What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-26 compared with 2023-03-01 · 298 added, 377 removed, 1497 unchanged (31% of the section changed)

4 unchanged sentences

Report of Independent Registered Public Accounting Firm (PCAOB ID No.

Consolidated Balance Sheets as of January 1, 2023 and January 2, 2022

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

Consolidated Balance Sheets as of December 31, 2023 and January 1, 2023

Consolidated Statements of Operations for the years ended December 31, 2023, January 1, 2023 and

January 2, 2022

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

Consolidated Statements of Comprehensive Income for the years ended December 31, 2023, January 1, 2023 and

January 2, 2022

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

Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2023, January 1, 2023 and

January 2, 2022

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

Consolidated Statements of Cash Flows for the years ended December 31, 2023, January 1, 2023 and

January 2, 2022

17 unchanged sentences

(17) Impairment of Long-Lived Assets 98

(18) Investment Income (Loss), Net 99

(18) Retirement Benefit Plans 99

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2019-1 Class A-1 Notes (12) Long-Term Debt

2019 ASR Agreement (15) Stockholders’ Equity

2020-1 Class A-1 Notes (12) Long-Term Debt

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Advertising Funds (1) Summary of Significant Accounting Policies

AMC (22) Transactions with Related Parties

Black-Scholes Model (1) Summary of Significant Accounting Policies

10 unchanged sentences

February 2022 Authorization (15) Stockholders’ Equity

Fountain Beverages (21) Guarantees and Other Commitments and Contingencies

1 unchanged sentence

FRG (3) Acquisitions

G&A (5) Reorganization and Realignment Costs

G&A Realignment Plan (5) Reorganization and Realignment Costs

GAAP (1) Summary of Significant Accounting Policies

2 unchanged sentences

IRS (14) Income Taxes

IT (5) Reorganization and Realignment Costs

IT Realignment Plan (5) Reorganization and Realignment Costs

IT (21) Guarantees and Other Commitments and Contingencies

January 2023 Authorization (15) Stockholders’ Equity

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NPC (3) Acquisitions

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

Organizational Redesign Plan (5) Reorganization and Realignment Costs

Pacesetter (21) Guarantees and Other Commitments and Contingencies

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Senior Notes (12) Long-Term Debt

Defined Term Footnote Where Defined

SERP (18) Retirement Benefit Plans

SOFR (1) Summary of Significant Accounting Policies

Straight-Line Rent (1) Summary of Significant Accounting Policies

Target (16) Share-Based Compensation

Defined Term Footnote Where Defined

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

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Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of The Wendy’s Company and subsidiaries (the “Company”) as of January 1, 2023 and January 2, 2022, the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows, for each of the three years in the period ended January 1, 2023, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of January 1, 2023 and January 2, 2022, and the results of its operations and its cash flows for each of the three years in the period ended January 1, 2023, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of January 1, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 1, 2023, expressed an unqualified opinion on the Company’s internal control over financial reporting.

We have audited the accompanying consolidated balance sheets of The Wendy’s Company and subsidiaries (the “Company”) as of December 31, 2023 and January 1, 2023, the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows, for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and January 1, 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 26, 2024, expressed an unqualified opinion on the Company’s internal control over financial reporting.

Basis for Opinion

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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, terminal value growth rate and the weighted average cost of capital (discount rate).

The income approach requires management to make significant estimates and assumptions including future sales growth, terminal value growth rate, operating profit, 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 $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 goodwill balance was $773.7 million as of December 31, 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, terminal value growth rate and the selection of the discount rate.

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, terminal value growth rate, 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, terminal value growth rate and selection of the discount rate.

Our audit procedures related to the estimates of future sales growth, terminal value growth rate, operating profit, and the 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, terminal value growth rate, 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.

• We evaluated the reasonableness of management’s sales and operating profit forecasts by comparing the forecasts to (1) historical sales and operating profit and (2) internal communications to management and the Board of Directors.

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 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.

• We performed sensitivity analyses as part of our risk assessment on future sales growth, terminal value growth rate, operating profit, and the discount rate to evaluate the impact of such sensitivity on anticipated cash flows.

• We evaluated the reasonableness of management’s future sales growth and operating profit by comparing the forecasts to (1) historical sales growth and operating profit and (2) internal communications to the senior leadership team and the Board of Directors.

We also considered the impact of changes in management’s forecasts from the annual measurement date in the fourth quarter to December 31, 2023.

◦ Utilizing industry and market-specific data to assess the reasonableness of the terminal value growth rate selected by management.

◦ Developing a range of independent estimates for the discount rate and compared those to the discount rate selected by management.

/s/ Deloitte & Touche LLP

Columbus, Ohio

March 1, 2023

February 26, 2024

We have served as the Company’s auditor since 1994.

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Interest expense, net ( 124,061 ) ( 122,319 ) ( 109,185 )

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

Investment income (loss), net 2,107 39 ( 225 )

Gain (loss) on early extinguishment of debt, net 2,283 — ( 17,917 )

Investment (loss) income, net ( 10,358 ) 2,107 39

Other income, net 29,570 10,403 681

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Net income $ 204,440 $ 177,370 $ 200,392

Other comprehensive (loss) income:

Other comprehensive income (loss):

Foreign currency translation adjustment 5,801 ( 15,976 ) 1,441

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

Other comprehensive income (loss) 5,801 ( 15,976 ) 1,441

Comprehensive income $ 210,241 $ 161,394 $ 201,833

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Capital Retained Earnings Common Stock Held in Treasury Accumulated Other Comprehensive Loss Total

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

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

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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 )

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Net income — — 204,440 — — 204,440

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

Other comprehensive income, net — — — — 5,801 5,801

Cash dividends — — ( 209,253 ) — — ( 209,253 )

Repurchases of common stock — — — ( 191,871 ) — ( 191,871 )

including accelerated share

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

Share-based compensation — 23,747 — — — 23,747

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Other — 230 ( 73 ) 244 — 401

Balance at January 1, 2023 $ 47,042 $ 2,937,885 $ 414,749 $ ( 2,869,780 ) $ ( 64,176 ) $ 465,720

Balance at December 31, 2023 $ 47,042 $ 2,960,035 $ 409,863 $ ( 3,048,786 ) $ ( 58,375 ) $ 309,779

See accompanying notes to consolidated financial statements.

