What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-03-01 compared with 2022-03-01 · 341 added, 390 removed, 1533 unchanged (32% of the section changed)

6 unchanged sentences

Consolidated Statements of Operations for the years ended January 1, 2023, January 2, 2022 and

December 29, 2019

January 3, 2021

Consolidated Statements of Comprehensive Income for the years ended January 1, 2023, January 2, 2022 and

December 29, 2019

January 3, 2021

Consolidated Statements of Stockholders’ Equity for the years ended January 1, 2023, January 2, 2022 and

December 29, 2019

January 3, 2021

Consolidated Statements of Cash Flows for the years ended January 1, 2023, January 2, 2022 and

December 29, 2019

January 3, 2021

Notes to Consolidated Financial Statements 63

19 unchanged sentences

(20) Leases 100

(21) Supplemental Cash Flow Information 103

(22) Guarantees and Other Commitments and Contingencies 104

12 unchanged sentences

2021 ASR Agreement (15) Stockholders’ Equity

2022-1 Class A-2 Notes (12) Long-Term Debt

401(k) Plan (19) Retirement Benefit Plans

3 unchanged sentences

CAP (14) Income Taxes

Caracci Case (23) Legal and Environmental Matters

Class A-2 Notes (12) Long-Term Debt

Cloud Computing Arrangements (1) Summary of Significant Accounting Policies

CCA (1) Summary of Significant Accounting Policies

Company (1) Summary of Significant Accounting Policies

Contingent Rent (1) Summary of Significant Accounting Policies

COVID-19 (1) Summary of Significant Accounting Policies

EBITDA (27) Segment Information

1 unchanged sentence

FASB (1) Summary of Significant Accounting Policies

February 2019 Authorization (15) Stockholders’ Equity

February 2020 Authorization (15) Stockholders’ Equity

February 2022 Authorization (15) Stockholders’ Equity

Fountain Beverages (22) Guarantees and Other Commitments and Contingencies

4 unchanged sentences

GAAP (1) Summary of Significant Accounting Policies

Graham Case (23) Legal and Environmental Matters

Groundbreaker (22) Guarantees and Other Commitments and Contingencies

Indenture (12) Long-Term Debt

2 unchanged sentences

IT Realignment Plan (5) Reorganization and Realignment Costs

LIBOR (12) Long-Term Debt

January 2023 Authorization (15) Stockholders’ Equity

LIBOR (1) Summary of Significant Accounting Policies

Master Issuer (12) Long-Term Debt

1 unchanged sentence

Operations and Field Realignment Plan (5) Reorganization and Realignment Costs

Pacesetter (22) Guarantees and Other Commitments and Contingencies

QSCC (23) Transactions with Related Parties

6 unchanged sentences

Senior Notes (12) Long-Term Debt

Defined Term Footnote Where Defined

SERP (19) Retirement Benefit Plans

1 unchanged sentence

Target (16) Share-Based Compensation

Defined Term Footnote Where Defined

The Wendy’s Company (1) Summary of Significant Accounting Policies

32 unchanged sentences

The Company used both an income approach and a market approach to estimate fair value of the global real estate and development operations reporting unit.

The income approach requires management to make significant estimates and assumptions including future sales growth, operating profit and the weighted average cost of capital (discount rate).

The income approach requires management to make significant estimates and assumptions including future sales growth, operating profit, terminal value growth rate and the weighted average cost of capital (discount rate).

The market approach requires use of market price data of guideline public companies to estimate the fair value of the reporting unit.

Changes in these assumptions could have a significant impact on either the fair value, the amount of any goodwill impairment charge, or both.

The goodwill balance was $775.3 million as of January 2, 2022, of which $122.5 million was allocated to the

global real estate and development operations reporting unit.

The goodwill balance was $773.1 million as of January 1, 2023, of which $122.5 million

was allocated to the global real estate and development operations reporting unit.

The fair value of the global real estate and development operations reporting unit exceeded its carrying value as of the measurement date and, therefore, no impairment was recognized.

We identified the Company’s income approach in the impairment evaluation of goodwill for the global real estate and development operations reporting unit as a critical audit matter because of the significant judgments made by management to estimate the fair value of this reporting unit.

This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions, particularly related to future sales growth, operating profit and the selection of the discount rate.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the estimates of future sales growth, operating profit and discount rate used by management to estimate the fair value of the global real estate and development operations reporting unit included the following, among others:

• We tested the effectiveness of controls over management’s goodwill impairment evaluation, including those over the determination of the fair value of the global real estate and development operations reporting unit, such as controls related to management’s forecasts of future sales growth, operating profit and selection of the discount rate.

• We evaluated management’s ability to accurately forecast future sales growth and operating profit by comparing actual results to management’s historical forecasts.

1 unchanged sentence

We also considered the impact of changes in management’s forecasts from the annual measurement date in the fourth quarter to January 1, 2023.

• With the assistance of our fair value specialists, we evaluated the discount rate, including testing the underlying source information and the mathematical accuracy of the calculation, and by developing a range of independent estimates and comparing those to the discount rate selected by management.

• With the assistance of our fair value specialists, we evaluated the terminal value growth rate and the discount rate, including testing the underlying source information and the mathematical accuracy of the calculation, and by developing a range of independent estimates and comparing those to the discount rate selected by management.

/s/ Deloitte & Touche LLP

59 unchanged sentences

2023 January 2,

2021 December 29,

2022 January 3,

Sales $ 896,585 $ 734,074 $ 722,764

9 unchanged sentences

General and administrative 254,979 242,970 206,876

Depreciation and amortization 125,540 132,775 131,693

Depreciation and amortization (exclusive of amortization of cloud computing arrangements shown separately below) 133,414 125,540 132,775

Amortization of cloud computing arrangements 2,394 — —

System optimization gains, net ( 6,779 ) ( 33,545 ) ( 3,148 )

20 unchanged sentences

2023 January 2,

2021 December 29, 2019

2022 January 3, 2021

Net income $ 177,370 $ 200,392 $ 117,832

Other comprehensive income:

Other comprehensive (loss) income:

Foreign currency translation adjustment ( 15,976 ) 1,441 4,187

Other comprehensive income 1,441 4,187 7,845

Other comprehensive (loss) income ( 15,976 ) 1,441 4,187

Comprehensive income $ 161,394 $ 201,833 $ 122,019

9 unchanged sentences

Cash dividends — — ( 64,866 ) — — ( 64,866 )

Repurchases of common stock, including accelerated share repurchase

— ( 15,000 ) — ( 202,771 ) — ( 217,771 )

Repurchases of common stock,

including accelerated share

repurchase — 15,000 — ( 76,095 ) — ( 61,095 )

Share-based compensation — 18,930 — — — 18,930

Common stock issued upon exercises of stock options

— ( 808 ) — 28,944 — 28,136

Common stock issued upon vesting of restricted shares

— ( 13,677 ) — 5,050 — ( 8,627 )

Cumulative effect of change in accounting principle

— — ( 1,105 ) — — ( 1,105 )

Common stock issued upon

exercises of stock options — ( 912 ) — 24,263 — 23,351

Common stock issued upon vesting

of restricted shares — ( 7,889 ) — 2,500 — ( 5,389 )

Other — 146 ( 17 ) 158 — 287

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

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

Net income — — 200,392 — — 200,392

1 unchanged sentence

Cash dividends — — ( 94,846 ) — — ( 94,846 )

Repurchases of common stock, including accelerated share repurchase

— 15,000 — ( 76,095 ) — ( 61,095 )

Repurchases of common stock,

including accelerated share

repurchase — ( 18,750 ) — ( 249,058 ) — ( 267,808 )

Share-based compensation — 22,019 — — — 22,019

Common stock issued upon exercises of stock options

— ( 912 ) — 24,263 — 23,351

Common stock issued upon vesting of restricted shares

— ( 7,889 ) — 2,500 — ( 5,389 )

Common stock issued upon

exercises of stock options — 1,911 — 27,139 — 29,050

Common stock issued upon vesting

of restricted shares — ( 6,023 ) — 2,285 — ( 3,738 )

Other — 200 ( 22 ) 121 — 299

1 unchanged sentence

Net income — — 177,370 — — 177,370

Other comprehensive income, net — — — — 1,441 1,441

Other comprehensive loss, net — — — — ( 15,976 ) ( 15,976 )

Cash dividends — — ( 106,779 ) — — ( 106,779 )

Repurchases of common stock, including accelerated share repurchase

— ( 18,750 ) — ( 249,058 ) — ( 267,808 )

Repurchases of common stock,

including accelerated share

repurchase — 18,750 — ( 70,700 ) — ( 51,950 )

Share-based compensation — 24,538 — — — 24,538

Common stock issued upon exercises of stock options

— 1,911 — 27,139 — 29,050

Common stock issued upon vesting of restricted shares

— ( 6,023 ) — 2,285 — ( 3,738 )

Common stock issued upon

exercises of stock options — 1,117 — 3,461 — 4,578

Common stock issued upon vesting

of restricted shares — ( 5,363 ) — 2,482 — ( 2,881 )

Other — 210 ( 40 ) 245 — 415

5 unchanged sentences

2023 January 2,

2021 December 29, 2019

2022 January 3,

Cash flows from operating activities:

1 unchanged sentence

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

Depreciation and amortization 125,540 132,775 131,693

Depreciation and amortization (exclusive of amortization of cloud computing arrangements shown separately below) 133,414 125,540 132,775

Amortization of cloud computing arrangements 2,394 — —

Share-based compensation 24,538 22,019 18,930

3 unchanged sentences

Change in operating lease liabilities ( 45,682 ) ( 45,606 ) ( 40,905 )

