Wendy's Co [WEN] Filings

10-Q 1 wen-20211003.htm 10-Q wen-20211003

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒						QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 3, 2021


☐						TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to _______________

Commission file number: 1-2207

THE WENDY’S COMPANY

(Exact name of registrant as specified in its charter)


Delaware		38-0471180
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

One Dave Thomas Blvd.
Dublin,	Ohio	43017
(Address of principal executive offices)		(Zip Code)

(614) 764-3100

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $.10 par value	WEN	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

There were 220,634,432 shares of The Wendy’s Company common stock outstanding as of November 3, 2021.

THE WENDY’S COMPANY AND SUBSIDIARIES

INDEX TO FORM 10-Q


			Page
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements			4
Unaudited Condensed Consolidated Balance Sheets as of October 3, 2021 and January 3, 2021			4
Unaudited Condensed Consolidated Statements of Operations for the three and nine months ended October 3, 2021 and September 27 , 2020			5
Unaudited Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended October 3 , 2021 and September 27 , 2020			6
Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended October 3 , 2021 and September 27 , 2020			7
Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended October 3, 2021 and September 27 , 2020			9
Notes to Condensed Consolidated Financial Statements			10
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			32
Item 3. Quantitative and Qualitative Disclosures about Market Risk			48
Item 4. Controls and Procedures			49

PART II: OTHER INFORMATION			50
Item 1. Legal Proceedings			51
Item 1A. Risk Factors			52
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			52
Item 6. Exhibits			53
Signatures			54

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

THE WENDY’S COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands Except Par Value)


	October 3, 2021		January 3, 2021
ASSETS	(Unaudited)
Current assets:
Cash and cash equivalents	$	571,502	$	306,989
Restricted cash	36,321		33,973
Accounts and notes receivable, net	100,265		109,891
Inventories	4,257		4,732
Prepaid expenses and other current assets	23,820		89,732
Advertising funds restricted assets	107,320		142,306
Total current assets	843,485		687,623
Properties	873,250		915,889
Finance lease assets	210,660		206,153
Operating lease assets	783,986		821,480
Goodwill	751,805		751,049
Other intangible assets	1,209,695		1,224,960
Investments	41,356		44,574
Net investment in sales-type and direct financing leases	305,242		268,221
Other assets	137,468		120,057
Total assets	$	5,156,947	$	5,040,006

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	32,750	$	28,962
Current portion of finance lease liabilities	15,915		12,105
Current portion of operating lease liabilities	45,541		45,346
Accounts payable	26,506		31,063
Accrued expenses and other current liabilities	158,800		155,321
Advertising funds restricted liabilities	127,673		140,511
Total current liabilities	407,185		413,308
Long-term debt	2,360,763		2,218,163
Long-term finance lease liabilities	528,775		506,076
Long-term operating lease liabilities	830,488		865,325
Deferred income taxes	279,813		280,755
Deferred franchise fees	90,086		89,094
Other liabilities	117,083		117,689
Total liabilities	4,614,193		4,490,410
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.10 par value; 1,500,000 shares authorized; 470,424 shares issued; 221,301 and 224,268 shares outstanding, respectively	47,042		47,042
Additional paid-in capital	2,911,552		2,899,276
Retained earnings	317,956		238,674
Common stock held in treasury, at cost; 249,123 and 246,156 shares, respectively	(2,685,063)		(2,585,755)
Accumulated other comprehensive loss	(48,733)		(49,641)
Total stockholders’ equity	542,754		549,596
Total liabilities and stockholders’ equity	$	5,156,947	$	5,040,006

See accompanying notes to condensed consolidated financial statements.

Table of Contents

THE WENDY’S COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In Thousands Except Per Share Amounts)


	Three Months Ended				Nine Months Ended
	October 3, 2021		September 27, 2020		October 3, 2021		September 27, 2020
	(Unaudited)
Revenues:
Sales	$	171,078	$	191,946	$	553,660	$	522,961
Franchise royalty revenue and fees	138,755		116,820		398,246		321,645
Franchise rental income	62,446		58,721		182,190		173,434
Advertising funds revenue	97,976		84,755		289,699		241,468
	470,255		452,242		1,423,795		1,259,508
Costs and expenses:
Cost of sales	146,436		159,545		457,440		450,170
Franchise support and other costs	10,509		5,960		27,080		19,427
Franchise rental expense	34,424		32,426		101,058		93,024
Advertising funds expense	108,529		92,048		310,642		253,353
General and administrative	62,840		47,322		178,576		147,553
Depreciation and amortization	30,940		32,966		93,243		98,726
System optimization gains, net	(1,437)		(23)		(32,719)		(2,333)
Reorganization and realignment costs	345		3,375		7,381		10,196
Impairment of long-lived assets	566		23		1,831		4,727
Other operating income, net	(3,092)		(2,748)		(10,800)		(6,076)
	390,060		370,894		1,133,732		1,068,767
Operating profit	80,195		81,348		290,063		190,741
Interest expense, net	(26,000)		(29,086)		(82,990)		(86,696)
Loss on early extinguishment of debt	—		—		(17,917)		—
Other income, net	171		181		461		1,113
Income before income taxes	54,366		52,443		189,617		105,158
Provision for income taxes	(13,195)		(12,690)		(41,356)		(26,060)
Net income	$	41,171	$	39,753	$	148,261	$	79,098

Net income per share:
Basic	$	.19	$	.18	$	.67	$	.35
Diluted	.18		.17		.66		.35

See accompanying notes to condensed consolidated financial statements.