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Change in operating lease liabilities ( 47,212 ) ( 45,682 ) ( 45,606 )

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

Net receipt (recognition) of deferred vendor incentives 1,034 ( 1,060 ) 715

System optimization gains, net ( 880 ) ( 6,779 ) ( 33,545 )

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Payments related to tax withholding for share-based compensation ( 3,873 ) ( 3,168 ) ( 4,511 )

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

Net cash (used in) provided by financing activities ( 504,303 ) 288,674 ( 242,742 )

Net cash (used in) provided by operations before effect of exchange rate changes on cash ( 245,433 ) 470,802 ( 51,639 )

Effect of exchange rate changes on cash 2,448 ( 5,967 ) 364

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

Net (decrease) increase in cash, cash equivalents and restricted cash ( 242,985 ) 464,835 ( 51,275 )

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

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Wendy’s franchises and operates Wendy’s quick-service restaurants specializing in hamburger sandwiches throughout the United States of America (“U.S.”) and in 32 foreign countries and U.S.

At January 1, 2023, Wendy’s operated and franchised 415 and 6,680 restaurants, respectively.

At December 31, 2023, Wendy’s operated and franchised 415 and 6,825 restaurants, respectively.

The Company manages and internally reports its business in the following segments:

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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 due to risks and uncertainties, including uncertainty in the current economic environment due to the COVID-19 pandemic and other factors.

Reclassifications

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.

Actual results could differ materially from those estimates.

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 December 31, 2023” or “2023,” (2) “the year ended January 1, 2023” or “2022,” and (3) “the year ended January 2, 2022” or “2021,” all of which consisted of 52 weeks.

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

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Cash and Cash Equivalents

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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.

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Restricted Cash

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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

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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.

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.

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.

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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.

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If the carrying value of the reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit.

Our critical estimates in this impairment test include future sales growth, operating profit, income tax rates, terminal value growth rates, capital expenditures and the weighted average cost of capital (discount rate).

Our critical estimates in this impairment test include future sales growth, operating profit, terminal value growth rates and the weighted average cost of capital (discount rate).

We also utilize other key inputs such as income tax rates and capital expenditures to derive fair value.

Our fair value estimates are subject to change as a result of many factors including, among others, any changes in our business plans, changing economic conditions and the competitive environment.

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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

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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.

7 unchanged sentences

The Company has significant influence over these investees.

Such investments are accounted for using the equity method, under which our results of operations include our share of the income (loss) of the investees in “Other operating income, net.” Cash distributions and dividends received that are determined to be returns of capital are recorded as a reduction of the carrying value of our investments and returns on our investments are recorded to “Investment income (loss), net.”

The difference between the carrying value of our TimWen equity investment and the underlying equity in the historical net assets of the investee is accounted for as if the investee were a consolidated subsidiary.

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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

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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.

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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

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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.

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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

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.

THE WENDY’S COMPANY AND SUBSIDIARIES

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(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

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(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)

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.”

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

Finance Leases

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Wendy’s had no customers which accounted for 10% or more of consolidated revenues in 2023, 2022 or 2021.

As of January 1, 2023, Wendy’s had one main in-line distributor of food, packaging and beverage products, excluding breads, that serviced approximately 67 % of Wendy’s restaurants in the U.S.

As of December 31, 2023, Wendy’s had one main in-line distributor of food, packaging and beverage products, excluding breads, that serviced approximately 67 % of Wendy’s restaurants in the U.S.

and four additional in-line distributors that, in the aggregate, serviced approximately 32 % of Wendy’s restaurants in the U.S.

We believe that our vulnerability to risk concentrations related to significant vendors and sources of our raw materials is mitigated as we believe that there are other vendors who would be able to service our requirements.

However, if a disruption of service from any of our main in-line distributors was to occur, we could experience short-term increases in our costs while distribution channels were adjusted.

However, if a disruption of service from any of our in-line distributors was to occur, we could experience short-term increases in our costs while distribution channels were adjusted.

Wendy’s restaurants are principally located throughout the U.S.

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territories, with the largest number in Canada.

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.

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.

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

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territories, we believe the risk of geographic concentration is not significant.

We could be adversely affected by changing consumer preferences resulting from concerns over nutritional or safety aspects of beef, chicken, french fries or other products we sell or the effects of food safety events or disease outbreaks.

We could be adversely affected by changing consumer preferences resulting from concerns over nutritional or safety aspects of beef, chicken, eggs, pork, french fries or other products we sell or the effects of food safety events or disease outbreaks.

Our exposure to foreign exchange risk is primarily related to fluctuations in the Canadian dollar relative to the U.S.

dollar for our Canadian operations.

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 WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

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.

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New Accounting Standards Adopted

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.

Reference Rate Reform

In March 2020, the Financial Accounting Standards Board (“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 market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates.

During 2023, certain of the Company’s subsidiaries executed amendments to the 2021-1 Variable Funding Senior Secured Notes, Class A-1 and the U.S.

advertising fund revolving line of credit to transition from LIBOR to the Secured Overnight Financing Rate (“SOFR”), plus any applicable margin.

In connection with these contract amendments, the Company adopted the reference rate reform guidance during the second quarter of 2023.

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

New Accounting Standards

Business Combinations

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The amendment requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with current revenue recognition guidance as if the acquirer had originated the contracts.

The standard is effective beginning with our 2023 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 Company adopted this amendment during the first quarter of 2023.

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

New Accounting Standards

Income Tax Disclosures

In December 2023, the FASB issued an amendment to enhance its income tax disclosure requirements.

The amendment requires annual disclosure of specific categories in the rate reconciliation and additional information for reconciling items that meet a quantitative threshold.

The amendment also requires annual disclosure of income taxes paid disaggregated by federal, state and foreign taxes and by individual jurisdictions in which income taxes paid is equal to or greater than 5% of total income taxes paid.

The amendment is effective commencing with our 2025 fiscal year.

We are currently evaluating the impact of the adoption of this guidance on our consolidated financial statements.

Reportable Segment Disclosures

In November 2023, the FASB issued an amendment to enhance reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.

In addition, the amendment enhances interim disclosure requirements, clarifies circumstances in which an entity can disclose multiple segment measures of profit or loss and provides new segment disclosure requirements for entities with a single reportable segment.

The amendment is effective commencing with our 2024 fiscal year.

We are currently evaluating the impact of the adoption of this guidance on our consolidated financial statements.

Common-Control Lease Arrangements

In March 2023, the FASB issued an update to amend certain lease accounting guidance that applies to arrangements between related parties under common control.

The amendment requires a lessee in a common-control lease arrangement to amortize leasehold improvements that it owns over the useful life of the improvements to the common-control group, regardless of the lease term, if the lessee continues to control the use of the underlying asset through a lease.

The standard is effective

THE WENDY’S COMPANY AND SUBSIDIARIES

1 unchanged sentence

(In Thousands Except Per Share Amounts)

beginning with our 2024 fiscal year.

