What changed in this filing

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Item 1. Financial Statements

2022-11-09 compared with 2022-08-10 · 180 added, 105 removed, 608 unchanged (32% of the section changed)

57 unchanged sentences

(In Thousands Except Per Share Amounts)

Three Months Ended Six Months Ended

Three Months Ended Nine Months Ended

2022 October 3,

2021 October 2,

2022 October 3,

Sales $ 228,786 $ 171,078 $ 668,930 $ 553,660

9 unchanged sentences

General and administrative 62,523 62,840 186,506 178,576

Depreciation and amortization 33,428 30,761 66,659 62,303

Depreciation and amortization (exclusive of amortization of cloud computing arrangements shown separately below) 34,252 30,940 100,911 93,243

Amortization of cloud computing arrangements 888 — 888 —

System optimization gains, net ( 452 ) ( 1,437 ) ( 4,138 ) ( 32,719 )

6 unchanged sentences

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

Investment (loss) income, net ( 4 ) 3 2,107 6

Investment income, net — — 2,107 6

Other income, net 2,910 171 4,355 455

9 unchanged sentences

(In Thousands)

Three Months Ended Six Months Ended

Three Months Ended Nine Months Ended

2022 October 3,

2021 October 2,

2022 October 3,

Net income $ 50,542 $ 41,171 $ 136,095 $ 148,261

32 unchanged sentences

Balance at July 3, 2022 $ 47,042 $ 2,926,739 $ 376,187 $ ( 2,872,568 ) $ ( 54,537 ) $ 422,863

Net income — — 50,542 — — 50,542

Other comprehensive loss — — — — ( 14,183 ) ( 14,183 )

Cash dividends — — ( 26,607 ) — — ( 26,607 )

Share-based compensation — 5,027 — — — 5,027

Common stock issued upon exercises of stock options

— 450 — 241 — 691

Common stock issued upon vesting of restricted shares

— ( 1,876 ) — 817 — ( 1,059 )

Other — 48 ( 11 ) 68 — 105

Balance at October 2, 2022 $ 47,042 $ 2,930,388 $ 400,111 $ ( 2,871,442 ) $ ( 68,720 ) $ 437,379

See accompanying notes to condensed consolidated financial statements.

27 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.

2 unchanged sentences

(In Thousands)

Six Months Ended

Nine Months Ended

2022 October 3,

Cash flows from operating activities:

1 unchanged sentence

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

Depreciation and amortization 66,659 62,303

Depreciation and amortization (exclusive of amortization of cloud computing arrangements shown separately below) 100,911 93,243

Amortization of cloud computing arrangements 888 —

Share-based compensation 17,497 16,735

26 unchanged sentences

Payments related to tax withholding for share-based compensation ( 2,980 ) ( 4,390 )

Net cash provided by financing activities 362,707 28,929

Net cash provided by (used in) financing activities 324,505 ( 57,481 )

Net cash provided by operations before effect of exchange rate changes on cash 461,068 234,234

9 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 3, 2022, the results of our operations for the three and six months ended July 3, 2022 and July 4, 2021 and cash flows for the six months ended July 3, 2022 and July 4, 2021.

The results of operations for the six months ended July 3, 2022 are not necessarily indicative of the results to be expected for the full 2022 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 2, 2022, the results of our operations for the three and nine months ended October 2, 2022 and October 3, 2021 and cash flows for the nine months ended October 2, 2022 and October 3, 2021.

The results of operations for the nine months ended October 2, 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”).

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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.

1 unchanged sentence

Reclassifications

The Company has reclassified payments for cloud computing arrangements to “Cloud computing arrangements expenditures,” which were previously recorded to “Changes in operating assets and liabilities and other, net.” The prior period amounts in the condensed consolidated statement of cash flows reflect the reclassification of these cash flows to conform to the current year presentation.

Beginning in 2022, the Company has reclassified payments for cloud computing arrangements to “Cloud computing arrangements expenditures,” which were previously recorded to “Changes in operating assets and liabilities and other, net.” The prior period amounts in the condensed consolidated statement of cash flows reflect the reclassification of these cash flows to conform to the current year presentation.