Table of Contents

THE WENDY’S COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In Thousands)


	Three Months Ended				Nine Months Ended
	October 3, 2021		September 27, 2020		October 3, 2021		September 27, 2020
	(Unaudited)
Net income	$	41,171	$	39,753	$	148,261	$	79,098
Other comprehensive (loss) income:
Foreign currency translation adjustment	(4,659)		3,220		908		(5,138)
Other comprehensive (loss) income	(4,659)		3,220		908		(5,138)
Comprehensive income	$	36,512	$	42,973	$	149,169	$	73,960

See accompanying notes to condensed consolidated financial statements.

Table of Contents

THE WENDY’S COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In Thousands)


	Common Stock		Additional Paid-In Capital		Retained Earnings		Common Stock Held in Treasury		Accumulated Other Comprehensive Loss		Total

	(Unaudited)
Balance at January 3, 2021	$	47,042	$	2,899,276	$	238,674	$	(2,585,755)	$	(49,641)	$	549,596
Net income	—		—		41,366		—		—		41,366
Other comprehensive income	—		—		—		—		2,220		2,220
Cash dividends	—		—		(20,156)		—		—		(20,156)
Repurchases of common stock	—		—		—		(56,084)		—		(56,084)
Share-based compensation	—		5,151		—		—		—		5,151
Common stock issued upon exercises of stock options	—		(20)		—		683		—		663
Common stock issued upon vesting of restricted shares	—		(2,996)		—		817		—		(2,179)
Other	—		49		(5)		44		—		88
Balance at April 4, 2021	$	47,042	$	2,901,460	$	259,879	$	(2,640,295)	$	(47,421)	$	520,665
Net income	—		—		65,724		—		—		65,724
Other comprehensive income	—		—		—		—		3,347		3,347
Cash dividends	—		—		(22,123)		—		—		(22,123)
Repurchases of common stock	—		—		—		(27,291)		—		(27,291)
Share-based compensation	—		5,882		—		—		—		5,882
Common stock issued upon exercises of stock options	—		850		—		23,466		—		24,316
Common stock issued upon vesting of restricted shares	—		(959)		—		714		—		(245)
Other	—		41		(5)		45		—		81
Balance at July 4, 2021	$	47,042	$	2,907,274	$	303,475	$	(2,643,361)	$	(44,074)	$	570,356
Net income	—		—		41,171		—		—		41,171
Other comprehensive loss	—		—		—		—		(4,659)		(4,659)
Cash dividends	—		—		(26,684)		—		—		(26,684)
Repurchases of common stock	—		—		—		(43,857)		—		(43,857)
Share-based compensation	—		5,702		—		—		—		5,702
Common stock issued upon exercises of stock options	—		351		—		1,465		—		1,816
Common stock issued upon vesting of restricted shares	—		(1,835)		—		642		—		(1,193)
Other	—		60		(6)		48		—		102
Balance at October 3, 2021	$	47,042	$	2,911,552	$	317,956	$	(2,685,063)	$	(48,733)	$	542,754

See accompanying notes to condensed consolidated financial statements.

Table of Contents

THE WENDY’S COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY—CONTINUED

(In Thousands)


	Common Stock		Additional Paid-In Capital		Retained Earnings		Common Stock Held in Treasury		Accumulated Other Comprehensive Loss		Total

	(Unaudited)
Balance at December 29, 2019	$	47,042	$	2,874,001	$	185,725	$	(2,536,581)	$	(53,828)	$	516,359
Net income	—		—		14,441		—		—		14,441
Other comprehensive loss	—		—		—		—		(12,507)		(12,507)
Cash dividends	—		—		(26,793)		—		—		(26,793)
Repurchases of common stock, including accelerated share repurchase	—		15,000		—		(58,336)		—		(43,336)
Share-based compensation	—		4,539		—		—		—		4,539
Common stock issued upon exercises of stock options	—		280		—		1,330		—		1,610
Common stock issued upon vesting of restricted shares	—		(4,017)		—		726		—		(3,291)
Other	—		33		(7)		27		—		53
Balance at March 29, 2020	$	47,042	$	2,889,836	$	173,366	$	(2,592,834)	$	(66,335)	$	451,075
Net income	—		—		24,904		—		—		24,904
Other comprehensive income	—		—		—		—		4,149		4,149
Cash dividends	—		—		(11,181)		—		—		(11,181)