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

Nature of Goods and Services

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

The technical assistance fee is used to defray some of the costs to Wendy’s for training, start-up and transitional services related to new and existing franchisees acquiring restaurants and in the development and opening of new restaurants.

The technical assistance fee is used to defray some of the costs to Wendy’s for start-up and transitional services related to new and existing franchisees acquiring restaurants and in the development and opening of new restaurants.

The franchise agreement also requires that the franchisee pay an annual fee for technology services.

47 unchanged sentences

(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.

(c) Deferred franchise fees are included in “Accrued expenses and other current liabilities” and “Deferred franchise fees” and totaled $ 10,673 and $ 90,132 , respectively, as of December 31, 2023, and $ 8,977 and $ 90,231 , respectively, as of January 1, 2023.

Significant changes in deferred franchise fees are as follows:

8 unchanged sentences

Estimate for fiscal year:

2024 (a) $ 10,673

Thereafter 64,904

_______________

(a) Includes development-related franchise fees expected to be recognized over a duration of one year or less.

THE WENDY’S COMPANY AND SUBSIDIARIES

37 unchanged sentences

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

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

As of December 31, 2023, Company-operated restaurant ownership was approximately 5 % of the total system.

While the Company has no plans to move its ownership away from approximately 5 % of the total system, the Company expects to continue to optimize the Wendy’s system through Franchise Flips, as well as evaluating strategic acquisitions of franchised restaurants and strategic dispositions of Company-operated restaurants to existing and new franchisees, to further strengthen the franchisee base, drive new restaurant development and accelerate reimages.

During 2023, 2022 and 2021, the Company facilitated 99 , 79 and 34 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 each of 2022 and 2020, the Company completed the sale of one Company-operated restaurant to a franchisee.

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

No Company-operated restaurants were sold to franchisees during 2023.

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

27 unchanged sentences

Assets Held for Sale

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.

As of December 31, 2023 and January 1, 2023, the Company had assets held for sale of $ 2,689 and $ 1,661 , respectively, primarily consisting of surplus properties.

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

2 unchanged sentences

2023 2022 2021

Operations and field realignment $ 59 $ 1,758 $ 3,801

IT realignment 32 ( 10 ) 7,288

G&A realignment ( 4 ) ( 52 ) 614

Organizational Redesign Plan $ 9,064 $ — $ —

System optimization initiative 136 611 6,852

Other reorganization and realignment plans — 87 1,696

Reorganization and realignment costs $ 9,200 $ 698 $ 8,548

Operations and Field Realignment

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

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

restaurant operations.

The Operations and Field Realignment Plan also included contract terminations, including the closure of certain field offices.

During 2021 and 2020, the Company recognized costs totaling $ 1,758 and $ 3,801 , respectively, which primarily included third-party and other costs in 2021 and severance and related employee costs and share-based compensation in 2020.

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

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

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 held its general and administrative expense in 2023 relatively flat compared with 2022.

Additionally, in January 2024, the Board of Directors announced the appointment of Kirk Tanner as the Company’s new President and Chief Executive Officer, effective February 5, 2024.

Tanner succeeded Todd A.

Penegor, the Company’s previous President and Chief Executive Officer, who departed from the Company in February.

As a result of the succession of the President and Chief Executive Officer, the Company now expects to incur total costs of approximately $ 17,000 to $ 19,000 related to the Organizational Redesign Plan.

During 2023, the Company recognized costs totaling $ 9,064 , which primarily included severance and related employee costs and share-based compensation.

The Company expects to incur additional costs aggregating approximately $ 8,000 to $ 10,000 , comprised of (1) severance and related employee costs of approximately $ 7,000 , (2) share-based compensation of approximately $ 2,000 and (3) recruitment and relocation costs of approximately $ 500 .

The Company expects costs related to the Organizational Redesign Plan to continue into 2026.

The following is a summary of the costs recorded as a result of the Organizational Redesign Plan:

Severance and related employee costs $ 6,243

Recruitment and relocation costs 554

Third-party and other costs 996

59 1,758 3,180 4,997

Share-based compensation (a) 1,271

Total operations and field realignment $ 59 $ 1,758 $ 3,801 $ 5,618

Total organizational redesign $ 9,064

_______________

(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.

(a) Primarily represents the accelerated recognition of share-based compensation resulting from the termination of employees under the Organizational Redesign Plan.

THE WENDY’S COMPANY AND SUBSIDIARIES

1 unchanged sentence

(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 ) $ —

Third-party and other costs 11 52 ( 63 ) —

$ 166 $ 59 $ ( 225 ) $ —

The table below presents a rollforward of our accruals for the Organizational Redesign Plan, which are included in “Accrued expenses and other current liabilities” as of December 31, 2023.

Balance January 1, 2023

Charges Payments Balance January 2, 2022

Charges Payments Balance December 31, 2023

Severance and related employee costs $ — $ 6,243 $ ( 4,551 ) $ 1,692

Third-party and other costs — 1,488 ( 1,477 ) 11

$ 2,600 $ 1,758 $ ( 4,192 ) $ 166

Information Technology ( “ IT ”) Realignment

In December 2019, our Board of Directors approved a plan to realign and reinvest resources in the Company’s IT organization to strengthen its ability to accelerate growth (the “IT Realignment Plan”).

The Company has partnered with a third-party global IT consultant on this new structure to leverage their global capabilities, enabling a more seamless integration between its digital and corporate IT assets.

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

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

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

Year Ended Total Incurred Since Inception

2022 2021 2020

Severance and related employee costs (a) $ — $ ( 165 ) $ 843 $ 8,226

Recruitment and relocation costs — 554 ( 554 ) —

1 unchanged sentence

$ — $ 7,793 $ ( 6,101 ) $ 1,692

Share-based compensation (b) — — — 193

Total IT realignment $ 32 $ ( 10 ) $ 7,288 $ 16,437

_______________

(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 IT realignment plan.

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”).

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.

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

System Optimization Initiative

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

During 2023, the Company recognized costs totaling $ 136 .

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.

During 2020, the Company recognized costs totaling $ 4,327 , which primarily included professional fees related to the NPC bankruptcy sale process.

See Note 3 for further information.

See Note 3 for further information on the NPC bankruptcy sale process.

The Company expects to recognize a gain of approximately $ 150 , primarily related to the write-off of certain NPC-related lease liabilities upon final termination of the leases.

As of December 31, 2023, January 1, 2023 and January 2, 2022 there were no accruals for our system optimization initiative.

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 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 ) $ —

Professional fees 1,230 1,570 ( 2,800 ) —

Other — 1,765 ( 1,765 ) —

$ 1,230 $ 3,996 $ ( 5,226 ) $ —

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.