There was no impact to “Net cash provided by operating activities.”

The following table illustrates the reclassifications made to the condensed consolidated statement of cash flows for the six months ended July 4, 2021:

The following table illustrates the reclassifications made to the condensed consolidated statement of cash flows for the nine months ended October 3, 2021:

As Previously Reported Reclassifications As Currently Reported

7 unchanged sentences

Wendy’s International Global Real Estate & Development Total

Three Months Ended July 3, 2022

Three Months Ended October 2, 2022

Sales at Company-operated restaurants $ 225,245 $ 3,541 $ — $ 228,786

4 unchanged sentences

Total revenues $ 445,934 $ 27,547 $ 59,088 $ 532,569

Six Months Ended July 3, 2022

Nine Months Ended October 2, 2022

Sales at Company-operated restaurants $ 659,649 $ 9,281 $ — $ 668,930

4 unchanged sentences

Total revenues $ 1,303,685 $ 77,916 $ 177,394 $ 1,558,995

Three Months Ended July 4, 2021

Three Months Ended October 3, 2021

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

4 unchanged sentences

Total revenues $ 383,804 $ 22,674 $ 63,777 $ 470,255

Six Months Ended July 4, 2021

Nine Months Ended October 3, 2021

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

18 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 $ 9,862 and $ 89,246 , respectively, as of July 3, 2022, and $ 9,084 and $ 88,102 , respectively, as of January 2, 2022.

(c) Deferred franchise fees are included in “Accrued expenses and other current liabilities” and “Deferred franchise fees” and totaled $ 8,467 and $ 91,669 , respectively, as of October 2, 2022, and $ 9,084 and $ 88,102 , respectively, as of January 2, 2022.

Significant changes in deferred franchise fees are as follows:

Six Months Ended

Nine Months Ended

2022 October 3,

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

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(3) Acquisitions

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

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

The Company completed no significant acquisitions of restaurants from franchisees during the nine months ended October 2, 2022 and October 3, 2021.

During the fourth quarter of 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.

4 unchanged sentences

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 six months ended July 3, 2022 and July 4, 2021, the Company facilitated 46 and 19 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 July 3, 2022.

During the nine months ended October 2, 2022 and October 3, 2021, the Company facilitated 54 and 34 Franchise Flips, respectively.

Additionally, during the nine months ended October 2, 2022, the Company completed the sale of one Company-operated restaurant to a franchisee and, 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.

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

Three Months Ended Nine Months Ended

2022 October 3,

2021 October 2,

2022 October 3,

Number of restaurants sold to franchisees 1 — 1 47

7 unchanged sentences

Post-closing adjustments on sales of restaurants (e) — 5 3,522 520

Gain on sales of restaurants, net 75 30,801 3,522 31,316

Gain (loss) on sales of other assets, net (f) 77 ( 35 ) 164 ( 34 )

(Loss) gain on sales of restaurants, net ( 416 ) 5 3,106 31,321

Gain on sales of other assets, net (f) 868 1,432 1,032 1,398

System optimization gains, net $ 452 $ 1,437 $ 4,138 $ 32,719

_______________

(a) In addition to the proceeds noted herein, the Company received cash proceeds of $ 63 and $ 158 during the three and six months ended July 3, 2022, respectively, related to a note receivable issued in connection with the sale of the Manhattan Company-operated restaurants.

THE WENDY’S COMPANY AND SUBSIDIARIES

1 unchanged sentence

(In Thousands Except Per Share Amounts)

(a) In addition to the proceeds noted herein, the Company received cash proceeds of $ 126 and $ 284 during the three and nine months ended October 2, 2022, respectively, and $ 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 consisted primarily of equipment.

(c) 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).

(d) 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.

(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.

(e) 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.

(f) During the three and six months ended July 3, 2022, the Company received net cash proceeds of $ 690 and $ 858 , respectively, primarily from the sale of surplus and other properties.

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.

(f) During the three and nine months ended October 2, 2022, the Company received net cash proceeds of $ 2,510 and $ 3,368 , respectively, primarily from the sale of surplus and other properties.

