What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-05-10 compared with 2022-11-09 · 188 added, 239 removed, 238 unchanged (64% of the section changed)

2 unchanged sentences

Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended January 1, 2023 (the “Form 10-K”).

There have been no material changes as of October 2, 2022 to the application of our critical accounting policies as described in Item 7 of the Form 10-K.

There have been no material changes as of April 2, 2023 to the application of our critical accounting policies as described in Item 7 of the Form 10-K.

Certain statements we make under this Item 2 constitute “forward-looking statements” under the Private Securities Litigation Reform Act of 1995.

13 unchanged sentences

and 31 foreign countries and U.S.

territories as of October 2, 2022.

territories as of April 2, 2023.

Each Wendy’s restaurant offers an extensive menu specializing in hamburger sandwiches and featuring filet of chicken breast sandwiches, which are prepared to order with the customer’s choice of toppings and condiments.

3 unchanged sentences

system and in Canada.

Wendy’s breakfast menu features a variety of breakfast sandwiches such as the Breakfast Baconator ® , sides such as seasoned potatoes, and a beverage platform that includes our vanilla and chocolate Frosty-ccino TM iced coffee.

Wendy’s breakfast menu features a variety of breakfast sandwiches such as the Breakfast Baconator ® and sides such as seasoned potatoes.

The Company is comprised of the following segments:

12 unchanged sentences

The Company’s fiscal reporting periods consist of 52 or 53 weeks ending on the Sunday closest to December 31.

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

All three-month periods presented herein contain 13 weeks.

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

Executive Overview

As of October 2, 2022, the Wendy’s restaurant system was comprised of 7,080 restaurants, with 5,997 Wendy’s restaurants in operation in the U.S.

As of April 2, 2023, the Wendy’s restaurant system was comprised of 7,095 restaurants, with 5,989 Wendy’s restaurants in operation in the U.S.

restaurants, 403 were operated by the Company and 5,586 were operated by a total of 217 franchisees.

In addition, at October 2, 2022, there were 1,083 Wendy’s restaurants in operation in 31 foreign countries and U.S.

Of the international restaurants, 1,074 were operated by franchisees and nine were operated by the Company in the United Kingdom (the “U.K.”).

In addition, at April 2, 2023, there were 1,106 Wendy’s restaurants in operation in 31 foreign countries and U.S.

Of the international restaurants, 1,095 were operated by a total of 106 franchisees and 11 were operated by the Company in the United Kingdom (the “U.K.”).

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

(1) sales at Company-operated restaurants and (2) franchise-related revenues, including royalties, national advertising funds contributions, rents and franchise fees received from Wendy’s franchised restaurants.

Company-operated restaurants comprised approximately 5% of the total Wendy’s system as of October 2, 2022.

Company-operated restaurants comprised approximately 5% of the total Wendy’s system as of April 2, 2023.

Wendy’s operating results are impacted by a number of external factors, including commodity costs, labor costs, intense price competition, unemployment and consumer spending levels, general economic and market trends and weather.

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

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

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

Key Business Measures

14 unchanged sentences

The Company calculates same-restaurant sales and systemwide sales growth on a constant currency basis.

Constant currency results exclude the impact of foreign currency translation and are derived by translating current year results at prior

year average exchange rates.

Constant currency results exclude the impact of foreign currency translation and are derived by translating current year results at prior year average exchange rates.

The Company believes excluding the impact of foreign currency translation provides better year over year comparability.

Same-restaurant sales and systemwide sales exclude sales from Argentina and Venezuela due to the highly inflationary economies of those countries.

Same-restaurant sales and systemwide sales exclude sales from Argentina due to that country’s highly inflationary economy.

The Company considers economies that have had cumulative inflation in excess of 100% over a three-year period as highly inflationary.

5 unchanged sentences

Because all companies do not calculate non-GAAP financial measures in the same way, this measure as used by other companies may not be consistent with the way the Company calculates such measure.

Third Quarter Financial Highlights

• Revenue increased 13.3% to $532.6 million in the third quarter of 2022 compared to $470.3 million in the third quarter of 2021;

• Global same-restaurant sales increased 6.9%, U.S.

same-restaurant sales increased 6.4% and international same-restaurant sales increased 10.8% compared to the third quarter of 2021;

• Company-operated restaurant margin was 14.3% in the third quarter of 2022, a decrease of 10 basis points compared to the third quarter of 2021;

• Net income increased 22.8% to $50.5 million in the third quarter of 2022 compared to $41.2 million in the third quarter of 2021.

Year-to-Date Financial Highlights

• Revenue increased 9.5% to $1.6 billion in the first nine months of 2022 compared to $1.4 billion in the first nine months of 2021;

First Quarter Financial Highlights

• Revenue increased 8.2% to $528.8 million in the first quarter of 2023 compared with $488.6 million in the first quarter of 2022;

• Global same-restaurant sales increased 8.0%, U.S.

same-restaurant sales increased 3.3% and international same-restaurant sales increased 13.3% compared to the first nine months of 2021;

• Company-operated restaurant margin was 13.5% in the first nine months of 2022, a decrease of 390 basis points from the first nine months of 2021;

• Net income decreased 8.2% to $136.1 million in the first nine months of 2022 compared to $148.3 million in the first nine months of 2021.

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

Since the launch of breakfast across the U.S.

system in March 2020, systemwide sales have benefited from this new daypart, with average weekly U.S.

breakfast sales representing approximately $2,600 per restaurant during the nine months ended October 2, 2022.