Other Reorganization and Realignment

For 2022 and 2021, costs incurred under the Company’s other reorganization and realignment plans were $ 87 and $ 1,696 , respectively.

No costs were incurred under the Company’s other reorganization and realignment plans in 2023.

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

(6) Net Income Per Share

13 unchanged sentences

(7) Cash and Receivables

January 1, 2023 January 2, 2022

December 31, 2023 January 1, 2023

Cash and cash equivalents

11 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

December 31, 2023 January 1, 2023

Gross Allowance for Doubtful Accounts Net Gross Allowance for Doubtful Accounts Net

6 unchanged sentences

_______________

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

(a) Includes income tax refund receivables of $ 5,284 and $ 3,236 as of December 31, 2023 and January 1, 2023, respectively.

Additionally, includes receivables of $ 17,460 as of December 31, 2023 related to expected contributions from applicable insurance for legal settlements.

See Note 11 for further information on our legal reserves.

(b) Includes the current portion of sales-type and direct financing lease receivables of $ 10,779 and $ 8,263 as of December 31, 2023 and January 1, 2023, respectively.

See Note 19 for further information.

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.

Includes a note receivable from a franchisee in Indonesia of $ 394 and $ 1,153 as of December 31, 2023 and January 1, 2023, respectively.

(c) Includes notes receivable related to the Brazil JV, of which $ 6,837 and $ 13,087 are included in current notes receivable as of December 31, 2023 and January 1, 2023, respectively, and $ 3,888 is included in non-current notes receivable as of January 1, 2023.

As of December 31, 2023 and January 1, 2023, the Company had reserves of $ 1,149 and $ 4,640 , respectively, on the loans outstanding related to the Brazil JV.

See Note 8 for further information.

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.”

2 unchanged sentences

(In Thousands Except Per Share Amounts)

The following is an analysis of the allowance for doubtful accounts:

The following is a rollforward of the allowance for doubtful accounts:

Accounts Receivable Notes Receivable Total

3 unchanged sentences

Uncollectible accounts written off, net of recoveries ( 703 ) ( 3,077 ) ( 3,780 )

Balance at January 1, 2023

Balance at December 31, 2023

$ 1,538 $ 1,149 $ 2,687

5 unchanged sentences

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

Balance at December 29, 2019

Balance at January 3, 2021

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

15 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 during 2020.

The Brazil JV ceased operations in 2021 and no income or loss was recorded during 2023, 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.

Dollars, which is also the functional currency of the subsidiary;

therefore, there is no exposure to changes in foreign currency rates.

The loans bear interest at rates ranging from 3.25 % to 6.5 % per year.

Of the total loans outstanding as of January 1, 2023, $ 12,775 was due primarily in the fourth quarter of 2020 and $ 4,200 is due primarily in 2024.

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

The Company is currently pursuing collection of certain of the past due amounts.

A wholly-owned subsidiary of Wendy’s had receivables outstanding related to the Brazil JV totaling $ 6,837 and $ 16,975 as of December 31, 2023 and January 1, 2023, respectively.

The total receivables outstanding as of December 31, 2023 are due in 2024.

As of December 31, 2023 and January 1, 2023, the Company had reserves of $ 1,149 and $ 4,640 , respectively, on the receivables related to the Brazil JV.

See Note 7 for further information.

The carrying value of our investment in TimWen exceeded our interest in the underlying equity of the joint venture by $ 14,086 and $ 16,423 as of December 31, 2023 and January 1, 2023, respectively, primarily due to purchase price adjustments from the 2008 merger of Triarc Companies, Inc.

and Wendy’s International, Inc.

(the “Wendy’s Merger”).

THE WENDY’S COMPANY AND SUBSIDIARIES

1 unchanged sentence

(In Thousands Except Per Share Amounts)

The carrying value of our investment in TimWen exceeded our interest in the underlying equity of the joint venture by $ 16,423 and $ 20,532 as of January 1, 2023 and January 2, 2022, respectively, primarily due to purchase price adjustments from the 2008 merger of Triarc Companies, Inc.

and Wendy’s International, Inc.

(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 1, 2023, January 2, 2022 and January 3, 2021.

Presented below is activity related to our investment in TimWen included in our consolidated balance sheets and consolidated statements of operations as of and for the years ended December 31, 2023, January 1, 2023 and January 2, 2022.

2023 2022 2021

5 unchanged sentences

Foreign currency translation adjustment included in

“Other comprehensive income” and other

“Other comprehensive income (loss)” and other

888 ( 2,759 ) 430

5 unchanged sentences

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.

During the year ended December 31, 2023, the Company recorded impairment charges of $ 10,389 for the difference between the estimated fair value and the carrying value of the investment.

(9) Properties

January 1, 2023 January 2, 2022

December 31, 2023 January 1, 2023

Land $ 373,634 $ 371,347

17 unchanged sentences

Changes in goodwill:

Restaurant acquisitions 23,442 — — 23,442

Restaurant dispositions (b) 547 — — 547

Restaurant acquisitions (b) ( 260 ) — — ( 260 )

Restaurant dispositions — — — —

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

4 unchanged sentences

Changes in goodwill:

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

Restaurant acquisitions — — — —

Restaurant dispositions — — — —

Currency translation adjustment and other — 639 — 639

Balance at January 1, 2023:

Balance at December 31, 2023:

Goodwill, gross 620,603 39,973 122,548 783,124

3 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) 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.

(b) 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.

3 unchanged sentences

The following is a summary of the components of other intangible assets and the related amortization expense:

January 1, 2023 January 2, 2022

December 31, 2023 January 1, 2023

Cost Accumulated Amortization Net Cost Accumulated Amortization Net

15 unchanged sentences

(11) Accrued Expenses and Other Current Liabilities

January 1, 2023 January 2, 2022

December 31, 2023 January 1, 2023

Accrued compensation and related benefits $ 44,625 $ 39,247

Accrued taxes 28,134 30,159

Legal reserves (a) 19,699 907

Other 42,691 45,697

$ 135,149 $ 116,010

_______________

(a) The Company maintains insurance coverage to help mitigate against a variety of risks, including claims and litigation.

The Company’s legal reserve may include amounts that are covered by applicable insurance, in which case any expected insurance receivables are included in “Accounts and notes receivable, net.” See Note 7 for further information.

