What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-05-11 compared with 2021-11-10 · 210 added, 523 removed, 442 unchanged (62% of the section changed)

57 unchanged sentences

(In Thousands Except Per Share Amounts)

Three Months Ended Nine Months Ended

2021 September 27,

2020 October 3,

2021 September 27,

Three Months Ended

2022 April 4,

Sales $ 209,275 $ 189,057

17 unchanged sentences

Interest expense, net ( 26,365 ) ( 28,786 )

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

Investment income, net 2,111 3

Other income, net 207 126

9 unchanged sentences

(In Thousands)

Three Months Ended Nine Months Ended

2021 September 27,

2020 October 3,

2021 September 27,

Three Months Ended

2022 April 4,

Net income $ 37,402 $ 41,366

Other comprehensive (loss) income:

Other comprehensive income:

Foreign currency translation adjustment 1,118 2,220

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

Other comprehensive income 1,118 2,220

Comprehensive income

10 unchanged sentences

Cash dividends — — ( 26,911 ) — — ( 26,911 )

Repurchases of common stock — — — ( 56,084 ) — ( 56,084 )

Share-based compensation — 5,151 — — — 5,151

Common stock issued upon exercises of stock options

— ( 20 ) — 683 — 663

Common stock issued upon vesting of restricted shares

— ( 2,996 ) — 817 — ( 2,179 )

Other — 49 ( 5 ) 44 — 88

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

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.

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

Net income — — 14,441 — — 14,441

Other comprehensive loss

— — — — ( 12,507 ) ( 12,507 )

Cash dividends — — ( 26,793 ) — — ( 26,793 )

Repurchases of common stock, including accelerated share repurchase — 18,750 — ( 18,750 ) — —

— 15,000 — ( 58,336 ) — ( 43,336 )

Share-based compensation — 6,348 — — — 6,348

4 unchanged sentences

Other — 63 ( 8 ) 57 — 112

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

Balance at April 3, 2022 $ 47,042 $ 2,922,042 $ 354,681 $ ( 2,822,148 ) $ ( 47,082 ) $ 454,535

Balance at January 3, 2021 $ 47,042 $ 2,899,276 $ 238,674 $ ( 2,585,755 ) $ ( 49,641 ) $ 549,596

Net income — — 41,366 — — 41,366

8 unchanged sentences

Other — 49 ( 5 ) 44 — 88

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

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

See accompanying notes to condensed consolidated financial statements.

2 unchanged sentences

(In Thousands)

Nine Months Ended

2021 September 27,

Three Months Ended

2022 April 4,

Cash flows from operating activities:

11 unchanged sentences

Long-term debt-related activities, net 1,717 1,677

Cloud computing arrangements expenditures ( 4,656 ) —

Changes in operating assets and liabilities and other, net ( 58,537 ) 615

2 unchanged sentences

Capital expenditures ( 12,496 ) ( 10,364 )

Franchise development fund ( 955 ) —

Acquisitions — 4,879

Dispositions 263 3

Proceeds from sale of investments — 169

Notes receivable, net 141 397

Net cash provided by (used in) investing activities 15,042 ( 40,999 )

Net cash used in investing activities ( 13,047 ) ( 5,085 )

Cash flows from financing activities:

7 unchanged sentences

Payments related to tax withholding for share-based compensation ( 1,530 ) ( 2,308 )

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

Net cash provided by (used in) financing activities 452,802 ( 91,662 )

Net cash provided by (used in) operations before effect of exchange rate changes on cash 460,737 ( 10,917 )

Effect of exchange rate changes on cash 305 823

Net increase in cash, cash equivalents and restricted cash 234,411 47,717

Net increase (decrease) in cash, cash equivalents and restricted cash 461,042 ( 10,094 )

Cash, cash equivalents and restricted cash at beginning of period 366,966 418,241

Cash, cash equivalents and restricted cash at end of period $ 828,008 $ 408,147

Supplemental non-cash investing and financing activities:

Capital expenditures included in accounts payable $ 4,363 $ 4,789

Finance leases 43,277 24,617

2021 January 3,

Reconciliation of cash, cash equivalents and restricted cash at end of period:

Cash and cash equivalents $ 571,502 $ 306,989

Restricted cash 36,321 33,973

Restricted cash, included in Advertising funds restricted assets 44,829 77,279

Total cash, cash equivalents and restricted cash $ 652,652 $ 418,241

See accompanying notes to condensed consolidated financial statements.

4 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 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.

In our opinion, the Financial Statements contain all adjustments of a normal recurring nature necessary to present fairly our financial position as of April 3, 2022 and the results of our operations and cash flows for the three months ended April 3, 2022 and April 4, 2021.

