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Item 7. Management’s Discussion and Analysis

2023-03-01 compared with 2022-03-01 · 162 added, 176 removed, 426 unchanged (44% of the section changed)

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The Company measures segment profit using segment adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”).

Segment adjusted EBITDA excludes certain unallocated general and administrative expenses and other items that vary from period to period without correlation to the

Company’s core operating performance.

Segment adjusted EBITDA excludes certain unallocated general and administrative expenses and other items that vary from period to period without correlation to the Company’s core operating performance.

See “Results of Operations” below and Note 27 of the Financial Statements and Supplementary Data contained in Item 8 herein for segment financial information.

The Company’s fiscal reporting periods consist of 52 or 53 weeks ending on the Sunday closest to December 31 and are referred to herein as (1) “the year ended January 2, 2022” or “2021,” which consisted of 52 weeks, (2) “the year ended January 3, 2021” or “2020,” which consisted of 53 weeks, and (3) “the year ended December 29, 2019” or “2019,” which consisted of 52 weeks.

The Company’s fiscal reporting periods consist of 52 or 53 weeks ending on the Sunday closest to December 31 and are referred to herein as (1) “the year ended January 1, 2023” or “2022,” which consisted of 52 weeks, (2) “the year ended January 2, 2022” or “2021,” which consisted of 52 weeks, and (3) “the year ended January 3, 2021” or “2020,” which consisted of 53 weeks.

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

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In addition, at January 1, 2023, there were 1,101 Wendy’s restaurants in operation in 31 foreign countries and U.S.

Of the international restaurants, 1,006 were operated by franchisees and five were operated by the Company in the United Kingdom (the “U.K.”).

Of the international restaurants, 1,089 were operated by 106 franchisees and 12 were operated by the Company in the United Kingdom (the “U.K.”).

The revenues from our restaurant business are derived from two principal sources:

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The COVID-19 pandemic has had and may continue to have the effect of heightening the impact of many of these factors.

See “COVID-19 Update” below and “Special Note Regarding Forward-Looking Statements and Projections” in “Part I” preceding “Item 1 - Business” for additional information.

Wendy’s long-term growth opportunities include investing in accelerated global growth through (1) building our breakfast daypart, (2) accelerating our implementation of consumer-facing digital platforms and technologies and (3) expanding the Company’s footprint through targeted U.S.

restaurant expansion and accelerated international restaurant expansion.

See “Special Note Regarding Forward-Looking Statements and Projections” in “Part I” preceding “Item 1 - Business” for additional information.

Wendy’s long-term growth opportunities include delivering accelerated global growth through (1) driving strong same-restaurant sales momentum across all dayparts, (2) accelerating our implementation of consumer-facing digital platforms and technologies and (3) expanding the Company’s footprint through global restaurant expansion.

Key Business Measures

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Cost of sales includes food and paper, restaurant labor and occupancy, advertising and other operating costs.

Cost of sales excludes certain costs that support restaurant operations that are not allocated to individual restaurants, which are included in “General and administrative.” Cost of sales also excludes depreciation and amortization expense and impairment of long-lived assets.

Therefore, as restaurant margin as presented excludes certain costs as described above, its usefulness may be limited and may not be comparable to other similarly titled measures of other companies in our industry.

Restaurant margin is influenced by factors such as price increases, the effectiveness of our advertising and marketing initiatives, featured products, product mix, fluctuations in food and labor costs, restaurant openings, remodels and closures and the level of our fixed and semi-variable costs.

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The Company’s consolidated financial statements do not include sales by franchised restaurants to their customers.

The Company’s royalty and advertising

funds revenues are computed as percentages of sales made by Wendy’s franchisees.

The Company’s royalty and advertising funds revenues are computed as percentages of sales made by Wendy’s franchisees.

As a result, sales by Wendy’s franchisees have a direct effect on the Company’s royalty and advertising funds revenues and profitability.

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same-restaurant sales increased 3.9% and international same-restaurant sales increased 12.4% compared to 2021.

• Company-operated restaurant margin was 16.7% in 2021, an increase of 180 basis points compared to 2020;

• Net income increased 70.1% to $200.4 million in 2021 compared to $117.8 million in 2020.

COVID-19 Update

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;

however, we cannot predict the ultimate duration, scope or severity of the COVID-19 pandemic or its ultimate impact on our results of operations, financial condition and prospects.

In response to the pandemic, in March 2020, Wendy’s updated its brand standard to include the closure of all dining rooms except where there were specific needs, or a drive-thru or pick-up window option was not available, subject to applicable

federal, state and local requirements.

Substantially all Wendy’s restaurants continued to offer drive-thru and delivery service to our customers.

During the second quarter of 2020, the Company began to implement its restaurant and dining room reopening process through a phased approach in accordance with federal, state and local requirements, with customer and team member safety as its top priority.

Dining rooms have been re-opening at each restaurant owner’s discretion, subject to applicable regulatory restrictions.

During 2021, restaurant operations have been impacted by increased pressure on labor availability brought about by both the COVID-19 pandemic and other macroeconomic factors;

however, as of January 2, 2022, substantially all restaurants were open across the Wendy’s system, and the majority of restaurants had dining rooms open.

Global systemwide same-restaurant sales during 2021 increased 10.0%, in part due to a significant increase in customer count compared with the adversely impacted fiscal months of March through June 2020.

Wendy’s long-term growth opportunities include investing in accelerated global growth, which includes building upon our breakfast daypart.

Since the launch of breakfast across the U.S.

system in March 2020, systemwide sales have benefited from this new daypart, with breakfast representing approximately 7.3% of U.S.

systemwide sales during 2021 and 7.8% during the fourth quarter of 2021.

The Company funded $25.0 million of incremental advertising to support the breakfast daypart during 2021, which continued to drive trial and acceleration of the Company’s breakfast offering.

The Company recently announced plans to launch breakfast in Canada in the second quarter of 2022, which will increase the percentage of global systemwide restaurants serving breakfast to approximately 95%.

On a two-year basis, global same-restaurant sales increased 14.9%;

• Global Company-operated restaurant margin was 13.8% in 2022, a decrease of 290 basis points compared to 2021;

• Net income decreased 11.5% to $177.4 million in 2022 compared to $200.4 million in 2021.

Global Same-Restaurant Sales

Wendy’s long-term growth opportunities include driving strong same-restaurant sales momentum across all dayparts through our ownable core products, exciting menu innovation, compelling value offerings and improvements in speed and consistency in our restaurants.

Global same-restaurant sales increased 4.9% during 2022.

Wendy’s long-term growth opportunities include accelerated implementation of consumer-facing digital platforms and technologies.

The Company has invested significant resources to focus on consumer-facing technology, including activating mobile ordering via Wendy’s mobile app, launching the Wendy’s Rewards loyalty program and establishing delivery agreements with third-party vendors.