THE WENDY’S COMPANY AND SUBSIDIARIES

4 unchanged sentences

2023 January 1,

Series 2022-1 Class A-2 Notes:

Class A-2 Notes:

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

$ 98,500 $ 99,500

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

Series 2021-1 Class A-2 Notes:

390,134 398,000

2.370 % Series 2021-1 Class A-2-I Notes, anticipated repayment date 2029

2 unchanged sentences

633,530 640,250

Series 2019-1 Class A-2 Notes:

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

2 unchanged sentences

403,123 409,500

Series 2018-1 Class A-2 Notes:

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

6 unchanged sentences

Total long-term debt $ 2,732,814 $ 2,822,196

Aggregate annual maturities of long-term debt, excluding the effect of purchase accounting adjustments, as of January 1, 2023 were as follows:

Aggregate annual maturities of long-term debt, excluding the effect of purchase accounting adjustments, as of December 31, 2023 were as follows:

2024 $ 29,250

1 unchanged sentence

Wendy’s Funding, LLC (“Wendy’s Funding”), 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.

As of January 1, 2023, the Master Issuer issued the following outstanding series of fixed rate senior secured notes:

As of December 31, 2023, the Master Issuer has issued the following outstanding series of fixed rate senior secured notes:

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

5 unchanged sentences

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

During the year ended December 31, 2023, the Company repurchased $ 29,171 in principal of its Class A-2 Notes for $ 24,935 .

As a result, the Company recognized a gain on early extinguishment of debt of $ 3,914 for the year ended December 31, 2023.

As of December 31, 2023, the Company had no outstanding borrowings under the 2021-1 Class A-1 Notes.

THE WENDY’S COMPANY AND SUBSIDIARIES

1 unchanged sentence

(In Thousands Except Per Share Amounts)

of credit facility.

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

The Class A-2 Notes and the 2021-1 Class A-1 Notes are collectively referred to as the “Senior Notes.”

The Master Issuer’s issuance of the 2021-1 Class A-1 Notes in June 2021 replaced the Company’s previous $ 150,000 Series 2019-1 Variable Funding Senior Secured Notes, Class A-1 (the “2019-1 Class A-1 Notes”) and $ 100,000 Series 2020-1 Variable Funding Senior Secured Notes, Class A-1 (the “2020-1 Class A-1 Notes”).

In March 2020, the Company drew down $ 120,000 under the Series 2019-1 Class A-1 Notes, which was fully repaid in July 2020.

In June 2020, the Master Issuer issued the Series 2020-1 Class A-1 Notes.

The Class A-2 Notes and the 2021-1 Class A-1 Notes are collectively referred to as the “Senior Notes.”

The Senior Notes are secured by a security interest in substantially all of the assets of the Master Issuer and certain other limited-purpose, bankruptcy-remote, wholly-owned indirect subsidiaries of the Company that act as guarantors (collectively, the “Securitization Entities”), except for certain real estate assets and subject to certain limitations as set forth in the indenture governing the Senior Notes (the “Indenture”) and the related guarantee and collateral agreements.

4 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) 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.

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) SOFR for U.S.

There is a commitment fee on the unused portions of the 2021-1 Class A-1 Notes, which ranges from 0.40 % to 0.75 % based on utilization.

As of January 1, 2023, $ 28,388 of letters of credit were outstanding against the 2021-1 Class A-1 Notes, which relate primarily to interest reserves required under the Indenture.

As of December 31, 2023, $ 28,627 of letters of credit were outstanding against the 2021-1 Class A-1 Notes, which relate primarily to interest reserves required under the Indenture.

Covenants and Restrictions

4 unchanged sentences

In accordance with the Indenture, certain cash accounts have been established with the Indenture trustee for the benefit of the trustee and the noteholders, and are restricted in their use.

As of January 1, 2023 and January 2, 2022, Wendy’s Funding had restricted cash of $ 34,850 and $ 27,188 , respectively, which primarily represents cash collections and cash reserves held by the trustee to be used for payments of principal, interest and commitment fees required for the Class A-2 Notes.

As of December 31, 2023 and January 1, 2023, Wendy’s Funding had restricted cash of $ 35,483 and $ 34,850 , respectively, which primarily represents cash collections and cash reserves held by the trustee to be used for payments of principal, interest and commitment fees required for the Class A-2 Notes.

THE WENDY’S COMPANY AND SUBSIDIARIES

9 unchanged sentences

As part of the June 2021 refinancing transaction, the Master Issuer also issued the 2021-1 Class A-1 Notes.

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

The Series 2021-1 Class A-1 Notes replaced the 2019-1 Class A-1 Notes and 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.

Debt Issuance Costs

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.

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

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 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.

As of December 31, 2023, the effective interest rates, including the amortization of debt issuance costs, were 4.0 %, 4.0 %, 4.2 %, 2.5 %, 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 .

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.

During 2023, Wendy’s repurchased $ 40,430 in principal of its 7 % debentures for $ 40,517 .

As a result, the Company recognized a loss on early extinguishment of debt of $ 1,631 during 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.

1 unchanged sentence

In March 2020, the Company drew down C$ 5,500 under the revolving credit facility, which the Company fully repaid through repayments of C$ 3,000 in the fourth quarter of 2020 and C$ 2,500 in the first quarter of 2021.

As of January 1, 2023, the Company had no outstanding borrowings under the Canadian revolving credit facility.

advertising fund has a revolving line of credit of $ 25,000 , which was established to support the advertising fund operations and bears interest at LIBOR plus 2.15 %.

As of December 31, 2023, the Company had no outstanding borrowings under the Canadian revolving credit facility.

advertising fund has a revolving line of credit of $ 15,000 , which was established to support the Company’s advertising fund operations and bears interest at SOFR plus 2.25 %.

Borrowings under the line of credit are guaranteed by Wendy’s.

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 2022 or 2021.

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

As of December 31, 2023, the Company had no outstanding borrowings under the advertising fund revolving line of credit.

Interest Expense

27 unchanged sentences

The following table presents the carrying amounts and estimated fair values of the Company’s financial instruments:

January 1, 2023 January 2, 2022

December 31, 2023 January 1, 2023

Value Carrying

19 unchanged sentences

Our cash equivalents are the only financial assets measured and recorded at fair value on a recurring basis.

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Non-Recurring Fair Value Measurements

2 unchanged sentences

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.

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Total impairment losses may also include the impact of remeasuring long-lived assets held for sale.

19 unchanged sentences

(a) Excludes foreign income of domestic subsidiaries.