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.

Assets Held for Sale

As of July 3, 2022 and January 2, 2022, the Company had assets held for sale of $ 3,754 and $ 3,541 , respectively, primarily consisting of surplus properties.

As of October 2, 2022 and January 2, 2022, the Company had assets held for sale of $ 2,100 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 Six Months Ended

Three Months Ended Nine Months Ended

2022 October 3,

2021 October 2,

2022 October 3,

System optimization initiative $ 7 $ 295 $ 548 $ 5,870

3 unchanged sentences

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

During the six months ended July 3, 2022, the Company recognized costs totaling $ 541 , 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 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 bankruptcy sale process of NPC Quality Burgers, Inc.

During the nine months ended October 2, 2022, the Company recognized costs totaling $ 548 , 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 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 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.

4 unchanged sentences

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

2022 October 3,

2021 October 2,

2022 October 3,

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 .

(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.

10 unchanged sentences

Other Reorganization and Realignment Plans

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

Costs incurred under the Company’s other reorganization and realignment plans were not material during the nine months ended October 2, 2022 and October 3, 2021.

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

14 unchanged sentences

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

Six Months Ended

Nine Months Ended

2022 October 3,

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

9 unchanged sentences

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

During the six months ended July 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.

During the nine months ended October 2, 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

6 unchanged sentences

4.236 % Series 2022-1 Class A-2-I Notes, anticipated repayment date 2029

$ 100,000 $ —

4.535 % Series 2022-1 Class A-2-II Notes, anticipated repayment date 2032

24 unchanged sentences

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 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 have scheduled principal payments of $ 2,500 in 2022 (of which $ 1,250 was paid during the three months ended October 2, 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.

1 unchanged sentence

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 six months ended July 3, 2022.

During the six months ended July 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.

No amounts were borrowed under the Class A-1 Notes during the nine months ended October 2, 2022.

During the nine months ended October 2, 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.

42 unchanged sentences

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

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

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

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

15 unchanged sentences

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

Three Months Ended Nine Months Ended

2022 October 3,

2021 October 2,

2022 October 3,

Company-operated restaurants $ 159 $ 566 $ 2,234 $ 1,500

2 unchanged sentences

$ 206 $ 566 $ 2,682 $ 1,831

(10) Income Taxes

The Company’s effective tax rate for the three months ended July 3, 2022 and July 4, 2021 was 26.4 % and 18.6 %, respectively.

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

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

THE WENDY’S COMPANY AND SUBSIDIARIES

1 unchanged sentence

(In Thousands Except Per Share Amounts)

The Company’s effective tax rate for the six months ended July 3, 2022 and July 4, 2021 was 26.4 % and 20.8 %, respectively.

(10) Income Taxes

The Company’s effective tax rate for the three months ended October 2, 2022 and October 3, 2021 was 26.9 % and 24.3 %, respectively.

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

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

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

federal statutory rate of 21 % for the three months ended October 2, 2022 primarily due to state income taxes, including discrete changes to state deferred income taxes, and tax effects of our foreign operations.

The Company’s effective tax rate for the nine months ended October 2, 2022 and October 3, 2021 was 26.6 % and 21.8 %, respectively.

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

federal statutory rate of 21 % for the nine months ended October 2, 2022 primarily due to state income taxes, including discrete changes to state deferred income taxes.

Unrecognized tax benefits for the Company decreased $ 1,225 and $ 1,175 during the three and nine months ended October 2, 2022, respectively.

The decrease was primarily related to a state tax law change and the lapse of statutes of limitations during the third quarter of 2022.

During the next twelve months, we believe it is reasonably possible the Company will reduce unrecognized tax benefits by up to $ 308 due to lapses of statutes of limitations.

The current portion of refundable income taxes was $ 8,266 and $ 11,901 as of July 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 July 3, 2022 and January 2, 2022.

