — 7,156 —

Other (c) ( 2,148 ) — ( 2,148 ) —

30,801 — 30,801 —

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

Other (d) — — ( 2,148 ) —

Post-closing adjustments on sales of restaurants (e) 5 23 520 368

Gain on sales of restaurants, net 5 23 31,321 368

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

(Loss) gain on sales of other assets, net (f) 1,432 — 1,398 1,965

System optimization gains, net $ 1,437 $ 23 $ 32,719 $ 2,333

_______________

(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.

(a) In addition to the proceeds noted herein, the Company received cash proceeds of $ 26 during the three and nine months ended October 3, 2021 related to a note receivable issued in connection with the sale of the Manhattan Company-operated restaurants.

(b) Net assets sold consist primarily of equipment.

(c) During the nine months ended October 3, 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).

(d) The nine months ended October 3, 2021 include a deferred gain of $ 3,500 as a result of certain contingencies related to the extension of lease terms.

THE WENDY’S COMPANY AND SUBSIDIARIES

1 unchanged sentence

(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.

(e) The nine months ended October 3, 2021 includes the recognition of deferred gains of $ 515 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 27, 2020 represent the recognition of such deferred gains.

(f) During the three and nine months ended October 3, 2021, the Company received net cash proceeds of $ 2,100 and $ 2,113 , respectively, primarily from the sale of surplus and other properties.

During the nine months ended September 27, 2020, the Company received net cash proceeds of $ 3,570 , primarily from the sale of surplus and other properties.

Assets Held for Sale

10 unchanged sentences

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

Three Months Ended Six Months Ended

2021 June 28,

Three Months Ended Nine Months Ended

2021 September 27,

2020 October 3,

2021 September 27,

Operations and field realignment $ 74 $ 3,021 $ 1,563 $ 3,021

9 unchanged sentences

The Company expects to incur total costs aggregating approximately $ 5,500 to $ 6,000 related to the Operations and Field Realignment Plan.

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.

During the nine months ended October 3, 2021, the Company recognized costs totaling $ 1,563 , which primarily included third-party and other costs.

During the three and 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 up to approximately $ 500 , 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.

3 unchanged sentences

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

Three Months Ended Six Months Ended Total

Three Months Ended Nine Months Ended Total

Incurred Since Inception

2021 September 27,

2020 October 3,

2021 September 27,

Severance and related employee costs $ — $ 2,502 $ 333 $ 2,502 $ 3,446

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 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 July 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 October 3, 2021.

January 3, 2021 Charges Payments Balance

2 unchanged sentences

$ 2,600 $ 1,563 $ ( 3,607 ) $ 556

December 29, 2019 Charges Payments Balance

September 27,

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

Information Technology ( “ IT ”) Realignment

3 unchanged sentences

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 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.

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

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 IT Realignment Plan:

Three Months Ended Six Months Ended Total

Three Months Ended Nine Months Ended Total

Incurred Since Inception

2021 June 28,

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

2021 September 27,

2020 October 3,

2021 September 27,

Severance and related employee

$ ( 32 ) $ 34 $ ( 151 ) $ 1,009 $ 8,240

Recruitment and relocation costs 12 345 133 659 1,429

4 unchanged sentences

_______________

(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)

(a) The three and nine months ended October 3, 2021 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 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 $ 462 and $ 10 as of July 4, 2021 and $ 4,039 and $ 371 as of June 28, 2020, respectively.

As of October 3, 2021, the accruals for the IT Realignment Plan are included in “Accrued expenses and other current liabilities.” As of September 27, 2020, the accruals for the IT Realignment Plan were included in “Accrued expenses and other current liabilities” and “Other liabilities” and totaled $ 2,739 and $ 178 , respectively.

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

5 unchanged sentences

December 29, 2019 Charges Payments Balance

September 27,

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

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

During the nine months ended September 27, 2020, the Company recognized costs totaling $ 282 , which primarily included share-based compensation.

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

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 G&A Realignment Plan:

Three Months Ended Six Months Ended Total

Three Months Ended Nine Months Ended Total

Incurred Since Inception

2021 June 28,

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

2021 September 27,

2020 October 3,

2021 September 27,

Severance and related employee

$ ( 8 ) $ ( 116 ) $ ( 61 ) $ 30 $ 24,205

Recruitment and relocation costs 1 27 1 42 2,877

5 unchanged sentences

_______________

(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.