The results of operations for the three months ended April 3, 2022 are not necessarily indicative of the results to be expected for the full 2022 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 2, 2022 (the “Form 10-K”).

On March 11, 2020, the World Health Organization declared the novel strain of coronavirus (“COVID-19”) a global pandemic.

In March 2020, the World Health Organization declared the novel strain of coronavirus (“COVID-19”) a global pandemic.

We continue to monitor the dynamic nature of the COVID-19 pandemic on our business, results and financial condition;

5 unchanged sentences

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

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

All three-month periods presented herein contain 13 weeks.

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 October 3, 2021

Three Months Ended April 3, 2022

Sales at Company-operated restaurants $ 206,501 $ 2,774 $ — $ 209,275

Franchise royalty revenue 97,920 13,825 — 111,745

Franchise fees (a) 19,759 1,144 1,331 22,234

Franchise fees 15,405 1,271 555 17,231

Franchise rental income — — 57,871 57,871

5 unchanged sentences

Wendy’s International Global Real Estate & Development Total

Nine Months Ended October 3, 2021

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

Franchise royalty revenue 305,373 39,048 — 344,421

Franchise fees (a) 46,020 4,041 3,764 53,825

Franchise rental income — — 182,190 182,190

Advertising funds revenue 271,911 17,788 — 289,699

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

Three Months Ended September 27, 2020

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

Franchise royalty revenue 98,128 11,216 — 109,344

Franchise fees (a) 5,651 463 1,362 7,476

Franchise rental income — — 58,721 58,721

Advertising funds revenue 79,170 5,585 — 84,755

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

Nine Months Ended September 27, 2020

Three Months Ended April 4, 2021

Sales at Company-operated restaurants $ 189,057 $ — $ — $ 189,057

Franchise royalty revenue 96,764 11,570 — 108,334

Franchise fees (a) 16,244 1,369 2,141 19,754

Franchise fees 11,930 1,443 1,123 14,496

Franchise rental income — — 58,876 58,876

1 unchanged sentence

Total revenues $ 381,954 $ 18,250 $ 59,999 $ 460,203

_______________

(a) Includes fees for providing information technology services to franchisees, which are recognized as revenue as earned.

Contract Balances

2 unchanged sentences

Receivables, which are included in “Accounts and notes receivable, net” (b)

$ 52,032 $ 49,168

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

4 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 $ 8,971 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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

(c) Deferred franchise fees are included in “Accrued expenses and other current liabilities” and “Deferred franchise fees” and totaled $ 9,953 and $ 88,476 , respectively, as of April 3, 2022, and $ 9,084 and $ 88,102 , respectively, as of January 2, 2022.

Significant changes in deferred franchise fees are as follows:

Nine Months Ended

2021 September 27,

Three Months Ended

2022 April 4,

Deferred franchise fees at beginning of period $ 97,186 $ 97,785

3 unchanged sentences

Deferred franchise fees at end of period $ 98,429 $ 95,247

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Anticipated Future Recognition of Deferred Franchise Fees

6 unchanged sentences

(3) Acquisitions

No restaurants were acquired from franchisees during the nine months ended October 3, 2021 and September 27, 2020.

NPC Quality Burgers, Inc.

As previously announced, NPC, formerly the Company’s largest franchisee, filed for chapter 11 bankruptcy in July 2020 and commenced a process to sell all or substantially all of its assets, including its interest in approximately 393 Wendy’s restaurants across eight different markets, pursuant to a court-approved auction process.

On November 18, 2020, the Company submitted a consortium bid together with a group of pre-qualified franchisees to acquire NPC’s Wendy’s restaurants.

Under the terms of the consortium bid, several existing and new franchisees would have been the ultimate purchasers of seven of the NPC markets, while the Company would have acquired one market.

As part of the consortium bid, the Company submitted a deposit of $ 43,240 , which was included in “Prepaid expenses and other current assets” as of January 3, 2021.

The deposit included $ 38,361 received from the group of prequalified franchisees, which was payable to the franchisees and included in “Accrued expenses and other current liabilities” as of January 3, 2021 pending resolution of the bankruptcy sale process.

During the three months ended April 4, 2021, following a court-approved mediation process, NPC and certain affiliates of Flynn Restaurant Group (“FRG”) and the Company entered into separate asset purchase agreements under which all of NPC’s Wendy’s restaurants were sold to Wendy’s approved franchisees.

Under the transaction, FRG acquired approximately half of NPC’s Wendy’s restaurants in four markets, while several existing Wendy’s franchisees that were part of the Company’s consortium bid acquired the other half of NPC’s Wendy’s restaurants in the other four markets.