The current portion of refundable income taxes was $ 7,136 and $ 11,901 as of October 2, 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 October 2, 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 Six Months Ended

Three Months Ended Nine Months Ended

2022 October 3,

2021 October 2,

2022 October 3,

Net income $ 50,542 $ 41,171 $ 136,095 $ 148,261

7 unchanged sentences

Diluted $ .24 $ .18 $ .63 $ .66

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

Basic net income per share for the three and nine months ended October 2, 2022 and October 3, 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 5,538 and 4,417 for the three and six months ended July 3, 2022, respectively, and 1,825 and 1,847 for the three and six months ended July 4, 2021, respectively, from our diluted net income per share calculation as they would have had anti-dilutive effects.

We excluded potential common shares of 4,298 and 4,377 for the three and nine months ended October 2, 2022, respectively, and 2,746 and 2,147 for the three and nine months ended October 3, 2021, 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 each of the first and second quarters of 2022, the Company paid quarterly dividends per share of $ .125 .

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

During each of the first, second and third quarters of 2022, the Company paid quarterly dividends per share of $ .125 .

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

Repurchases of Common Stock

1 unchanged sentence

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 six months ended July 3, 2022, the Company repurchased 2,759 shares under the February 2022 Authorization with an aggregate purchase price of $ 51,911 , excluding commissions of $ 39 .

As of July 3, 2022, the Company had $ 198,089 of

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

availability remaining under its February 2022 authorization.

Subsequent to July 3, 2022 through August 9, 2022, no shares were repurchased under the February 2022 Authorization.

During the nine months ended October 2, 2022, the Company repurchased 2,759 shares under the February 2022 Authorization with an aggregate purchase price of $ 51,911 , excluding commissions of $ 39 .

As of October 2, 2022, the Company had $ 198,089 of availability remaining under its February 2022 authorization.

Subsequent to October 2, 2022 through November 2, 2022, no shares were repurchased under the February 2022 Authorization.

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”).

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

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

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 .

Accumulated Other Comprehensive Loss

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

Six Months Ended

Nine Months Ended

2022 October 3,

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

2 unchanged sentences

Balance at end of period $ ( 68,720 ) $ ( 48,733 )

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Nature of Leases

1 unchanged sentence

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

At July 3, 2022, Wendy’s and its franchisees operated 7,040 Wendy’s restaurants.

At October 2, 2022, Wendy’s and its franchisees operated 7,080 Wendy’s restaurants.

Of the 412 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 142 restaurants and held leases covering the land and building for 112 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

Three Months Ended Nine Months Ended

2022 October 3,

2021 October 2,

2022 October 3,

Finance lease cost:

8 unchanged sentences

_______________

(a) Includes expenses for executory costs of $ 9,245 and $ 10,087 for the three months ended July 3, 2022 and July 4, 2021, respectively, and $ 18,853 and $ 20,150 for the six months ended July 3, 2022 and July 4, 2021, respectively, for which the Company is reimbursed by sublessees.

(b) Includes $ 32,071 and $ 34,063 for the three months ended July 3, 2022 and July 4, 2021, respectively, and $ 60,996 and $ 66,615 for the six months ended July 3, 2022 and July 4, 2021, respectively, recorded to “Franchise rental expense” for leased properties that are subsequently leased to franchisees.

Also includes $ 7,479 and $ 6,111 for the three months ended July 3, 2022 and July 4, 2021, respectively, and $ 14,773 and $ 12,792 for the six months ended July 3, 2022 and July 4, 2021, respectively, recorded to “Cost of sales” for leases for Company-operated restaurants.

(a) Includes expenses for executory costs of $ 8,943 and $ 10,016 for the three months ended October 2, 2022 and October 3, 2021, respectively, and $ 27,796 and $ 30,166 for the nine months ended October 2, 2022 and October 3, 2021, respectively, for which the Company is reimbursed by sublessees.

(b) Includes $ 31,559 and $ 34,396 for the three months ended October 2, 2022 and October 3, 2021, respectively, and $ 92,555 and $ 101,011 for the nine months ended October 2, 2022 and October 3, 2021, respectively, recorded to “Franchise rental expense” for leased properties that are subsequently leased to franchisees.