(a) The three and nine months ended October 3, 2021 and September 27, 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.

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.

As of October 3, 2021, the accruals for the G&A realignment plan are included in “Accrued expenses and other current liabilities.” As of September 27, 2020, the accruals for the G&A realignment plan are included in “Accrued expenses and other current liabilities” and “Other liabilities” and totaled and $ 1,705 and $ 18 , respectively.

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

5 unchanged sentences

2019 Charges Payments Balance

September 27,

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

4 unchanged sentences

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

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.

During the nine months ended October 3, 2021, the Company recognized costs totaling $ 5,870 , 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 WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

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

Three Months Ended Six Months Ended Total

Three Months Ended Nine Months Ended Total

Incurred Since Inception

2021 June 28,

2021 September 27,

2020 October 3,

2021 September 27,

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

7 unchanged sentences

_______________

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

(a) The nine months ended October 3, 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 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)

(c) The nine months ended October 3, 2021 includes the write-off of lease assets of $ 1,359 and lease termination fees paid of $ 1,480 .

(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.

6 unchanged sentences

(6) Investments

Equity Investments

Equity Method Investments

Wendy’s has a 50 % share in a partnership in a Canadian restaurant real estate joint venture (“TimWen”) with a subsidiary of Restaurant Brands International Inc., a quick-service restaurant company that owns the Tim Hortons ® brand.

2 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:

Six Months Ended

2021 June 28,

Nine Months Ended

2021 September 27,

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

2 unchanged sentences

Distributions received ( 9,174 ) ( 5,629 )

Foreign currency translation adjustment included in “Other comprehensive income (loss)” and other

1,456 ( 1,631 )

Foreign currency translation adjustment included in “Other comprehensive (loss) income” and other

Balance at end of period $ 41,356 $ 43,422

1 unchanged sentence

(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

25 unchanged sentences

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”).

Class A-2-I with an

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

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.

3 unchanged sentences

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.

As a result of the refinancing, the Company recorded a loss on early extinguishment of debt of $ 17,917 during the nine months ended October 3, 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 (of which $ 2,750 was paid during the three months ended October 3, 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.

No amounts were borrowed under the Series 2021-1 Class A-1 Notes during the nine months ended October 3, 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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(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.

During the nine months ended October 3, 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.

3 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 July 4, 2021, the Company had no outstanding borrowings under the Canadian revolving credit facility.

As a result, as of October 3, 2021, the Company had no outstanding borrowings under the Canadian revolving credit facility.

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

(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

21 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 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.

Impairment charges during the nine months ended September 27, 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 Six Months Ended

2021 June 28,

Three Months Ended Nine Months Ended

2021 September 27,

2020 October 3,

2021 September 27,

Company-operated restaurants $ 566 $ — $ 1,500 $ 4,395

2 unchanged sentences

$ 566 $ 23 $ 1,831 $ 4,727

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 July 4, 2021 and June 28, 2020 was 18.6 % and 20.8 %, respectively.

The Company’s effective tax rate for the three months ended October 3, 2021 and September 27, 2020 was 24.3 % and 24.2 %, respectively.

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

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.

federal statutory rate of 21 % for the three months ended October 3, 2021 primarily due to state income taxes, partially offset by a benefit related to the filing of our 2020 federal income tax return.

The Company’s effective tax rate for the nine months ended October 3, 2021 and September 27, 2020 was 21.8 % and 24.8 %, 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.

federal statutory rate of 21 % for the nine months ended October 3, 2021 primarily due to state income taxes, including discrete changes to state deferred taxes, partially offset by the tax benefit from share-based compensation.

Unrecognized tax benefits for the Company decreased $ 1,874 and $ 2,019 during the three and nine months ended October 3, 2021, respectively.

The decrease was primarily related to settlements with various taxing jurisdictions.

During the next twelve months, we believe it is reasonably possible the Company will reduce unrecognized tax benefits by up to $ 66 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 $ 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.

The current portion of refundable income taxes was $ 1,813 and $ 5,399 as of October 3, 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 October 3, 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 Six Months Ended

2021 June 28,

Three Months Ended Nine Months Ended

2021 September 27,

2020 October 3,

2021 September 27,

Net income $ 41,171 $ 39,753 $ 148,261 $ 79,098

7 unchanged sentences

Diluted $ .18 $ .17 $ .66 $ .35

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.