The Company did not acquire any restaurants as part of this transaction.

In addition, the deposits outstanding as of January 3, 2021 were settled during the three months ended April 4, 2021 upon resolution of the bankruptcy sale process.

The net settlement of deposits of $ 4,879 is included in “Acquisitions” in the condensed consolidated statements of cash flows.

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

The Company completed no significant acquisitions of restaurants from franchisees during the three months ended April 3, 2022 and April 4, 2021.

During 2021, the Company acquired 93 restaurants from a franchisee for total net cash consideration of $ 127,948 .

The fair values of the identifiable net assets related to the acquisition were provisional amounts as of January 2, 2022, pending final purchase accounting adjustments.

The Company finalized the purchase price allocation during the three months ended April 3, 2022, which resulted in no adjustments to the fair values of the identifiable net assets related to the acquisition.

(4) System Optimization Gains, Net

1 unchanged sentence

As of January 1, 2017, the Company completed its plan to reduce its ongoing Company-operated restaurant ownership to approximately 5 % of the total system.

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 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.

While the Company has no plans to move its ownership away from approximately 5 % of the total system, 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 3, 2022, the Company facilitated five Franchise Flips.

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

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

1 unchanged sentence

All other costs incurred related to facilitating Franchise Flips are recorded to “Franchise support and other costs.”

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

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 (a) $ — $ — $ 50,518 $ —

Net assets sold (b) — — ( 16,939 ) —

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

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

Gain on sales-type leases — — 7,156 —

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 (f) 1,432 — 1,398 1,965

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

_______________

(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) 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

2021 January 3,

Number of restaurants classified as held for sale — 43

Net restaurant assets held for sale (a) $ — $ 20,587

Other assets held for sale (b) $ 3,749 $ 1,732

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

Three Months Ended

2022 April 4,

Post-closing adjustments on sales of restaurants (a) $ 3,447 $ 515

Gain on sales of other assets, net (b) 87 1

System optimization gains, net $ 3,534 $ 516

_______________

(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.

(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 3, 2022 and April 4, 2021, the Company received net cash proceeds of $ 168 and $ 3 , respectively, primarily from the sale of surplus and other properties.

The Company also received cash proceeds of $ 95 during the three months ended April 3, 2022 related to a note receivable issued in connection with the sale of the Manhattan Company-operated restaurants during 2021.

Assets Held for Sale

As of April 3, 2022 and January 2, 2022, the Company had assets held for sale of $ 3,485 and $ 3,541 , respectively, primarily consisting of surplus properties.

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

1 unchanged sentence

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

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

IT realignment ( 17 ) 403 ( 11 ) 6,809

G&A realignment ( 7 ) ( 49 ) ( 41 ) 282

Three Months Ended

2022 April 4,

System optimization initiative $ 407 $ 4,678

Other reorganization and realignment plans 57 256

Reorganization and realignment costs $ 464 $ 4,934

Operations and Field Realignment

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

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

restaurant operations.

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 $ 5,500 to $ 6,000 related to the Operations and Field Realignment Plan.

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.

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 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

Third-party and other costs 74 — 1,230 — 1,297

74 2,502 1,563 2,502 4,743

Share-based compensation (a) — 519 — 519 621

Total operations and field realignment $ 74 $ 3,021 $ 1,563 $ 3,021 $ 5,364

_______________

(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 October 3, 2021.

January 3, 2021 Charges Payments Balance

Severance and related employee costs $ 2,600 $ 333 $ ( 2,377 ) $ 556

Third-party and other costs — 1,230 ( 1,230 ) —

$ 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

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, 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 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 Nine Months Ended Total

Incurred Since Inception

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

Third-party and other costs 3 24 7 5,141 6,542

( 17 ) 403 ( 11 ) 6,809 16,211

Share-based compensation (b) — — — — 193

Total IT realignment $ ( 17 ) $ 403 $ ( 11 ) $ 6,809 $ 16,404

_______________

(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.

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.

January 3, 2021 Charges Payments Balance

Severance and related employee costs $ 1,508 $ ( 151 ) $ ( 1,115 ) $ 242

Recruitment and relocation costs — 133 ( 133 ) —

Third-party and other costs — 7 ( 7 ) —

$ 1,508 $ ( 11 ) $ ( 1,255 ) $ 242

December 29, 2019 Charges Payments Balance

September 27,

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

Recruitment and relocation costs — 659 ( 659 ) —

Third-party and other costs 1,076 5,141 ( 6,217 ) —

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

General and Administrative ( “ G&A ”) Realignment

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

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

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

During the nine months ended September 27, 2020, 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 Nine Months Ended Total

Incurred Since Inception

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

Third-party and other costs — 9 — 10 2,223

( 7 ) ( 80 ) ( 60 ) 82 29,305

Share-based compensation (b) — 31 19 200 8,130

Termination of defined benefit plans — — — — 1,335

Total G&A realignment $ ( 7 ) $ ( 49 ) $ ( 41 ) $ 282 $ 38,770

_______________

(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.