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

The (provision for) benefit from income taxes is set forth below:

7 unchanged sentences

Foreign ( 1,920 ) 2,192 ( 2,160 )

Deferred tax (provision) benefit ( 4,305 ) 13,781 ( 10,266 )

Deferred tax benefit (provision) 807 ( 4,305 ) 13,781

Income tax provision $ ( 74,978 ) $ ( 66,135 ) $ ( 40,186 )

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Deferred tax assets (liabilities) are set forth below:

January 1, 2023 January 2, 2022

December 31, 2023 January 1, 2023

Deferred tax assets:

15 unchanged sentences

$ ( 270,353 ) $ ( 270,421 )

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

The amounts and expiration dates of net operating loss and tax credit carryforwards are as follows:

2 unchanged sentences

federal foreign tax credits $ 17,111 2027-2033

State tax credits 423 2023-2024

Foreign tax credits of non-U.S.

2 unchanged sentences

Net operating loss carryforwards (pre-tax):

State and local net operating loss carryforwards $ 744,363 2024-2035

State and local net operating loss carryforwards 219,652 Indefinite

1 unchanged sentence

Total $ 975,624

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

The Company’s valuation allowances of $ 39,346 and $ 35,680 as of December 31, 2023 and January 1, 2023, respectively, relate primarily to foreign and state tax credit and net operating loss carryforwards.

Valuation allowances increased $ 3,666 during 2023 and decreased $ 2,597 and $ 11,691 during 2022 and 2021, respectively.

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.

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

The current portion of refundable income taxes was $ 5,284 and $ 3,236 as of December 31, 2023 and January 1, 2023, respectively, and is included in “Accounts and notes receivable, net.” There were no long-term refundable income taxes as of December 31, 2023 and January 1, 2023.

The reconciliation of income tax computed at the U.S.

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As such, our tax returns for fiscal years through 2021 have been settled.

The statute of limitations for the Company’s state tax returns vary, but generally the Company’s state income tax returns from its 2018 fiscal year and forward remain subject to examination.

The statute of limitations for the Company’s

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

state tax returns vary, but generally the Company’s state income tax returns from its 2018 fiscal year and forward remain subject to examination.

We believe that adequate provisions have been made for any liabilities, including interest and penalties that may result from the completion of these examinations.

Unrecognized Tax Benefits

As of January 1, 2023, the Company had unrecognized tax benefits of $ 17,404 , which, if resolved favorably, would reduce income tax expense by $ 13,749 .

As of December 31, 2023, the Company had unrecognized tax benefits of $ 16,719 , which, if resolved favorably, would reduce income tax expense by $ 13,208 .

A reconciliation of the beginning and ending amount of unrecognized tax benefits follows:

7 unchanged sentences

During 2024, we believe it is reasonably possible the Company will reduce unrecognized tax benefits by up to $ 220 due primarily to the lapse of statutes of limitations and expected settlements.

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

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.

During 2023, 2022 and 2021, the Company recognized $ 134 , $( 30 ) and $ 138 of expense (income) for interest, respectively, and $ 37 of income in 2021 for penalties, related to uncertain tax positions.

The Company has $ 979 and $ 943 accrued for interest related to uncertain tax positions as of December 31, 2023 and January 1, 2023, respectively.

(15) Stockholders’ Equity

12 unchanged sentences

Number of shares at end of year 265,027 257,323 254,575

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Repurchases of Common Stock

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”).

During 2023, the Company repurchased 9,107 shares under the January 2023 Authorization with an aggregate purchase price of $ 190,000 , of which $ 573 was accrued as of December 31, 2023, and excluding excise tax of $ 1,744 and commissions of $ 127 .

As of December 31, 2023, the Company had $ 310,000 of availability remaining under the January 2023 Authorization.

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.

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

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

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

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

In February 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

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

agreed upon discount.

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

In addition to the shares repurchased in connection with the 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 Authorization.

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

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 .

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

In addition, during 2021, the Board of Directors approved increases totaling $ 200,000 to the February 2020 Authorization, resulting in an aggregate authorization of $ 300,000 that continued to expire on February 28, 2022.

4 unchanged sentences

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

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

Preferred Stock

6 unchanged sentences

Balance at end of period $ ( 58,375 ) $ ( 64,176 ) $ ( 48,200 )

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

(16) Share-Based Compensation

3 unchanged sentences

All equity grants in 2023, 2022, and 2021 were issued from the 2020 Plan.

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

As of December 31, 2023, there were approximately 14,850 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.

Stock Options

The Company’s current outstanding stock options have maximum contractual terms of 10 years and vest ratably over three years or cliff vest after three years .

The Company grants stock options that have maximum contractual terms of 10 years and vest ratably over three years .

The exercise price of options granted is equal to the market price of the Company’s common stock on the date of grant.

10 unchanged sentences

Forfeited and/or expired ( 385 ) 22.01

Outstanding at January 1, 2023

Outstanding at December 31, 2023

10,490 $ 19.55 5.78 $ 14,801

Vested or expected to vest at January 1, 2023

Vested or expected to vest at December 31, 2023

10,414 $ 19.53 5.76 $ 14,801

Exercisable at January 1, 2023

Exercisable at December 31, 2023

8,153 $ 18.89 4.89 $ 14,801

12 unchanged sentences

The expected dividend yield represents the Company’s annualized average yield for regular quarterly dividends declared prior to the respective stock option grant dates.

The Black-Scholes Model has limitations on its effectiveness including that it was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable and that the model requires the use of highly subjective assumptions, such as expected stock price volatility.

Employee stock option awards have characteristics significantly different from those of traded options and changes in the subjective input assumptions can materially affect the fair value estimates.

THE WENDY’S COMPANY AND SUBSIDIARIES

1 unchanged sentence

(In Thousands Except Per Share Amounts)

Employee stock option awards have characteristics significantly different from those of traded options and changes in the subjective input assumptions can materially affect the fair value estimates.

Restricted Shares

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.

The Company grants RSUs, which primarily vest ratably over three years or cliff vest after three years .

The Company also grants RSAs to non-employee directors, which primarily cliff vest after one year.

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

The fair value of Restricted Shares granted is determined using the fair market value of the Company’s common stock on the date of grant, as set forth in the applicable plan document.

7 unchanged sentences

Forfeited ( 96 ) 22.11

Non-vested at January 1, 2023

Non-vested at December 31, 2023

1,372 $ 20.42

16 unchanged sentences

(a) The Monte Carlo method assumes a reinvestment of dividends.

Share-based compensation expense is recorded ratably for market condition awards during the requisite service period and is not reversed, except for forfeitures, at the vesting date regardless of whether the market condition is met.