Also includes $ 7,357 and $ 5,213 for the three months ended October 2, 2022 and October 3, 2021, respectively, and $ 22,130 and $ 18,005 for the nine months ended October 2, 2022 and October 3, 2021, respectively, recorded to “Cost of sales” for leases for Company-operated restaurants.

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Company as Lessor

The components of lease income are as follows:

Three Months Ended Six Months Ended

Three Months Ended Nine Months Ended

2022 October 3,

2021 October 2,

2022 October 3,

Sales-type and direct-financing leases:

6 unchanged sentences

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

(b) Includes sublease income of $ 43,689 and $ 45,245 recognized during the three months ended July 3, 2022 and July 4, 2021, respectively, and $ 86,854 and $ 88,495 recognized during the six months ended July 3, 2022 and July 4, 2021, respectively.

Sublease income includes lessees’ variable payments to the Company for executory costs of $ 9,250 and $ 10,195 for the three months ended July 3, 2022 and July 4, 2021, respectively, and $ 18,785 and $ 20,069 for the six months ended July 3, 2022 and July 4, 2021, respectively.

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

(b) Includes sublease income of $ 43,540 and $ 46,102 recognized during the three months ended October 2, 2022 and October 3, 2021, respectively, and $ 130,394 and $ 134,597 recognized during the nine months ended October 2, 2022 and October 3, 2021, respectively.

Sublease income includes lessees’ variable payments to the Company for executory costs of $ 8,947 and $ 10,087 for the three months ended October 2, 2022 and October 3, 2021, respectively, and $ 27,732 and $ 30,156 for the nine months ended October 2, 2022 and October 3, 2021, respectively.

(14) Supplemental Cash Flow Information

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

Six Months Ended

Nine Months Ended

2022 October 3,

Supplemental non-cash investing and financing activities:

12 unchanged sentences

Capital expenditures related to the fund are included in “Franchise development fund” 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)

(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 six months ended July 3, 2022 and July 4, 2021, Wendy’s paid TimWen $ 9,601 and $ 8,817 , respectively, under these lease agreements.

In addition, TimWen paid Wendy’s a management fee under the TimWen joint venture agreement of $ 111 and $ 110 during the six months ended July 3, 2022 and July 4, 2021, respectively, which has been included as a reduction to “General and administrative.”

During the nine months ended October 2, 2022 and October 3, 2021, Wendy’s paid TimWen $ 15,148 and $ 13,994 , respectively, under these lease agreements.

In addition, TimWen paid Wendy’s a management fee under the TimWen joint venture agreement of $ 166 and $ 165 during the nine months ended October 2, 2022 and October 3, 2021, respectively, which has been included as a reduction to “General and administrative.”

Transactions with Yellow Cab

2 unchanged sentences

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

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

During the six months ended July 3, 2022 and July 4, 2021, the Company recognized $ 6,476 and $ 4,353 , respectively, in royalty, advertising fund, lease and other income from Yellow Cab and related entities.

As of July 3, 2022 and January 2, 2022, $ 1,046 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)

Matthew Peltz, our Vice Chairman, hold indirect, minority ownership interests in Yellow Cab Holdings, LLC (“Yellow Cab”) and operating companies managed by Yellow Cab, a Wendy’s franchisee, that as of October 2, 2022 owned and operated 84 Wendy’s restaurants.

During the nine months ended October 2, 2022 and October 3, 2021, the Company recognized $ 9,942 and $ 7,016 , respectively, in royalty, advertising fund, lease and other income from Yellow Cab and related entities.

As of October 2, 2022 and January 2, 2022, $ 987 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.”

(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 $ 88,778 as of July 3, 2022.

These leases extend through 2045.

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

We have had no judgments against us as guarantor of these leases as of October 2, 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 July 3, 2022.

The liability recorded for our probable exposure associated with these lease guarantees was not material as of October 2, 2022.

Letters of Credit

As of July 3, 2022, the Company had outstanding letters of credit with various parties totaling $ 28,633 .

As of October 2, 2022, the Company had outstanding letters of credit with various parties totaling $ 28,619 .