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.

2021 Charges Payments Balance

Severance and related employee costs $ 932 $ ( 61 ) $ ( 828 ) $ 43

Recruitment and relocation costs — 1 ( 1 ) —

Third-party and other costs — — — —

$ 932 $ ( 60 ) $ ( 829 ) $ 43

2019 Charges Payments Balance

September 27,

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

Recruitment and relocation costs 83 42 ( 81 ) 44

Third-party and other costs — 10 ( 10 ) —

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

System Optimization Initiative

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

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.

During the three months ended April 3, 2022, the Company recognized costs totaling $ 407 , which were primarily comprised of professional fees and other costs associated with the Company’s acquisition of 93 franchise-operated restaurants in Florida during the fourth quarter of 2021.

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 bankruptcy sale process of NPC Quality Burgers, Inc.

As previously announced, NPC, formerly the Company’s largest franchisee, filed for chapter 11 bankruptcy in July 2020 and completed a process during the three months ended April 4, 2021 under which all of NPC’s Wendy’s restaurants were sold to Wendy’s approved franchisees.

The Company expects to recognize a gain of approximately $ 900 , primarily related to the write-off of certain NPC-related lease liabilities, upon final termination of the leases.

THE WENDY’S COMPANY AND SUBSIDIARIES

2 unchanged sentences

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

Three Months Ended Nine Months Ended Total

Three Months Ended Total

Incurred Since Inception

2021 September 27,

2020 October 3,

2021 September 27,

2022 April 4,

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

7 unchanged sentences

_______________

(a) The nine months ended October 3, 2021 includes transaction fees of $ 1,350 associated with the NPC bankruptcy sale process.

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

(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 .

(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 were included in “Accrued expenses and other current liabilities” as of January 3, 2021.

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 April 4, 2021.

2022 Charges Payments Balance

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

Professional fees — 294 ( 294 ) —

1 unchanged sentence

$ — $ 390 $ ( 390 ) $ —

(6) 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.

(Tim Hortons is a registered trademark of Tim Hortons USA Inc.) In addition, a wholly-owned subsidiary of Wendy’s has a 20 % share in a joint venture for the operation of Wendy’s restaurants in Brazil (the “Brazil JV”).

The Company has significant influence over these investees.

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.”

2021 Charges Payments Balance

Professional fees $ 1,230 235 ( 1,461 ) $ 4

Other — 1,354 ( 1,354 ) —

$ 1,230 $ 1,589 $ ( 2,815 ) $ 4

Other Reorganization and Realignment Plans

Costs incurred under the Company’s other reorganization and realignment plans were not material during the three months ended April 3, 2022 and April 4, 2021.

The Company does not expect to incur any material additional costs under these plans.

THE WENDY’S COMPANY AND SUBSIDIARIES

1 unchanged sentence

(In Thousands Except Per Share Amounts)

(6) Investments

The following is a summary of the carrying value of our investments:

2022 January 2,

Equity method investments $ 39,346 $ 39,870

Other investments in equity securities 12,107 10,000

$ 51,453 $ 49,870

Equity Method Investments

In addition, the Company has a 20 % share in a joint venture in Brazil (the “Brazil JV”).

The Company has significant influence over these investees.

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

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

Nine Months Ended

2021 September 27,

Three Months Ended

2022 April 4,

Balance at beginning of period $ 39,870 $ 44,574

2 unchanged sentences

Distributions received ( 2,675 ) ( 2,981 )

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

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

Balance at end of period $ 39,346 $ 43,743

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.

Other Investments in Equity Securities

During 2021, the Company made an investment in equity securities of $ 10,000 .

During the three months ended April 3, 2022, the Company recognized a gain of $ 2,107 as a result of an observable price change for a similar investment of the same issuer.

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

(7) Long-Term Debt

11 unchanged sentences

Series 2019-1 Class A-2 Notes:

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

3.783 % Series 2019-1 Class A-2-I Notes, anticipated repayment date 2026

367,000 368,000

4.080 % Series 2019-1 Class A-2-II Notes, anticipated repayment date 2029

1 unchanged sentence

Series 2018-1 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

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

454,813 456,000

7 % debentures, due in 2025

5 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.

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

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”).