The Company’s digital business continues to grow and represented approximately 8.5% of global systemwide sales during 2021, with the fourth quarter of 2021 reaching approximately 9.5%.

Over the past several years, the Company has invested significant resources to focus on consumer-facing

technology, including activating mobile ordering via Wendy’s mobile app, launching the Wendy’s Rewards loyalty program in the U.S.

and Canada and establishing delivery agreements with third-party vendors.

The Company is also partnering with key technology providers to help execute our digital, restaurant technology and enterprise technology initiatives and support our technology innovation and growth.

The Company’s digital business represented approximately 10.3% of global systemwide sales during 2022.

New Restaurant Development

Wendy’s long-term growth opportunities include expanding the Company’s footprint through targeted U.S.

restaurant expansion and accelerated international restaurant expansion.

To promote new restaurant development, the Company has provided franchisees with certain incentive programs for qualifying new restaurants, including technical assistance fee waivers and reductions in royalty and national advertising payments.

Wendy’s long-term growth opportunities include expanding the Company’s footprint through global restaurant expansion.

To promote new restaurant development, the Company has provided franchisees with certain incentive programs for qualifying new restaurants.

In February 2023, the Company announced a new restaurant development incentive program in the U.S.

and Canada that provides for waivers of royalty, national advertising and technical assistance fees for up to the first three years of operation for qualifying new restaurants.

In addition, the Company has development agreements in place with a number of franchisees that contractually obligate such franchisees to open additional Wendy’s restaurants over a specified timeframe.

During 2022, the Company and its franchisees added 146 net new restaurants across the Wendy’s system.

The Company expects to reach 8,500 to 9,000 systemwide restaurants by the end of 2025.

REEF Kitchens Development Commitment

On August 11, 2021, the Company announced a development commitment by REEF Kitchens (“REEF”) to open and operate 700 delivery kitchens over a five-year period across the U.S., Canada and the U.K.

Strategic Build to Suit Development Fund

On August 11, 2021, the Company announced the creation o f a $100.0 million strategic build to suit development fund to drive additional new restaurant growth that is being funded by the additional cash that was obtained as part of the Company’s debt refinancing transaction completed in June 2021.

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

System Optimization Initiative

The Company’s system optimization initiative includes a shift from Company-operated restaurants to franchised restaurants over time, through acquisitions and dispositions, as well as facilitating Franchise Flips.

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

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 2021, the Company completed the sale of 47 Company-operated restaurants in New York (including Manhattan) to franchisees, resulting in net gains totaling $30.8 million.

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

See Note 4 of the Financial Statements and Supplementary Data contained in Item 8 herein for further information on the dispositions.

In addition, during 2021, the Company completed a transaction to acquire 93 franchise-operated restaurants in Florida for $127.9 million.

See Note 3 of the Financial Statements and Supplementary Data contained in Item 8 herein for further information on the acquisition.

Debt Refinancing

In June 2021, the Company completed a refinancing transaction under which the Company issued fixed rate senior secured notes in the following 2021-1 series:

Class A-2-I with an interest rate of 2.370% and initial principal amount of $450.0 million and Class A-2-II with an interest rate of 2.775% and initial principal amount of $650.0 million (collectively, the “Series 2021-1 Class A-2 Notes”).

A portion of the net proceeds from the sale of the Series 2021-1 Class A-2 Notes were used to repay in full the Company’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 Company 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”), which allows for the drawing of up to $300.0 million 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 2021.

The Series 2021-1 Class A-1 Notes replaced the Company’s $150.0 million Series 2019-1 Class A-1 Notes and $100.0 million Series 2020-1 Class A-1 Notes, which were cancelled on the closing date.

As a result of the refinancing transaction, the Company incurred a loss on the early extinguishment of debt of $17.9 million, which was comprised of a specified make-whole payment of $9.6 million and the write-off of certain unamortized deferred financing costs of $8.3 million.

See Note 12 of the Financial Statements and Supplementary Data contained in Item 8 herein for further information on the Company’s debt refinancing transaction.

Organizational Redesign

On February 16, 2023, the Board of Directors approved a plan to redesign the Company’s organizational structure to better support the execution of the Company’s long-term growth strategy by maximizing organizational efficiency and streamlining decision making.

As a result of the redesign, the Company expects to hold its general and administrative expense in 2023 and 2024 relatively flat compared with 2022.

The Company expects to incur total costs of approximately $11 million to $13 million related to these savings, of which approximately $9 million to $11 million will be cash expenditures.

The cash expenditures are expected to continue into 2025, with approximately two-thirds of the total cash expenditures occurring in 2023.

Costs related to the plan are recorded to “Reorganization and realignment costs.” The total costs expected to be incurred are comprised of (1) severance and related employee costs of approximately $8 million, (2) recruitment and relocation costs of approximately $1 million, (3) third-party and other costs of approximately $1 million and (4) share-based compensation of approximately $2 million.

The Company expects costs to be recognized during 2023 and continue into 2026, with approximately three-fourths to be recognized during 2023.

Debt Financing

On April 1, 2022, the Company completed a debt financing transaction under which the Company issued fixed rate senior secured notes in the following 2022-1 series:

Class A-2-I with an interest rate of 4.236% and initial principal amount of $100.0 million (the “Class A-2-I Notes”) and Class A-2-II with an interest rate of 4.535% and initial principal amount of $400.0 million (the “Class A-2-II Notes”).

The anticipated repayment dates of the Class A-2-I Notes and the Class A-2-II Notes will be March 2029 and March 2032, respectively.

See Note 12 of the Financial Statements and Supplementary Data contained in Item 8 herein for further information on the Company’s debt financing transaction.

This section of this Form 10-K generally discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021.

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Results of Operations

The tables included throughout this Results of Operations section set forth in millions (except as otherwise indicated) the Company’s consolidated results of operations for the years ended January 2, 2022, January 3, 2021 and December 29, 2019.

Except as noted below, the Company’s consolidated results of operations described below includes the benefit of the 53 rd week in 2020.

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General and administrative 255.0 12.0 243.0 36.1 206.9

Depreciation and amortization 125.5 (7.3) 132.8 1.1 131.7

Depreciation and amortization (exclusive of amortization of cloud computing arrangements shown separately below) 133.4 7.9 125.5 (7.3) 132.8

Amortization of cloud computing arrangements 2.4 2.4 — — —

System optimization gains, net (6.8) 26.7 (33.5) (30.4) (3.1)

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2022 % of Sales 2021 % of Sales 2020 % of Sales

Restaurant margin $ 122.4 16.7 % $ 107.9 14.9 % $ 110.0 15.5 %

Company-operated restaurant margin:

$ 125.9 14.3 % $ 124.4 17.0 % $ 108.9 15.1 %

Global 123.4 13.8 % 122.4 16.7 % 107.9 14.9 %

The table below presents certain of the Company’s key business measures, which are defined and further discussed in the “Executive Overview” section included herein.