The Company launched breakfast in Canada in May 2022, which has increased the percentage of global systemwide restaurants serving breakfast to approximately 95%.

The Company expects to fund a total of $16.0 million of incremental advertising during 2022 to support the breakfast daypart, which the Company expects will continue to drive trial and acceleration of the Company’s breakfast offering in the U.S.

same-restaurant sales increased 7.2% and international same-restaurant sales increased 13.9% compared with the first quarter of 2022.

On a two-year basis, global same-restaurant sales increased 10.4%;

• Global Company-operated restaurant margin was 13.8% in the first quarter of 2023, an increase of 220 basis points compared with the first quarter of 2022;

• Net income increased 6.4% to $39.8 million in the first quarter of 2023 compared with $37.4 million in the first quarter of 2022.

Global Same-Restaurant Sales

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

Global same-restaurant sales increased 8.0% in the first quarter of 2023 and increased 10.4% on a two-year basis.

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

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

The Company’s digital business represented approximately 10.1% of global systemwide sales during the nine months ended October 2, 2022.

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

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

The Company’s digital business represented approximately 12.4% and 10.6% of global systemwide sales during the three months ended April 2, 2023 and April 3, 2022, respectively.

New Restaurant Development

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

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

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

During the nine months ended October 2, 2022, the Company and its franchisees added 131 net new restaurants across the Wendy’s system.

During the first nine months of 2022, the Company reevaluated its development plans resulting in a reduction in its expected net new restaurant growth, primarily related to non-traditional restaurants.

As a result, the Company now expects net new restaurant growth of 2.0% to 2.5% in 2022 and expects to reach 8,000 to 8,500 systemwide restaurants by the end of 2025.

Debt Financing

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

Class A-2-I with an interest rate of 4.236% and initial principal amount of $100.0 million (the “Class A-2-I Notes”) and Class A-2-II with an interest rate of 4.535% and initial principal amount of $400.0 million (the “Class A-2-II Notes” and, collectively, the “Series 2022-1 Class A-2 Notes”).

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

See “Liquidity and Capital Resources” below and Note 7 to the Condensed Consolidated Financial Statements contained in Item 1 herein for further information on the Company’s debt financing transaction.

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

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

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

In addition, the Company has development agreements in place with a number of

franchisees that contractually obligate such franchisees to open additional Wendy’s restaurants over a specified timeframe.

Global restaurant counts as of April 2, 2023 were flat compared with January 1, 2023.

Organizational Redesign

In February 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 (the “Organizational Redesign Plan”).

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

The Company expects to incur total costs of approximately $11 million to $13 million related to the Organizational Redesign Plan, of which approximately $9 million to $11 million will be cash expenditures.

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

Costs related to the Organizational Redesign Plan are recorded to “Reorganization and realignment costs.” During the three months ended April 2, 2023, the Company recognized costs totaling $6.7 million, which primarily included severance and related employee costs and share-based compensation.

The Company expects to incur additional costs aggregating approximately $4 million to $6 million, comprised of (1) severance and related employee costs of approximately $2.5 million, (2) recruitment and relocation costs of approximately $0.9 million, (3) third-party and other costs of approximately $0.7 million and (4) share-based compensation of approximately $1.2 million.

The Company expects costs related to the Organizational Redesign Plan to continue into 2026, with approximately three-fourths of the total costs to be recognized during 2023.

Results of Operations

The tables included throughout this Results of Operations set forth in millions the Company’s condensed consolidated results of operations for the third quarter and the first nine months of 2022 and 2021.

Third Quarter Nine Months

2022 2021 Change 2022 2021 Change

The tables included throughout this Results of Operations set forth in millions the Company’s condensed consolidated results of operations for the first quarter of 2023 and 2022.

First Quarter

2023 2022 Change

Sales $ 227.9 $ 209.3 $ 18.6

9 unchanged sentences

General and administrative 62.3 62.3 —

Depreciation and amortization (exclusive of amortization of cloud computing arrangements shown separately below) 34.3 30.9 3.4 100.9 93.2 7.7

Depreciation and amortization (exclusive of amortization of

cloud computing arrangements shown separately below)

33.5 33.2 0.3

Amortization of cloud computing arrangements 1.6 — 1.6

7 unchanged sentences

Loss on early extinguishment of debt (1.3) — (1.3)

Investment income, net — — — 2.1 — 2.1

Investment (loss) income, net (3.6) 2.1 (5.7)

Other income, net 7.4 0.2 7.2

2 unchanged sentences

Net income $ 39.8 $ 37.4 $ 2.4

Third Quarter Nine Months

Total Revenues 2021 % of

Total Revenues 2022 % of

First Quarter

Total Revenues 2022 % of

11 unchanged sentences

$ 528.8 100.0 % $ 488.6 100.0 %

Third Quarter Nine Months

Sales 2021 % of

Sales 2022 % of

First Quarter

Sales 2022 % of

5 unchanged sentences

Total cost of sales $ 196.5 86.2 % $ 185.1 88.4 %

Third Quarter Nine Months

Sales 2021 % of

Sales 2022 % of

First Quarter

Sales 2022 % of

Restaurant margin $ 32.6 14.3 % $ 24.7 14.4 % $ 90.4 13.5 % $ 96.3 17.4 %

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

Third Quarter Nine Months

Company-operated restaurant margin:

$ 32.7 14.7 % $ 24.7 12.0 %

Global 31.4 13.8 % 24.2 11.6 %

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

First Quarter

Key business measures:

2 unchanged sentences

Franchised 7.2 % 1.0 %

6.4 % 2.1 % 3.3 % 10.2 %

International same-restaurant sales (a) 13.9 % 14.1 %

12 unchanged sentences

_______________

(a) Excludes Argentina and Venezuela due to the impact of the highly inflationary economies of those countries.