On April 1, 2022, the Master Issuer completed a financing transaction with respect to this facility under which the Master Issuer issued fixed rate senior secured notes in the following 2022-1 series:

Class A-2-I with an initial principal amount of $ 100,000 and Class A-2-II with an initial principal amount of $ 400,000 (collectively, the “Series 2022-1 Class A-2 Notes”).

Interest and principal payments on the Series 2022-1 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.

The legal final maturity date of the Series 2022-1 Class A-2 Notes is March 2052.

If the Master Issuer has not repaid or refinanced the Series 2022-1 Class A-2 Notes prior to their respective anticipated repayment dates, additional interest will accrue pursuant to the indenture governing the Series 2022-1 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 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 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 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 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.

Other Long-Term Debt

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

Borrowings under the facility are guaranteed by Wendy’s.

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

The net proceeds from the sale of the Series 2022-1 Class A-2 Notes will be used for general corporate purposes, which may include funding for growth initiatives, return of capital to shareholders and debt retirement.

The Series 2022-1 Class A-2 Notes have scheduled principal payments of $ 2,500 in 2022, $ 5,000 annually from 2023 through 2028, $ 97,500 in 2029, $ 4,000 annually from 2030 through 2031 and $ 362,000 in 2032.

The Series 2022-1 Class A-2 Notes are secured by a security interest in 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 2022-1 Class A-2 Notes are subject to substantially the same series of covenants and restrictions as the Company’s outstanding Series 2021-1 Class A-2 Notes, Series 2019-1 Class A-2 Notes and Series 2018-1 Class A-2 Notes.

Under the securitized financing facility, the Master Issuer has issued outstanding Series 2021-1 Variable Funding Senior Secured Notes, Class A-1 (the “Class A-1 Notes”), which allow 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 Class A-1 Notes during the three months ended April 3, 2022.

During the three months ended April 3, 2022, the Company incurred debt issuance costs of $ 10,232 in connection with the issuance of the Series 2022-1 Class A-2 Notes.

The debt issuance costs will be amortized to “Interest expense, net” through the anticipated repayment dates of the Series 2022-1 Class A-2 Notes utilizing the effective interest rate method.

THE WENDY’S COMPANY AND SUBSIDIARIES

19 unchanged sentences

Cash equivalents $ 415,000 $ 415,000 $ — $ — Level 1

Other investments in equity securities (a) 12,107 12,107 10,000 10,000 Level 2

Financial liabilities

Series 2021-1 Class A-2-I Notes (a) 448,875 454,441 — — Level 2

Series 2021-1 Class A-2-II Notes (a) 648,375 663,806 — — Level 2

Series 2019-1 Class A-2-I Notes (a) 373,000 395,641 386,000 409,778 Level 2

Series 2019-1 Class A-2-II Notes (a) 419,625 454,874 434,250 469,555 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) 457,188 486,037 460,750 491,021 Level 2

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

Canadian revolving credit facility — — 1,962 1,962 Level 2

7 % debentures, due in 2025 (a)

Series 2022-1 Class A-2-I Notes (b) 100,000 99,320 — — Level 2

Series 2022-1 Class A-2-II Notes (b) 400,000 398,680 — — Level 2

Series 2021-1 Class A-2-I Notes (b) 446,625 395,442 447,750 439,283 Level 2

Series 2021-1 Class A-2-II Notes (b) 645,125 565,517 646,750 642,352 Level 2

Series 2019-1 Class A-2-I Notes (b) 367,000 358,853 368,000 381,579 Level 2

Series 2019-1 Class A-2-II Notes (b) 412,875 405,113 414,000 439,792 Level 2

Series 2018-1 Class A-2-II Notes (b) 454,813 445,307 456,000 473,693 Level 2

7 % debentures, due in 2025 (b)

85,472 97,425 85,175 101,142 Level 2

_______________

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

(a) The fair value of our other investments in equity securities is based on our review of information provided by the investment manager, which is based on observable price changes in orderly transactions for a similar investment of the same issuer.

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

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

23 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 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 Nine Months Ended

2021 September 27,

2020 October 3,

2021 September 27,

Three Months Ended

2022 April 4,

Company-operated restaurants $ 367 $ 446

1 unchanged sentence

Surplus properties 55 —

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

(10) Income Taxes

The Company’s effective tax rate for the three months ended April 3, 2022 and April 4, 2021 was 26.4 % and 24.1 %, respectively.

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

federal statutory rate of 21 % for the three months ended April 3, 2022 primarily due to state income taxes.

THE WENDY’S COMPANY AND SUBSIDIARIES

1 unchanged sentence

(In Thousands Except Per Share Amounts)

(10) Income Taxes

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 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 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 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.