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systemwide sales increased 8.6% and 4.8%, respectively, and international systemwide sales increased 20.7% and decreased 5.5%, respectively, on a constant currency basis.

2020 systemwide sales growth percentages included a positive impact of approximately 2% for the 53 rd week in 2020.

systemwide sales increased 5.3% and 8.6%, respectively, and international systemwide sales increased 19.2% and 20.7%, respectively, on a constant currency basis.

The table below presents details regarding the change in restaurant counts of the Wendy’s system from 2020 to 2022.

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Restaurant count:

Restaurant count at December 29, 2019

357 5,495 — 936 6,788

Opened 7 91 — 49 147

Closed (a) (2) (67) — (38) (107)

Net (sold to) purchased by franchisees (1) 1 — — —

Restaurant count at January 3, 2021

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Opened 7 116 5 82 210

Closed (a) (8) (58) — (23) (89)

Closed (8) (58) — (23) (89)

Net purchased from (sold by) franchisees 43 (43) — — —

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403 5,535 5 1,006 6,949

Opened 7 132 7 130 276

Closed (7) (76) — (47) (130)

Restaurant count at January 1, 2023

403 5,591 12 1,089 7,095

(a) Excludes restaurants temporarily closed due to the impact of the COVID-19 pandemic.

Sales 2022 2021 2020

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Sales $ 896.6 $ 162.5 $ 734.1 $ 11.3 $ 722.8

The increase in sales during 2021 was primarily due to (1) an 11.9% increase in Company-operated same-restaurant sales, (2) net new restaurant development and (3) the Company’s acquisition of 93 franchise-operated restaurants in Florida during the fourth quarter of 2021.

These increases were partially offset by (1) the impact of the sale of 47 Company-operated restaurants in New York during the second quarter of 2021 and (2) Company-operated sales during the 53 rd week of 2020 of approximately $13.7 million.

Company-operated same-restaurant sales increased due to (1) higher average check and (2) an increase in customer count, reflecting the positive impact from the breakfast daypart and the prior year impact of the COVID-19 pandemic.

Company-operated same-restaurant sales during 2021 benefited from government stimulus payments to consumers during the first quarter of 2021.

The increase in sales during 2022 was primarily due to (1) the Company’s acquisition of 93 franchise-operated restaurants in Florida during the fourth quarter of 2021 of $162.7 million, (2) a 4.4% increase in Company-operated same-restaurant sales of $27.9 million and (3) net new restaurant development of $11.4 million.

The increase in sales during 2022 was partially offset by the sale of 47 Company-operated restaurants in New York during the second quarter of 2021 of $42.9 million.

Company-operated same-restaurant sales increased due to higher average check, partially offset by a decrease in customer count.

Company-operated same-restaurant sales during 2021 benefited from government stimulus payments to consumers during the first quarter of 2021, which did not recur in 2022.

Franchise Royalty Revenue and Fees 2022 2021 2020

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$ 558.2 $ 21.5 $ 536.7 $ 92.0 $ 444.7

The increase in franchise royalty revenue during 2021 was primarily due to (1) a 9.9% increase in global franchise same-restaurant sales and (2) a net increase in the number of franchise restaurants in operation during 2021 compared to 2020.

These increases were partially offset by royalties earned during the 53 rd week of 2020 of approximately $7.8 million.

Franchise same-restaurant sales increased due to (1) higher average check and (2) an increase in customer count, reflecting the positive impact from the breakfast daypart and the prior year impact of the COVID-19 pandemic.

Franchise same-restaurant sales during 2021 benefited from government stimulus payments to consumers during the first quarter of 2021.

The increase in franchise fees during 2021 was primarily due to (1) an increase in fees for providing information technology services to franchisees and (2) the accelerated recognition of franchise agreement revenue as a result of franchisee-to-franchisee restaurant transfers.

Franchise royalty revenue during 2022 increased $24.8 million, of which (1) $21.8 million was due to a 4.9% increase in global franchise same-restaurant sales and (2) $3.1 million was due to a net increase in the number of franchise restaurants in operation during 2022 compared to 2021.

Franchise same-restaurant sales during 2022 increased due to higher average check, partially offset by a decrease in customer count.

Franchise same-restaurant sales during 2021 benefited from government stimulus payments to consumers during the first quarter of 2021, which did not recur in 2022.

The decrease in franchise fees during 2022 was primarily due to the accelerated recognition of franchise agreement revenue in the prior year as a result of franchisee-to-franchisee restaurant transfers of $8.3 million, partially offset by higher fees for providing information technology services to franchisees of $5.8 million.

This increase in fees for providing information technology services during 2022 reflects the one-month waiver of technology fees during the first quarter of 2021.

Franchise Rental Income 2022 2021 2020

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Franchise rental income $ 234.5 $ (2.2) $ 236.7 $ 4.1 $ 232.6

The increase in franchise rental income during 2021 was primarily due to (1) an increase in percent rent, reflecting higher systemwide sales compared with 2020, and (2) the impact of the sale of 47 Company-operated restaurants in New York during the second quarter of 2021.

These increases were partially offset by the impact of terminating existing leases where the Company was lessor in connection with the Company’s acquisition of franchise-operated restaurants in Florida during the fourth quarter of 2021.

The decrease in franchise rental income during 2022 was primarily due to the impact of terminating existing leases where the Company was lessor of $5.2 million, primarily in connection with the Company’s acquisition of franchise-operated restaurants in Florida during the fourth quarter of 2021.

The decrease in franchise rental income was partially offset by (1) the impact of the sale of Company-operated restaurants in New York during the second quarter of 2021 of $1.5 million and (2) assigning certain leases to franchisees of $1.5 million.

Advertising Funds Revenue 2022 2021 2020

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Advertising funds revenue $ 406.2 $ 16.7 $ 389.5 $ 55.8 $ 333.7

The Company maintains two national advertising funds established to collect and administer funds contributed for use in advertising and promotional programs for Company-operated and franchised restaurants in the U.S.

Franchisees make contributions to the national advertising funds based on a percentage of sales of the franchised restaurants.

The increase in advertising funds revenue during 2022 was primarily due to an increase in franchise same-restaurant sales in the U.S.

and Canada and (2) the prior year abatement of national advertising fund contributions on breakfast sales.

These increases were partially offset by revenues earned during the 53 rd week of 2020 of approximately $6.4 million.

Cost of Sales, as a Percent of Sales 2022 2021 2020

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86.2 % 2.9 % 83.3 % (1.8) % 85.1 %

The decrease in cost of sales, as a percent of sales, during 2021 was primarily due to (1) higher average check, (2) an increase in customer count, reflecting the prior year impact of the COVID-19 pandemic, and (3) incremental recognition pay during April and May of 2020.