(b) During the third quarter of 2022 and 2021, global systemwide sales increased 8.9% and 5.3%, respectively, U.S.

systemwide sales increased 7.7% and 3.7%, respectively, and international systemwide sales increased 18.3% and 20.2%, respectively, on a constant currency basis.

During the first nine months of 2022 and 2021, global systemwide sales increased 6.3% and 13.2%, respectively, U.S.

(a) Excludes Argentina due to the impact of that country’s highly inflationary economy.

(b) During the first quarter of 2023 and 2022, global systemwide sales increased 10.0% and 4.2%, respectively, U.S.

systemwide sales increased 8.6% and 2.4%, respectively, and international systemwide sales increased 21.0% and 19.2%, respectively, on a constant currency basis.

Third Quarter

First Quarter

Company-operated U.S.

1 unchanged sentence

Restaurant count:

Restaurant count at July 3, 2022

403 5,580 8 1,049 7,040

Opened 2 25 1 30 58

Closed (a) (1) (12) — (5) (18)

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

Restaurant count at October 2, 2022

403 5,594 9 1,074 7,080

Company-operated U.S.

Franchised International Company-operated International Franchised Systemwide

Restaurant count at January 1, 2023

1 unchanged sentence

Opened 1 19 — 19 39

Closed (a) (5) (37) — (25) (67)

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

Restaurant count at October 2, 2022

403 5,594 9 1,074 7,080

Closed (1) (24) (1) (13) (39)

Restaurant count at April 2, 2023

403 5,586 11 1,095 7,095

(a) Excludes restaurants temporarily closed.

Sales Third Quarter Nine Months

2022 2021 Change 2022 2021 Change

Sales First Quarter

2023 2022 Change

Sales $ 227.9 $ 209.3 $ 18.6

The increase in sales for the third quarter and the first nine months of 2022 was primarily due to (1) the Company’s acquisition of 93 franchise-operated restaurants in Florida during the fourth quarter of 2021 of $43.0 million and $128.2 million, respectively, (2) a 6.8% and 4.2% increase in Company-operated same-restaurant sales of $11.2 million and $22.6 million, respectively, and (3) net new restaurant development of $2.9 million and $4.8 million, respectively.

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

The increase in sales during the first quarter of 2023 was primarily due to (1) a 7.4% increase in Company-operated same-restaurant sales of $14.9 million and (2) net new restaurant development compared with the first quarter of 2022 of $4.2 million.

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

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

Franchise Royalty Revenue and Fees Third Quarter Nine Months

2022 2021 Change 2022 2021 Change

Franchise Royalty Revenue and Fees First Quarter

2023 2022 Change

Franchise royalty revenue $ 122.2 $ 111.7 $ 10.5

1 unchanged sentence

$ 141.7 $ 128.9 $ 12.8

Franchise royalty revenue during the third quarter of 2022 increased $7.9 million, of which (1) $7.7 million was due to a 6.9% increase in global franchise same-restaurant sales and (2) $0.4 million was due to a net increase in the number of franchise restaurants in operation during 2022 compared to 2021.

Franchise royalty revenue during the first nine months of 2022 increased $17.0 million, of which (1) $14.6 million was due to a 4.4% increase in global franchise same-restaurant sales and (2) $2.8 million was due to a net increase in the number of franchise restaurants in operation during 2022 compared to 2021.

Franchise same-restaurant sales during the third quarter and the first nine months of 2022 increased due to higher average check, partially offset by a decrease in customer count.

Franchise same-restaurant sales during the first nine months of 2021

benefited from government stimulus payments to consumers during the first quarter of 2021, which did not recur in the first nine months of 2022.

The decrease in franchise fees during the third quarter and the first nine months of 2022 was primarily due to the accelerated recognition of franchise agreement revenue in the prior year as a result of franchisee-to-franchisee restaurant transfers of $4.8 million.

During the first nine months of 2022, franchise fees also decreased due to the accelerated recognition of franchise fees of $1.7 million associated with canceled development agreements during the first nine months of 2021, partially offset by higher fees for providing information technology services to franchisees of $5.5 million.

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

Franchise Rental Income Third Quarter Nine Months

2022 2021 Change 2022 2021 Change

Franchise royalty revenue during the first quarter of 2023 increased $10.5 million, of which (1) $8.8 million was due to an 8.0% increase in global franchise same-restaurant sales and (2) $2.0 million was due to net new restaurant development compared with the first quarter of 2022.

Franchise same-restaurant sales during the first quarter of 2023 increased due to (1) higher average check and (2) an increase in customer count.

The increase in franchise fees during the first quarter of 2023 was primarily due to (1) higher fees for providing information technology services to franchisees of $0.9 million and (2) higher other miscellaneous franchise fees of $0.9 million.

Franchise Rental Income First Quarter

2023 2022 Change

Franchise rental income $ 57.8 $ 57.9 $ (0.1)

The decrease in franchise rental income during the third quarter and the first nine months of 2022 was primarily due to the impact of terminating existing leases where the Company was lessor of $3.2 million and $8.0 million, respectively, primarily in connection with the Company’s acquisition of franchise-operated restaurants in Florida during the fourth quarter of 2021.