Basic net income per share for the three and nine months ended October 3, 2021 and September 27, 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 nine months ended October 3, 2021 and September 27, 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 2,746 and 2,147 for the three and nine months ended October 3, 2021, respectively, and 1,049 and 2,117 for the three and nine months ended September 27, 2020, 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)

(12) Stockholders’ Equity

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.

During the first, second and third quarter of 2021, the Company paid dividends per share of $ .09 , $ .10 and $ .12 , respectively.

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

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.

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.

1 unchanged sentence

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

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.

In November 2019, the Company entered into an accelerated share repurchase agreement (the “2019 ASR Agreement”) with a third-party financial institution to repurchase common stock as part of the Company’s existing share repurchase program.

In addition, in May 2021 and August 2021, the Board of Directors approved increases of $ 50,000 and $ 70,000 , respectively, to the February 2020 authorization, resulting in an aggregate authorization of $ 220,000 that continues to expire on February 28, 2022.

During the nine months ended October 3, 2021, the Company repurchased 5,876 shares under the February 2020 authorization with an aggregate purchase price of $ 127,150 , of which $ 2,299 was accrued at October 3, 2021, and excluding commissions of $ 82 .

As of October 3, 2021, the Company had $ 60,566 of availability remaining under the February 2020 authorization.

Subsequent to October 3, 2021 through November 3, 2021, the Company repurchased 697 shares under the February 2020 authorization with an aggregate purchase price of $ 15,494 , excluding commissions of $ 10 .

In addition, in November 2021, the Board of Directors approved an increase of $ 80,000 to the February 2020 authorization, resulting in an aggregate authorization of $ 300,000 that continues to expire on February 28, 2022.

The Company also announced in November 2021 its intention to launch a $ 125,000 accelerated share repurchase transaction during the fourth quarter of 2021 as part of the February 2020 authorization.

The Company has availability of $ 125,072 remaining under the February 2020 authorization as of November 10, 2021.

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.

2 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 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.

In addition to the shares repurchased in connection with the 2019 ASR Agreement, during the nine months ended September 27, 2020, the Company repurchased 2,172 shares with an aggregate purchase price of $ 45,014 , excluding commissions of $ 30 , 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 the February 2019 authorization.

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Accumulated Other Comprehensive Loss

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

Six Months Ended

2021 June 28,

Nine Months Ended

2021 September 27,

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

At October 3, 2021, Wendy’s and its franchisees operated 6,891 Wendy’s restaurants.

Of the 313 Company-operated Wendy’s restaurants, Wendy’s owned the land and building for 136 restaurants, owned the building and held long-term land leases for 117 restaurants and held leases covering the land and building for 60 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

2021 June 28,

Three Months Ended Nine Months Ended

2021 September 27,

2020 October 3,

2021 September 27,

Finance lease cost:

8 unchanged sentences

_______________

(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.

(a) Includes expenses for executory costs of $ 10,016 and $ 9,326 for the three months ended October 3, 2021 and September 27, 2020, respectively, and $ 30,166 and $ 28,526 for the nine months ended October 3, 2021 and September 27, 2020, respectively, for which the Company is reimbursed by sublessees.

(b) Includes $ 34,396 and $ 32,421 for the three months ended October 3, 2021 and September 27, 2020, respectively, and $ 101,011 and $ 92,975 for the nine months ended October 3, 2021 and September 27, 2020, respectively, recorded to “Franchise rental expense” for leased properties that are subsequently leased to franchisees.

Also includes $ 5,213 and $ 6,651 for the three months ended October 3, 2021 and September 27, 2020, respectively, and $ 18,005 and $ 20,315 for the nine months ended October 3, 2021 and September 27, 2020, 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)

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

Six Months Ended

2021 June 28,

Nine Months Ended

2021 September 27,

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

5 unchanged sentences

Operating lease liabilities 11,404 12,149

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:

11 unchanged sentences

Operating lease assets 783,986 821,480

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

The following table illustrates the Company’s future minimum rental payments for non-cancelable leases as of October 3, 2021:

Leases Operating

12 unchanged sentences

_______________

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

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

3 unchanged sentences

(d) The present value of minimum operating lease payments of $ 45,541 and $ 830,488 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 Six Months Ended

2021 June 28,

Three Months Ended Nine Months Ended

2021 September 27,

2020 October 3,

2021 September 27,

Sales-type and direct-financing leases:

6 unchanged sentences

(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:

(b) Includes sublease income of $ 46,102 and $ 43,122 for the three months ended October 3, 2021 and September 27, 2020, respectively, and $ 134,597 and $ 126,653 for the nine months ended October 3, 2021 and September 27, 2020, respectively.