These impacts were partially offset by (1) an increase in restaurant labor rates and (2) higher commodity costs.

The increase in cost of sales, as a percent of sales, during 2022 was primarily due to (1) higher commodity costs, (2) an increase in restaurant labor rates, (3) a decrease in customer count and (4) the impact of the Company’s investments to support the entry into the U.K.

These impacts were partially offset by higher average check.

Franchise Support and Other Costs 2022 2021 2020

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Franchise support and other costs $ 46.7 $ 3.8 $ 42.9 $ 16.4 $ 26.5

The increase in franchise support and other costs during 2021 was primarily due to an increase in costs incurred to provide information technology and other services to franchisees, partially offset by investments made in 2020 to support U.S.

franchisees in preparation of the national launch of breakfast in March 2020.

The increase in franchise support and other costs during 2022 was primarily due to an increase in costs incurred to provide information technology and other services to franchisees.

Franchise Rental Expense 2022 2021 2020

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Franchise rental expense $ 124.1 $ (8.3) $ 132.4 $ 6.8 $ 125.6

The increase in franchise rental expense during 2021 was primarily due to (1) an increase in percent rent, reflecting higher systemwide sales compared with 2020 and (2) the impact of the sale of 47 Company-operated restaurants in New York to franchisees during the second quarter of 2021.

The decrease in franchise rental expense during 2022 was primarily due to (1) the impact of assigning certain leases to franchisees and (2) the impact of the Company’s acquisition of franchise-operated restaurants in Florida during the fourth quarter of 2021.

Advertising Funds Expense 2022 2021 2020

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Advertising funds expense $ 430.8 $ 19.0 $ 411.8 $ 66.4 $ 345.4

The increase in advertising funds expense during 2021 was primarily due to the same factors as described above for “Advertising Funds Revenue.” Advertising funds expense also increased during 2021 due to the Company’s funding of $25.0 million of incremental advertising to support the breakfast daypart, compared with the Company’s funding of $14.6 million in 2020.

The increase in advertising funds expense during 2022 was primarily due to (1) an increase in franchise same-restaurant sales in the U.S.

and Canada and (2) timing of promotions.

These increases were partially offset by a decrease in the Company’s funding of incremental advertising.

General and Administrative 2022 2021 2020

Amount Change Amount Change Amount

Incentive compensation $ 46.5 $ 23.5 $ 23.0 $ (3.0) $ 26.0

Professional fees 41.0 8.7 32.3 12.8 19.5

Share-based compensation 22.0 3.9 18.1 0.8 17.3

Amount Change Amount (a) Change Amount (a)

Employee compensation and benefits $ 128.5 $ 13.4 $ 115.1 $ (1.5) $ 116.6

Professional services 61.8 8.5 53.3 11.3 42.0

Travel-related expenses 11.5 6.0 5.5 0.3 5.2

Share-based compensation 24.5 2.5 22.0 3.9 18.1

Incentive compensation 25.0 (21.5) 46.5 23.5 23.0

Other, net 3.7 3.1 0.6 (1.4) 2.0

$ 255.0 $ 12.0 $ 243.0 $ 36.1 $ 206.9

The increase in general and administrative expenses during 2021 was primarily due to (1) an increase in incentive compensation accruals and higher share-based compensation, reflecting higher operating performance as compared to plan in 2021, and (2) higher professional fees, primarily as a result of costs associated with the Company’s enterprise resource planning (“ERP”) implementation.

Depreciation and Amortization 2021 2020 2019

_______________

(a) Certain reclassifications have been made to the prior year presentation to conform to the current year presentation.

The increase in general and administrative expenses during 2022 was primarily due to (1) an increase in employee compensation and benefits, reflecting investments in resources to support the Company’s development and digital organizations, (2) higher professional fees, primarily as a result of costs associated with the Company’s enterprise resource planning (“ERP”) system implementation and (3) an increase in travel-related expenses.

These increases were partially offset by a decrease in incentive compensation accruals, reflecting higher operating performance as compared to plan in 2021 versus 2022.

Depreciation and Amortization (exclusive of amortization of cloud computing arrangements shown separately below) 2022 2021 2020

Amount Change Amount Change Amount

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$ 133.4 $ 7.9 $ 125.5 $ (7.3) $ 132.8

The decrease in depreciation and amortization during 2021 was primarily due to (1) assets becoming fully depreciated and (2) the impact of a prior year change in useful lives for certain asset categories.

These decreases were partially offset by an increase in depreciation and amortization for technology investments.

The increase in depreciation and amortization during 2022 was primarily due to depreciation and amortization on assets acquired from a franchisee in Florida during the fourth quarter of 2021.

Amortization of Cloud Computing Arrangements 2022 2021 2020

Amount Change Amount Change Amount

Amortization of cloud computing arrangements $ 2.4 $ 2.4 $ — $ — $ —

Amortization of cloud computing arrangements primarily represents amortization of assets associated with the Company’s ERP system implementation completed in 2022.

System Optimization Gains, Net 2022 2021 2020

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System optimization gains, net $ (6.8) $ 26.7 $ (33.5) $ (30.4) $ (3.1)

System optimization gains, net during 2022 were primarily comprised of gains on the sale of surplus and other properties.

System optimization gains, net during 2021 were primarily comprised of a gain on the sale of 47 Company-operated restaurants in New York.

See Note 4 of the Financial Statements and Supplementary Data contained in Item 8 herein for further discussion.

System optimization gains, net during 2020 were primarily comprised of gains on the sale of surplus and other properties.

Reorganization and Realignment Costs 2022 2021 2020

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$ 0.7 $ (7.8) $ 8.5 $ (7.5) $ 16.0

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 included contract terminations, including the closure of certain field offices.

During 2021, the Company recognized costs associated with the Operations and Field Realignment Plan totaling $1.7 million, which primarily included third-party and other costs.

During 2020, the Company recognized costs associated with the Operations and Field Realignment Plan totaling $3.8 million, which included severance and related employee costs of $3.1 million and share-based compensation of $0.6 million.

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

In December 2019, the Company’s 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”).

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.

During 2020, the Company recognized costs associated with the IT Realignment Plan totaling $7.3 million, which included third-party and other costs of $5.2 million, recruitment and relocation costs of $1.3 million and severance and related employee costs of $0.8 million.

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

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

Additionally, in May 2019, the Company announced changes to its management and operating structure.

G&A realignment costs for 2020 were primarily comprised of share-based compensation.

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

As part of the Company’s system optimization initiative, the Company expects to continue to optimize the Wendy’s system through strategic restaurant acquisitions and dispositions, as well as by facilitating Franchise Flips.

During 2021, the Company recognized costs associated with its system optimization initiative totaling $6.9 million, which were primarily comprised of the write-off of certain lease assets, lease termination fees and transaction fees associated with the NPC bankruptcy sale process, as well as professional fees and transaction fees associated with the Company’s acquisition of 93 franchise-operated restaurants in Florida during the fourth quarter of 2021.