The decrease in franchise rental income for the first nine months of 2022 was partially offset by the impact of the sale of Company-operated restaurants in New York during the second quarter of 2021.

Advertising Funds Revenue Third Quarter Nine Months

2022 2021 Change 2022 2021 Change

The decrease in franchise rental income during the first quarter of 2023 was primarily due to the impact of assigning fewer leases to franchisees during 2023 compared with 2022.

Advertising Funds Revenue First Quarter

2023 2022 Change

Advertising funds revenue $ 101.4 $ 92.5 $ 8.9

The increase in advertising funds revenue during the third quarter and the first nine months of 2022 was primarily due to an increase in franchise same-restaurant sales in the U.S.

Cost of Sales, as a Percent of Sales Third Quarter Nine Months

2022 2021 Change 2022 2021 Change

The increase in advertising funds revenue during the first quarter of 2023 was primarily due to an increase in franchise same-restaurant sales in the U.S.

Cost of Sales, as a Percent of Sales First Quarter

2023 2022 Change

Food and paper 32.4 % 32.6 % (0.2) %

2 unchanged sentences

86.2 % 88.4 % (2.2) %

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

These impacts were partially offset by higher average check.

Franchise Support and Other Costs Third Quarter Nine Months

2022 2021 Change 2022 2021 Change

The decrease in cost of sales, as a percent of sales, during the first quarter of 2023 was primarily due to higher average check.

This impact was partially offset by (1) higher commodity costs, (2) an increase in restaurant labor rates, (3) a decrease in customer count and (4) the impact of the Company’s investments to support the entry into the U.K.

market and additional inflationary pressures in the U.K.

Franchise Support and Other Costs First Quarter

2023 2022 Change

Franchise support and other costs $ 13.3 $ 11.8 $ 1.5

The increase in franchise support and other costs during the third quarter and the first nine months of 2022 was primarily due to an increase in costs incurred to provide information technology and other services to franchisees.

Franchise Rental Expense Third Quarter Nine Months

2022 2021 Change 2022 2021 Change

The increase in franchise support and other costs during the first quarter of 2023 was primarily due to an increase in costs incurred to provide information technology and other services to franchisees.

Franchise Rental Expense First Quarter

2023 2022 Change

Franchise rental expense $ 30.6 $ 28.9 $ 1.7

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

Advertising Funds Expense Third Quarter Nine Months

2022 2021 Change 2022 2021 Change

The increase in franchise rental expense during the first quarter of 2023 was primarily due to the impact of assigning fewer leases to franchisees during 2023 compared with 2022.

Advertising Funds Expense First Quarter

2023 2022 Change

Advertising funds expense $ 101.7 $ 97.8 $ 3.9

On an interim basis, advertising funds expense is recognized in proportion to advertising funds revenue.

The Company expects advertising funds expense to exceed advertising funds revenue by approximately $21.0 million for 2022, which includes (1) the Company’s previously announced decision to fund up to $16.0 million of incremental advertising and (2) the amount by which advertising funds revenue exceeded advertising funds expense in prior years (excluding the Company’s funding of incremental advertising) of approximately $5.0 million.

During the third quarter of 2022, advertising funds expense decreased due to a decrease in the recognition of the Company’s funding of incremental advertising, partially offset by an increase in franchise same-restaurant sales in the U.S.

During the first nine months of 2022, advertising funds expense increased due to an increase in franchise same-restaurant sales in the U.S.

and Canada, partially offset by a decrease in the recognition of the Company’s funding of incremental advertising.

General and Administrative Third Quarter Nine Months

2022 2021 (a) Change 2022 2021 (a) Change

Incentive compensation $ 6.4 $ 11.0 $ (4.6) $ 19.2 $ 33.5 $ (14.3)

Employee compensation and benefits 32.0 29.5 2.5 96.1 86.8 9.3

The Company expects advertising funds expense to be lower than advertising funds revenue by approximately $3.0 million for 2023, which includes the amount by which advertising funds expense exceeded advertising funds revenue in prior years (excluding the Company’s funding of incremental advertising) of approximately $5.0 million, partially offset by the Company’s planned incremental funding of advertising in Canada of approximately $2.0 million.

During the first quarter of 2023, advertising funds expense increased due to an increase in franchise same-restaurant sales in the U.S.

and Canada, partially offset by a decrease in the Company’s funding of incremental advertising.

General and Administrative First Quarter

2023 2022 (a) Change

Share-based compensation $ 3.8 $ 6.3 $ (2.5)

Professional fees 15.0 13.5 1.5

Travel-related expenses 3.0 1.7 1.3 7.8 3.4 4.4

Incentive compensation 7.5 6.2 1.3

Other, net 36.0 36.3 (0.3)

2 unchanged sentences

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

The decrease in general and administrative expenses during the third quarter of 2022 was primarily due to a decrease in incentive compensation accruals, reflecting higher operating performance as compared to plan in the first nine months of 2021 compared to the first nine months of 2022.

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

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

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

Depreciation and Amortization (exclusive of amortization of cloud computing arrangements shown separately below) Third Quarter Nine Months

2022 2021 Change 2022 2021 Change

General and administrative expenses during the first quarter of 2023 were flat compared with the first quarter of 2022, primarily due to a decrease in share-based compensation, offset by (1) higher professional fees, reflecting higher information technology-related costs, and (2) an increase in incentive compensation accruals.