THE WENDY’S COMPANY AND SUBSIDIARIES

1 unchanged sentence

(In Thousands Except Per Share Amounts)

The following table summarizes activity of performance shares at Target during 2023:

9 unchanged sentences

Forfeited ( 99 ) 22.44 ( 53 ) 28.47

Non-vested at January 1, 2023

Non-vested at December 31, 2023

608 $ 21.66 494 $ 26.68

8 unchanged sentences

Stock options $ 7,687 $ 9,072 $ 9,256

Restricted shares (a) 7,106 6,677 6,507

Restricted shares 9,503 7,106 6,677

Performance shares:

1 unchanged sentence

Market condition awards 4,033 3,929 3,225

Modifications, net — — 621

Share-based compensation 23,747 24,538 22,019

1 unchanged sentence

Share-based compensation, net of income tax benefit $ 20,540 $ 21,495 $ 19,229

_______________

(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.

As of December 31, 2023, there was $ 27,245 of total unrecognized share-based compensation, which will be recognized over a weighted average amortization period of 1.56 years.

(17) Impairment of Long-Lived Assets

The Company records impairment charges as a result of (1) the deterioration in operating performance of certain Company-operated restaurants, (2) the Company’s decision to lease and/or sublease properties to franchisees in connection with the sale or anticipated sale of Company-operated restaurants, including any subsequent lease modifications, and (3) closing Company-operated restaurants and classifying such surplus properties as held for sale.

THE WENDY’S COMPANY AND SUBSIDIARIES

1 unchanged sentence

(In Thousands Except Per Share Amounts)

(17) Impairment of Long-Lived Assets

Impairment charges during 2020 were primarily due to the deterioration in operating performance of certain Company-operated restaurants as a result of the COVID-19 pandemic.

The following is a summary of impairment losses recorded, which represent the excess of the carrying amount over the fair value of the affected assets and are included in “Impairment of long-lived assets:”

4 unchanged sentences

$ 1,401 $ 6,420 $ 2,251

(18) Investment Income (Loss), Net

2022 2021 2020

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 )

Other, net — ( 24 ) 246

$ 2,107 $ 39 $ ( 225 )

(18) Retirement Benefit Plans

1 unchanged sentence

The 401(k) Plan permits employees to contribute up to 75 % of their compensation, subject to certain limitations, and provides for matching employee contributions up to 4 % of compensation and for discretionary profit sharing contributions.

In connection with the matching and profit sharing contributions, the Company recognized compensation expense of $ 5,929 , $ 4,583 and $ 5,175 in 2022, 2021 and 2020, respectively.

Wendy’s Executive Plans

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 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.

In connection with the matching contributions, the Company recognized compensation expense of $ 5,947 , $ 5,929 and $ 4,583 in 2023, 2022 and 2021, respectively.

Deferred Compensation Plan

The Company has a non-qualified, unfunded deferred compensation plan for management and highly compensated employees, whereby participants may defer all or a portion of their base compensation and certain incentive awards on a pre-tax basis.

1 unchanged sentence

The Company may also make discretionary contributions to the plan.

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.”

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

The total of participant deferrals was $ 1,959 and $ 1,435 at December 31, 2023 and January 1, 2023, respectively, which are included in “Other liabilities.”

Nature of Leases

1 unchanged sentence

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

At January 1, 2023, Wendy’s and its franchisees operated 7,095 Wendy’s restaurants.

At December 31, 2023, Wendy’s and its franchisees operated 7,240 Wendy’s restaurants.

Of the 415 Company-operated Wendy’s restaurants, Wendy’s owned the land and building for 158 restaurants, owned the building and held long-term land leases for 145 restaurants and held leases covering the land and building for 112 restaurants.

1 unchanged sentence

The Company also leases restaurant, office and transportation equipment.

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Company as Lessee

27 unchanged sentences

The following table includes supplemental information related to leases:

January 1, 2023 January 2,

December 31, 2023 January 1,

Weighted-average remaining lease term (years):

9 unchanged sentences

Operating lease assets 705,615 754,498

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

The following table illustrates the Company’s future minimum rental payments for non-cancelable leases as of December 31, 2023:

Leases Operating

30 unchanged sentences

Sublease income includes lessees’ variable payments to the Company for executory costs of $ 39,350 , $ 38,733 and $ 39,650 for 2023, 2022 and 2021, respectively.

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

The following table illustrates the Company’s future minimum rental receipts for non-cancelable leases and subleases as of December 31, 2023:

Sales-Type and

17 unchanged sentences

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

January 1, 2023 January 2, 2022

December 31, 2023 January 1, 2023

Land $ 260,125 $ 260,650

9 unchanged sentences

Long-term debt-related activities, net:

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

(Gain) loss on early extinguishment of debt $ ( 2,283 ) $ — $ 17,917

Accretion of long-term debt 755 1,194 1,177

16 unchanged sentences

In August 2021, the Company announced the creation of a 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.

12 unchanged sentences

Lease Guarantees

Wendy’s has guaranteed the performance of certain leases and other obligations, primarily from former Company-operated restaurant locations now operated by franchisees, amounting to $ 102,627 as of January 1, 2023.

These leases extend through 2045.

We have had no judgments against us as guarantor of these leases as of January 1, 2023.

We have had no judgments against us as guarantor of these leases as of December 31, 2023.

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

The liability recorded for our probable exposure associated with these lease guarantees was not material as of January 1, 2023.

The liability recorded for our probable exposure associated with these lease guarantees was not material as of December 31, 2023.

Wendy’s is self-insured for most workers’ compensation losses and purchases insurance for general liability and automotive liability losses, all subject to a $ 500 per occurrence retention or deductible limit.

Wendy’s determines its liability for claims incurred but not reported for the insurance liabilities on an actuarial basis.

As of January 1, 2023, the Company had $ 17,885 recorded for these insurance liabilities.

As of December 31, 2023, the Company had $ 17,157 recorded for these insurance liabilities.

Wendy’s is self-insured for health care claims for eligible participating employees subject to certain deductibles and limitations and determines its liability for health care claims incurred but not reported based on historical claims runoff data.

As of January 1, 2023, the Company had $ 2,873 recorded for these health care insurance liabilities.

As of December 31, 2023, the Company had $ 3,089 recorded for these health care insurance liabilities.

Letters of Credit

As of January 1, 2023, the Company had outstanding letters of credit with various parties totaling $ 28,622 .

As of December 31, 2023, the Company had outstanding letters of credit with various parties totaling $ 28,847 .

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

8 unchanged sentences

Beverage purchases made by the Company under this agreement during 2023, 2022 and 2021 were $ 11,893 , $ 10,545 and $ 9,709 , respectively.

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

The Company estimates future annual purchases to be approximately $ 12,400 in 2024 and $ 12,700 in 2025 based on current pricing and the expected ratio of usage at Company-

THE WENDY’S COMPANY AND SUBSIDIARIES

1 unchanged sentence

(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.