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

1 unchanged sentence

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

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

(17) Legal and Environmental Matters

6 unchanged sentences

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

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

Except as set forth below, there were no material developments in those legal proceedings as of October 2, 2022.

Certain of the Company’s present and former directors have been named in two putative stockholder derivative complaints arising out of the cybersecurity incidents that affected certain of our franchisees in 2015 and 2016.

The first case, brought by James Graham in the U.S.

District Court for the Southern District of Ohio (the “Graham Case”), asserts claims of breach of fiduciary duty, waste of corporate assets, unjust enrichment and gross mismanagement, and additionally names one non-director executive officer of the Company.

The second case, brought by Thomas Caracci in the U.S.

District Court for the Southern District of Ohio (the “Caracci Case”), asserts claims of breach of fiduciary duty and violations of Section 14(a) and Rule 14a-9 of the Securities Exchange Act of 1934.

Collectively, the plaintiffs seek a judgment on behalf of the Company for all damages incurred or that will be incurred as a result of the alleged wrongful acts or omissions, a judgment ordering disgorgement of all profits, benefits, and other compensation obtained by the named individual defendants, a judgment directing the Company to reform its governance and internal procedures, attorneys’ fees and other costs.

The Graham Case and the Caracci Case were consolidated and on December 31, 2018, the court issued an order naming Graham and his counsel as lead in the case.

On January 31, 2019, Graham filed a consolidated verified stockholder derivative complaint with the court.

On January 24, 2020, 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 filed a Notice of Appeal.

On August 11, 2022, the U.S.

Court of Appeals for the Sixth Circuit issued an opinion affirming the district court’s order.

(18) Segment Information

Revenues by segment were as follows:

Three Months Ended Six Months Ended

Three Months Ended Nine Months Ended

2022 October 3,

2021 October 2,

2022 October 3,

$ 445,934 $ 383,804 $ 1,303,685 $ 1,175,601

6 unchanged sentences

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

Three Months Ended Six Months Ended

Three Months Ended Nine Months Ended

2022 October 3,

2021 October 2,

2022 October 3,

(a) $ 123,696 $ 108,878 $ 355,519 $ 347,615

5 unchanged sentences

Unallocated general and administrative (c) ( 31,517 ) ( 30,744 ) ( 93,511 ) ( 84,715 )

Depreciation and amortization ( 33,428 ) ( 30,761 ) ( 66,659 ) ( 62,303 )

Depreciation and amortization (exclusive of amortization of cloud computing arrangements shown separately below) ( 34,252 ) ( 30,940 ) ( 100,911 ) ( 93,243 )

Amortization of cloud computing arrangements ( 888 ) — ( 888 ) —

System optimization gains, net 452 1,437 4,138 32,719

4 unchanged sentences

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

Investment (loss) income, net ( 4 ) 3 2,107 6

Investment income, net — — 2,107 6

Other income, net 2,910 171 4,355 455

2 unchanged sentences

(a) Wendy’s U.S.

includes advertising fund expense of $ 2,766 and $ 5,322 for the three and six months ended July 3, 2022, respectively, and $ 3,990 and $ 7,524 for the three and six months ended July 4, 2021, respectively, related to the Company’s funding of incremental advertising.

(b) Wendy’s International includes advertising fund expense of $ 1,084 and $ 1,922 for the three and six months ended July 3, 2022, respectively, related to the Company’s funding of incremental advertising.

In addition, Wendy’s International includes other international-related advertising expense of $ 880 and $ 1,522 for the three and six months ended July 3, 2022, respectively.

includes advertising fund expense of $ 2,779 and $ 8,101 for the three and nine months ended October 2, 2022, respectively, and $ 8,979 and $ 16,503 for the three and nine months ended October 3, 2021, respectively, related to the Company’s funding of incremental advertising.

(b) Wendy’s International includes advertising fund expense of $ 1,002 and $ 2,924 for the three and nine months ended October 2, 2022, respectively, related to the Company’s funding of incremental advertising.

In addition, Wendy’s International includes other international-related advertising surplus (deficit) of $ 538 and $( 984 ) for the three and nine months ended October 2, 2022, respectively.

7 unchanged sentences

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