There were no significant changes to the unrecognized tax benefits or related interest and penalties for the three months ended April 3, 2022.

During the next twelve months, we believe it is reasonably possible the Company will reduce unrecognized tax benefits by up to $ 936 due to lapses of statutes of limitations.

The current portion of refundable income taxes was $ 7,206 and $ 11,901 as of April 3, 2022 and January 2, 2022, respectively, and is included in “Accounts and notes receivable, net.” There were no long-term refundable income taxes as of April 3, 2022 and January 2, 2022.

(11) Net Income Per Share

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

Three Months Ended Nine Months Ended

2021 September 27,

2020 October 3,

2021 September 27,

Three Months Ended

2022 April 4,

Net income $ 37,402 $ 41,366

2 unchanged sentences

Dilutive effect of stock options and restricted shares

2,685 4,410 3,201 4,312

Weighted average diluted shares outstanding 218,167 226,727

2 unchanged sentences

Diluted $ .17 $ .18

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)

Basic net income per share for the three months ended April 3, 2022 and April 4, 2021 was computed by dividing net income amounts by the weighted average number of shares of common stock outstanding.

Diluted net income per share 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 3,295 and 1,870 for the three months ended April 3, 2022 and April 4, 2021, respectively, from our diluted net income per share calculation as they would have had anti-dilutive effects.

(12) Stockholders’ Equity

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.

During the first quarter of 2022 and 2021, the Company paid dividends per share of $ .125 and $ .09 , respectively.

Repurchases of Common Stock

In February 2022, our Board of Directors authorized a repurchase program of up to $ 100,000 of our common stock through February 28, 2023, when and if market conditions warrant and to the extent legally permissible (the “February 2022 Authorization”).

On April 1, 2022, the Company’s Board of Directors approved an increase of $ 150,000 to the February 2022 Authorization, resulting in an aggregate authorization of $ 250,000 that continues to expire on February 28, 2023.

During the three months ended April 3, 2022, no shares were repurchased under the February 2022 Authorization.

Subsequent to April 3, 2022 through May 4, 2022, the Company repurchased 1,156 shares under the February 2022 Authorization with an aggregate purchase price of $ 23,521 , excluding commissions of $ 16 .

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 (the “February 2020 Authorization”).

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

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 in August 2020.

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.

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 (the February 2019 authorization”).

In July 2020, the Company’s Board of Directors approved an extension of the February 2020 Authorization by one year, through February 28, 2022.

In addition, in May 2021, August 2021 and November 2021, the Board of Directors

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

approved increases of $ 50,000 , $ 70,000 and $ 80,000 , respectively, to the February 2020 Authorization, resulting in an aggregate authorization of $ 300,000 that continued to expire on February 28, 2022.

In November 2021, the Company entered into an accelerated share repurchase agreement (the “2021 ASR Agreement”) with a third-party financial institution to repurchase common stock as part of the February 2020 Authorization.

Under the 2021 ASR Agreement, the Company paid the financial institution an initial purchase price of $ 125,000 in cash and received an initial delivery of 4,910 shares of common stock, representing an estimated 85 % of the total shares expected to be delivered under the 2021 ASR Agreement.

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

In February 2022, the Company completed the 2021 ASR Agreement and received an additional 715 shares of common stock.

The total number of shares of common stock ultimately purchased by the Company under the 2021 ASR Agreement was based on the average of the daily volume-weighted average prices of the common stock during the term of the 2021 ASR Agreement, less an agreed upon discount.

In total, 5,625 shares were delivered under the 2021 ASR Agreement at an average purchase price of $ 22.22 per share.

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)

With the completion of the 2021 ASR Agreement in February 2022 as described above, the Company completed the February 2020 Authorization.

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

Accumulated Other Comprehensive Loss

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

Nine Months Ended

2021 September 27,

The following table provides a rollforward of accumulated other comprehensive loss, which is entirely comprised of foreign currency translation:

Three Months Ended

2022 April 4,

Balance at beginning of period $ ( 48,200 ) $ ( 49,641 )

Foreign currency translation

908 ( 5,138 )

Balance at end of period $ ( 47,082 ) $ ( 47,421 )

2 unchanged sentences

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

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

At April 3, 2022, Wendy’s and its franchisees operated 7,016 Wendy’s restaurants.

Of the 408 Company-operated Wendy’s restaurants, Wendy’s owned the land and building for 158 restaurants, owned the building and held long-term land leases for 140 restaurants and held leases covering the land and building for 110 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 Nine Months Ended

2021 September 27,

2020 October 3,

2021 September 27,

Three Months Ended

2022 April 4,

Finance lease cost:

8 unchanged sentences

_______________

(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:

Nine Months Ended

2021 September 27,

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

Operating cash flows from finance leases $ 31,608 $ 28,689

Operating cash flows from operating leases 69,476 62,026

Financing cash flows from finance leases 9,021 5,850

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

Finance lease liabilities 43,277 24,617

Operating lease liabilities 11,404 12,149

The following table includes supplemental information related to leases:

2021 January 3,

Weighted-average remaining lease term (years):

Finance leases 15.8 16.2

Operating leases 14.2 14.6

Weighted average discount rate:

Finance leases 9.19 % 9.54 %

Operating leases 5.01 % 5.06 %

Supplemental balance sheet information:

Finance lease assets, gross $ 271,075 $ 261,308

Accumulated amortization ( 60,415 ) ( 55,155 )

Finance lease assets 210,660 206,153

Operating lease assets 783,986 821,480

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

Leases Operating

Fiscal Year Company-Operated Franchise

and Other Company-Operated Franchise

2021 (a) (b) $ 1,398 $ 13,934 $ 3,504 $ 18,313

2022 3,699 51,912 14,412 73,572

2023 3,644 53,569 14,726 73,226

2024 3,712 54,001 14,738 73,145

2025 3,787 54,496 14,633 72,829

Thereafter 46,140 682,798 141,258 732,276

Total minimum payments $ 62,380 $ 910,710 $ 203,271 $ 1,043,361

Less interest

( 22,694 ) ( 405,706 ) ( 58,455 ) ( 312,148 )

Present value of minimum lease payments (c) (d) $ 39,686 $ 505,004 $ 144,816 $ 731,213

_______________

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.

(b) In addition to the 2021 future minimum rental payments, the Company expects to pay $ 1,038 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 $ 15,915 and $ 528,775 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 $ 45,541 and $ 830,488 are included in “Current portion of operating lease liabilities” and “Long-term operating lease liabilities,” respectively.

(a) Includes expenses for executory costs of $ 9,608 and $ 10,063 for the three months ended April 3, 2022 and April 4, 2021, respectively, for which the Company is reimbursed by sublessees.

(b) Includes $ 28,925 and $ 32,552 for the three months ended April 3, 2022 and April 4, 2021, respectively, recorded to “Franchise rental expense” for leased properties that are subsequently leased to franchisees.

Also includes $ 7,294 and $ 6,681 for the three months ended April 3, 2022 and April 4, 2021, respectively, recorded to “Cost of sales” for leases for Company-operated restaurants.

Company as Lessor

The components of lease income are as follows:

Three Months Ended Nine Months Ended

2021 September 27,

2020 October 3,

2021 September 27,

Three Months Ended

2022 April 4,

Sales-type and direct-financing leases:

6 unchanged sentences

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

(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.

(b) Includes sublease income of $ 43,165 and $ 43,250 recognized during the three months ended April 3, 2022 and April 4, 2021, respectively.

Sublease income includes lessees’ variable payments to the Company for executory costs of $ 9,535 and $ 9,874 for the three months ended April 3, 2022 and April 4, 2021, respectively.

THE WENDY’S COMPANY AND SUBSIDIARIES

1 unchanged sentence

(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

Direct Financing Leases Operating

Fiscal Year Subleases Owned Properties Subleases Owned Properties

2021 (a) (b) $ 8,409 $ 1,407 $ 28,841 $ 13,942

2022 34,188 2,610 116,068 56,305

2023 35,247 2,656 116,795 56,614

2024 37,248 2,667 116,962 57,720

2025 36,149 2,784 116,443 58,323

Thereafter 479,695 32,057 1,172,444 748,781

Total future minimum receipts 630,936 44,181 $ 1,667,553 $ 991,685

Unearned interest income ( 341,031 ) ( 21,892 )

Net investment in sales-type and direct financing leases (c) $ 289,905 $ 22,289

_______________

(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 $ 273 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 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:

(14) Supplemental Cash Flow Information

The following table includes supplemental non-cash investing and financing activities:

Three Months Ended

2022 April 4,

Supplemental non-cash investing and financing activities:

Capital expenditures included in accounts payable $ 6,522 $ 5,461

Finance leases 7,207 5,539

The following table includes a reconciliation of cash, cash equivalents and restricted cash:

2022 January 2,

Land $ 280,767 $ 279,956

Buildings and improvements 307,593 309,605

Restaurant equipment 1,701 1,701

590,061 591,262

Accumulated depreciation and amortization ( 179,439 ) ( 170,722 )

$ 410,622 $ 420,540

Reconciliation of cash, cash equivalents and restricted cash at end of period:

Cash and cash equivalents $ 741,216 $ 249,438

Restricted cash 32,627 27,535

Restricted cash, included in Advertising funds restricted assets 54,165 89,993

Total cash, cash equivalents and restricted cash $ 828,008 $ 366,966

Franchise Development Fund

In August 2021, the Company announced the creation of a $ 100,000 strategic build to suit development fund to drive additional new restaurant growth.

The Company expects the development fund to drive approximately 80 to 90 new franchise restaurants from 2022 to 2025.

Capital expenditures related to the fund are included in “Franchise development fund” in the condensed consolidated statements of cash flows.

(15) 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 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)

During the three months ended April 3, 2022 and April 4, 2021, Wendy’s paid TimWen $ 4,350 and $ 4,026 , respectively, under these lease agreements.

In addition, TimWen paid Wendy’s a management fee under the TimWen joint venture agreement of $ 54 during each of the three months ended April 3, 2022 and April 4, 2021, which has been included as a reduction to “General and administrative.”

Transactions with Yellow Cab

1 unchanged sentence

Nelson Peltz, our Chairman, and Mr.

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 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.

As part of the consortium bid, in November 2020, the Company received deposits from each of the pre-qualified franchisees (including Yellow Cab), which amounts were transferred to a third-party escrow account pending resolution of the bankruptcy sale process.

On January 7, 2021, following a court-approved mediation process, Yellow Cab was selected as the purchaser for 54 of NPC’s Wendy’s restaurants.

In March 2021, Yellow Cab closed on its acquisition of these restaurants and its deposit was applied against the purchase price for the restaurants.

See Note 3 for further information.

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

Matthew Peltz, our Vice Chairman, hold indirect, minority ownership interests in operating companies managed by Yellow Cab Holdings, LLC (“Yellow Cab”), a Wendy’s franchisee, that as of April 3, 2022 owned and operated 82 Wendy’s restaurants.

During the three months ended April 3, 2022 and April 4, 2021, the Company recognized $ 3,067 and $ 1,659 , respectively, in royalty, advertising fund, lease and other income from Yellow Cab and related entities.

As of April 3, 2022 and January 2, 2022, $ 984 and $ 974 , respectively, was due from Yellow Cab for such income, which is included in “Accounts and notes receivable, net” and “Advertising funds restricted assets.”

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

(16) Guarantees and Other Commitments and Contingencies

2 unchanged sentences

Lease Guarantees

Wendy’s has guaranteed the performance of certain leases and other obligations, primarily from former Company-operated restaurant locations now operated by franchisees, amounting to $ 89,574 as of October 3, 2021.

These leases extend through 2045.

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.

We have had no judgments against us as guarantor of these leases as of April 3, 2022.

In the event of default by a franchise owner where Wendy’s is called upon to perform under its guarantee, Wendy’s has the ability to pursue repayment from the franchise owner.

The liability recorded for our probable exposure associated with these lease guarantees was not material as of April 3, 2022.

Letters of Credit

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

As of April 3, 2022, the Company had outstanding letters of credit with various parties totaling $ 22,121 .

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

See Note 7 for further information.

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

7 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 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 (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.

As of April 3, 2022, there were no material developments in those legal proceedings.

(18) Segment Information

Revenues by segment were as follows:

Three Months Ended Nine Months Ended

2021 September 27,

2020 October 3,

2021 September 27,

Three Months Ended

2022 April 4,

$ 407,311 $ 381,954

2 unchanged sentences

Total revenues $ 488,643 $ 460,203

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 Nine Months Ended

2021 September 27,

2020 October 3,

2021 September 27,

Three Months Ended

2022 April 4,

(a) $ 104,824 $ 112,087

Wendy’s International 6,949 6,567 21,161 15,256

Wendy’s International (a) 5,453 7,684

Global Real Estate & Development 27,607 26,253

9 unchanged sentences

Interest expense, net ( 26,365 ) ( 28,786 )

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

Investment income, net 2,111 3

Other income, net 207 126

1 unchanged sentence

_______________

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.

(a) Wendy’s U.S.

includes advertising fund expense of $ 2,556 and $ 3,534 for the three months ended April 3, 2022 and April 4, 2021, respectively, and Wendy’s International includes advertising fund expense of $ 838 for the three months ended April 3, 2022, all of which related to the Company’s funding of incremental advertising.

In addition, Wendy’s International includes other international-related advertising expense of $ 642 for the three months ended April 3, 2022.

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

(19) 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 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.

Financial Instruments

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

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

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

The Company adopted this amendment during the first quarter of 2022.

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