IT Services Agreement

In December 2019, the Company entered into an agreement to partner with a third-party global IT consultant on the Company’s new IT organization structure to leverage the consultant’s global capabilities, which the Company believes will enable a more seamless integration between its digital and corporate IT assets.

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 $ 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.”

operated restaurants to franchised restaurants.

As of December 31, 2023, $ 3,906 was due to the beverage vendor and is included in “Accounts payable,” principally for annual estimated payments that exceeded usage under this agreement.

Marketing Agreement

The Company has an agreement with two national broadcasters that grants the Company certain marketing and media rights.

Costs incurred by the Company under this agreement were approximately $ 12,000 and $ 15,000 in 2022 and 2021, respectively, which are included in “Advertising funds expense.” No costs were incurred under this agreement in 2020.

The Company’s unconditional purchase obligations under the agreement are approximately $ 15,900 in 2023, $ 13,400 in 2024 and $ 12,700 in 2025.

Costs incurred by the Company under this agreement were approximately $ 16,000 , $ 12,000 and $ 15,000 in 2023, 2022, and 2021, respectively, which are included in “Advertising funds expense.” The Company’s unconditional purchase obligations under the agreement are approximately $ 16,300 in 2024 and $ 12,700 in 2025.

(22) Transactions with Related Parties

4 unchanged sentences

Rental receipts (b) 231 198 217

TimWen lease and management fee payments (c) $ 19,694 $ 18,687 $ 16,130

Yellow Cab royalty, advertising fund, lease and other income (d) $ 13,404 $ 9,869 $ 1,090

TimWen lease and management fee payments, net (c) $ 20,653 $ 19,694 $ 18,687

Transactions with Yellow Cab (d) $ 14,757 $ 13,404 $ 9,869

Transactions with AMC (e) $ 2,366 $ — $ —

_______________

7 unchanged sentences

Should QSCC’s sourcing fees exceed its expected needs, QSCC’s board of directors may return some or all of the excess to its members in the form of a patronage dividend.

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.

Wendy’s recorded its share of patronage dividends of $ 363 , $ 427 and $ 279 in 2023, 2022 and 2021, respectively, which are included as a reduction of “Cost of sales.”

(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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

The Company received lease payments from QSCC of $ 231 , $ 198 and $ 217 during 2023, 2022 and 2021, respectively, which has been recorded to “Franchise rental income.”

TimWen Lease and Management Fee Payments

1 unchanged sentence

Wendy’s paid TimWen $ 20,894 , $ 19,927 and $ 18,906 under these lease agreements during 2023, 2022 and 2021, 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 $ 241 , $ 233 and $ 219 during 2023, 2022 and 2021, respectively, which has been included as a reduction to “General and administrative.”

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Transactions with Yellow Cab

2 unchanged sentences

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

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

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

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

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

See Note 3 for further information.

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 December 31, 2023 owned and operated 83 Wendy’s restaurants (including 54 restaurants acquired from NPC during the first quarter of 2021).

During 2023, 2022 and 2021, the Company recognized $ 14,757 , $ 13,404 and $ 9,869 , respectively, in royalty, advertising fund, lease and other income from Yellow Cab and related entities.

As of December 31, 2023 and January 1, 2023, $ 1,153 and $ 1,125 , respectively, was due from Yellow Cab for such income, which is included in “Accounts and notes receivable, net” and “Advertising funds restricted assets.”

Transactions with AMC

(e) In February 2023, Ms.

Kristin Dolan, a director of the Company, was appointed as Chief Executive Officer of AMC Networks Inc.

During 2023, the Company purchased approximately $ 2,366 of advertising time from a subsidiary of AMC.

The Company’s advertising spend with AMC was made in the ordinary course of business and approved on an arm’s-length basis, consistent with the Company’s comparable advertising decisions.

As of December 31, 2023, approximately $ 584 was due to AMC for advertising time, which is included in “Advertising funds restricted liabilities.”

(23) Legal and Environmental Matters

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(24) Advertising Costs and Funds

We maintain U.S.

and Canadian national advertising funds established to collect and administer funds contributed for use in advertising and promotional programs.

We maintain the Advertising Funds established to collect and administer funds contributed for use in advertising and promotional programs.

Contributions to the Advertising Funds are required from both Company-operated and franchised restaurants and are based on a percentage of restaurant sales.

In addition to the contributions to the Advertising Funds, Company-operated and franchised restaurants make additional contributions to other local and regional advertising programs.

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

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

Restricted assets and liabilities of the Advertising Funds at December 31, 2023 and January 1, 2023 are as follows:

December 31, 2023 January 1, 2023

Cash and cash equivalents $ 36,931 $ 50,709

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Advertising funds restricted liabilities $ 120,558 $ 132,307

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Advertising expenses included in “Cost of sales” totaled $ 38,837 , $ 37,418 and $ 31,617 in 2023, 2022 and 2021, respectively.

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The accounting policies of the Company’s segments are the same as those described in Note 1.

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Revenues by segment are as follows:

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Total revenues $ 2,181,578 $ 2,095,505 $ 1,896,998

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

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

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Unallocated franchise support and other costs ( 831 ) ( 742 ) ( 753 )

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

Advertising funds surplus (deficit) 4,344 ( 8,325 ) 2,770

Unallocated general and administrative (c) ( 132,344 ) ( 130,103 ) ( 116,273 )

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Interest expense, net ( 124,061 ) ( 122,319 ) ( 109,185 )

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

Investment income (loss), net 2,107 39 ( 225 )

Gain (loss) on early extinguishment of debt 2,283 — ( 17,917 )

Investment (loss) income, net ( 10,358 ) 2,107 39

Other income, net 29,570 10,403 681

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includes advertising funds expense of $ 11,000 and $ 25,000 for 2022 and 2021, 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.

(b) Wendy’s International includes advertising fund expense of $ 2,401 and $ 4,116 for 2023 and 2022, respectively, related to the Company’s funding of incremental advertising.

In addition, Wendy’s International includes other international-related advertising deficit of $ 950 and $ 1,099 for 2023 and 2022, respectively.

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.

Net income (loss) of equity method investments by segment was as follows:

2022 2021 2020

Wendy’s International $ — $ — $ ( 417 )

Global Real Estate & Development 9,422 11,203 6,513

Total net income of equity method investments $ 9,422 $ 11,203 $ 6,096

Net income of our TimWen equity method investment is included in segment profit for the Global Real Estate & Development segment and totaled $ 10,819 , $ 9,422 and $ 11,203 during 2023, 2022 and 2021, respectively .

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

1 unchanged sentence

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