Depreciation and Amortization (exclusive of amortization of cloud computing arrangements shown separately below) First Quarter

2023 2022 Change

Restaurants $ 20.9 $ 21.8 $ (0.9)

1 unchanged sentence

$ 33.5 $ 33.2 $ 0.3

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

Amortization of Cloud Computing Arrangements Third Quarter Nine Months

2022 2021 Change 2022 2021 Change

The increase in depreciation and amortization during the first quarter of 2023 was primarily due to depreciation and amortization for technology investments and new restaurant assets, partially offset by assets becoming fully depreciated.

Amortization of Cloud Computing Arrangements First Quarter

2023 2022 Change

Amortization of cloud computing arrangements $ 1.6 $ — $ 1.6

Amortization of cloud computing arrangements primarily represents amortization of assets associated with the Company's ERP implementation.

System Optimization Gains, Net Third Quarter Nine Months

2022 2021 Change 2022 2021 Change

Amortization of cloud computing arrangements primarily represents amortization of assets associated with the Company’s enterprise resource planning (“ERP”) system implementation completed in the third quarter of 2022.

System Optimization Gains, Net First Quarter

2023 2022 Change

System optimization gains, net $ — $ (3.5) $ 3.5

System optimization gains, net for the first nine months of 2022 were primarily comprised of post-closing adjustments on previous sales of restaurants.

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

System optimization gains, net for the first quarter of 2022 were primarily comprised of post-closing adjustments on previous sales of restaurants.

See Note 3 to the Condensed Consolidated Financial Statements contained in Item 1 herein for further information.

Reorganization and Realignment Costs Third Quarter Nine Months

2022 2021 Change 2022 2021 Change

System optimization initiative $ — $ 0.3 $ (0.3) $ 0.5 $ 5.8 $ (5.3)

Reorganization and Realignment Costs First Quarter

2023 2022 Change

Organizational redesign $ 6.7 $ — $ 6.7

Other reorganization and realignment plans 0.1 0.5 (0.4)

$ 6.8 $ 0.5 $ 6.3

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

During the first nine months of 2022, the Company recognized costs associated with its system optimization initiative totaling $0.5 million, which were primarily comprised of professional fees and other costs associated with the Company’s acquisition of 93 franchise-operated restaurants in Florida during the fourth quarter of 2021.

During the first nine months of 2021, the Company recognized costs totaling $5.8 million, which were primarily comprised of the write-off of certain lease assets and lease termination fees associated with the bankruptcy sale process of NPC Quality Burgers, Inc.

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

See Note 5 to the Condensed Consolidated Financial Statements contained in Item 1 herein for further information regarding the NPC bankruptcy sale process.

Costs incurred under the Company’s other reorganization and realignment plans were not material during the third quarter and first nine months of 2022 and 2021.

During the three months ended April 2, 2023, the Company recognized costs totaling $6.7 million under the Organizational Redesign Plan, which primarily included severance and related employee costs of $5.5 million and share-based compensation of $0.8 million.

See Note 4 to the Condensed Consolidated Financial Statements contained in Item 1 herein for further information.

Costs incurred under the Company’s other reorganization and realignment plans were not material during the first quarter of 2023 and 2022.

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

Impairment of Long-Lived Assets Third Quarter Nine Months

2022 2021 Change 2022 2021 Change

Impairment of Long-Lived Assets First Quarter

2023 2022 Change

Impairment of long-lived assets $ 0.4 $ 0.6 $ (0.2)

The change in impairment charges during the first nine months of 2022 was primarily driven by impairment charges as a result of the deterioration in operating performance of certain Company-operated restaurants.

Other Operating Income, Net Third Quarter Nine Months

2022 2021 Change 2022 2021 Change

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

Equity in earnings in joint ventures, net (2.6) (2.3) (0.3) (6.9) (5.6) (1.3)

The decrease in impairment charges during the first quarter of 2023 was primarily driven by lease modifications associated with restaurants leased or subleased to franchisees in the prior year.

Other Operating Income, Net First Quarter

2023 2022 Change

Lease buyout $ (0.2) $ (0.8) $ 0.6

Gains on sales-type leases (0.1) (0.5) 0.4

Other, net 0.1 — 0.1 — (0.1) 0.1

Equity in earnings in joint ventures, net (2.1) (1.7) (0.4)

$ (2.4) $ (3.0) $ 0.6

The increase in other operating income, net during the third quarter of 2022 was primarily due to a gain from insurance recoveries.

The increase in other operating income, net during the first nine months of 2022 was primarily due to (1) a gain from insurance recoveries, (2) an increase in the equity in earnings from our TimWen joint venture and (3) lease buyout activity.

During the first nine months of 2022, these increases were partially offset by lower gains on new and modified sales-type leases.

Interest Expense, Net Third Quarter Nine Months

2022 2021 Change 2022 2021 Change

The decrease in other operating income, net during the first quarter of 2023 was primarily due to (1) lower lease buyout activity and (2) lower gains on sales-type leases.

These decreases were partially offset by an increase in the equity in earnings from our TimWen joint venture.

Interest Expense, Net First Quarter

2023 2022 Change

Interest expense, net $ 31.7 $ 26.4 $ 5.3

The increase in interest expense, net during the third quarter and the first nine months of 2022 was primarily due to the impact of completing a debt financing transaction under the Company’s securitized financing facility in the first quarter of 2022.