Share-based compensation	—		4,787		—		—		—		4,787
Common stock issued upon exercises of stock options	—		(902)		—		11,361		—		10,459
Common stock issued upon vesting of restricted shares	—		(1,041)		—		773		—		(268)
Other	—		19		(3)		42		—		58
Balance at June 28, 2020	$	47,042	$	2,892,699	$	187,086	$	(2,580,658)	$	(62,186)	$	483,983
Net income	—		—		39,753		—		—		39,753
Other comprehensive income	—		—		—		—		3,220		3,220
Cash dividends	—		—		(11,202)		—		—		(11,202)
Repurchases of common stock	—		—		—		(1,708)		—		(1,708)
Share-based compensation	—		5,786		—		—		—		5,786
Common stock issued upon exercises of stock options	—		838		—		2,465		—		3,303
Common stock issued upon vesting of restricted shares	—		(2,600)		—		918		—		(1,682)
Other	—		44		(2)		40		—		82
Balance at September 27, 2020	$	47,042	$	2,896,767	$	215,635	$	(2,578,943)	$	(58,966)	$	521,535

See accompanying notes to condensed consolidated financial statements.

Table of Contents

THE WENDY’S COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)


	Nine Months Ended
	October 3, 2021		September 27, 2020
	(Unaudited)
Cash flows from operating activities:
Net income	$	148,261	$	79,098
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	93,243		98,726
Share-based compensation	16,735		15,112
Impairment of long-lived assets	1,831		4,727
Deferred income tax	(25)		5,878
Non-cash rental expense, net	28,421		19,967
Change in operating lease liabilities	(34,220)		(29,539)
Net receipt of deferred vendor incentives	1,906		5,061
System optimization gains, net	(32,719)		(2,333)
Distributions received from joint ventures, net of equity in earnings	3,561		1,187
Long-term debt-related activities, net	23,043		4,866
Changes in operating assets and liabilities and other, net	26,636		3,009
Net cash provided by operating activities	276,673		205,759
Cash flows from investing activities:
Capital expenditures	(43,401)		(44,876)
Acquisitions	4,879		—
Dispositions	52,657		3,570
Proceeds from sale of investments	—		169
Notes receivable, net	907		138
Net cash provided by (used in) investing activities	15,042		(40,999)
Cash flows from financing activities:
Proceeds from long-term debt	1,100,000		153,315
Repayments of long-term debt	(955,782)		(174,959)
Repayments of finance lease liabilities	(9,021)		(5,850)
Deferred financing costs	(20,873)		(2,122)
Repurchases of common stock	(125,656)		(46,667)
Dividends	(68,963)		(49,176)
Proceeds from stock option exercises	27,204		15,540
Payments related to tax withholding for share-based compensation	(4,390)		(5,409)
Net cash used in financing activities	(57,481)		(115,328)
Net cash provided by operations before effect of exchange rate changes on cash	234,234		49,432
Effect of exchange rate changes on cash	177		(1,715)
Net increase in cash, cash equivalents and restricted cash	234,411		47,717
Cash, cash equivalents and restricted cash at beginning of period	418,241		358,707
Cash, cash equivalents and restricted cash at end of period	$	652,652	$	406,424

Supplemental non-cash investing and financing activities:
Capital expenditures included in accounts payable	$	4,363	$	4,789
Finance leases	43,277		24,617

	October 3, 2021		January 3, 2021
Reconciliation of cash, cash equivalents and restricted cash at end of period:
Cash and cash equivalents	$	571,502	$	306,989
Restricted cash	36,321		33,973
Restricted cash, included in Advertising funds restricted assets	44,829		77,279
Total cash, cash equivalents and restricted cash	$	652,652	$	418,241

See accompanying notes to condensed consolidated financial statements.

Table of Contents

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

(1) Basis of Presentation

Wendy's Co [WEN] Filings
10-Q	[2021-11-10]
10-Q	[2021-08-11]
10-Q	[2021-05-12]
10-K	[2021-03-03]
10-Q	[2020-11-04]
10-Q	[2020-08-05]
10-Q	[2020-05-06]
10-K	[2020-02-26]
10-Q	[2019-11-06]
10-Q	[2019-08-07]
10-Q	[2019-05-08]
10-K	[2019-02-27]
10-Q	[2018-11-06]
10-Q	[2018-08-07]
10-Q	[2018-05-08]
10-K	[2018-02-28]
10-Q	[2017-11-08]
10-Q	[2017-08-09]
10-Q	[2017-05-10]
10-K	[2017-03-02]
10-Q	[2016-11-09]
10-Q	[2016-08-10]
10-Q	[2016-05-11]
10-K	[2016-03-03]
10-Q	[2015-11-04]
10-Q	[2015-08-05]
10-Q	[2015-05-06]
10-K	[2015-02-26]
10-Q	[2014-11-06]
10-Q	[2014-08-07]
10-Q	[2014-05-08]
10-K	[2014-02-27]
10-Q	[2013-11-07]
10-Q	[2013-08-07]
10-Q	[2013-05-08]
10-K	[2013-02-28]
10-Q	[2012-11-08]
10-Q	[2012-08-09]
10-Q	[2012-05-08]
10-K	[2012-03-01]