Sublease income includes lessees’ variable payments to the Company for executory costs of $ 10,087 and $ 9,379 for the three months ended October 3, 2021 and September 27, 2020, respectively, and $ 30,156 and $ 28,538 for the nine months ended October 3, 2021 and September 27, 2020, respectively.

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

The following table illustrates the Company’s future minimum rental receipts for non-cancelable leases and subleases as of October 3, 2021:

Sales-Type and

14 unchanged sentences

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

(c) The present value of minimum sales-type and direct financing rental receipts of $ 6,952 and $ 305,242 are included in “Accounts and notes receivable, net” and “Net investment in sales-type and direct financing leases,” respectively.

The present value of minimum sales-type and direct financing rental receipts includes a net investment in unguaranteed residual assets of $ 535 .

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

10 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 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.”

During the nine months ended October 3, 2021 and September 27, 2020, Wendy’s paid TimWen $ 13,994 and $ 11,970 , respectively, under these lease agreements.

In addition, TimWen paid Wendy’s a management fee under the TimWen joint venture agreement of $ 165 and $ 152 during the nine months ended October 3, 2021 and September 27, 2020, respectively, which has been included as a reduction to “General and administrative.”

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

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 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.”

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 October 3, 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 nine months ended October 3, 2021, the Company recognized $ 7,016 in royalty, advertising fund, lease and other income from Yellow Cab and related entities.

As of October 3, 2021, $ 866 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 $ 95,160 as of July 4, 2021.

These leases extend through 2045.

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(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.

We have had no judgments against us as guarantor of these leases as of October 3, 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 October 3, 2021.

Letters of Credit

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

As of October 3, 2021, the Company had outstanding letters of credit with various parties totaling $ 23,569 .

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

8 unchanged sentences

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

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

Except as set forth below, there were no material developments in those legal proceedings as of October 3, 2021.

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

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.

On September 15, 2021, the Court issued an order granting final approval of the Settlement, with the final judgment entered on September 24, 2021.

On October 20, 2021, Thomas Caracci, one of the plaintiffs in the matter, filed a Notice of Appeal.

(17) Segment Information

Revenues by segment were as follows:

Three Months Ended Six Months Ended

2021 June 28,

Three Months Ended Nine Months Ended

2021 September 27,

2020 October 3,

2021 September 27,

$ 383,804 $ 374,895 $ 1,175,601 $ 1,037,194

2 unchanged sentences

Total revenues $ 470,255 $ 452,242 $ 1,423,795 $ 1,259,508

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 Six Months Ended

2021 June 28,

Three Months Ended Nine Months Ended

2021 September 27,

2020 October 3,

2021 September 27,

(a) $ 108,878 $ 108,297 $ 347,615 $ 283,261

2 unchanged sentences

Total segment profit $ 142,854 $ 140,204 $ 448,625 $ 374,058

Unallocated franchise support and other costs ( 70 ) — ( 70 ) —

Advertising funds deficit ( 1,574 ) ( 1,140 ) ( 4,440 ) ( 3,547 )

7 unchanged sentences

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

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

Other income, net 171 181 461 1,113

Income before income taxes $ 54,366 $ 52,443 $ 189,617 $ 105,158

_______________

(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.

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

(a) Includes advertising funds expense of $ 8,979 and $ 16,503 for the three and nine months ended October 3, 2021, respectively, and $ 6,153 and $ 8,338 for the three and nine months ended September 27, 2020, respectively, related to the Company funding of incremental advertising.

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

2 unchanged sentences

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.

The Company early adopted this amendment during the three months ended October 3, 2021 by applying the guidance prospectively to leases that commence or are modified on or after the date of adoption.

The adoption of this guidance did not have a material impact on our condensed 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