During the first nine months of 2022, this increase was partially offset by the impact of completing the refinancing of a portion of the Company’s securitized financing facility in the second quarter of 2021.

Loss on Early Extinguishment of Debt Third Quarter Nine Months

2022 2021 Change 2022 2021 Change

The increase in interest expense, net during the first quarter of 2023 was primarily due to the impact of completing a debt financing transaction under the Company’s securitized financing facility in the first quarter of 2022.

Loss on Early Extinguishment of Debt First Quarter

2023 2022 Change

Loss on early extinguishment of debt $ 1.3 $ — $ 1.3

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

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

Investment Income, Net Third Quarter Nine Months

2022 2021 Change 2022 2021 Change

Investment income, net $ — $ — $ — $ 2.1 $ — $ 2.1

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

Other Income, Net Third Quarter Nine Months

2022 2021 Change 2022 2021 Change

During the first quarter of 2023, the Company incurred a loss on early extinguishment of debt of $1.3 million due to the repurchase of $31.6 million in principal of the Company’s 7% debentures.

Investment (Loss) Income, Net First Quarter

2023 2022 Change

Investment (loss) income, net $ (3.6) $ 2.1 $ (5.7)

During the first quarter of 2023, the Company recorded a loss of $3.6 million due to an impairment charge for the difference between the estimated fair value and the carrying value of an investment in equity securities.

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

Other Income, Net First Quarter

2023 2022 Change

Other income, net $ 7.4 $ 0.2 $ 7.2

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

Provision for Income Taxes Third Quarter Nine Months

2022 2021 Change 2022 2021 Change

The increase in other income, net during the first quarter of 2023 was primarily due to interest income earned on our cash equivalents, which increased as a result of cash received from our debt financing transaction under the Company’s securitized financing facility in the first quarter of 2022.

Provision for Income Taxes First Quarter

2023 2022 Change

Income before income taxes $ 55.3 $ 50.8 $ 4.5

3 unchanged sentences

28.0 % 26.4 % 1.6 %

Our effective tax rates for the third quarter and the first nine months of 2022 and 2021 were impacted by variations in income before income taxes, adjusted for recurring items such as non-deductible expenses and state income taxes, as well as non-recurring discrete items.

The increase in the effective tax rate for the third quarter of 2022 compared with the third quarter of 2021 was primarily due to an increase in the tax effects of our foreign operations.

The increase in the effective tax rate for the first nine months of 2022 compared with the first nine months of 2021 was primarily due to a decrease in the benefit from share-based compensation and an increase in the tax effects of our foreign operations.

Our effective tax rates for the first quarter of 2023 and 2022 were impacted by variations in income before income taxes, adjusted for recurring items such as non-deductible expenses and state income taxes, as well as non-recurring discrete items.

The increase in the effective tax rate for the first quarter of 2023 compared with the first quarter of 2022 was primarily due to a one-time adjustment to our foreign deferred income taxes related to prior periods.

This unfavorable adjustment was partially offset by state income taxes, including discrete changes to state deferred income taxes.

Segment Information

See Note 17 to the Condensed Consolidated Financial Statements contained in Item 1 herein for further information regarding the Company’s segments.

Third Quarter Nine Months

2022 2021 Change 2022 2021 Change

First Quarter

2023 2022 Change

Sales $ 222.6 $ 206.5 $ 16.1

5 unchanged sentences

The increase in Wendy’s U.S.

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

The increase in Wendy’s U.S.

revenues during the first nine months of 2022 was also driven by higher fees for providing information technology services to franchisees, reflecting the one-month waiver of technology fees during the first quarter of 2021, partially offset by the sale of 47 Company-operated restaurants in New York during the second quarter of 2021.

Same-restaurant sales increased during the third quarter and the first nine months of 2022 primarily due to higher average check, partially offset by a decrease in customer count.

revenues during the first quarter of 2023 was primarily due to an increase in same-restaurant sales.

Same-restaurant sales increased during the first quarter of 2023 primarily due to (1) higher average check and (2) an increase in customer count.

The increase in Wendy’s U.S.

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

During the first nine months of 2022, these increases were partially offset by higher cost of sales, as a percent of sales for Company-operated restaurants driven by the same factors as described above for “Cost of Sales, as a Percent of Sales” (excluding the impact of the U.K.

segment profit during the first quarter of 2023 was primarily due to (1) higher revenues, (2) lower cost of sales, as a percent of sales for Company-operated restaurants driven by the same factors as described above for “Cost of Sales, as a Percent of Sales” (excluding the impact of the U.K.

market) and (3) a decrease in the recognition of the Company’s funding of incremental advertising.

Wendy’s International

Third Quarter Nine Months

2022 2021 Change 2022 2021 Change

First Quarter

2023 2022 Change

Sales $ 5.3 $ 2.8 $ 2.5

4 unchanged sentences

Segment profit $ 7.4 $ 5.5 $ 1.9

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

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

Same-restaurant sales increased during the third quarter and first nine months of 2022 due to (1) an increase in customer count and (2) higher average check.

The increase in Wendy’s International segment profit during the third quarter and the first nine months of 2022 was primarily due to higher revenues.

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

The increase in Wendy’s International revenues during the first quarter of 2023 was primarily due to (1) net new restaurant development in the U.K.

and (2) an increase in same-restaurant sales.