Net receipt (recognition) of deferred vendor incentives 715 2,495 ( 501 )

Net (recognition) receipt of deferred vendor incentives ( 1,060 ) 715 2,495

System optimization gains, net ( 6,779 ) ( 33,545 ) ( 3,148 )

2 unchanged sentences

Equity in earnings in joint ventures, net ( 9,422 ) ( 11,203 ) ( 6,096 )

Long-term debt-related activities, net (see below) 24,758 6,723 15,317

Long-term debt-related activities, net (see Note 21)

7,762 24,758 6,723

Cloud computing arrangements expenditures ( 30,220 ) ( 14,086 ) —

Other, net ( 4,554 ) 844 ( 6,438 )

9 unchanged sentences

Capital expenditures ( 85,544 ) ( 77,984 ) ( 68,969 )

Franchise development fund ( 3,605 ) — —

Acquisitions — ( 123,069 ) ( 4,879 )

10 unchanged sentences

Repurchases of common stock, including accelerated share repurchase ( 51,950 ) ( 268,531 ) ( 62,173 )

( 268,531 ) ( 62,173 ) ( 217,797 )

Dividends ( 106,779 ) ( 94,846 ) ( 64,866 )

1 unchanged sentence

Payments related to tax withholding for share-based compensation ( 3,168 ) ( 4,511 ) ( 5,577 )

( 4,511 ) ( 5,577 ) ( 8,820 )

Net cash used in financing activities ( 242,742 ) ( 157,907 ) ( 365,296 )

Net cash (used in) provided by operations before effect of exchange rate changes on cash ( 51,639 ) 58,204 ( 131,294 )

Net cash provided by (used in) financing activities 288,674 ( 242,742 ) ( 157,907 )

Net cash provided by (used in) operations before effect of exchange rate changes on cash 470,802 ( 51,639 ) 58,204

Effect of exchange rate changes on cash ( 5,967 ) 364 1,330

Net (decrease) increase in cash, cash equivalents and restricted cash ( 51,275 ) 59,534 ( 127,805 )

Net increase (decrease) in cash, cash equivalents and restricted cash 464,835 ( 51,275 ) 59,534

Cash, cash equivalents and restricted cash at beginning of period 366,966 418,241 358,707

Cash, cash equivalents and restricted cash at end of period $ 831,801 $ 366,966 $ 418,241

THE WENDY’S COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS—CONTINUED

(In Thousands)

2022 January 3,

2021 December 29,

Detail of cash flows from operating activities:

Long-term debt-related activities, net:

Loss on early extinguishment of debt $ 17,917 $ — $ 8,496

Accretion of long-term debt 1,177 1,161 1,272

Amortization of deferred financing costs 5,664 5,562 5,549

$ 24,758 $ 6,723 $ 15,317

Supplemental cash flow information:

Cash paid for:

Interest $ 133,284 $ 136,228 $ 138,270

Income taxes, net of refunds 54,779 16,202 34,798

Supplemental non-cash investing and financing activities:

Capital expenditures included in accounts payable $ 6,158 $ 3,673 $ 6,026

Finance leases 82,032 34,918 50,061

2022 January 3,

2021 December 29,

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

Cash and cash equivalents $ 249,438 $ 306,989 $ 300,195

Restricted cash 27,535 33,973 34,539

Restricted cash, included in Advertising funds restricted assets 89,993 77,279 23,973

Total cash, cash equivalents and restricted cash $ 366,966 $ 418,241 $ 358,707

See accompanying notes to consolidated financial statements.

20 unchanged sentences

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and 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.

Actual results could differ materially from those estimates.

On March 11, 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.

Actual results could differ materially from those estimates due to risks and uncertainties, including uncertainty in the current economic environment due to the COVID-19 pandemic and other factors.

Reclassifications

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

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.

Beginning in 2022, the Company has reclassified payments for cloud computing arrangements in the consolidated statements of cash flows to “Cloud computing arrangements expenditures,” which were previously recorded to “Other, net.” The prior period amounts in the consolidated statement of cash flows for 2021 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.” No payments for cloud computing arrangements were made by the Company in 2020.

The following table illustrates the reclassifications made to the consolidated statement of cash flows for 2021:

As Previously Reported Reclassifications As Currently Reported

Cloud computing arrangements expenditures $ — $ ( 14,086 ) $ ( 14,086 )

Other, net ( 13,242 ) 14,086 844

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.

Cash and Cash Equivalents

All highly liquid investments with a maturity of three months or less when acquired are considered cash equivalents.

The Company’s cash and cash equivalents principally consist of cash in bank and money market mutual fund accounts and are primarily not in Federal Deposit Insurance Corporation insured accounts.

THE WENDY’S COMPANY AND SUBSIDIARIES

1 unchanged sentence

(In Thousands Except Per Share Amounts)

Securities Investor Protection Corporation of up to $ 500 per account, as well as supplemental private insurance coverage maintained by substantially all of our brokerage firms, to the extent our cash equivalents are held in brokerage accounts.

Cash and Cash Equivalents

All highly liquid investments with a maturity of three months or less when acquired are considered cash equivalents.

The Company’s cash and cash equivalents principally consist of cash in bank and money market mutual fund accounts and are primarily not in Federal Deposit Insurance Corporation insured accounts.

We believe that our vulnerability to risk concentrations in our cash equivalents is mitigated by (1) our policies restricting the eligibility, credit quality and concentration limits for our placements in cash equivalents and (2) insurance from the Securities Investor Protection Corporation of up to $ 500 per account, as well as supplemental private insurance coverage maintained by substantially all of our brokerage firms, to the extent our cash equivalents are held in brokerage accounts.

Restricted Cash

13 unchanged sentences

Capitalized CCA implementation costs are included in “Prepaid expenses and other current assets” and “Other assets.” The CCA implementation costs are amortized over the term of the related hosting agreement, including renewal periods that are reasonably certain to be exercised.

Amortization expense of CCA implementation costs is recorded to “General and administrative.” The CCA implementation costs are included within operating activities in the Company’s consolidated statements of cash flows.

Amortization expense of CCA implementation costs is recorded to “Amortization of cloud computing arrangements.” The CCA implementation costs are included within operating activities in the Company’s consolidated statements of cash flows.

See “Reclassifications” above for further information.

Properties and Depreciation and Amortization

1 unchanged sentence

Depreciation and amortization of properties is computed principally on the straight-line basis using the following estimated useful lives of the related major classes of properties:

3 to 20 years for office and restaurant equipment (including technology), 3 to 15 years for transportation equipment and 7 to 30 years for buildings and improvements.

When the Company commits to a plan to cease using certain properties before the end of their estimated useful lives, depreciation expense is accelerated to reflect the use of the assets over their shortened useful lives.

three to 20 years for office and restaurant equipment (including technology), three to 15 years for transportation equipment and seven to 30 years for buildings and improvements.

When the Company commits to a plan to cease using certain properties before the end of their estimated useful lives, depreciation expense is accelerated to reflect the use

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

of the assets over their shortened useful lives.

Leasehold improvements are amortized over the shorter of their estimated useful lives or the terms of the respective leases, including periods covered by renewal options that the Company is reasonably assured of exercising.

2 unchanged sentences

See “Impairment of Long-Lived Assets” below for further information.

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

The Company classifies assets as held for sale and ceases depreciation of the assets when there is a plan for disposal of the assets and those assets meet the held for sale criteria.

19 unchanged sentences

Should actual cash flows and our future estimates vary adversely from those estimates we used, we may be required to recognize additional impairment charges in future years.

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Other Intangible Assets

1 unchanged sentence

for favorable leases, the terms of the respective leases, including periods covered by renewal options that the Company as lessor is reasonably certain the tenant will exercise;

1 to 5 years for computer software;

4 to 20 years for reacquired rights under franchise agreements;

one to five years for computer software;

two to 20 years for reacquired rights under franchise agreements;

and 20 years for franchise agreements.

Trademarks have an indefinite life and are not amortized.

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

The Company reviews definite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the intangible asset may not be recoverable.

3 unchanged sentences

If the Company determines that impairment of its intangible assets may exist, the amount of impairment loss is measured as the excess of carrying value over fair value.

Our estimates in the determination of the fair value of indefinite-lived intangible assets include the anticipated future revenues of Company-operated and franchised restaurants and the resulting cash flows.

Our critical estimates in the determination of the fair value of indefinite-lived intangible assets include the anticipated future revenues of Company-operated and franchised restaurants and the resulting cash flows.

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

15 unchanged sentences

The Monte Carlo simulation model utilizes multiple input variables to estimate the probability that market conditions will be achieved.

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Foreign Currency Translation

3 unchanged sentences

Net gains or losses resulting from the translation are recorded to the “Foreign currency translation adjustment” component of “Accumulated other comprehensive loss.” Gains and losses arising from the impact of foreign currency exchange rate fluctuations on transactions in foreign currency are included in “General and administrative.”

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

The Company accounts for income taxes under the asset and liability method.

24 unchanged sentences

See “Revenue Recognition” below for further information.

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Revenue Recognition

4 unchanged sentences

Gift card payments are recorded as deferred income when received and are recognized as revenue upon redemption.

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

“Franchise royalty revenue and fees” includes royalties, new build technical assistance fees, renewal fees, franchisee-to- franchisee restaurant transfer (“Franchise Flip”) technical assistance fees, Franchise Flip advisory fees, development fees and information technology and other fees.

25 unchanged sentences

The Company provides for their estimated cost to settle both known claims and claims incurred but not yet reported.

Liabilities associated with these claims are estimated, in part, by considering the frequency and severity of historical claims, both specific to us, as well as industry-wide loss experience and other actuarial assumptions.

We determine our insurance obligations with the assistance of actuarial firms.

Since there are many estimates and assumptions involved in recording insurance liabilities and in the case of workers’ compensation a significant period of time elapses before the ultimate resolution of claims, differences between actual future events and prior estimates and assumptions could result in adjustments to these liabilities.

Liabilities associated with these claims are estimated, in part, by considering the frequency and severity of historical claims, both specific to us, as

THE WENDY’S COMPANY AND SUBSIDIARIES

1 unchanged sentence

(In Thousands Except Per Share Amounts)

well as industry-wide loss experience and other actuarial assumptions.

We determine our insurance obligations with the assistance of actuarial firms.

Determination of Whether a Contract Contains a Lease

26 unchanged sentences

(1) rental expense related to leases for Company-operated restaurants is recorded to “Cost of sales,” (2) rental expense for leased properties that are subsequently subleased to franchisees is recorded to “Franchise rental expense” and (3) rental expense related to leases for corporate offices and equipment is recorded to “General and administrative.”

Favorable and unfavorable lease amounts for operating leases where the Company is the lessor are recorded as components of “Other intangible assets” and “Other liabilities,” respectively.

Favorable and unfavorable lease amounts are amortized on a straight-line basis over the term of the leases.

THE WENDY’S COMPANY AND SUBSIDIARIES

1 unchanged sentence

(In Thousands Except Per Share Amounts)

operating leases are recognized on a gross basis as “Franchise rental income” with a corresponding expense recorded to “Franchise rental expense.”

Favorable and unfavorable lease amounts for operating leases where the Company is the lessor are recorded as components of “Other intangible assets” and “Other liabilities,” respectively.

Favorable and unfavorable lease amounts are amortized on a straight-line basis over the term of the leases.

Rental income and favorable and unfavorable lease amortization for operating leases on properties leased or subleased to franchisees is recorded to “Franchise rental income.” Lessees’ variable payments to the Company for executory costs under operating leases are recognized on a gross basis as “Franchise rental income” with a corresponding expense recorded to “Franchise rental expense.”

Finance Leases

Lease cost for finance leases where the Company is the lessee includes the amortization of the ROU asset, which is amortized on a straight-line basis and recorded to “Depreciation and amortization,” and interest expense on the finance lease liability, which is calculated using the interest method and recorded to “Interest expense, net.” Finance lease ROU assets are amortized over the shorter of their estimated useful lives or the terms of the respective leases, including periods covered by renewal options that the Company is reasonably certain of exercising.

Lease cost for finance leases where the Company is the lessee includes the amortization of the ROU asset, which is amortized on a straight-line basis and recorded to “Depreciation and amortization (exclusive of amortization of cloud computing arrangements shown separately below),” and interest expense on the finance lease liability, which is calculated using the interest method and recorded to “Interest expense, net.” Finance lease ROU assets are amortized over the shorter of their estimated useful lives or the terms of the respective leases, including periods covered by renewal options that the Company is reasonably certain of exercising.

Sales-Type and Direct Financing Leases

16 unchanged sentences

territories, with the largest number in Canada.

restaurants are located in 50 states and the District of Columbia, with the largest number in Florida, Texas, Ohio, Georgia, California, North Carolina, Pennsylvania and Michigan.

restaurants are located in 50 states and the District of Columbia,

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

with the largest number in Florida, Texas, Ohio, Georgia, California, North Carolina, Pennsylvania and Michigan.

Because our restaurant operations are generally located throughout the U.S.

4 unchanged sentences

dollar for our Canadian operations.

However, our exposure to

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Canadian dollar foreign currency risk is mitigated by the fact that there are no Company-operated restaurants in Canada and less than 10 % of Wendy’s franchised restaurants are in Canada.

However, our exposure to Canadian dollar foreign currency risk is mitigated by the fact that there are no Company-operated restaurants in Canada and less than 10 % of Wendy’s franchised restaurants are in Canada.

The Company is subject to credit risk through its accounts receivable consisting primarily of amounts due from franchisees for royalties, franchise fees and rent.

3 unchanged sentences

New Accounting Standards Adopted

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

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

The Company early adopted this amendment during the third quarter of 2021 by applying the guidance prospectively to leases that commence or are modified on or after the date of adoption.

Financial Instruments

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

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

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

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

The adoption of this guidance did not have a material impact on our consolidated financial statements.

5 unchanged sentences

The Company does not expect the guidance to have a material impact on our consolidated financial statements.

Financial Instruments

In August 2020, the FASB issued an amendment that simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity.

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

The amendment is effective commencing with our 2022 fiscal year.

The Company does not expect the guidance to have a material impact on our consolidated financial statements.

Reference Rate Reform

In March 2020, the FASB issued guidance to provide temporary optional expedients and exceptions to current reference rate reform guidance to ease the financial reporting burdens related to the expected market transition from the London interbank offered rate (“LIBOR”) and other interbank offered rates to alternative reference rates.

The guidance, as amended, was effective upon issuance and may be applied prospectively to applicable contract modifications through December 31, 2024.

We are currently evaluating the impact of the transition from LIBOR to alternative reference rates but do not anticipate the adoption of this guidance to have a material impact on our consolidated financial statements.

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Nature of Goods and Services

The Company generates revenues from sales at Company-operated restaurants and earns fees and rental income from franchised restaurants.

The Company generates revenues from sales at Company-operated restaurants and earns royalties, fees and rental income from franchised restaurants.

Revenues are recognized upon delivery of food to the customer at Company-operated restaurants or upon the fulfillment of terms outlined in the franchise agreement for franchised restaurants.

3 unchanged sentences

The franchise agreement requires that the franchisee pay a royalty based on a percentage of sales at the franchised restaurant, as well as make contributions to the Advertising Funds based on a percentage of sales.

Wendy’s may offer development incentive programs from time to time that provide for a discount or lesser royalty amount or Advertising Fund

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

contribution for a limited period of time.

Wendy’s may offer development incentive programs from time to time that provide for a discount or lesser royalty amount or Advertising Fund contribution for a limited period of time.

The agreement also typically requires that the franchisee pay Wendy’s a technical assistance fee.

11 unchanged sentences

Rental income is due in accordance with the terms of each lease, which is generally at the beginning of each month.

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Disaggregation of Revenue

19 unchanged sentences

Total revenues $ 1,431,382 $ 65,642 $ 236,801 $ 1,733,825

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Contract Balances

The following table provides information about receivables and contract liabilities (deferred franchise fees) from contracts with customers:

2022 (a) January 3, 2021 (a)

2023 (a) January 2,

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

6 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 $ 9,084 and $ 88,102 as of January 2, 2022, respectively, and $ 8,691 and $ 89,094 as of January 3, 2021, respectively.

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

(c) Deferred franchise fees are included in “Accrued expenses and other current liabilities” and “Deferred franchise fees” and totaled $ 8,977 and $ 90,231 , respectively, as of January 1, 2023, and $ 9,084 and $ 88,102 , respectively, as of January 2, 2022.

Significant changes in deferred franchise fees are as follows:

13 unchanged sentences

(3) Acquisitions

During 2021 and 2019, the Company acquired 93 restaurants and five restaurants from franchisees, respectively.

No restaurants were acquired from franchisees during 2020.

The Company did not incur any material acquisition-related costs associated with the acquisitions and such transactions were not significant to our consolidated financial statements.

The table below presents the allocation of the total purchase price to the fair value of assets acquired and liabilities assumed for restaurants acquired from franchisees:

2021 (a) 2019

Restaurants acquired from franchisees (b) 93 5

During 2021, the Company acquired 93 restaurants from a franchisee.

The Company completed no significant acquisitions of restaurants from franchisees during 2022 or 2020.

The Company did not incur any material acquisition-related costs associated with the acquisition in 2021 and such transaction was not significant to our consolidated financial statements.

The table below presents the allocation of the total purchase price to the fair value of assets acquired and liabilities assumed for restaurants acquired from a franchisee:

Restaurants acquired from franchisee (b) 93

Total consideration paid, net of cash received $ 127,948

6 unchanged sentences

Operating lease liabilities ( 43,478 )

Other ( 9 ) ( 2,316 )

Total identifiable net assets 104,506

1 unchanged sentence

_______________

(a) The fair value of the assets acquired are provisional amounts as of January 2, 2022, pending final purchase accounting adjustments.

The Company utilized management estimates and consultation with an independent third-party valuation firm to assist in the valuation process.

(b) 2021 includes two restaurants under construction and not operating as of January 2, 2022.

(a) The fair values of assets acquired and liabilities assumed related to restaurants acquired in 2021 were provisional amounts as of January 2, 2022, pending final purchase accounting adjustments.

The Company finalized the purchase price allocation during 2022, which resulted in an increase in cash received of $ 260 .

(b) Included two restaurants under construction and not operating as of January 2, 2022.

NPC Quality Burgers, Inc.

2 unchanged sentences

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

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

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

As part of the consortium bid, the Company submitted a deposit of $ 43,240 .

The deposit included $ 38,361 received from the group of prequalified franchisees, which was payable to the franchisees pending resolution of the bankruptcy sale process.

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

11 unchanged sentences

During 2022, 2021 and 2020, the Company facilitated 79 , 34 and 54 Franchise Flips, respectively.

Additionally, during 2021, the Company completed the sale of 47 Company-operated restaurants in New York (including Manhattan) to franchisees and, during 2020, completed the sale of one Company-operated restaurant to a franchisee.

No Company-operated restaurants were sold to franchisees during 2019.

Additionally, during 2021, the Company completed the sale of 47 Company-operated restaurants in New York (including Manhattan) to franchisees and, during each of 2022 and 2020, the Company completed the sale of one Company-operated restaurant to a franchisee.

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

10 unchanged sentences

Other (d) 6 ( 2,148 ) —

( 416 ) 30,801 16

Post-closing adjustments on sales of restaurants (e) (f) 2,877 1,218 362

3 unchanged sentences

_______________

(a) In addition to the proceeds noted herein, the Company received cash proceeds of $ 39 during 2021 related to a note receivable issued in connection with the sale of the Manhattan Company-operated restaurants.

(a) In addition to the proceeds noted herein, the Company received cash proceeds of $ 378 and $ 39 during 2022 and 2021, respectively, 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.

6 unchanged sentences

(f) 2022, 2021 and 2020 include the recognition of deferred gains of $ 3,522 , $ 515 and $ 368 , respectively, as a result of the resolution of certain contingencies related to the extension of lease terms for restaurants previously sold to franchisees.

(g) During 2021, 2020 and 2019, Wendy’s received cash proceeds of $ 4,561 , $ 6,041 and $ 3,448 , respectively, primarily from the sale of surplus and other properties.

(g) During 2022, 2021 and 2020, the Company received cash proceeds of $ 7,780 , $ 4,561 and $ 6,041 , respectively, primarily from the sale of surplus and other properties.

Assets Held for Sale

January 2, 2022 January 3, 2021

Number of restaurants classified as held for sale — 43

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

Other assets held for sale (b) $ 3,541 $ 1,732

_______________

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

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

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

As of January 1, 2023 and January 2, 2022, the Company had assets held for sale of $ 1,661 and $ 3,541 , respectively, primarily consisting of surplus properties.

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

14 unchanged sentences

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

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

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

Year Ended Total Incurred Since Inception

2022 2021 2020

Severance and related employee costs $ 7 $ 270 $ 3,113 $ 3,390

5 unchanged sentences

(a) Primarily represents incremental share-based compensation resulting from the modification of stock options in connection with the termination of employees under the Operations and Field Realignment Plan.

As of January 2, 2022, the accruals for the Operations and Field Realignment Plan are included in “Accrued expenses and other current liabilities.” As of January 3, 2021, the accruals for the Operations and Field Realignment Plan are included in “Accrued expenses and other current liabilities” and “Other liabilities” and totaled $ 2,487 and $ 113 , respectively.

The tables below present a rollforward of our accruals for the Operations and Field Realignment Plan.

Balance January 3, 2021 Charges Payments Balance January 2, 2022

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

The tables below present a rollforward of our accruals for the Operations and Field Realignment Plan, which are included in “Accrued expenses and other current liabilities” as of January 2, 2022.

Balance January 2, 2022

Charges Payments Balance January 1, 2023

Severance and related employee costs $ 155 $ 7 $ ( 162 ) $ —

1 unchanged sentence

$ 166 $ 59 $ ( 225 ) $ —

Balance December 29, 2019 Charges Payments Balance January 3, 2021

Balance January 3, 2021

Charges Payments Balance January 2, 2022

Severance and related employee costs $ 2,600 $ 270 $ ( 2,715 ) $ 155

5 unchanged sentences

The IT Realignment Plan has reduced certain employee compensation and other related costs that the Company has reinvested back into IT to drive additional capabilities and capacity across all of its technology platforms.

Additionally, in June 2020, the Company made changes to its leadership structure that included the elimination of the Chief Digital Experience Officer position and the creation of a Chief Information Officer position, for which the Company completed the hiring process in October 2020.

During 2020 and 2019, the Company recognized costs totaling $ 7,288 and $ 9,127 , respectively, which primarily included third-party and other costs and recruitment and relocation costs in 2020 and severance and related employee costs and third-party and other costs in 2019.

During 2020, the Company recognized costs totaling $ 7,288 , which primarily included third-party and other costs and recruitment and relocation costs.

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

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

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

10 unchanged sentences

(b) Primarily represents incremental share-based compensation resulting from the modification of stock options in connection with the termination of employees under the IT realignment plan.

The tables below present a rollforward of our accruals for the IT Realignment Plan, which are included in “Accrued expenses and other current liabilities” as of January 2, 2022 and January 3, 2021.

Balance January 3, 2021 Charges Payments Balance January 2, 2022

Severance and related employee costs $ 1,508 $ ( 165 ) $ ( 1,250 ) $ 93

Recruitment and relocation costs — 146 ( 146 ) —

Third-party and other costs — 9 ( 9 ) —

$ 1,508 $ ( 10 ) $ ( 1,405 ) $ 93

Balance December 29, 2019 Charges Payments Balance January 3, 2021

Severance and related employee costs $ 7,548 $ 843 $ ( 6,883 ) $ 1,508

Recruitment and relocation costs — 1,296 ( 1,296 ) —

Third-party and other costs 1,076 5,149 ( 6,225 ) —

$ 8,624 $ 7,288 $ ( 14,404 ) $ 1,508

General and Administrative ( “ G&A ”) Realignment

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

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

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

During 2020 and 2019, the Company recognized costs totaling $ 614 and $ 7,749 , respectively, which primarily included recruitment and relocation costs and share-based compensation in 2020 and severance and related employee costs and share-based compensation in 2019.

No material costs were incurred by the Company under the G&A Realignment Plan during 2022, 2021 and 2020.

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

2 unchanged sentences

(In Thousands Except Per Share Amounts)

The following is a summary of the activity recorded as a result of the G&A Realignment Plan:

Year Ended Total Incurred

Since Inception

2021 2020 2019

Severance and related employee costs (a) $ ( 74 ) $ 28 $ 5,485 $ 24,192

Recruitment and relocation costs 1 360 950 2,877

Third-party and other costs 2 13 100 2,225

( 71 ) 401 6,535 29,294

Share-based compensation (b) 19 213 1,214 8,130

Termination of defined benefit plans — — — 1,335

Total G&A realignment $ ( 52 ) $ 614 $ 7,749 $ 38,759

_______________

(a) 2021 includes a reversal of an accrual as a result of a change in estimate.

(b) Primarily represents incremental share-based compensation resulting from the modification of stock options in connection with the termination of employees under the G&A Realignment Plan.

The tables below present a rollforward of our accruals for the G&A Realignment Plan, which are included in “Accrued expenses and other current liabilities” as of January 2, 2022 and January 3, 2021.

2021 Charges Payments Balance

Severance and related employee costs $ 932 $ ( 74 ) $ ( 847 ) $ 11

Recruitment and relocation costs — 1 ( 1 ) —

Third-party and other costs — 2 ( 2 ) —

$ 932 $ ( 71 ) $ ( 850 ) $ 11

2019 Charges Payments Balance

Severance and related employee costs $ 5,276 $ 28 $ ( 4,372 ) $ 932

Recruitment and relocation costs 83 360 ( 443 ) —

Third-party and other costs — 13 ( 13 ) —

$ 5,359 $ 401 $ ( 4,828 ) $ 932

System Optimization Initiative

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

During 2022, the Company recognized costs totaling $ 611 , 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 $ 6,852 , 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.

2 unchanged sentences

The Company expects to recognize a gain of approximately $ 700 , primarily related to the write-off of certain NPC-related lease liabilities upon final termination of the leases.

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

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

14 unchanged sentences

(d) Represents incremental share-based compensation resulting from the modification of stock options and performance-based awards in connection with the termination of employees under our system optimization initiative.

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

January 3, 2021 Charges Payments Balance

January 2, 2022

The table below presents a rollforward of our accruals for our system optimization initiative.

Balance January 3, 2021

Charges Payments Balance January 2, 2022

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

2 unchanged sentences

$ 1,230 $ 3,996 $ ( 5,226 ) $ —

December 29, 2019 Charges Payments Balance

January 3, 2021

Professional fees $ — $ 4,323 $ ( 3,093 ) $ 1,230

Other — 4 ( 4 ) —

$ — $ 4,327 $ ( 3,097 ) $ 1,230

THE WENDY’S COMPANY AND SUBSIDIARIES

1 unchanged sentence

(In Thousands Except Per Share Amounts)

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 $ 11,000 to $ 13,000 related to these savings.

The total costs expected to be incurred are comprised of (1) severance and related employee costs of approximately $ 8,000 , (2) recruitment and relocation costs of approximately $ 1,000 , (3) third-party and other costs of approximately $ 1,000 and (4) share-based compensation of approximately $ 2,000 .

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

(6) Net Income Per Share

27 unchanged sentences

_______________

(a) Included in “Advertising funds restricted assets.”

THE WENDY’S COMPANY AND SUBSIDIARIES

1 unchanged sentence

(In Thousands Except Per Share Amounts)

(a) Included in “Advertising funds restricted assets.”

January 1, 2023 January 2, 2022

1 unchanged sentence

Accounts and Notes Receivable, Net

Accounts receivable (a) (b) $ 104,744 $ ( 3,229 ) $ 101,515 $ 97,399 $ ( 3,739 ) $ 93,660

Notes receivable from franchisees (c) (d) 23,000 ( 4,975 ) 18,025 21,227 ( 4,996 ) 16,231

Accounts receivable (a) $ 100,270 $ ( 1,707 ) $ 98,563 $ 104,744 $ ( 3,229 ) $ 101,515

Notes receivable from franchisees (b) (c) 22,503 ( 4,640 ) 17,863 23,000 ( 4,975 ) 18,025

$ 122,773 $ ( 6,347 ) $ 116,426 $ 127,744 $ ( 8,204 ) $ 119,540

Non-current (e)

Notes receivable from franchisees (d) $ 4,514 $ ( 315 ) $ 4,199 $ 6,759 $ ( 629 ) $ 6,130

Non-current (d)

Notes receivable from franchisees (c) $ 3,888 $ — $ 3,888 $ 4,514 $ ( 315 ) $ 4,199

_______________

(a) Includes income tax refund receivables of $ 3,236 and $ 11,901 as of January 1, 2023 and January 2, 2022, respectively.

(b) As of January 3, 2021, included incremental rent receivables of $ 5,226 due to actions taken by the Company in response to the COVID-19 pandemic, which included offering to defer base rent payments on properties owned by Wendy’s and leased to franchisees by 50% and offering to pass along any deferrals that were obtained on properties leased by Wendy’s and subleased to franchisees by up to 100%, beginning in May for a three month period, which were substantially repaid over a 12 month period beginning in August 2020.

(c) Includes the current portion of sales-type and direct financing lease receivables of $ 6,266 and $ 5,965 as of January 2, 2022 and January 3, 2021, respectively.

(b) Includes the current portion of sales-type and direct financing lease receivables of $ 8,263 and $ 6,266 as of January 1, 2023 and January 2, 2022, respectively.

See Note 20 for further information.

(d) Includes a note receivable from a franchisee in India, of which $ 335 and $ 356 are included in current notes receivable and $ 315 and $ 629 are included in non-current notes receivable as of January 2, 2022 and January 3, 2021, respectively.

As of January 2, 2022 and January 3, 2021, the Company had reserves of $ 650 and $ 985 , respectively, on the loan outstanding to the franchisee in India.

Includes a note receivable from a franchisee in Indonesia, of which $ 1,795 and $ 831 are included in current notes receivable as of January 2, 2022 and January 3, 2021, respectively, and $ 1,780 which is included in non-current notes receivable as of January 3, 2021.

Includes notes receivable related to the Brazil JV, of which $ 12,925 and $ 12,775 are included in current notes receivable and $ 4,200 and $ 4,350 are included in non-current notes receivable as of January 2, 2022 and January 3, 2021, respectively.

Includes a note receivable from a franchisee in Indonesia of $ 1,153 and $ 1,795 as of January 1, 2023 and January 2, 2022, respectively.

(c) Includes notes receivable related to the Brazil JV, of which $ 13,087 and $ 12,925 are included in current notes receivable and $ 3,888 and $ 4,200 are included in non-current notes receivable as of January 1, 2023 and January 2, 2022, respectively.

As of both January 1, 2023 and January 2, 2022, the Company had reserves of $ 4,640 on the loans outstanding related to the Brazil JV.

See Note 8 for further information.

(e) Included in “Other assets.”

As of January 2, 2022, included a note receivable from a franchisee in India, of which $ 335 was included in current notes receivable and $ 315 was included in non-current notes receivable.

As of January 2, 2022, the Company had reserves of $ 650 on the loan.

During 2022, the Company received a payment of $ 350 from the franchisee and the remaining note receivable balance and related reserve were written off.

(d) Included in “Other assets.”

THE WENDY’S COMPANY AND SUBSIDIARIES

9 unchanged sentences

$ 1,707 $ 4,640 $ 6,347

Balance at December 29, 2019

Balance at January 3, 2021

$ 3,739 $ 5,625 $ 9,364

7 unchanged sentences

Uncollectible accounts written off, net of recoveries ( 222 ) ( 1,286 ) ( 1,508 )

Balance at December 29, 2019

Balance at January 3, 2021

$ 3,739 $ 5,625 $ 9,364

11 unchanged sentences

contributed $ 1 , $ 2 and $ 2 , respectively, each receiving proportionate equity interests of 20 %, 40 % and 40 % , respectively.

The Company did not receive any distributions and our share of the Brazil JV’s net losses was $ 417 and $ 1,022 during 2020 and 2019, respectively.

The Brazil JV has ceased operations and no income or loss was recorded during 2021.

A wholly-owned subsidiary of Wendy’s has loans outstanding related to the Brazil JV totaling $ 17,125 as of both January 2, 2022 and January 3, 2021.

The Company did not receive any distributions and our share of the Brazil JV’s net losses was $ 417 during 2020.

The Brazil JV ceased operations in 2021 and no income or loss was recorded during 2022 and 2021 .

A wholly-owned subsidiary of Wendy’s has loans outstanding related to the Brazil JV totaling $ 16,975 and $ 17,125 as of January 1, 2023 and January 2, 2022, respectively.

The loans are denominated in U.S.

12 unchanged sentences

(the “Wendy’s Merger”).

Presented below is activity related to our portion of TimWen and the Brazil JV included in our consolidated balance sheets and consolidated statements of operations as of and for the years ended January 2, 2022, January 3, 2021 and December 29, 2019.

2022 2021 2020

12 unchanged sentences

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

In October 2019, the Company received a $ 25,000 cash settlement related to a previously held investment.

As a result, the Company recorded $ 24,366 to “Investment income (loss), net” and $ 634 to “General and administrative” for the reimbursement of related costs during the fourth quarter of 2019.

During the year ended January 1, 2023, the Company recognized a gain of $ 2,107 as a result of an observable price change for a similar investment of the same issuer.

(9) Properties

14 unchanged sentences

International Global Real Estate & Development Total

Balance at December 29, 2019:

Balance at January 3, 2021:

Goodwill, gross $ 596,874 $ 41,024 $ 122,548 $ 760,446

2 unchanged sentences

Changes in goodwill:

Restaurant acquisitions 23,442 — — 23,442

Restaurant dispositions (b) 547 — — 547

5 unchanged sentences

Changes in goodwill:

Restaurant acquisitions 23,442 — — 23,442

Restaurant dispositions (b) 547 — — 547

Restaurant acquisitions (c) ( 260 ) — — ( 260 )

Restaurant dispositions — — — —

Currency translation adjustment and other — ( 1,930 ) — ( 1,930 )

5 unchanged sentences

(a) Accumulated impairment losses resulted from the full impairment of goodwill of the Wendy’s international franchise restaurants during the fourth quarter of 2013.

(b) During 2020, in connection with the Company’s plan to sell 43 Company-operated restaurants in New York (excluding Manhattan) in the second quarter of 2021, goodwill of $ 5,394 was reclassified to assets held for sale.

The goodwill allocated to the sale was decreased by $ 568 during 2021 upon final disposition of the restaurants.

In addition, during 2021, goodwill of $ 21 was reclassified to assets held for sale in connection with the Company’s sale of its four Manhattan restaurants.

(b) Represents adjustments to the amount of goodwill allocated to the Company’s sale of 47 Company-operated restaurants in New York (including Manhattan) in the second quarter of 2021 upon final disposition of the restaurants.

See Note 4 for further information.

(c) Includes an adjustment to the fair value of net assets acquired in connection with the acquisition of franchised restaurants during 2021.

See Note 3 for further information.

THE WENDY’S COMPANY AND SUBSIDIARIES

23 unchanged sentences

Accrued taxes 30,159 28,142

NPC consortium bid (a) — 38,361

Other 46,604 48,806

$ 116,010 $ 140,783

_______________

(a) Represented amounts received from franchisees as part of the consortium bid to acquire NPC’s Wendy’s restaurants.

See Note 3 for further information.

THE WENDY’S COMPANY AND SUBSIDIARIES

6 unchanged sentences

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

$ 447,750 $ —

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

5 unchanged sentences

Series 2019-1 Class A-2 Notes:

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

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

364,000 368,000

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

1 unchanged sentence

Series 2018-1 Class A-2 Notes:

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

Canadian revolving credit facility — 1,962

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

451,250 456,000

7 % debentures, due in 2025

10 unchanged sentences

(i) 2022-1 Class A-2-I with an initial principal amount of $ 100,000 ;

(ii) 2021-1 Class A-2-II with an initial principal amount of $ 650,000 ;

(ii) 2022-1 Class A-2-II with an initial principal amount of $ 400,000 (collectively, the 2022-1 Class A-2-I Notes and the 2022-1 Class A-2-II Notes are referred to herein as the “2022-1 Class A-2 Notes”);

(iii) 2021-1 Class A-2-I with an initial principal amount of $ 450,000 ;

(iv) 2021-1 Class A-2-II with an initial principal amount of $ 650,000 ;

and (v) 2018-1 Class A-2-II with an initial principal amount of $ 475,000 (collectively, the “Class A-2 Notes”).

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

(v) 2019-1 Class A-2-I with an initial principal amount of $ 400,000 ;

(vi) 2019-1 Class A-2-II with an initial principal amount of $ 450,000 ;

and (vii) 2018-1 Class A-2-II with an initial principal amount of $ 475,000 (collectively, the notes described in (i) to (vii) are referred to herein as the “Class A-2 Notes”).

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

THE WENDY’S COMPANY AND SUBSIDIARIES

1 unchanged sentence

(In Thousands Except Per Share Amounts)

instruments, including a letter of credit facility.

of credit facility.

No amounts were borrowed under the 2021-1 Class A-1 Notes during 2022.

9 unchanged sentences

If the Master Issuer has not repaid or refinanced the Class A-2 Notes prior to their respective anticipated repayment dates, which range from 2026 through 2032, additional interest will accrue pursuant to the Indenture.

The 2021-1 Class A-1 Notes accrue interest at a variable interest rate based on (i) the prime rate, (ii) overnight federal funds rates, (iii) the London interbank offered rate (“LIBOR”) for U.S.

The 2021-1 Class A-1 Notes accrue interest at a variable interest rate based on (i) the prime rate, (ii) overnight federal funds rates, (iii) LIBOR for U.S.

Dollars or (iv) with respect to advances made by conduit investors, the weighted average cost of, or related to, the issuance of commercial paper allocated to fund or maintain such advances, in each case plus any applicable margin and as specified in the respective purchase agreements for the 2021-1 Class A-1 Notes.

11 unchanged sentences

(In Thousands Except Per Share Amounts)

Debt Financing

In April 2022, the Master Issuer completed a debt financing transaction under which the Company issued the 2022-1 Class A-2 Notes with an initial principal amount of $500,000.

The legal final maturity date of the 2022-1 Class A-2 Notes is March 2052 and the anticipated repayment dates are in 2029 and 2032.

Refinancing Transactions

4 unchanged sentences

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

In June 2019, the Master Issuer completed a refinancing transaction under which the Master Issuer issued the Series 2019-1 Class A-2-I Notes and the Series 2019-1 Class A-2-II Notes.

The Master Issuer’s outstanding Series 2015-1 Class A-2-II Notes were redeemed as part of the transaction.

As a result, the Company recorded a loss on early extinguishment of debt of $ 7,150 during 2019, which was comprised of the write-off of certain unamortized deferred financing costs.

Debt Issuance Costs

During 2021, 2020 and 2019, the Company incurred debt issuance costs of $ 20,873 , $ 2,122 and $ 14,008 in connection with the June 2021 refinancing transaction, the issuance of the 2020-1 Class A-1 Notes and the June 2019 refinancing transaction, respectively.

During 2022, 2021 and 2020, the Company incurred debt issuance costs of $ 10,232 , $ 20,873 and $ 2,122 in connection with the issuance of the 2022-1 Class A-2 Notes, the June 2021 refinancing transaction and the issuance of the 2020-1 Class A-1 Notes, respectively.

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

As of January 2, 2022, the effective interest rates, including the amortization of debt issuance costs, were 4.1 %, 4.0 %, 4.2 %, 2.6 % and 2.9 % for the Series 2018-1 Class A-2-II Notes, Series 2019-1 Class A-2-I Notes, Series 2019-1 Class A-2-II Notes, Series 2021-1 Class A-2-I Notes and Series 2021 Class A-2-II Notes, respectively.

As of January 1, 2023, the effective interest rates, including the amortization of debt issuance costs, were 4.1 %, 4.0 %, 4.2 %, 2.6 %, 2.9 %, 4.7 % and 4.7 % for the Series 2018-1 Class A-2-II Notes, Series 2019-1 Class A-2-I Notes, Series 2019-1 Class A-2-II Notes, Series 2021-1 Class A-2-I Notes, Series 2021-1 Class A-2-II Notes, Series 2022-1 Class A-2-I Notes and Series 2022-1 Class A-2-II Notes, respectively.

Other Long-Term Debt

3 unchanged sentences

In December 2019, Wendy’s repurchased $ 10,000 in principal of its 7 % debentures for $ 10,550 , including a premium of $ 500 and transaction fees of $ 50 .

As a result, the Company recognized a loss on early extinguishment of debt of $ 1,346 during the fourth quarter of 2019.

Subsequent to January 1, 2023, Wendy’s repurchased $ 25,000 in principal of its 7 % debentures at par value.

As a result, the Company recognized a loss on early extinguishment of debt of $ 1,009 during the first quarter of 2023.

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

5 unchanged sentences

During 2020, the Company borrowed and repaid $ 29,397 under the revolving line of credit.

There were no borrowings or repayments under the line of credit during 2021.

As of January 2, 2022, the Company had no outstanding borrowings under the revolving line of credit.

The increased borrowings in 2020 were taken as precautionary measures to provide enhanced financial flexibility considering the uncertain market conditions arising from the COVID-19 pandemic.

There were no borrowings or repayments under the line of credit during 2022 or 2021.

As of January 1, 2023, the Company had no outstanding borrowings under the advertising fund revolving line of credit.

Interest Expense

6 unchanged sentences

Cash and cash equivalents $ 43,439

Restricted cash and other assets (including long-term) 27,193

Restricted cash and other assets 34,855

Accounts and notes receivable, net 44,246

24 unchanged sentences

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

Financial liabilities

Series 2021-1 Class A-2-I Notes (b) 447,750 439,283 — — Level 2

Series 2021-1 Class A-2-II Notes (b) 646,750 642,352 — — Level 2

Series 2019-1 Class A-2-I Notes (b) 368,000 381,579 386,000 409,778 Level 2

Series 2019-1 Class A-2-II Notes (b) 414,000 439,792 434,250 469,555 Level 2

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

Series 2018-1 Class A-2-II Notes (b) 456,000 473,693 460,750 491,021 Level 2

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

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

7 % debentures, due in 2025 (b)

Financial liabilities (b)

Series 2022-1 Class A-2-I Notes 99,500 89,401 — — Level 2

Series 2022-1 Class A-2-II Notes 398,000 349,444 — — Level 2

Series 2021-1 Class A-2-I Notes 443,250 357,304 447,750 439,283 Level 2

Series 2021-1 Class A-2-II Notes 640,250 499,011 646,750 642,352 Level 2

Series 2019-1 Class A-2-I Notes 364,000 334,334 368,000 381,579 Level 2

Series 2019-1 Class A-2-II Notes 409,500 361,875 414,000 439,792 Level 2

Series 2018-1 Class A-2-II Notes 451,250 405,809 456,000 473,693 Level 2

7 % debentures, due in 2025

86,369 92,367 85,175 101,142 Level 2

_______________

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

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

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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 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 ROU 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 ROU 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.

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The Company’s valuation allowances of $ 35,680 and $ 38,277 as of January 1, 2023 and January 2, 2022, respectively, relate primarily to foreign and state tax credit and net operating loss carryforwards.

Valuation allowances decreased $ 11,691 during 2021 and increased $ 4,785 and $ 3,008 during 2020 and 2019, respectively.

The decrease in 2021 resulted primarily from a 2021 change in state tax law, which resulted in a one-time reduction in previously recorded valuation allowances against our deferred state tax assets of $ 12,606 .

Additionally, the relative presence of Company-operated restaurants in various states impacts expected future state taxable income available to utilize state net operating loss carryforwards.

Valuation allowances decreased $ 2,597 and $ 11,691 during 2022 and 2021, respectively, and increased $ 4,785 during 2020.

The relative presence of Company-operated restaurants in various states impacts expected future state taxable income available to utilize state net operating loss carryforwards.

The current portion of refundable income taxes was $ 3,236 and $ 11,901 as of January 1, 2023 and January 2, 2022, respectively, and is included in “Accounts and notes receivable, net.” There were no long-term refundable income taxes as of January 1, 2023 and January 2, 2022.

9 unchanged sentences

federal income tax effect ( 11,616 ) ( 6,256 ) ( 4,664 )

Prior years’ tax matters (a) 1,820 1,761 6,135

Prior years’ tax matters 2,290 1,820 1,761

Excess federal tax benefits from share-based compensation 402 7,160 5,338

1 unchanged sentence

tax effects of foreign operations ( 3,744 ) ( 5 ) ( 397 )

Valuation allowances (b) 11,807 ( 4,593 ) ( 2,833 )

Non-deductible goodwill (c) ( 947 ) — —

Valuation allowances (a) 2,127 11,807 ( 4,593 )

Non-deductible goodwill (b) — ( 947 ) —

Tax credits 1,385 1,028 1,901

4 unchanged sentences

_______________

(a) 2019 primarily relates to a reduction in unrecognized tax benefits due to a lapse of statute of limitations.

(b) 2021 primarily relates to the $ 12,606 benefit resulting from the state tax law change described above.

The effect of the tax law change also included $ 840 of additional deferred tax expense included in the State income tax provision line item, for a total of $ 11,766 .

(a) 2021 primarily relates to a $ 12,606 benefit resulting from a change in state tax law.

(b) Related to the sale of the New York Company-operated restaurants (including Manhattan).

See Note 4 for further information.

11 unchanged sentences

Tax positions of prior years ( 662 ) ( 2,015 ) ( 1,183 )

Tax positions of prior years ( 2,015 ) ( 1,183 ) ( 227 )

Settlements ( 8 ) ( 46 ) ( 119 )

1 unchanged sentence

Ending balance $ 17,404 $ 18,849 $ 20,973

During 2023, we believe it is reasonably possible the Company will reduce unrecognized tax benefits by up to $ 582 due primarily to the lapse of statutes of limitations and expected settlements.

THE WENDY’S COMPANY AND SUBSIDIARIES

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(In Thousands Except Per Share Amounts)

The reductions in unrecognized tax benefits in 2021 and 2020 were primarily related to decreases as a result of settlements with various taxing jurisdictions.

The additions in unrecognized tax benefits in 2019 was primarily related to the uncertainty of the income tax consequences of a cash settlement related to a previously held investment.

During 2022, we believe it is reasonably possible the Company will reduce unrecognized tax benefits by up to $ 98 due primarily to the lapse of statutes of limitations and expected settlements.

During 2021, 2020 and 2019, the Company recognized $ 138 , $ 159 and $( 489 ) of expense (income) for interest and $ 37 , $ 81 and $ 81 of income for penalties, respectively, related to uncertain tax positions.

The Company has $ 975 and $ 873 accrued for interest and $ 0 and $ 37 accrued for penalties as of January 2, 2022 and January 3, 2021, respectively.

During 2022, 2021 and 2020, the Company recognized $( 30 ), $ 138 and $ 159 of (income) expense for interest and $ 0 , $ 37 and $ 81 of income for penalties, respectively, related to uncertain tax positions.

The Company has $ 943 and $ 975 accrued for interest related to uncertain tax positions as of January 1, 2023 and January 2, 2022, respectively.

(15) Stockholders’ Equity

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Repurchases of Common Stock

In February 2020, our Board of Directors authorized a repurchase program for up to $ 100,000 of our common stock through February 28, 2021, when and if market conditions warranted and to the extent legally permissible.

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

In February 2022, our Board of Directors authorized a repurchase program for up to $ 100,000 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 $ 150,000 to the February 2022 Authorization, resulting in an aggregate authorization of $ 250,000 that was set to expire on February 28, 2023.

During 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 January 1, 2023, the Company had $ 198,089 of availability remaining under the February 2022 Authorization.

In January 2023, our Board of Directors authorized a repurchase program for up to $ 500,000 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 578 shares under the January 2023 Authorization with an aggregate purchase price of $ 12,910 , excluding commissions of $ 8 .

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

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

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

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

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

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

THE WENDY’S COMPANY AND SUBSIDIARIES

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(In Thousands Except Per Share Amounts)

In addition to the shares repurchased in connection with the 2021 ASR Agreement, during 2021, the Company repurchased 6,577 shares with an aggregate purchase price of $ 142,715 , excluding commissions of $ 93 , under the February 2020 repurchase authorization.

agreed upon discount.

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

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 $ 100,000 of our common stock through February 28, 2023, when and if market conditions warrant and to the extent legally permissible.

During 2020, the Company repurchased 1,572 shares under the February 2020 repurchase authorization with an aggregate purchase price of $ 32,285 , of which $ 723 was accrued at January 3, 2021, and excluding commissions of $ 22 .

In February 2019, our Board of Directors authorized a repurchase program for up to $ 225,000 of our common stock through March 1, 2020, when and if market conditions warranted and to the extent legally permissible.

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

During 2020, the Company repurchased 1,572 shares under the February 2020 Authorization with an aggregate purchase price of $ 32,285 , of which $ 723 was accrued at January 3, 2021, and excluding commissions of $ 22 .

Under the 2019 ASR Agreement, the Company paid the financial institution an initial purchase price of $ 100,000 in cash and received an initial delivery of 4,051 shares of common stock, representing an estimated 85 % of the total shares expected to be delivered under the 2019 ASR Agreement.

3 unchanged sentences

In addition to the shares repurchased in connection with the 2019 ASR Agreement, during 2020, the Company repurchased 1,312 shares with an aggregate purchase price of $ 28,770 , excluding commissions of $ 18 , under the February 2019 Authorization.

After taking into consideration these repurchases, with the completion of the 2019 ASR Agreement in February 2020, the Company completed its February 2019 authorization.

In addition to the shares repurchased in connection with the 2019 ASR Agreement, during 2019, the Company repurchased 6,107 shares with an aggregate purchase price of $ 117,685 , of which $ 1,801 was accrued at December 29, 2019, and excluding commissions of $ 86 , under the February 2019 authorization and the Company’s November 2018 authorization for up to $ 220,000 of our common stock through December 27, 2019.

After taking into consideration these repurchases, with the completion of the 2019 ASR Agreement in February 2020, the Company completed the February 2019 Authorization.

Preferred Stock

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The Company’s previous 2010 Omnibus Award Plan (as amended, the “2010 Plan”) expired in accordance with its terms in 2020.

All equity grants in 2021

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

were issued from the 2020 Plan.

All equity grants in 2022 and 2021 were issued from the 2020 Plan.

Equity grants in 2020 were issued from both the 2020 Plan and the 2010 Plan.

All equity grants during 2019 were issued from the 2010 Plan.

The 2020 Plan is currently the only equity plan from which future equity awards may be granted, but outstanding awards granted under the 2010 Plan will continue to be governed by the terms of the 2010 Plan.

As of January 1, 2023, there were approximately 18,168 shares of common stock available for future grants under the 2020 Plan.

During the periods presented in the consolidated financial statements, the Company settled all exercises of stock options and vesting of restricted shares, including performance shares, with treasury shares.

During the periods presented in

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

the consolidated financial statements, the Company settled all exercises of stock options and vesting of restricted shares, including performance shares, with treasury shares.

Stock Options

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Vested or expected to vest at January 1, 2023

10,770 $ 18.97 6.57 $ 41,084

Exercisable at January 1, 2023

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Restricted Shares

The Company grants RSAs and RSUs, which primarily cliff vest after 1 to 3 years.

The Company grants RSAs and RSUs, which primarily cliff vest after one to three years , respectively.

For the purposes of our disclosures, the term “Restricted Shares” applies to RSAs and RSUs collectively unless otherwise noted.

40 unchanged sentences

Dividend equivalent units issued (a) 14 21.67 11 27.37

Vested (b) ( 88 ) 15.65 ( 119 ) 15.65

Vested ( 75 ) 17.86 ( 99 ) 21.37

Forfeited ( 67 ) 17.86 ( 20 ) 21.38

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There is no weighted average fair value associated with dividend equivalent units.

(b) Market condition awards exclude the vesting of an additional 52 shares, which resulted from the performance of the awards exceeding Target.

The total fair value of performance condition awards that vested in 2022, 2021 and 2020 was $ 1,712 , $ 1,784 and $ 3,447 , respectively.

The total fair value of market condition awards that vested in 2022, 2021 and 2020 was $ 2,253 , $ 3,498 and $ 4,910 , respectively.

Modifications of Share-Based Awards

During 2020 and 2019, the Company modified the terms of awards granted to seven and ten employees, respectively, in connection with its Operations and Field Realignment Plan, IT Realignment Plan and G&A Realignment Plan discussed in Note 5.

These modifications resulted in the accelerated vesting of certain stock options in connection with the termination of such employees.

As a result, during 2020 and 2019, the Company recognized an increase in share-based compensation of $ 621 and $ 1,011 , respectively, which was included in “Reorganization and realignment costs.” The Company did not modify the terms of any awards during 2021.

Share-Based Compensation

11 unchanged sentences

_______________

(a) 2021 and 2020 include $ 19 and $ 213 , respectively, related to retention awards in connection with the Company’s G&A Realignment Plan, which is included in “Reorganization and realignment costs.” See Note 5 for further information.

As of January 1, 2023, there was $ 30,038 of total unrecognized share-based compensation, which will be recognized over a weighted average amortization period of 1.98 years.

THE WENDY’S COMPANY AND SUBSIDIARIES

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(In Thousands Except Per Share Amounts)

(a) 2021, 2020 and 2019 include $ 19 , $ 213 and $ 396 , respectively, related to retention awards in connection with the Company’s G&A Realignment Plan, which is included in “Reorganization and realignment costs.” See Note 5 for further information.

As of January 2, 2022, there was $ 29,337 of total unrecognized share-based compensation, which will be recognized over a weighted average amortization period of 2.06 years.

(17) Impairment of Long-Lived Assets

9 unchanged sentences

2022 2021 2020

Gain on sale of investments, net (a) $ 63 $ — $ 24,496

Gain on other investments in equity securities $ 2,107 $ — $ —

Gain on sale of investments, net — 63 —

Impairment loss on other investments in equity securities — — ( 471 )

1 unchanged sentence

$ 2,107 $ 39 $ ( 225 )

_______________

(a) In October 2019, the Company received a $ 25,000 cash settlement related to a previously held investment.

As a result, the Company recorded $ 24,366 to “Investment income (loss), net” and $ 634 to “General and administrative” for the reimbursement of related costs.

(19) Retirement Benefit Plans

4 unchanged sentences

In conjunction with the Wendy’s Merger, amounts due under supplemental executive retirement plans (collectively, the “SERP”) were funded into a restricted account.

As of January 1, 2011, participation in the SERP was frozen to new entrants

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(In Thousands Except Per Share Amounts)

and future contributions, and existing participants’ balances only earn annual interest.

As of January 1, 2011, participation in the SERP was frozen to new entrants and future contributions, and existing participants’ balances only earn annual interest.

The corresponding SERP liabilities are included in “Accrued expenses and other current liabilities” and “Other liabilities” and, in the aggregate, were $ 281 and $ 294 as of January 1, 2023 and January 2, 2022, respectively.

3 unchanged sentences

The total of participant deferrals was $ 1,435 and $ 1,455 at January 1, 2023 and January 2, 2022, respectively, which are included in “Other liabilities.”

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Nature of Leases

21 unchanged sentences

Also includes $ 29,648 , $ 23,558 and $ 26,866 for 2022, 2021 and 2020, respectively, recorded to “Cost of sales” for leases for Company-operated restaurants.

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(In Thousands Except Per Share Amounts)

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

7 unchanged sentences

Operating lease liabilities 24,742 58,770 18,327

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The following table includes supplemental information related to leases:

11 unchanged sentences

Operating lease assets 754,498 812,620

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(In Thousands Except Per Share Amounts)

The following table illustrates the Company’s future minimum rental payments for non-cancelable leases as of January 1, 2023:

15 unchanged sentences

(b) The present value of minimum operating lease payments of $ 48,120 and $ 792,051 are included in “Current portion of operating lease liabilities” and “Long-term operating lease liabilities,” respectively.

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Company as Lessor

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Sublease income includes lessees’ variable payments to the Company for executory costs of $ 38,733 , $ 39,650 and $ 38,636 for 2022, 2021 and 2020, respectively.

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(In Thousands Except Per Share Amounts)

The following table illustrates the Company’s future minimum rental receipts for non-cancelable leases and subleases as of January 1, 2023:

14 unchanged sentences

The present value of minimum sales-type and direct financing rental receipts includes a net investment in unguaranteed residual assets of $ 611 .