During 2020, the Company recognized costs associated with its system optimization initiative totaling $4.3 million, which primarily included professional fees related to the NPC bankruptcy sale process.

During 2022, the Company recognized costs associated with its system optimization initiative totaling $0.6 million, 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 2021, the Company recognized costs totaling $6.9 million, which were primarily comprised of the write-off of certain lease assets, lease termination fees and transaction fees associated with the bankruptcy sale process of NPC Quality Burgers, Inc.

(“NPC”), as well as professional fees and transaction fees associated with the Company’s acquisition of 93 franchise-operated restaurants in Florida during the fourth quarter of 2021.

The Company expects to recognize a gain of approximately $0.7 million, primarily related to the write-off of certain NPC-related lease liabilities upon final termination of the leases.

See Note 3 of the Financial Statements and Supplementary Data contained in Item 8 herein for further information regarding the NPC bankruptcy sale process.

Costs incurred under the Company’s other reorganization and realignment plans were not material during 2022 and 2021.

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

See Note 5 of the Financial Statements and Supplementary Data contained in Item 8 herein for further information regarding the Company’s reorganization and realignment plans.

Impairment of Long-Lived Assets 2022 2021 2020

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Impairment of long-lived assets $ 6.4 $ 4.1 $ 2.3 $ (5.7) $ 8.0

The change in impairment charges during 2021 was primarily driven by the deterioration in operating performance of certain Company-operated restaurants in 2020 as a result of the COVID-19 pandemic.

The increase in impairment charges during 2022 was primarily driven by the deterioration in operating performance of certain Company-operated restaurants.

Other Operating Income, Net 2022 2021 2020

Amount Change Amount Change Amount

Gains on sales-type leases $ (4.2) $ (2.2) $ (2.0) $ 0.3 $ (2.3)

Gain from insurance recoveries $ (8.6) $ (8.6) $ — $ — —

Lease buyout (2.8) (3.8) 1.0 1.6 (0.6)

Equity in earnings in joint ventures, net (9.4) 1.8 (11.2) (5.1) (6.1)

Gains on sales-type leases (3.0) 1.2 (4.2) (2.2) (2.0)

Other, net 0.1 0.3 (0.2) (0.4) 0.2

$ (23.7) $ (9.1) $ (14.6) $ (6.1) $ (8.5)

The increase in other operating income, net during 2021 was primarily due to (1) an increase in the equity in earnings from our TimWen joint venture, which included a gain on the sale of a parcel of land during 2021, and (2) gains on new and modified sales-type leases.

The increase in other operating income, net during 2022 was primarily due to (1) a gain from insurance recoveries and (2) lease buyout activity.

These impacts were partially offset by a decrease in the equity in earnings from our TimWen joint venture, which included a gain on the sale of a parcel of land during 2021.

Interest Expense, Net 2022 2021 2020

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Interest expense, net $ 122.3 $ 13.1 $ 109.2 $ (8.5) $ 117.7

Interest expense, net decreased during 2021 primarily due to (1) the impact of completing the refinancing of a portion of the Company’s securitized financing facility in the second quarter of 2021 and (2) the impact of the 53 rd week in 2020 of approximately $1.9 million.

Interest expense, net increased during 2022 primarily due to the impact of completing a debt financing transaction under the Company’s securitized financing facility in the first quarter of 2022, partially offset by the impact of completing the refinancing of a portion of the Company’s securitized financing facility in the second quarter of 2021.

Loss on Early Extinguishment of Debt 2022 2021 2020

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Loss on early extinguishment of debt $ — $ (17.9) $ 17.9 $ 17.9 $ —

During the second quarter of 2021, in connection with the refinancing of a portion of the Company’s securitized financing facility, the Company incurred a loss on the early extinguishment of debt as a result of repaying the outstanding Series 2015-1 Class A-2-III Notes and Series 2018-1 Class A-2-I Notes with the proceeds from the issuance of its Series 2021-1 Class A-2 Notes.

During the second quarter of 2021, in connection with the refinancing of a portion of the Company’s securitized financing facility, the Company incurred a loss on the early extinguishment of debt as a result of repaying the outstanding 2015-1 Class A-2-III Notes and 2018-1 Class A-2-I Notes with the proceeds from the issuance of its 2021-1 Class A-2 Notes.

The loss on the early extinguishment of debt of $17.9 million was comprised of a specified make-whole payment of $9.6 million and the write-off of certain unamortized deferred financing costs of $8.3 million.

Investment Income (Loss), Net 2022 2021 2020

Amount Change Amount Change Amount

Investment income (loss), net $ 2.1 $ 2.1 $ — $ 0.2 $ (0.2)

During 2022, the Company recognized a gain of $2.1 million on an investment in equity securities as a result of an observable price change.

Other Income, Net 2022 2021 2020

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Other income, net $ 10.4 $ 9.7 $ 0.7 $ (0.7) $ 1.4

Other income, net decreased during 2021 primarily due to fluctuations in interest income earned on our cash equivalents.

The increase in other income, net during 2022 was primarily due to interest income earned on our cash equivalents, which increased as a result of cash received from our debt financing transaction under the Company’s securitized financing facility in the first quarter of 2022.

Provision for Income Taxes 2022 2021 2020

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Effective tax rate on income 27.2 % 10.5 % 16.7 % (6.2) % 22.9 %

The increase in the provision for income taxes during 2021 was primarily due to higher income before income taxes in 2021, partially offset by (1) the tax benefit for changes in state deferred income taxes and (2) an increase in the tax benefit from share-based compensation.

The 2021 tax benefit for changes in state deferred income taxes was primarily due to a 2021 change in tax law, which resulted in a one-time release of a previously recorded valuation allowance against our deferred tax assets.

The decrease in the effective tax rate in 2021 was primarily due to the tax benefit for changes in state deferred income taxes described above and a decrease in the tax effect of our foreign operations.

The increase in the provision for income taxes and effective tax rate during 2022 was primarily due to (1) an increase in state income taxes, including an increase in state deferred income taxes, (2) a decrease in the tax benefit from share-based compensation and (3) an increase in tax on our foreign operations.

The increase in state deferred income taxes from 2021 to 2022 was primarily due to a 2021 change in tax law, which resulted in a one-time release of a previously recorded valuation allowance against our state deferred tax assets.

Segment Information

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The increase in Wendy’s U.S.

revenues during 2021 was primarily due to (1) an increase in systemwide same-restaurant sales, (2) higher franchise fees, reflecting an increase in fees for providing information technology services to franchisees, (3) net new restaurant development and (4) the Company’s acquisition of 93 franchise-operated restaurants in Florida during the fourth quarter of 2021.

Same-restaurant sales increased during 2021 primarily due to (1) higher average check and (2) an increase in customer count, reflecting the positive impact from the breakfast daypart and the prior year impact of the COVID-19 pandemic.

These increases were partially offset by (1) the impact of the sale of 47 Company-operated restaurants in New York during the second quarter of 2021 and (2) sales and royalty revenue during the 53 rd week of 2020 of approximately $13.7 million and $7.0 million, respectively.

revenues during 2022 was primarily due to (1) the Company’s acquisition of 93 franchise-operated restaurants in Florida during the fourth quarter of 2021 and (2) an increase in same-restaurant sales.

These increases were partially offset by the sale of 47 Company-operated restaurants in New York during the second quarter of 2021.

Same-restaurant sales increased during 2022 primarily due to higher average check, partially offset by a decrease in customer count.

The increase in Wendy’s U.S.

segment profit during 2021 was primarily due to (1) higher revenues and (2) lower cost of sales, as a percent of sales, for Company-operated restaurants driven by the same factors as described above for “Cost of Sales, as a Percent of Sales.” These changes were partially offset by (1) higher franchise support and other costs, (2) higher advertising fund expense, reflecting the Company’s funding of $25.0 million of incremental advertising to support the breakfast daypart, and (3) higher general and administrative expenses.

segment profit during 2022 was primarily due to (1) higher revenues and (2) a decrease in the Company’s funding of incremental advertising.

These increases were partially offset by higher cost of sales, as a percent of sales for Company-operated restaurants driven by the same factors as described above for “Cost of Sales, as a Percent of Sales” (excluding the impact of the U.K.

Wendy’s International

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Segment profit $ 30.4 $ 3.0 $ 27.4 $ 7.3 $ 20.1

The increase in Wendy’s International revenues during 2021 was primarily due to (1) an increase in same-restaurant sales, (2) the opening of Company-operated restaurants in the U.K and (3) higher franchise fees, reflecting an increase in fees for providing information technology services to franchisees.

Same-restaurant sales increased during 2021 due to (1) an increase in customer count, reflecting the prior year impact of the COVID-19 pandemic, and (2) higher average check.

The increase in Wendy’s International segment profit during 2021 was primarily due to higher revenues, partially offset by (1) higher general and administrative expenses and (2) higher franchise support and other costs.

The increase in Wendy’s International revenues during 2022 was primarily due to (1) the opening of Company-operated restaurants in the U.K.

beginning in the second quarter of 2021 and (2) an increase in franchise same-restaurant sales.

Franchise same-restaurant sales increased during 2022 due to (1) an increase in customer count and (2) higher average check.

The increase in Wendy’s International segment profit during 2022 was primarily due to higher revenues.

This increase was partially offset by (1) higher advertising fund expense, reflecting the Company’s funding of incremental advertising to support the launch of breakfast in Canada in May 2022, and (2) the Company’s investments to support the entry into the U.K.

Global Real Estate & Development

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Segment profit $ 108.7 $ 2.6 $ 106.1 $ 5.4 $ 100.7

The increase in Global Real Estate & Development revenues during 2021 was primarily due to (1) higher franchise rental income (see “Franchise Rental Income” above for further information) and (2) the accelerated recognition of franchise agreement revenue as a result of franchisee-to-franchisee restaurant transfers.

The increase in Global Real Estate & Development segment profit during 2021 was primarily due to (1) an increase in the equity in earnings from the TimWen joint venture and (2) gains on new and modified sales-type leases.

These increases were partially offset by a decrease in net rental income, reflecting the impact of terminating existing leases where the Company was lessor in connection with the Company’s acquisition of franchise-operated restaurants in Florida during the fourth quarter of 2021.

The decrease in Global Real Estate & Development revenues during 2022 was primarily due to (1) the accelerated recognition of franchise agreement revenue in the prior year as a result of franchisee-to-franchisee restaurant transfers and (2) lower franchise rental income.

See “Franchise Rental Income” above for further information.

The increase in Global Real Estate & Development segment profit during 2022 was primarily due to a decrease in franchise rental expense, partially offset by lower revenues.

See “Franchise Rental Expense” above for further information.

Consolidated Outlook for 2023

We expect sales at our Company-operated restaurants to be favorably impacted primarily by (1) a net increase in the number of Company-operated restaurants, including the Company’s acquisition of 93 franchise-operated restaurants in Florida during the fourth quarter of 2021 and the Company’s continued expansion in the U.K., (2) continued growth of our breakfast daypart, (3) our “Fast Food Done Right” strategy, which includes continuing core menu improvements, product innovation and strategic price increases on our menu items to partially offset commodity and labor inflation pressures, and (4) continued growth of our digital business.

We expect these favorable impacts to be partially offset by lapping the sale of 47 Company-operated restaurants in New York during the second quarter of 2021.

We expect sales at our Company-operated restaurants to be favorably impacted primarily by (1) a net increase in the number of Company-operated restaurants, (2) continued growth of our breakfast daypart, (3) our “Fast Food Done Right” strategy, which includes continuing core menu improvements, product innovation and strategic price increases on our menu items to partially offset commodity and labor inflation pressures, (4) focused execution of operational excellence and (5) continued growth of our digital business.

Franchise Royalty Revenue and Fees

We expect sales at franchised restaurants to generally benefit from many of the factors described above under “Sales.” In addition, we expect franchise royalty revenue and fees to be favorably impacted by (1) a net increase in the number of franchise restaurants in operation due to net new restaurant development, (2) the sale of 47 Company-operated restaurants in New York during the second quarter of 2021 and (3) the Company’s recently announced plans to launch breakfast in Canada in the second quarter of 2022.

We expect these favorable impacts to be partially offset by the Company’s acquisition of 93 franchise-owned restaurants in Florida during the fourth quarter of 2021.

We expect sales at franchised restaurants to generally benefit from many of the factors described above under “Sales.” In addition, we expect franchise royalty revenue and fees to be favorably impacted by (1) a net increase in the number of franchise restaurants in operation due to net new restaurant development and (2) a full year of operating in the breakfast daypart across the Canadian system after the launch of breakfast in Canada in May 2022.

Cost of Sales

We expect cost of sales, as a percent of sales to be negatively impacted by (1) higher restaurant labor rates and (2) an increase in commodity costs.

We expect cost of sales, as a percent of sales to be favorably impacted by many of the same factors described above under “Sales,” and to also benefit from productivity initiatives.

Advertising Funds Revenue and Expense

We expect advertising funds expense to exceed advertising funds revenue due to the Company’s plans to fund $16.0 million of incremental advertising in 2022 to continue to drive growth in our breakfast daypart.

We expect cost of sales, as a percent of sales to be negatively impacted by (1) an increase in commodity costs and (2) higher restaurant labor rates.

General and Administrative

We expect general and administrative expenses to be higher primarily due to increases in (1) IT-related costs, primarily related to our ERP implementation, (2) IT and development headcount investments and (3) travel-related expenses.

We expect these increases to be partially offset by lower incentive compensation.

We expect general and administrative expenses to be relatively flat, despite elevated inflationary pressures, primarily as a result of the Company’s organizational redesign.

See “Executive Overview” above for further information regarding expected costs to be incurred under the plan.

Reorganization and Realignment Costs

We expect reorganization and realignment costs to be elevated as a result of the Company’s organizational redesign announced in January 2023.

See “Executive Overview” above for further information regarding expected costs to be incurred under the plan.

Liquidity and Capital Resources

Our primary sources of liquidity and capital resources are cash flows from operations and borrowings under our securitized financing facility.

Our principal uses of cash are operating expenses, capital expenditures, repurchases of common stock and dividends to stockholders.

Our principal uses of cash are operating expenses, capital expenditures, repurchases of common stock, dividends to stockholders and repurchases of debt.

Cash Flows from Operating, Investing and Financing Activities

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Effect of exchange rate changes on cash (6.0) (6.3) 0.3 (1.0) 1.3

Net (decrease) increase in cash, cash equivalents and restricted cash $ (51.3) $ (110.8) $ 59.5 $ 187.3 $ (127.8)

Net increase (decrease) in cash, cash equivalents and restricted cash $ 464.8 $ 516.1 $ (51.3) $ (110.8) $ 59.5

Operating Activities

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Cash provided by operating activities was $259.9 million and $345.8 million in 2022 and 2021, respectively.

The increase was primarily due to (1) higher net income, adjusted for non-cash expenses, (2) a cash payment of $24.7 million related to the settlement of the financial institutions class action in January 2020, (3) the timing of the collection of royalty receivables and (4) a decrease in payments for incentive compensation for the 2020 fiscal year paid in 2021.

These increases were partially offset by (1) the timing of payments for marketing expenses of the national advertising funds, (2) an increase in cash paid for income taxes and (3) cash paid for cloud computing arrangements, primarily related to the Company’s ERP implementation.

The change was primarily due to (1) the timing of payments for marketing expenses of the national advertising funds, (2) an increase in payments for incentive compensation for the 2021 fiscal year paid in 2022 and (3) cash paid for cloud computing arrangements, primarily related to the Company’s ERP system implementation.

Investing Activities

Cash used in investing activities was $77.8 million and $154.7 million in 2022 and 2021, respectively.

The change was primarily due to (1) an increase in payments for acquisitions of $118.2 million compared to the prior year, reflecting the impact of the Company’s acquisition of 93 franchise-operated restaurants in Florida during the fourth quarter of 2021, (2) a payment for an investment in equity securities of $10.0 million during 2021 and (3) an increase in capital expenditures of $9.0 million.

These changes were partially offset by an increase in proceeds from dispositions of $49.0 million, reflecting the impact of the sale of 47 Company-operated restaurants in New York during the second quarter of 2021.

The change was primarily due to (1) a decrease in payments for acquisitions of $123.1 million, reflecting the impact of the Company’s acquisition of 93 franchise-operated restaurants in Florida during the fourth quarter of 2021 and (2) a payment for an investment in equity securities of $10.0 million during 2021.

These changes were partially offset by (1) a decrease in proceeds from dispositions of $46.9 million, reflecting the sale of 47 Company-operated restaurants in New York during the second quarter of 2021 and (2) an increase in capital expenditures of $7.6 million.

Financing Activities

Cash used in financing activities was $242.7 million and $157.9 million in 2021 and 2020, respectively.

The change was primarily due to (1) an increase in repurchases of common stock of $206.4 million and (2) an increase in dividends of $30.0 million.

These changes were partially offset by (1) a net increase in cash provided by long-term debt activities of $149.1 million, reflecting the impact of the completion of the Company’s debt refinancing transaction during the second quarter of 2021, and (2) an increase in proceeds from stock option exercises, net of payments related to tax withholding for share-based compensation, of $7.7 million.

Cash provided by (used in) financing activities was $288.7 million and $(242.7) million in 2022 and 2021, respectively.

The change was primarily due to (1) a net increase in cash provided by long-term debt activities of $354.2 million, reflecting the respective impacts of the completion of the Company’s debt financing transaction during the first quarter of 2022 and the Company’s debt refinancing transaction during the second quarter of 2021, and (2) a decrease in the repurchases of common stock of $216.6 million.

These changes were partially offset by (1) a decrease in proceeds from stock option exercises, net of payments related to tax withholding for share-based compensation, of $23.8 million and (2) an increase in dividends of $11.9 million.

Material Cash Requirements

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• capital expenditures of approximately $75.0 million to $85.0 million as discussed below in “Capital Expenditures;”

• quarterly cash dividends aggregating approximately $107.6 million as discussed below in “Dividends;” and

• stock repurchases of up to $100.0 million under our February 2022 authorization as discussed below in “Stock Repurchases.”

• quarterly cash dividends aggregating approximately $212.6 million as discussed below in “Dividends;”

• stock repurchases under the Company’s January 2023 Authorization as discussed below in “Stock Repurchases;” and

• debt repurchases of up to $75.0 million as discussed below in “Long-Term Debt, Including Current Portion.”

Based on current levels of operations, the Company expects that available cash and cash flows from operations will provide sufficient liquidity to meet operating cash requirements for the next 12 months.

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However, there can be no assurance that additional liquidity will be readily available or available on terms acceptable to us.

As previously announced, the Company is evaluating, subject to market and other conditions, a potential debt raise transaction within its securitized debt facility during 2022.

If the Company proceeds with the transaction and the transaction is completed, the Company expects to use the net proceeds from the transaction in accordance with its capital allocation policy, including investments to support the growth of the Wendy’s brand or the return of capital to stockholders through dividends and share repurchases.

Capital Expenditures

In 2022, cash capital expenditures amounted to $85.5 million.

In 2022, we expect that cash capital expenditures will amount to approximately $90.0 million to $100.0 million, principally relating to (1) the opening of new Company-operated restaurants and the reimaging of existing Company-operated restaurants, (2) technology investments, including consumer-facing digital technology, (3) restaurant equipment investments, (4) maintenance capital expenditures for Company-operated restaurants and (5) various other capital projects.

In addition to the capital expenditures noted above, the Company expects to spend approximately $30.0 million in 2022 on cloud computing arrangements (“CCA”), primarily related to the Company’s ERP implementation.

In 2023, we expect that cash capital expenditures will amount to approximately $75.0 million to $85.0 million, principally relating to (1) technology investments, including consumer-facing digital technology, (2) the opening of new Company-operated restaurants and the reimaging of existing Company-operated restaurants, (3) restaurant equipment investments, (4) maintenance capital expenditures for Company-operated restaurants and (5) various other capital projects.