Same-restaurant sales increased during the first quarter of 2023 due to (1) an increase in customer count and (2) higher average check.

The increase in Wendy’s International segment profit during the first quarter of 2023 was primarily due to higher revenues, partially offset by the Company’s investments to support the entry into the U.K.

market and inflationary pressures in the U.K.

Global Real Estate & Development

Third Quarter Nine Months

2022 2021 Change 2022 2021 Change

First Quarter

2023 2022 Change

Franchise fees $ 0.7 $ 0.5 $ 0.2

2 unchanged sentences

Segment profit $ 25.1 $ 27.6 $ (2.5)

The decrease in Global Real Estate & Development revenues during the third quarter and the first nine months of 2022 was primarily due to lower franchise rental income.

See “Franchise Rental Income” above for further information.

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

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

The increase in Global Real Estate & Development revenues during the first quarter of 2023 was primarily due to higher franchise development-related fees.

The decrease in Global Real Estate & Development segment profit during the first quarter of 2023 was primarily due to an increase in franchise rental expense.

See “Franchise Rental Expense” above for further information.

1 unchanged sentence

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

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

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

Our anticipated cash requirements for the remainder of 2023, exclusive of operating cash flow requirements, consist principally of:

• capital expenditures of approximately $63.0 million to $73.0 million, resulting in total anticipated cash capital expenditures for the year of approximately $75.0 million to $85.0 million;

• cash dividends aggregating approximately $26.6 million as discussed below in “Dividends;” and

• potential stock repurchases of up to $198.1 million, as discussed below in “Stock Repurchases.”

• cash dividends aggregating approximately $158.1 million as discussed below in “Dividends;”

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

• debt repurchases of up to $43.4 million as discussed below in “Long-Term Debt, Including Current Portion.”

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

1 unchanged sentence

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

The table below summarizes our cash flows from operating, investing and financing activities for the first nine months of 2022 and 2021:

The table below summarizes our cash flows from operating, investing and financing activities for the first three months of 2023 and 2022:

First Quarter

2023 2022 Change

4 unchanged sentences

Effect of exchange rate changes on cash 0.2 0.2 —

Net increase in cash, cash equivalents and restricted cash $ 453.9 $ 234.4 $ 219.5

Net (decrease) increase in cash, cash equivalents and restricted cash $ (91.2) $ 461.0 $ (552.2)

Operating Activities

Cash provided by operating activities consists primarily of net income, adjusted for non-cash expenses such as depreciation and amortization, deferred income tax and share-based compensation, and the net change in operating assets and liabilities.

Cash provided by operating activities was $182.6 million and $276.7 million in the first nine months of 2022 and 2021, respectively.

The change was primarily due to (1) an increase in payments for incentive compensation for the 2021 fiscal year paid in 2022, (2) the timing of receipt of franchisee rental payments, (3) cash paid for cloud computing arrangements, primarily related to the Company’s ERP implementation, and (4) the timing of payments for marketing expenses of the national advertising funds.

Cash provided by operating activities was $53.0 million and $21.0 million in the first quarter of 2023 and 2022, respectively.

The change was primarily due to (1) a decrease in payments for incentive compensation, (2) higher net income, adjusted for non-cash expenses, and (3) the timing of payments for marketing expenses of the national advertising funds.

These changes were partially offset by the timing of receipt of franchisee rental payments in the first quarter of 2022.

Investing Activities

Cash (used in) provided by investing activities was $(46.1) million and $15.0 million in the first nine months of 2022 and 2021, respectively.

The change was primarily due to (1) a decrease in proceeds from dispositions of $48.9 million, reflecting the sale of 47 Company-operated restaurants in New York during the second quarter of 2021, (2) an increase in capital expenditures of $6.6 million and (3) the net settlement of deposits associated with the Company’s consortium bid to acquire NPC’s Wendy’s restaurants of $4.9 million in the first quarter of 2021.

Cash used in investing activities was $12.1 million and $13.0 million in the first quarter of 2023 and 2022, respectively.

The change was primarily due to a decrease in expenditures associated with the Company’s franchise development fund of $0.7 million.

Financing Activities

Cash provided by (used in) financing activities was $324.5 million and $(57.5) million in the first nine months of 2022 and 2021, respectively.

The change was primarily due to (1) a net increase in cash provided by long-term debt activities of $347.0 million, reflecting the respective impacts of the completion of the Company’s debt financing transaction during the first quarter of 2022 and the Company’s debt refinancing transaction during the second quarter of 2021, and (2) a decrease in the repurchases of common stock of $73.7 million.

These changes were partially offset by (1) a decrease in proceeds from stock option exercises, net of payments related to tax withholding for share-based compensation, of $23.1 million and (2) an increase in dividends of $11.2 million.

Cash (used in) provided by financing activities was $(132.3) million and $452.8 million in the first quarter of 2023 and 2022, respectively.

The change was primarily due to (1) a net increase in cash used in long-term debt activities of $522.9 million, reflecting the respective impacts of the completion of the Company’s debt financing transaction during the first quarter of 2022 and repurchases of the Company’s 7% debentures during the first quarter of 2023, (2) an increase in the repurchases of common stock of $36.7 million and (3) an increase in dividends of $26.2 million.

Long-Term Debt, Including Current Portion

Wendy’s Funding, LLC, a limited-purpose, bankruptcy-remote, wholly-owned indirect subsidiary of The Wendy’s Company, is the master issuer (the “Master Issuer”) of outstanding senior secured notes under a securitized financing facility that was entered into in June 2015.