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(In Thousands Except Per Share Amounts)

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

6 unchanged sentences

$ 366,741 $ 375,753

(21) Supplemental Cash Flow Information

The following table includes supplemental cash flow information for 2022, 2021 and 2020:

2023 January 2,

2022 January 3,

Long-term debt-related activities, net:

Loss on early extinguishment of debt $ — $ 17,917 $ —

Accretion of long-term debt 1,194 1,177 1,161

Amortization of deferred financing costs 6,568 5,664 5,562

$ 7,762 $ 24,758 $ 6,723

Cash paid for:

Interest $ 144,418 $ 133,284 $ 136,228

Income taxes, net of refunds 47,769 54,779 16,202

Non-cash investing and financing activities:

Capital expenditures included in accounts payable $ 14,468 $ 6,158 $ 3,673

Finance leases 34,478 82,032 34,918

The following table includes a reconciliation of cash, cash equivalents and restricted cash for 2022, 2021 and 2020:

2023 January 2,

2022 January 3,

Cash and cash equivalents $ 745,889 $ 249,438 $ 306,989

Restricted cash 35,203 27,535 33,973

Restricted cash, included in Advertising funds restricted assets 50,709 89,993 77,279

Total cash, cash equivalents and restricted cash $ 831,801 $ 366,966 $ 418,241

Franchise Development Fund

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

The Company expects the development fund to drive up to 80 new franchise restaurants through 2026.

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

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(In Thousands Except Per Share Amounts)

(22) Guarantees and Other Commitments and Contingencies

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Franchisee Image Activation Incentive Programs

In order to promote new restaurant development, Wendy’s has an incentive program for franchisees that provides for technical assistance fee waivers and reductions in royalty and national advertising payments for up to the first two years of operation for qualifying new restaurants opened prior to December 31, 2022.

In addition, Wendy’s has a restaurant development incentive program that provides for incremental reductions in royalty and national advertising payments for up to the first two years of operation for qualifying new restaurants for existing franchisees that sign up for the program under a new development agreement, or through an extension of their existing development agreement, and commit to incremental development of new Wendy’s restaurants.

Under any extended development agreements, franchisees are also eligible for technical assistance fee waivers for restaurants opened one year in advance of their original development schedule so long as the restaurants are opened prior to December 31, 2022.

To promote new restaurant development, Wendy’s has provided franchisees with certain incentive programs for qualifying new restaurants.

In February 2023, Wendy’s 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 (“Pacesetter”).

Wendy’s previously offered and will continue to offer a restaurant development incentive program that provides for reductions in royalty and national advertising fees for up to the first two years of operation for qualifying new restaurants (“Groundbreaker”).

and Canadian franchisees may elect either the Pacesetter program or the Groundbreaker program when committing to new multi-unit development agreements or adding incremental commitments to existing development agreements.

Wendy’s also provides franchisees with the option of an early 20 -year or 25 -year renewal of their franchise agreement upon completion of reimaging utilizing certain approved Image Activation reimage designs.

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Lease Guarantees

21 unchanged sentences

Beverage purchases made by the Company under this agreement during 2022, 2021 and 2020 were $ 10,545 , $ 9,709 and $ 10,986 , respectively.

The Company estimates future annual purchases to be approximately $ 10,700 in 2022, $ 10,800 in 2023, $ 11,100 in 2024 and $ 11,400 in 2025 based on current pricing and the expected ratio of usage at Company-operated restaurants to franchised restaurants.

The Company estimates future annual purchases to be approximately $ 10,900 in 2023, $ 11,000 in 2024 and $ 11,200 in 2025 based on current pricing and the expected ratio of usage

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(In Thousands Except Per Share Amounts)

at Company-operated restaurants to franchised restaurants.

As of January 1, 2023, $ 2,707 is due to the beverage vendor and is included in “Accounts payable,” principally for annual estimated payments that exceeded usage under this agreement.

2 unchanged sentences

Costs incurred by the Company under this agreement were $ 18,780 , $ 20,053 and $ 16,961 during 2022, 2021 and 2020, respectively.

The Company’s unconditional purchase obligations under the agreement are approximately $ 17,100 in 2022, $ 14,700 in 2023, $ 13,800 in 2024 and $ 7,100 in 2025.

The Company’s unconditional purchase obligations under the agreement are approximately $ 14,700 in 2023, $ 13,800 in 2024 and $ 7,100 in 2025.

As of January 1, 2023, $ 1,395 is due to the consultant and is included in “Accrued expenses and other current liabilities.”

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Marketing Agreement

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Wendy’s recorded its share of patronage dividends of $ 427 and $ 279 in 2022 and 2021, respectively, which are included as a reduction of “Cost of sales.” There were no patronage dividends recorded during 2020.

(b) Pursuant to a lease agreement, Wendy’s leased 14,493 square feet of office space to QSCC for an annual base rental of $ 217 .

The lease was amended in June 2021 to increase both the leased square footage to 18,774 and the annual base rental to $ 250 , subject to annual increases, and to extend the lease term through January 31, 2027.

The Company received $ 217 of lease payments from QSCC during each of 2021, 2020 and 2019, which has been recorded to “Franchise rental income.”

TimWen Lease and Management Fee Payments

(c) 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.

Wendy’s paid TimWen $ 18,906 , $ 16,339 and $ 16,867 under these lease agreements during 2021, 2020 and 2019, respectively.

In addition, TimWen paid Wendy’s a management fee under the TimWen joint venture agreement of $ 219 , $ 209 and $ 207 during 2021, 2020 and 2019, respectively, which has been included as a reduction to “General and administrative.”

(b) Pursuant to a lease agreement, Wendy’s leased 14,493 square feet of office space to QSCC for an annual base rent of $ 217 .

The lease was amended in June 2021 to increase both the leased square footage to 18,774 and the annual base rent to $ 250 beginning in 2023, subject to annual increases, and to extend the lease term through January 31, 2027.

The Company received lease payments from QSCC of $ 198 during 2022 and $ 217 during each of 2021 and 2020, which has been recorded to “Franchise rental income.”

THE WENDY’S COMPANY AND SUBSIDIARIES

1 unchanged sentence

(In Thousands Except Per Share Amounts)

TimWen Lease and Management Fee Payments

(c) 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.

Wendy’s paid TimWen $ 19,927 , $ 18,906 and $ 16,339 under these lease agreements during 2022, 2021 and 2020, respectively, which has been recorded to “Franchise rental expense.” In addition, TimWen paid Wendy’s a management fee under the TimWen joint venture agreement of $ 233 , $ 219 and $ 209 during 2022, 2021 and 2020, 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 operating companies managed by Yellow Cab Holdings, LLC (“Yellow Cab”), a Wendy’s franchisee, that as of January 2, 2022 owned and operated 84 Wendy’s restaurants (including 54 restaurants acquired from NPC during the first quarter of 2021 as described below).

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 January 1, 2023 owned and operated 84 Wendy’s restaurants (including 54 restaurants acquired from NPC during the first quarter of 2021 as described below).

During 2022, 2021 and the fourth quarter of 2020, the Company recognized $ 13,404 , $ 9,869 and $ 1,090 , respectively, in royalty, advertising fund, lease and other income from Yellow Cab and related entities.

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

As of January 1, 2023 and January 2, 2022, $ 1,125 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.”

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

6 unchanged sentences

We provide accruals for such litigation and claims when we determine it is probable that a liability has been incurred and the loss is reasonably estimable.

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

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

The Company believes it has adequate accruals for all of our legal and environmental matters.

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

In addition, most cases seek an indeterminate amount of damages and many involve multiple parties.

Predicting the outcomes of settlement discussions or judicial or arbitral decisions is thus inherently difficult and future developments could cause these actions or claims, individually or in aggregate, to have a material adverse effect on the Company’s financial condition, results of operations, or cash flows of a particular reporting period.

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 21, 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.

(25) Advertising Costs and Funds

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(In Thousands Except Per Share Amounts)

Restricted assets and related liabilities of the Advertising Funds at January 2, 2022 and January 3, 2021 are as follows:

Restricted assets and liabilities of the Advertising Funds at January 1, 2023 and January 2, 2022 are as follows:

January 1, 2023 January 2, 2022

41 unchanged sentences

(a) $ 480,498 $ 450,117 $ 393,314

Wendy’s International 27,386 20,119 20,246

Wendy’s International (b) 30,432 27,386 20,119

Global Real Estate & Development 108,700 106,113 100,731

1 unchanged sentence

Unallocated franchise support and other costs ( 742 ) ( 753 ) —

Advertising funds surplus 2,770 2,904 1,337

Unallocated general and administrative (b) ( 116,273 ) ( 94,256 ) ( 81,230 )

Depreciation and amortization ( 125,540 ) ( 132,775 ) ( 131,693 )

Advertising funds (deficit) surplus ( 8,325 ) 2,770 2,904

Unallocated general and administrative (c) ( 130,103 ) ( 116,273 ) ( 94,256 )

Depreciation and amortization (exclusive of amortization of cloud computing arrangements shown separately below) ( 133,414 ) ( 125,540 ) ( 132,775 )

Amortization of cloud computing arrangements ( 2,394 ) — —

System optimization gains, net 6,779 33,545 3,148

8 unchanged sentences

_______________

(a) Includes advertising funds expense of $ 25,000 and $ 14,600 for 2021 and 2020, respectively, related to the Company funding of incremental advertising to support the breakfast daypart.

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

(a) Wendy’s U.S.

includes advertising funds expense of $ 11,000 , $ 25,000 and $ 14,600 for 2022, 2021 and 2020, respectively, related to the Company funding of incremental advertising.

(b) Wendy’s International includes advertising fund expense of $ 4,116 for 2022 related to the Company’s funding of incremental advertising.

In addition, Wendy’s International includes other international-related advertising deficit of $ 1,099 for 2022.

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Net income (loss) of our equity method investments for the Brazil JV and TimWen are included in segment profit for the Wendy’s International and Global Real Estate & Development segments, 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-K

Item 8. Financial Statements and Supplementary Data