In addition to the capital expenditures noted above, the Company’s cash expenditures related to cloud computing arrangements (“CCA”) amounted to $30.2 million during 2022, primarily related to the Company’s ERP system implementation.

In 2023, we expect to spend approximately $25.0 million on CCA, primarily related to the Company’s human capital management system implementation.

See Note 1 of the Financial Statements and Supplementary Data contained in Item 8 herein for further information related to our accounting policy for CCA.

On March 15, 2021, June 15, 2021, September 15, 2021 and December 15, 2021, the Company paid quarterly cash dividends per share of $.09, $.10, $.12 and $.12, respectively, aggregating $94.8 million.

On February 23, 2022, the Company announced a dividend of $0.125 per share to be paid on March 15, 2022 to stockholders of record as of March 7, 2022.

If the Company pays regular quarterly cash dividends for the remainder of 2022 at the same rate as declared in the first quarter of 2022, the Company’s total cash requirement for dividends for all of 2022 would be approximately $107.6 million based on the number of shares of its common stock outstanding at February 22, 2022.

On March 15, 2022, June 15, 2022, September 15, 2022 and December 15, 2022, the Company paid quarterly cash dividends per share of $.125, aggregating $106.8 million.

On January 13, 2023, the Company announced a dividend of $.25 per share to be paid on March 15, 2023 to stockholders of record as of March 1, 2023.

If the Company pays regular quarterly cash dividends for the remainder of 2023 at the same rate as declared in the first quarter of 2023, the Company’s total cash requirement for dividends for all of 2023 would be approximately $212.6 million based on the number of shares of its common

stock outstanding at February 21, 2023.

The Company currently intends to continue to declare and pay quarterly cash dividends;

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Stock Repurchases

In February 2020, our Board of Directors authorized a repurchase program for up to $100.0 million of our common stock through February 28, 2021, when and if market conditions warranted and to the extent legally permissible.

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

In February 2022, our Board of Directors authorized a repurchase program for up to $100.0 million of our common stock through February 28, 2023, when and if market conditions warranted and to the extent legally permissible (the “February 2022 Authorization”).

On April 1, 2022, the Company’s Board of Directors approved an increase of $150.0 million to the February 2022 Authorization, resulting in an aggregate authorization of $250.0 million that was set to expire on February 28, 2023.

During 2022, the Company repurchased 2.8 million shares under the February 2022 Authorization with an aggregate purchase price of $51.9 million, excluding commissions.

As of January 1, 2023, the Company had $198.1 million of availability remaining under the February 2022 Authorization.

In January 2023, our Board of Directors authorized a repurchase program for up to $500.0 million of our common stock through February 28, 2027, when and if market conditions warrant and to the extent legally permissible (the “January 2023 Authorization”).

In connection with the January 2023 Authorization, the remaining portion of the February 2022 Authorization was canceled.

Subsequent to January 1, 2023 through February 21, 2023, the Company repurchased 0.6 million shares under the January 2023 Authorization with an aggregate purchase price of $12.9 million, excluding commissions.

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

The Company resumed share repurchases in August 2020.

In addition, in May 2021, August 2021 and November 2021, the Board of Directors approved increases of $50.0 million, $70.0 million and $80.0 million, respectively, to the February 2020 Authorization, resulting in an aggregate authorization of $300.0 million 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 Company’s existing share repurchase program.

Under the 2021 ASR Agreement, the Company paid the financial institution an initial purchase price of $125.0 million in cash and received an initial delivery of 4.9 million shares of common stock, representing an estimated 85% of the total shares expected to be delivered under the 2021 ASR Agreement.

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In total, 5.6 million 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 2021 ASR Agreement, during 2021, the Company repurchased 6.6 million shares with an aggregate purchase price of $142.7 million, excluding commissions of $0.1 million, under the February 2020 repurchase authorization.

After taking into consideration these repurchases, with the completion of the 2021 ASR Agreement in February 2022 described above, the Company completed the February 2020 authorization.

In February 2022, our Board of Directors authorized the repurchase of up to $100.0 million of our common stock through February 28, 2023, when and if market conditions warrant and to the extent legally permissible.

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

Long-Term Debt, Including Current Portion

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No amounts were borrowed under the Class A-1 Notes during 2022.

Subsequent to January 1, 2023, Wendy’s repurchased $25.0 million in principal of its 7% debentures at par value.

We may from time to time seek to repurchase additional portions of our outstanding long-term debt, including our 7% debentures and/or our senior secured notes, through open market purchases, privately negotiated transactions or otherwise.

In February 2023, our Board of Directors authorized additional debt repurchases of up to $50.0 million through February 28, 2024, resulting in total debt repurchases of up to $75.0 million in 2023.

Such repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.

Whether or not to repurchase any debt and the size and timing of any such repurchases will be determined at our discretion.

See Note 12 of the Financial Statements and Supplementary Data contained in Item 8 herein for further information related to our long-term debt obligations and the timing of expected payments.

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Critical Accounting Policies and Estimates

The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions in applying our critical accounting policies that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amount of revenues and expenses during the reporting period.

financial statements and the reported amount of revenues and expenses during the reporting period.

Our estimates and assumptions affect, among other things, impairment of goodwill and indefinite-lived intangible assets, impairment of long-lived assets, realizability of deferred tax assets and federal and state income tax uncertainties.

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Company-operated and franchise restaurants and our Canada franchise restaurants reporting units was more likely than not greater than the carrying amount.

Our quantitative goodwill impairment test for our global real estate and development operations indicated that there had been no impairment and the fair value of this reporting unit of $1,586.0 million was approximately 33% in excess of its carrying value.

Our quantitative goodwill impairment test for our global real estate and development operations indicated that there had been no impairment and the fair value of this reporting unit of approximately $1,400.0 million was approximately 21% in excess of its carrying value.

Our indefinite-lived intangible assets represent trademarks and totaled $903.0 million as of January 1, 2023.

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Net operating loss and credit carryforwards are subject to various limitations and carryforward periods.

As of January 2, 2022, we have foreign tax credits of $19.5 million and state tax credits of $0.6 million, both of which will begin to expire in 2022.

In addition, as of January 2, 2022, we have deferred tax assets for foreign net operating loss carryforwards of $1.4 million, as well as state and local net operating loss carryforwards of $39.1 million that will begin to expire in 2022.

As of January 1, 2023, we have foreign tax credits of $18.2 million and state tax credits of $0.4 million.

The foreign tax credits begin to expire in 2027 and the state tax credits begin to expire in 2023.

In addition, as of January 1, 2023, we have deferred tax assets for foreign net operating loss carryforwards of $3.5 million and state and local net operating loss carryforwards of $35.9 million that will begin to expire in 2023.

We believe it is more likely than not that the benefit from certain net operating loss carryforwards and tax credits will not be realized.

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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-K

Item 7. Management’s Discussion and Analysis