On April 1, 2022, the Master Issuer completed a financing transaction with respect to this facility under which the Master Issuer issued the Series 2022-1 Class A-2 Notes with initial principal amounts totaling $500.0 million.

Under the securitized financing facility, the Master Issuer has issued outstanding Series 2021-1 Variable Funding Senior Secured Notes, Class A-1 (the “Class A-1 Notes”), which allow for the drawing of up to $300.0 million on a revolving basis

using various credit instruments, including a letter of credit facility.

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

Except as described above, there were no material changes to the terms of any debt obligations since January 2, 2022.

The Company was in compliance with its debt covenants as of October 2, 2022.

During the three months ended April 2, 2023, Wendy’s repurchased $31.6 million in principal of its 7% debentures at par value.

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

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

As of April 2, 2023, the Company had $43.4 million of additional debt repurchases remaining under the authorization.

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

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

Except as described above, there were no material changes to the Company’s debt obligations since January 1, 2023.

The Company was in compliance with its debt covenants as of April 2, 2023.

See Note 6 to the Condensed Consolidated Financial Statements contained in Item 1 herein for further information related to our long-term debt obligations.

On March 15, 2022, June 15, 2022 and September 15, 2022, the Company paid quarterly cash dividends per share of $.125, aggregating $80.2 million.

On November 9, 2022, the Company announced a dividend of $.125 per share to be paid on December 15, 2022 to stockholders of record as of December 1, 2022.

As a result, the Company expects that its total cash requirement for the fourth quarter of 2022 will be approximately $26.6 million based on the number of shares of its common stock outstanding at November 2, 2022.

On March 15, 2023, the Company paid quarterly cash dividends per share of $.25, aggregating $53.1 million.

On May 10, 2023, the Company announced a dividend of $.25 per share to be paid on June 15, 2023 to stockholders of record as of June 1, 2023.

If the Company pays regular quarterly cash dividends for the remainder of 2023 at the same rate as declared in the second quarter of 2023, the Company’s total cash requirement for dividends for the remainder of 2023 will be approximately $158.1 million based on the number of shares of its common stock outstanding at May 3, 2023.

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

1 unchanged sentence

Stock Repurchases

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

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

During the nine months ended October 2, 2022, the Company repurchased 2.8 million shares under the February 2022 Authorization with an aggregate purchase price of $51.9 million, excluding commissions.

As of October 2, 2022, the Company had $198.1 million of availability remaining under the February 2022 authorization.

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

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

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

In addition, in May 2021, August 2021 and November 2021, the Board of Directors approved increases of $50.0 million, $70.0 million and $80.0 million, respectively, to the February 2020 Authorization, resulting in an aggregate authorization of $300.0 million that continued to expire on February 28, 2022.

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

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

In February 2022, the Company completed the 2021 ASR Agreement and received an additional 0.7 million 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, 5.6 million shares were delivered under the 2021 ASR Agreement at an average purchase price of $22.22 per share.

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

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

In connection with the January 2023 Authorization, the remaining portion of the previous February 2022 authorization for $250.0 million was canceled.

During the three months ended April 2, 2023, the Company repurchased 1.8 million shares under the January 2023 Authorization with an aggregate purchase price of $38.8 million, of which $2.1 million was accrued as of April 2, 2023, and excluding commissions.

As of April 2, 2023, the Company had $461.2 million of availability remaining under the January 2023 Authorization.

Subsequent to April 2, 2023 through May 3, 2023, the Company repurchased 1.1 million shares under the January 2023 Authorization with an aggregate purchase price of $23.6 million, excluding commissions.

Cloud Computing Arrangements

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

The Company’s cash expenditures related to CCA amounted to $22.7 million during the nine months ended October 2, 2022.

In addition to the anticipated cash requirements for capital expenditures noted above in “Cash Flows,” the Company expects to spend approximately $25.0 million during 2023 on cloud computing arrangements (“CCA”), primarily related to the Company’s human capital management system implementation.

The Company’s cash expenditures related to CCA amounted to $6.6 million during the three months ended April 2, 2023.

General Inflation, Commodities and Changing Prices

Inflationary pressures on labor and commodity price increases directly impacted our consolidated results of operations during the nine months ended October 2, 2022, and we expect this to continue throughout the remainder of 2022.

We attempt to manage any inflationary costs and commodity price increases through selective menu price increases and changes in product mix.

Delays in implementing such menu price increases, competitive pressures, consumer spending levels and other factors

may limit our ability to recover such cost increases in the future.

Inflationary pressures on labor and commodity price increases directly impacted our consolidated results of operations during the three months ended April 2, 2023, and we expect this to continue throughout the remainder of 2023.

We attempt to

manage any inflationary costs and commodity price increases through selective menu price increases and product mix.

Delays in implementing such menu price increases and competitive pressures may limit our ability to recover such cost increases in the future.

Inherent volatility experienced in certain commodity markets, such as those for beef, chicken, pork, cheese and grains, could have a significant effect on our results of operations and may have an adverse effect on us in the future.

3 unchanged sentences

Because our business is moderately seasonal, results for a particular quarter are not necessarily indicative of the results that may be achieved for any other quarter or for the full fiscal year.

Quantitative and Qualitative Disclosures about Market Risk.

As of April 2, 2023, there were no material changes from the information contained in the Company’s Form 10-K for the fiscal year ended January 1, 2023.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis