UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



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

For the quarterly period ended ~~March 31,~~June 30, 2013



( )		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 registrants 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)

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 [x] 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 [x] No [ ]

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

Large accelerated filer [x] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [ ]

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

Yes [ ] No [x]

There were ~~393,367,322~~393,307,777 shares of The Wendy’s Company common stock outstanding as of ~~May~~August 2, 2013.

THE WENDY’S COMPANY AND SUBSIDIARIES

INDEX TO FORM 10-Q



	Page
Part I: FINANCIAL INFORMATION
Item 1. Financial Statements	3
Condensed Consolidated Balance Sheets as of ~~March 31,~~June 30, 2013 (Unaudited) and December 30, 2012	3
Unaudited Condensed Consolidated Statements of Operations for the three and six months ended ~~March 31,~~June 30, 2013 and ~~April~~July 1, 2012	4
Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) ~~Income~~ for the three and six months ended ~~March 31,~~June 30, 2013 and ~~April~~July 1, 2012	5
Unaudited Condensed Consolidated Statements of Cash Flows for the ~~three~~six months ended ~~March 31,~~June 30, 2013 and ~~April~~July 1, 2012	6
Notes to Condensed Consolidated Financial Statements	8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	1721
Item 3. Quantitative and Qualitative Disclosures about Market Risk	2437
Item 4. Controls and Procedures	2438

Part II: OTHER INFORMATION	2639
Item 1. Legal Proceedings	2740
Item 1A. Risk Factors	2841
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	2841
Item 6. Exhibits	2942
Signatures	3044

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

THE WENDY’S COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands)


	March 31, 2013			December 30, 2012			6/30/2013			December 30, 2012
ASSETS	(Unaudited)						(Unaudited)
Current assets:
Cash and cash equivalents	$	428,684		$	453,361		$	489,017		$	453,361
Accounts and notes receivable	61,761			61,164			65,810			61,164
Inventories	12,424			13,805			11,715			13,805
Prepaid expenses and other current assets	38,020			24,231			51,468			24,231
Deferred income tax benefit	84,659			91,489			86,501			91,489
Advertising funds restricted assets	70,118			65,777			71,284			65,777
Total current assets	695,666			709,827			775,795			709,827
Properties	1,233,283			1,250,338			1,226,532			1,250,338
Goodwill	875,179			876,201			872,883			876,201
Other intangible assets	1,293,862			1,301,537			1,300,585			1,301,537
Investments	110,901			113,283			107,445			113,283
Deferred costs and other assets	48,087			52,013			33,455			52,013
Total assets	$	4,256,978		$	4,303,199		$	4,316,695		$	4,303,199

LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt	$	13,803		$	12,911		$	248,876		$	12,911
Accounts payable	55,406			70,826			86,646			70,826
Accrued expenses and other current liabilities	132,298			137,348			128,212			137,348
Advertising funds restricted liabilities	70,118			65,777			71,284			65,777
Total current liabilities	271,625			286,862			535,018			286,862
Long-term debt	1,441,742			1,444,651			1,222,285			1,444,651
Deferred income taxes	435,632			438,217			440,364			438,217
Other liabilities	136,500			147,614			155,226			147,614
Commitments and contingencies
Stockholders’ equity:

Equity:
The Wendy’s Company stockholders’ equity:
Common stock, $0.10 par value; 1,500,000 shares authorized; 470,424 shares issued	47,042			47,042			47,042			47,042
Additional paid-in capital	2,783,154			2,782,765			2,785,952			2,782,765
Accumulated deficit	(480,592		)	(467,007		)	(484,115		)	(467,007		)
Common stock held in treasury, at cost; 77,236 and 78,051 shares	(378,975		)	(382,926		)
Accumulated other comprehensive income	850			5,981
Common stock held in treasury, at cost; 76,655 and 78,051 shares							(376,159		)	(382,926		)
Accumulated other comprehensive (loss) income							(6,587		)	5,981
Total stockholders’ equity	1,971,479			1,985,855			1,966,133			1,985,855
Total liabilities and stockholders’ equity	$	4,256,978		$	4,303,199
Noncontrolling interests							(2,331		)	—
Total equity							1,963,802			1,985,855
Total liabilities and equity							$	4,316,695		$	4,303,199

See accompanying notes to condensed consolidated financial statements.

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THE WENDY’S COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In Thousands Except Per Share Amounts)


	Three Months Ended						Three Months Ended						Six Months Ended
	March 31, 2013			April 1, 2012			6/30/2013			7/1/2012			6/30/2013			7/1/2012
	(Unaudited)						(Unaudited)
Revenues:
Sales	$	530,673		$	519,929		$	571,198		$	566,116		$	1,101,871		$	1,086,045
Franchise revenues	73,009			73,258			79,346			79,752			152,355			153,010
	603,682			593,187			650,544			645,868			1,254,226			1,239,055
Costs and expenses:
Cost of sales	460,828			455,467			473,298			483,080			934,126			938,547
General and administrative	65,310			72,304			74,795			73,345			140,105			145,649
Depreciation and amortization	51,797			32,311			38,719			35,947			90,516			68,258
Impairment of long-lived assets	—			4,511			—			3,270			—			7,781
Facilities relocation costs and other transactions	3,038			6,143
Facilities action charges, net							6,377			9,988			9,415			16,131
Other operating expense, net	245			1,535			365			1,847			610			3,382
	581,218			572,271			593,554			607,477			1,174,772			1,179,748
Operating profit	22,464			20,916			56,990			38,391			79,454			59,307
Interest expense	(20,964		)	(28,235		)	(18,964		)	(28,002		)	(39,928		)	(56,237		)
Other expense, net and investment income, net	(2,271		)	28,931
(Loss) income before income taxes and noncontrolling interests	(771		)	21,612
Benefit from (provision for) income taxes	2,904			(6,878		)
Net income	2,133			14,734
Net income attributable to noncontrolling interests	—			(2,384		)
Net income attributable to The Wendy’s Company	$	2,133		$	12,350
Loss on early extinguishment of debt							(21,019		)	(25,195		)	(21,019		)	(25,195		)
Investment income and other income (expense), net							48			640			(2,223		)	29,571
Income (loss) before income taxes and noncontrolling interests							17,055			(14,166		)	16,284			7,446
(Provision for) benefit from income taxes							(5,053		)	8,673			(2,149		)	1,795
Net income (loss)							12,002			(5,493		)	14,135			9,241
Net loss (income) attributable to noncontrolling interests							222			—			222			(2,384		)
Net income (loss) attributable to The Wendy’s Company							$	12,224		$	(5,493	)	$	14,357		$	6,857

Basic and diluted net income per share attributable to The Wendy’s Company	$	.01		$	.03
Basic and diluted net income (loss) per share attributable to The Wendy’s Company							$	.03		$	(.01	)	$	.04		$	.02

Dividends per share	$	.04		$	.02		$	.04		$	.02		$	.08		$	.04

See accompanying notes to condensed consolidated financial statements.

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THE WENDY’S COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) ~~INCOME~~

(In Thousands)

Three Months Ended
March 31,
2013 April 1,
2012
(Unaudited)

Net income $ 2,133
$ 14,734
Other comprehensive (loss) income, net:
   Foreign currency translation adjustment (5,069 ) 4,742
Change in unrecognized pension loss, net of income tax
provision of $37 and $127 (62 ) (217 )
     Other comprehensive (loss) income, net (5,131 ) 4,525
        Comprehensive (loss) income (2,998 ) 19,259
Comprehensive income attributable to noncontrolling
interests —
(2,384 )
Comprehensive (loss) income attributable to
The Wendy’s Company $ (2,998 ) $ 16,875



	Three Months Ended						Six Months Ended
	6/30/2013			7/1/2012			6/30/2013			7/1/2012
	(Unaudited)

Net income (loss)	$	12,002		$	(5,493	)	$	14,135		$	9,241
Other comprehensive (loss) income, net:
Foreign currency translation adjustment	(6,811		)	(3,353		)	(11,880		)	1,389
Change in unrecognized pension loss, net of income tax benefits of $37 and $127, respectively	—			—			(62		)	(217		)
Other comprehensive (loss) income, net	(6,811		)	(3,353		)	(11,942		)	1,172
Comprehensive income (loss)	5,191			(8,846		)	2,193			10,413
Comprehensive income attributable to noncontrolling interests	(404		)	—			(404		)	(2,384		)
Comprehensive income (loss) attributable to The Wendy’s Company	$	4,787		$	(8,846	)	$	1,789		$	8,029

See accompanying notes to condensed consolidated financial statements.

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THE WENDY’S COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)


	Three Months Ended						Six Months Ended
	March 31, 2013			April 1, 2012			6/30/2013			7/1/2012
	(Unaudited)						(Unaudited)
Cash flows from operating activities:
Net income	$	2,133		$	14,734		$	14,135		$	9,241
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	52,382			32,952			91,470			69,558
Loss on early extinguishment of debt							21,019			25,195
Distributions received from TimWen joint venture	2,701			3,253			6,026			6,694
Share-based compensation	3,010			2,597			6,960			5,164
Impairment of long-lived assets	—			4,511			—			7,781
Net recognition of deferred vendor incentives	(4,797		)	(58		)
System Optimization Remeasurement							5,938			—
Net receipt of deferred vendor incentives							15,769			12,486
Accretion of long-term debt	1,929			2,010			3,747			4,148
Amortization of deferred financing costs	762			1,361			1,407			2,718
Non-cash rent expense	2,156			1,639			4,530			874
Equity in earnings in joint ventures, net	(1,191		)	(2,134		)	(4,071		)	(4,914		)
Deferred income tax	2,593			5,773			5,736			(3,586		)
Gain on sale of investment, net	—			(27,407		)	—			(27,407		)
Gain on sale of restaurants							(1,276		)	—
Other, net	(7,784		)	1,404			(4,396		)	1,747
Changes in operating assets and liabilities:
Accounts and notes receivable	1,858			(74		)	(1,829		)	(3,115		)
Inventories	1,285			920			1,540			730
Prepaid expenses and other current assets	148			(2,658		)	(2,389		)	(6,740		)
Accounts payable	(2,409		)	(12,313		)	776			(7,140		)
Accrued expenses and other current liabilities	(22,172		)	(41,654		)	(21,728		)	(24,904		)
Net cash provided by (used in) operating activities	32,604			(15,144		)
Net cash provided by operating activities							143,364			68,530
Cash flows from investing activities:
Capital expenditures	(39,977		)	(46,998		)	(81,770		)	(84,079		)
Acquisitions	—			(2,594		)	(812		)	(21,779		)
Dispositions							16,011			907
Franchise loans, net	127			(1,096		)	257			(1,001		)
Dispositions	2,104			756
Proceeds from sales of investments	151			25,367			151			24,374
Other, net	—			(1,472		)	—			(564		)
Net cash used in investing activities	(37,595		)	(26,037		)	(66,163		)	(82,142		)
Cash flows from financing activities:
Proceeds from long-term debt							350,000			619,437
Repayments of long-term debt	(6,506		)	(6,354		)	(357,419		)	(602,823		)
Deferred financing costs							(5,811		)	(15,602		)
Premium payment on redemption of Senior Notes							—			(10,093		)
Dividends	(15,703		)	(7,795		)	(31,440		)	(15,597		)
Distribution to noncontrolling interests	—			(3,667		)	—			(3,667		)
Proceeds from stock option exercises	3,564			1,156			5,539			1,544
Other, net	—			52			219			52
Net cash used in financing activities	(18,645		)	(16,608		)	(38,912		)	(26,749		)
Net cash used in operations before effect of exchange rate changes on cash	(23,636		)	(57,789		)
Net cash provided by (used in) operations before effect of exchange rate changes on cash							38,289			(40,361		)
Effect of exchange rate changes on cash	(1,041		)	968			(2,633		)	230
Net decrease in cash and cash equivalents	(24,677		)	(56,821		)
Net increase (decrease) in cash and cash equivalents							35,656			(40,131		)
Cash and cash equivalents at beginning of period	453,361			475,231			453,361			475,231
Cash and cash equivalents at end of period	$	428,684		$	418,410		$	489,017		$	435,100

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THE WENDY’S COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS—CONTINUED

(In Thousands)


	Three Months Ended					Six Months Ended
	March 31, 2013			April 1, 2012		6/30/2013		7/1/2012
	(Unaudited)					(Unaudited)
Supplemental cash flow information:
Cash paid during the period for:
Cash paid for:
Interest	$	18,914		$	36,287	$	39,670	$	51,678
Income taxes (refunds), net	$	(306	)	$	6,323
Income taxes, net of refunds						$	778	$	8,271

Supplemental non-cash investing and financing activities:
Capital expenditures included in accounts payable	$	12,897		$	7,977	$	38,859	$	6,486
Capitalized lease obligations	$	1,035		$	190	$	4,628	$	14,961

See accompanying notes to condensed consolidated financial statements.

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THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

(1) Basis of Presentation

The accompanying unaudited condensed consolidated financial statements (the “Financial Statements”) of The Wendy’s Company (“The Wendy’s Company” and, together with its subsidiaries, the “Company,” “we,” “us” or “our”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and therefore, do not include all information and footnotes required by GAAP for complete financial statements. In our opinion, the Financial Statements contain all adjustments necessary to present fairly our financial position as of ~~March 31,~~June 30, 2013 and the results of our operations for the threeandsix months ended June 30, 2013 and July 1, 2012 and our cash flows for the ~~three~~six months ended ~~March 31,~~June 30, 2013 and ~~April~~July 1, 2012. The results of operations for the three and sixmonths ended ~~March 31,~~June 30, 2013 are not necessarily indicative of the results to be expected for the full 2013 fiscal year. These Financial Statements should be read in conjunction with the audited consolidated financial statements for The Wendy’s Company and notes thereto, included in our Annual Report on Form 10-K for the fiscal year ended December 30, 2012 (the “Form 10-K”).

The principal subsidiary of the Company is Wendy’s International, Inc. (“Wendy’s”) and its subsidiaries. The Company manages and internally reports its business geographically. The operation and franchising of Wendy’s^®restaurants in North America (defined as the U.S. and Canada) comprises virtually all of our current operations and represents a single reportable segment. The revenues and operating results of Wendy’s restaurants outside of North America are not material.

We report on a fiscal year consisting of 52 or 53 weeks ending on the Sunday closest to December 31. ~~Both~~All three and six month periods presented herein contain 13 ~~weeks.~~and 26 weeks, respectively. All references to years and quarters relate to fiscal periods rather than calendar periods.

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

In connection with the reimaging of restaurants as part of our Image Activation program, we have recorded $~~14,508~~4,246 and $18,754 of accelerated depreciation and amortization during the ~~first quarter of~~three and six months ended June 30, 2013, respectively, on certain long-lived assets to reflect their use over shortened estimated useful lives. We describe the circumstances under which we record accelerated depreciation and amortization for properties in our Form 10-K.

(2) Acquisitions and Dispositions

Consolidation of a Joint Venture in Japan

A wholly-owned subsidiary of Wendy’s owned a 49% share in a joint venture for the operation of Wendy’s restaurants in Japan (the “Japan JV”) with Ernest M. Higa and Higa Industries, Ltd., a corporation organized under the laws of Japan (collectively, the “Higa Partners”). In January 2013, Wendy’s and the Higa Partners agreed to fund approximately $3,000 and $657, respectively, of future anticipated cash requirements of the Japan JV, of which $1,000 and $219, respectively, were contributed in April 2013. In conjunction with the additional capital contributions in April 2013, the partners executed an amendment to the original joint venture agreement which includes revised rights and obligations of the partners and changes to the ownership and profit distribution percentages. The ownership and profit distribution percentages, as defined, are 60.9% and 58.5% and 39.1% and 41.5%, respectively for Wendy’s and the Higa Partners and will change as future contributions are made to fund the Japan JV. As a result of the changes in the ownership rights and obligations of the partners, Wendy’s is consolidating the Japan JV beginning in the second quarter of 2013 and we have reflected our $1,000 capital contribution, net of cash acquired of $188, in “Acquisitions” in our condensed consolidated statements of cash flows. Prior to our acquisition of this additional interest, the Japan JV was accounted for as an unconsolidated affiliate under the equity method of accounting.

Under the equity method of accounting, we previously reported our 49% share of the net loss of the Japan JV in “Other operating expense, net.” Beginning in the second quarter of 2013, we have reported the Japan JV’s results of operations in the appropriate line items in our condensed consolidated statements of operations. Net loss attributable to the Higa Partners’ ownership percentage is recorded in “Net loss (income) attributable to noncontrolling interests.” The consolidation of the Japan JV’s existing three restaurants did not have a material impact on our condensed consolidated financial statements.

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THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Acquisitions

During the six months ended June 30, 2013, Wendy’s acquired one franchised restaurant; such transaction was not significant.

On June 11, 2012, Wendy’s acquired 30 franchised restaurants in the Austin, Texas area from Pisces Foods, L.P. and Near Holdings, L.P. The allocation of the total purchase price of $18,915, including closing adjustments, to the fair value of assets acquired and liabilities assumed was finalized during the ~~three months ended~~first quarter of ~~March 31,~~ 2013 and unchanged from our Form 10-K disclosure.

~~During~~In addition, during the ~~three~~six months ended ~~April~~July 1, 2012, Wendy’s acquired two franchised restaurants along with certain other equipment and franchise rights. The total net cash consideration for this acquisition was $2,594. The total consideration was allocated to net tangible and identifiable intangible assets acquired, primarily properties, and liabilities assumed based on their estimated fair values, with the excess of $485 recognized as goodwill.

Dispositions

During the ~~three~~six months ended ~~March 31,~~June 30, 2013, Wendy’s received cash proceeds of $~~2,104~~13,211 from dispositions, consisting of (1) $8,653 resulting from franchisees exercising options to purchase previously subleased properties and (2) $4,558 primarily from the sale of surplus properties. These sales resulted in a net gain of $3,163 which is included as a reduction to “Depreciation and amortization.” See Note 4 for discussion of restaurant dispositions in connection with our system optimization initiative.

During the six months ended July 1, 2012, Wendy’s received cash proceeds of $907 from dispositions, consisting of (1) $653 from the sale of one company-owned restaurant to a franchisee and (2) $254 from the sale of surplus properties and other equipment. These sales resulted in a net gain of $~~564~~187 which is included as a reduction to “Depreciation and amortization.”

~~During the~~ ~~three months ended March 31, 2013, Wendy’s acquired~~ ~~one~~ ~~franchised restaurant; such transaction was not significant. Wendy’s sold one company-owned restaurant to a franchisee~~ ~~during the~~ ~~three months ended April 1, 2012; such transaction was not significant.~~

(3) Investments

Investment in Joint Venture with Tim Hortons Inc.

Wendy’s is a partner in a Canadian restaurant real estate joint venture (“TimWen”) with Tim Hortons Inc. Wendy’s 50% share of the joint venture is accounted for using the equity method of accounting. Our equity in earnings from TimWen is included in “Other operating expense, net.”

~~Table of Contents~~

~~THE WENDY’S COMPANY AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(In Thousands Except Per Share Amounts)~~

Presented below is an unaudited summary of activity related to our investment in TimWen included in our unaudited condensed consolidated financial statements:


	Three Months Ended						Six Months Ended
	March 31, 2013			April 1, 2012			6/30/2013			7/1/2012
Balance at beginning of period	$	89,370		$	91,742		$	89,370		$	91,742

Equity in earnings for the period	3,124			2,991			6,700			6,545
Amortization of purchase price adjustments (a)	(777		)	(780		)	(1,540		)	(1,554		)
	2,347			2,211			5,160			4,991
Distributions received	(2,701		)	(3,253		)	(6,026		)	(6,694		)
Foreign currency translation adjustment included in “Other comprehensive (loss) income, net”	(1,877		)	2,135			(4,820		)	475
Balance at end of period (b)	$	87,139		$	92,835		$	83,684		$	90,514

_____________________


(a)	Based upon an average original aggregate life of 21 years.


(b)	Included in “Investments.”

~~Presented below is a summary of certain unaudited interim income statement information of TimWen:~~

Three Months Ended
March 31,
2013 April 1,
2012
Revenues $ 9,024
$ 9,129
Income before income taxes and net income 6,247
5,982

~~Investment in Joint Venture in Japan~~

~~A wholly-owned subsidiary of Wendy’s has a~~ ~~49%~~ share in a joint venture for the operation of Wendy’s restaurants in Japan (the “Japan JV”) with Ernest M. Higa and Higa Industries, Ltd., a corporation organized under the laws of Japan (collectively, the “Higa Partners”). Wendy’s investment in the Japan JV is accounted for using the equity method of accounting and our equity in losses is included in “Other operating expense, net.”

Wendy’s has provided certain guarantees and the joint venture partners have agreed on a plan to finance anticipated future cash requirements of the Japan JV as further described below. Presented below is an unaudited summary of activity related to our investment in the Japan JV included in “Other liabilities” in our unaudited condensed consolidated financial statements:

Three Months Ended
March 31,
2013 April 1,
2012
Balance at beginning of period $ (1,750 ) $ 77
Equity in losses for the period (1,156 ) (367 )
Balance at end of period $ (2,906 ) $ (290 )

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THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Presented below is a summary of certain unaudited interim income statement information of ~~the Japan JV:~~TimWen:

Three Months Ended
March 31,
2013 April 1,
2012
Revenues $ 759
$ 607
Loss before income taxes and net loss (592 ) (708 )

~~In 2012, Wendy’s (1) provided a guarantee to certain lenders to the Japan JV for which the Higa Partners have agreed, should it become necessary, to reimburse and otherwise indemnify us for their~~ ~~51%~~ ~~share of the guarantee and (2) agreed to reimburse and otherwise indemnify the Higa Partners for our~~ ~~49%~~ ~~share of their guarantee of a line of credit granted by a different lender to the Japan JV to fund working capital requirements. As of~~ ~~March 31, 2013, our portion of these contingent obligations totaled approximately~~ ~~$3,100~~ ~~based upon then current rates of exchange. The fair value of our guarantees is immaterial.~~

~~In January 2013, the joint venture partners agreed on a plan to finance anticipated future cash requirements of the Japan JV. Wendy’s and the Higa Partners agreed to fund approximately~~ ~~$3,000~~ ~~and~~ ~~$657, respectively, of future cash requirements of the Japan JV, of which~~ ~~$1,000~~ ~~and~~ ~~$219~~, respectively, were paid in April 2013. As determined by the amount of capital contributions by each of the partners, Wendy’s will become the majority owner of the Japan JV. As a result, the Japan JV will be consolidated with and included in Wendy’s consolidated financial statements beginning in the second quarter of 2013.

~~Our obligations, including the remaining funding of anticipated future cash requirements of the Japan JV of approximately~~ ~~$2,000, could total up to approximately~~ ~~$6,700~~ ~~if the Higa Partners are unable to perform their reimbursement and indemnity obligations to us.~~



	Six Months Ended
	6/30/2013		7/1/2012
Revenues	$	19,039	$	19,283
Income before income taxes and net income	13,400		13,090

Sale of Investment in Jurlique International Pty Ltd.

On February 2, 2012, Jurl Holdings, LLC (“Jurl”), a 99.7% owned subsidiary, completed the sale of our investment in Jurlique International Pty Ltd. (“Jurlique”) for which we received proceeds of $27,287, net of the amount held in escrow and recorded a gain on sale of this investment of $27,407, which included a loss of $2,913 on the settlement of a related derivative transaction. The gain was included in ~~“Other expense, net~~“Investment income and ~~investment~~other income (expense), net” in our condensed consolidated statement of operations for the ~~three~~six months ended ~~April~~July 1, ~~2012.~~2012. The amount held in escrow as of ~~March 31,~~June 30, 2013 was $~~3,386~~2,969, which was adjusted for foreign currency translation and was included in “Deferred costs and other assets.”

We have reflected net income attributable to noncontrolling interests of $2,384, net of an income tax benefit of $1,283, for the ~~three~~six months ended ~~April~~July 1, 2012 in connection with the equity and profit interests discussed below. As a result of this sale and the distributions to the minority shareholders, there are no remaining noncontrolling interests in this consolidated subsidiary.

Prior to 2009 when our predecessor entity was a diversified company active in investments, we had provided our Chairman, who was also our then Chief Executive Officer, and our Vice Chairman, who was our then President and Chief Operating Officer (the “Former Executives”), and certain other former employees, equity and profit interests in Jurl. In connection with the gain on sale of Jurlique, we distributed, based on the related agreement, approximately $3,667 to Jurl’s minority shareholders, including approximately $2,296 to the Former Executives.

(4) Facilities Action Charges, Net



	Three Months Ended				Six Months Ended
	June 30, 2013		July 1, 2012		June 30, 2013		July 1, 2012
System optimization initiative	$	4,799	$	—	$	4,799	$	—
Facilities relocation and other transition costs	1,154		9,426		3,324		14,957
Breakfast discontinuation	361		—		1,029		—
Arby’s transaction related costs	63		562		263		1,174
	$	6,377	$	9,988	$	9,415	$	16,131

System Optimization Initiative

In July 2013, the Company announced a system optimization initiative, as part of its brand transformation, which includes a plan to sell approximately 425 company-owned restaurants to franchisees by mid-year 2014. The Company’s system optimization initiative also includes the consolidation of regional and divisional territories. As a result of the system optimization initiative, the Company anticipates recognizing the following costs during 2013 and 2014: (1) losses on remeasuring long-lived assets to fair value upon determination that the assets will be leased and/or subleased to franchisees in connection with the sale or anticipated sale of restaurants (“System Optimization Remeasurement”), (2) professional fees and (3) severance and related employee costs. These costs, as well as gains or losses recognized on the sale of restaurants under the system optimization initiative will be recorded to “Facilities action charges, net” in our condensed consolidated statement of operations. The Company estimates severance and related employee costs will total between $7,000 and $10,000. The Company cannot estimate the other components of the system optimization initiative resulting from future sales of restaurants.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

~~(4)~~optimization and included in “Facilities action charges, net” in our condensed consolidated statement of operations for the three and six months ended June 30, 2013.

The following is a summary of the activity recorded under our system optimization initiative:



	Three Months Ended
	June 30, 2013
Gain on the sale of restaurants (a)	$	(1,276	)
System Optimization Remeasurement (b)	5,938
Professional fees	125
Other	12
Total system optimization initiative	$	4,799

_______________


(a)	During the three months ended June 30, 2013, Wendy’s sold eight restaurants to franchisees for $2,800. Net assets sold totaled $843 and consisted primarily of cash, inventory and equipment. In addition, goodwill of $681 was written off in connection with the sales.

(b)

Represents the loss on remeasurement of long-lived assets (including land, buildings, leasehold improvements and favorable lease assets) at certain company-owned restaurants to fair value as a result of the Company’s decision to lease and/or sublease such land and/or buildings and sell certain other restaurant assets to franchisees in connection with our system optimization initiative. See Note 6 for more information on non-recurring fair value measurements.

Restaurant Assets Held for Sale



	June 30, 2013
Number of restaurants classified as assets held for sale (a)	54

Restaurant assets held for sale (b)	$	10,050

_______________


(a)	Represents the number of restaurants which have assets classified as held for sale and included in “Prepaid expenses and other current assets” as of June 30, 2013.


(b)	Net restaurant assets held for sale primarily consist of cash, inventory and equipment.

In the third quarter of 2013, the Company completed the sale of certain assets used in the operation of 22 Wendy’s restaurants which were classified as held for sale as of June 30, 2013, for cash proceeds of approximately $9,310, subject to customary purchase price adjustments. This sale is expected to result in an estimated pre-tax gain of approximately $4,300.

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THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Facilities Relocation and Other Transition Costs

The relocation of the Company’s Atlanta restaurant support center to Ohio was substantially completed during 2012. The Company expects to record any remaining costs related to the relocation, which are anticipated to aggregate approximately $1,400, during the remainder of 2013.



	Three Months Ended				Six Months Ended				Total Incurred Since Inception		Total Expected to be Incurred
	June 30, 2013		July 1, 2012		June 30, 2013		July 1, 2012		Total Incurred Since Inception		Total Expected to be Incurred
Severance, retention and other payroll costs	$	424	$	4,317	$	1,366	$	7,316	$	16,663	$	17,140
Relocation costs	444		1,505		1,261		2,081		6,483		7,405
Atlanta facility closure costs	177		133		395		177		4,936		4,936
Consulting and professional fees	21		1,933		128		2,818		5,056		5,056
Other	88		879		174		1,265		2,314		2,345
	1,154		8,767		3,324		13,657		35,452		36,882
Accelerated depreciation expense	—		659		—		1,300		2,118		2,118
Share-based compensation	—		—		—		—		271		271
Total	$	1,154	$	9,426	$	3,324	$	14,957	$	37,841	$	39,271

The table below presents a rollforward of our accruals for facility relocation costs, which are included in “Accrued expenses and other current liabilities” and “Other liabilities.”



	Balance December 30, 2012		Charges		Payments			Balance June 30, 2013
Severance, retention and other payroll costs	$	4,121	$	1,366	$	(3,293	)	$	2,194
Relocation costs	500		1,261		(1,761		)	—
Atlanta facility closure costs	4,170		395		(1,118		)	3,447
Consulting and professional fees	80		128		(208		)	—
Other	9		174		(183		)	—
	$	8,880	$	3,324	$	(6,563	)	$	5,641

Breakfast Discontinuation

In January 2013, Wendy’s announced that it was discontinuing the breakfast daypart at certain restaurants. During the three and six months ended June 30, 2013, we reflected $361 and $1,029, respectively, of costs for such discontinuance, primarily representing the remaining carrying value of breakfast related equipment no longer being used.

Arby’s Transaction Related Costs

As disclosed in our Form 10-K, the remaining Arby’s transaction related costs were associated with the relocation of a corporate executive that were being expensed over the three year period following the executive’s relocation in accordance with the terms of the agreement. In accordance with the terms of a separation agreement with such executive, the remaining unamortized costs were recorded to severance expense and included in “General and administrative” during the second quarter of 2013. The Company does not expect to incur additional costs related to the sale of Arby’s.

(5) Long-Term Debt

Except as described below, the Company did not have any significant changes to its long-term debt as disclosed in the notes to our consolidated financial statements included in the Form 10-K.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Long-term debt consisted of the following:



	6/30/2013			December 30, 2012
Term Loan A, due in 2018	$	350,000		$	—
Term Loan B, due in 2019	769,375			1,114,826
6.20% senior notes, due in 2014 (a)	225,623			225,940
7% debentures, due in 2025	84,079			83,496
Capital lease obligations, due through 2040	36,743			32,594
Other (b)	5,341			706
	1,471,161			1,457,562
Less amounts payable within one year (a)	(248,876		)	(12,911		)
Total long-term debt	$	1,222,285		$	1,444,651

_______________


(a)	As of June 30, 2013, we classified our 6.20% senior notes in “Current portion of long-term debt” in our condensed consolidated balance sheet as the debt is due in June of 2014.

(b) Other includes $4,988 of debt resulting from the consolidation of the Japan JV in the second quarter of 2013. The carrying amount of the long-term debt approximates fair value.

Refinancing of Credit Agreement

On May 16, 2013, Wendy’s amended and restated (the “Restated Credit Agreement”) its Credit Agreement, dated as of May 15, 2012 (the “Credit Agreement”). The Restated Credit Agreement is comprised of (1) a $350,000 senior secured term loan facility (“Term Loan A”) which will mature on May 15, 2018 and bears interest at the Eurodollar Rate (as defined in the Restated Credit Agreement) plus 2.25%, (2) a $769,375 senior secured term loan facility (“Term Loan B”) which will mature on May 15, 2019 and bears interest at the Eurodollar Rate plus 2.50% with a floor of 0.75% and (3) a $200,000 senior secured revolving credit facility which will mature on May 15, 2018. The proceeds from the Term Loan A were used to refinance a portion of our existing Term Loan B (formerly described in our Form 10-K as the “Term Loan”). The terms and amounts of the senior secured revolving credit facility are unchanged with the exception of the maturity date which was extended from May 15, 2017. The Restated Credit Agreement does not contain any material changes to existing covenants or other terms of the Credit Agreement, except as described above. The interest rates on Term Loan A and Term Loan B were 2.44% and 3.25%, respectively, as of June 30, 2013.

Wendy’s incurred $5,811 in fees related to the refinancing, which are being amortized to “Interest expense” utilizing the effective interest rate method through the maturities of the related debt instruments.

As a result of the refinancing of its existing Credit Agreement, described above, Wendy’s incurred a loss on the early extinguishment of debt as follows:



	Three Months Ended
	June 30, 2013
Unaccreted discount on Term Loan B	$	9,561
Deferred costs associated with the Credit Agreement	11,458
Loss on early extinguishment of debt	$	21,019

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THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

The Company incurred a loss on the early extinguishment of debt in 2012 related to the repayment of debt from the proceeds of the 2012 term loan under the May 15, 2012 Credit Agreement, as follows:



	Three Months Ended
	July 1, 2012
Premium payment to purchase Wendy’s Restaurants 10.00% Senior Notes due in 2016 (the “Senior Notes”)	$	10,093
Unaccreted discount on the Senior Notes	2,086
Deferred costs associated with the Senior Notes	2,796
Unaccreted discount on the 2010 term loan	1,695
Deferred costs associated with the 2010 term loan	8,525
Loss on early extinguishment of debt	$	25,195

(6) Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Valuation techniques under the accounting guidance related to fair value measurements are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect our market assumptions. These inputs are classified into the following hierarchy:

Level 1 Inputs - Quoted prices for identical assets or liabilities in active markets.

Level 2 Inputs - Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

Level 3 Inputs - Pricing inputs are unobservable for the assets or liabilities and include situations where there is little, if any, market activity for the assets or liabilities. The inputs into the determination of fair value require significant management judgment or estimation.

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THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Financial Instruments

The following table presents the carrying amounts and estimated fair values of the Company’s financial instruments at ~~March 31,~~June 30, 2013 and December 30, 2012:


	March 31, 2013				December 30, 2012					6/30/2013				December 30, 2012
	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Fair Value Measurements	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Fair Value Measurements
Financial assets
Cash equivalents	$	242,545	$	242,545	$	264,925	$	264,925	Level 1	$	275,078	$	275,078	$	264,925	$	264,925	Level 1
Non-current cost method investments (a)	23,762		51,061		23,913		50,761		Level 3	23,761		51,009		23,913		50,761		Level 3
Interest rate swaps (b)	6,791		6,791		8,169		8,169		Level 2	5,400		5,400		8,169		8,169		Level 2

Financial liabilities
Term Loan, due in 2019 (c)	1,109,611		1,127,770		1,114,826		1,130,434		Level 2
Term Loan A, due in 2018 (c)										350,000		349,125		—		—		Level 2
Term Loan B, due in 2019 (c)										769,375		766,251		1,114,826		1,130,434		Level 2
6.20% senior notes, due in 2014 (c)	225,788		235,800		225,940		240,750		Level 2	225,623		230,063		225,940		240,750		Level 2
7% debentures, due in 2025 (c)	83,788		101,000		83,496		99,900		Level 2	84,079		96,750		83,496		99,900		Level 2
Capital lease obligations (d)	36,005		36,068		32,594		33,299		Level 3	36,743		35,605		32,594		33,299		Level 3
Guarantees of franchisee loan obligations (e)	933		933		940		940		Level 3	920		920		940		940		Level 3

_______________

(a)

The fair value of our indirect investment in Arby’s Restaurant Group, Inc. (“Arby’s”) is based on a review of its ~~current~~most recent unaudited financial information. The fair values of our remaining investments were based on our review of information provided by the investment managers or investees which was based on (1) valuations performed by the investment managers or investees, (2) quoted market or broker/dealer prices for similar investments and (3) quoted market or broker/dealer prices adjusted by the investment managers for legal or contractual restrictions, risk of nonperformance or lack of marketability, depending upon the underlying investments.


(b)	The fair values were based on information provided by the bank counterparties that is model-driven and where inputs were observable or where significant value drivers were observable.


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


(d)	The fair values were determined by discounting the future scheduled principal payments using an interest rate assuming the same original issuance spread over a current U.S. Treasury bond yield for securities with similar durations.

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~~THE WENDY’S COMPANY AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(In Thousands Except Per Share Amounts)~~

(e)

Wendy’s has provided loan guarantees to various lenders on behalf of franchisees entering into pooled debt facility arrangements for new restaurant development and equipment financing. ~~During~~In 2012, Wendy’s provided a guarantee to a lender for a franchisee in connection with the refinancing of the franchisee’s debt. We have accrued a liability for the fair value of these guarantees, the calculation of which was based upon a weighted average risk percentage established at inception adjusted for a history of defaults.

The carrying amounts of cash, accounts payable and accrued expenses approximated fair value due to the short-term ~~maturities~~nature of those items. The carrying amounts of accounts and notes receivable (both current and non-current) approximated fair value due to the effect of the related allowance for doubtful accounts.

Derivative Instruments

Our derivative instruments for the periods presented included interest rate swaps on our 6.20% senior notes with notional amounts totaling $225,000 that were all designated as fair value hedges. The fair value of our interest rate swaps of $~~6,791~~5,400 and $8,169 at ~~March 31,~~June 30, 2013 and December 30, 2012, respectively, was included in ~~“Deferred~~“Prepaid expenses and other current assets” and

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THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

“Deferred costs and other ~~assets”~~assets,” respectively and as an adjustment to the carrying amount of our 6.20% senior notes. Interest income on the interest rate swaps was $~~1,435~~1,455 and $~~1,326~~2,890 for the three and six months ended ~~March 31,~~June 30, 2013, respectively, and $1,404 and ~~April~~$2,730 for the three and six months ended July 1, 2012, respectively. No ineffectiveness has been recorded to net income related to our fair value hedges for the ~~three~~six months ended ~~March 31,~~June 30, 2013 and ~~April~~July 1, 2012. ~~Our interest rate swaps (and cash and cash equivalents as described above) are~~

Non-Recurring Fair Value Measurements

The following tables present the ~~only financial~~fair values for those assets and liabilities measured ~~and recorded~~ at fair value on a ~~recurring basis.~~non-recurring basis during the six months ended June 30, 2013 and the year ended December 30, 2012 and the resulting impact in the consolidated statements of operations.

Total losses for the six months ended June 30, 2013 reflect the impact of remeasuring long-lived assets (including land, buildings, leasehold improvements and favorable lease assets) at certain company-owned restaurants to fair value as a result of the Company’s decision to lease and/or sublease the land and/or buildings and sell certain other restaurant assets to franchisees. Such losses were determined prior to the announcement of our system optimization initiative in connection with the sale of eight restaurants during the second quarter of 2013 and the anticipated sale of restaurants in the third quarter of 2013 and have been presented as System Optimization Remeasurement and included in “Facilities action charges, net” in our condensed consolidated statement of operations for the six months ended June 30, 2013. The fair value of long-lived assets presented in the table below represents the remaining carrying value of the long-lived assets discussed above and was based upon discounted cash flows of future anticipated lease and sublease income. See Note 4 for more information on our system optimization initiative and the related activity included in “Facility action charges, net” including System Optimization Remeasurement.

Total losses for the year ended December 30, 2012 reflect the impact of remeasuring long-lived assets at company-owned restaurants and a company-owned aircraft to fair value and were recorded to “Impairment of long-lived assets” in the consolidated statements of operations. The fair value of long-lived assets presented in the table below substantially represents the remaining carrying value of land for Wendy’s properties that were impaired in 2012 and were estimated based on current market values as determined by sales prices of comparable properties and current market trends. As of December 30, 2012, the carrying value of the aircraft, which reflected current market conditions, approximated its fair value. See Note 7 for more information on the impairment of our long-lived assets.



			Fair Value Measurements						Six Months Ended June 30, 2013 Total Losses
	June 30, 2013		Level 1		Level 2		Level 3		Six Months Ended June 30, 2013 Total Losses
Long-lived assets	$	2,022	$	—	$	—	$	2,022	$	5,938
Total	$	2,022	$	—	$	—	$	2,022	$	5,938



			Fair Value Measurements						2012 Total Losses
	December 30, 2012		Level 1		Level 2		Level 3		2012 Total Losses
Long-lived assets	$	7,311	$	—	$	—	$	7,311	$	19,469
Aircraft	5,926		—		—		5,926		1,628
Total	$	13,237	$	—	$	—	$	13,237	$	21,097

~~(5)~~(7) Impairment of Long-Lived Assets

During the second quarter of 2012, we closed 15 company-owned restaurants in connection with our review of certain underperforming locations, which resulted in an impairment charge of $3,270. In addition, we incurred costs related to these restaurant closings of $1,477, primarily for continuing lease obligations, which are included in “Other operating expense, net.”

Our company-owned restaurant impairment losses of $2,883 ~~for~~in the ~~three months ended~~ ~~April 1,~~first quarter of 2012 predominantly ~~reflect~~reflected impairment charges on restaurant-level assets resulting from the deterioration in operating performance of certain restaurants and additional charges for capital improvements in restaurants impaired in prior years which did not subsequently recover. In addition, during

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THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

~~During~~ the ~~three months ended April 1,~~first quarter of 2012, we reclassified a company-owned aircraft as held and used from its previous held for sale ~~classification. For the three months ended~~ ~~April 1, 2012, the Company~~classification and recorded an impairment charge of $1,628 on the company-owned ~~aircraft, which was included in “Impairment of long-lived assets.” As of~~ ~~March 31, 2013, the carrying value of the aircraft, which reflects current market conditions, approximated its fair value and is included in “Properties.”~~aircraft.

These impairment losses, as detailed in the following table, represented the excess of the carrying amount over the fair value of the affected assets and are included in “Impairment of long-lived assets.”


	Three Months Ended		Three Months Ended		Six Months Ended
	April 1, 2012		July 1, 2012		July 1, 2012
Properties and intangible assets	$	2,883	$	3,270	$	6,153
Aircraft	1,628		—		1,628
	$	4,511	$	3,270	$	7,781

~~(6) Facilities Relocation Costs and Other Transactions~~

Three Months Ended
March 31, 2013 April 1, 2012
Facilities relocation and other transition costs $ 2,170
$ 5,531
Breakfast discontinuation 668
—
Arby’s transaction related costs 200
612
$ 3,038
$ 6,143

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~~THE WENDY’S COMPANY AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(In Thousands Except Per Share Amounts)~~

~~Facilities Relocation and Other Transition Costs~~

As announced in December 2011, we commenced the relocation of the Company’s Atlanta restaurant support center to Ohio. The relocation was substantially completed during 2012. The Company expects to record costs aggregating approximately ~~$4,800~~ ~~in 2013 primarily related to severance and relocation.~~

Three Months Ended Total Incurred Since Inception Total Expected to be Incurred
March 31, 2013 April 1, 2012
Severance, retention and other payroll costs $ 942
$ 2,999
$ 16,239
$ 17,526
Relocation costs 817
576
6,039
7,270
Atlanta facility closure costs 218
44
4,759
4,759
Consulting and professional fees 107
885
5,035
5,035
Other 86
386
2,226
2,292
2,170
4,890
34,298
36,882
Accelerated depreciation expense —
641
2,118
2,118
Share-based compensation —
—
271
271
Total $ 2,170
$ 5,531
$ 36,687
$ 39,271

~~The table below presents a rollforward of our accruals for facility relocation costs, which are included in “Accrued expenses and other current liabilities” and “Other liabilities.”~~

Balance
December 30, 2012
Charges Payments
Balance
March 31,
2013
Severance, retention and other payroll costs $ 4,121
$ 942
$ (2,131 ) $ 2,932
Relocation costs 500
817
(1,199 ) 118
Atlanta facility closure costs 4,170
218
(638 ) 3,750
Consulting and professional fees 80
107
(187 ) —
Other 9
86
(95 ) —
$ 8,880
$ 2,170
$ (4,250 ) $ 6,800

~~Breakfast Discontinuation~~

~~In January 2013, Wendy’s announced that it was discontinuing the breakfast daypart at certain restaurants. During the three months ended March 31, 2013, we reflected~~ ~~$668~~ ~~of costs for such discontinuance, primarily representing the remaining carrying value of breakfast related equipment no longer being used.~~

~~(7)~~(8) Income Taxes

The Company’s effective tax rate and effective tax rate benefit for the three months ended ~~March 31,~~June 30, 2013 and ~~effective tax rate for the~~ ~~three~~ ~~months ended~~ ~~April~~July 1, 2012 was ~~376.7%~~29.6% and ~~31.8%~~61.2%, respectively. The Company’s effective tax rate varies from the U.S. federal statutory rate of 35% due to the effect of (1) state income taxes net of federal benefit, (2) adjustments to our uncertain tax positions, (3) employment tax credits and (4) foreign rate differential.

The Company’s effective tax rate and effective tax rate benefit for the six months ended June 30, 2013 and July 1, 2012 was 13.2% and 24.1%, respectively. The Company’s effective tax rate varies from the U.S. federal statutory rate of 35% due to the effect of (1) state taxes net of federal benefit, (2) the reversal of deferred tax liabilities on temporary differences related to investments in foreign subsidiaries which the Company now considers permanently invested outside of the U.S., ~~(2)~~(3) adjustments to our uncertain tax positions ~~(3) exclusion of the~~and (4) employment tax ~~benefit of certain foreign ordinary losses not expected to be realized, (4) state income taxes net of federal benefit and (5) foreign rate differential.~~credits.

During the ~~three~~first quarter ~~months ended~~of ~~March 31,~~ 2013, the Company finalized its long-term investment plan with respect to the Company’s non-U.S. earnings. There are no plans to repatriate cash from, and Wendy’s intends to indefinitely reinvest undistributed earnings of, its non-U.S. subsidiaries. As such, the Company reversed $1,934 of deferred tax liabilities during the first quarter of 2013relating to investments in foreign subsidiaries which the Company now considers permanently invested outside of the U.S.

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~~THE WENDY’S COMPANY AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(In Thousands Except Per Share Amounts)~~

There were no significant changes to unrecognized tax benefits or related interest and penalties for the Company ~~for~~during the ~~three~~six months ended ~~March 31,~~June 30, 2013 and ~~April~~July 1, 2012.

The Company participates in the Internal Revenue Service Compliance Assurance Process. During the ~~three~~first quarter ~~months ended~~of ~~March 31,~~ 2013, we concluded, without adjustment, the examination of our January 1, 2012 tax return.

~~(8)~~(9) Net Income (Loss) Per Share

Basic ~~net~~ income (loss) per share for the three and sixmonths ended ~~March 31,~~June 30, 2013 and ~~April~~July 1, 2012 was computed by dividing net income (loss) attributable to The Wendy’s Company by the weighted average number of common shares outstanding.

The weighted average number of shares used to calculate basic and diluted ~~net~~ income (loss) per share were as follows:


	Three Months Ended		Three Months Ended		Six Months Ended
	March 31, 2013	April 1, 2012	6/30/2013	7/1/2012	6/30/2013	7/1/2012
Common stock:
Weighted average basic shares outstanding	392,498	389,701	393,174	389,978	392,836	389,840
Dilutive effect of stock options and restricted shares	3,196	2,574	4,710	—	3,953	2,161
Weighted average diluted shares outstanding	395,694	392,275	397,884	389,978	396,789	392,001

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THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Diluted income (loss) per share for the three and sixmonths ended ~~March 31,~~June 30, 2013 and ~~April~~July 1, 2012 was computed by dividing net income (loss) attributable to The Wendy’s Company by the weighted average number of basic shares outstanding plus the potential common share effect of dilutive stock options and restricted shares, computed using the treasury stock method. For the three and sixmonths ended ~~March 31,~~June 30, 2013, we excluded 13,145 and ~~April~~15,488, respectively, of potential common shares from our diluted income per share calculation as they would have had anti-dilutive effects. Diluted loss per share for the three months ended July 1, 2012 was the same as basic loss per share since the Company reported a loss from continuing operations and therefore, the effect of all potentially dilutive securities would have been anti-dilutive. For the six months ended July 1, 2012, we excluded ~~17,831~~19,541 ~~and~~ ~~19,312, respectively,~~ of potential common shares from our diluted income per share calculation as they would have had anti-dilutive effects.

~~(9)~~(10) Equity

~~Stockholders’ Equity~~

The following ~~is a summary of~~tables present the changes in ~~stockholders’ equity:~~equity attributable to The Wendy’s Company and noncontrolling interest for the six months ended June 30, 2013 and July 1, 2012:

Three Months Ended
March 31,
2013 April 1,
2012
Balance, beginning of year $ 1,985,855
$ 1,996,069
Comprehensive (loss) income (2,998 ) 16,875
Share-based compensation 3,010
2,597
Exercises of stock options 3,256
654
Dividends (15,703 ) (7,795 )
Tax charge from share-based compensation (1,934 ) (1,057 )
Other (7 ) (2 )
Balance, end of the period $ 1,971,479
$ 2,007,341



	Attributable to The Wendy’s Company
	Common Stock		Additional Paid-In Capital			Accumulated Deficit			Common Stock Held in Treasury			Accumulated Other Comprehensive Income (Loss)			Noncontrolling Interest			Total
Balance at December 30, 2012	$	47,042	$	2,782,765		$	(467,007	)	$	(382,926	)	$	5,981		$	—		$	1,985,855
Consolidation of the Japan JV	—		—			—			—			—			(2,735		)	(2,735		)
Net income	—		—			14,357			—			—			(222		)	14,135
Foreign currency translation adjustment	—		—			—			—			(12,506		)	626			(11,880		)
Unrecognized pension loss	—		—			—			—			(62		)	—			(62		)
Cash dividends	—		—			(31,440		)	—			—			—			(31,440		)
Share-based compensation expense	—		6,960			—			—			—			—			6,960
Common stock issued related to share-based compensation	—		(1,685		)	—			6,670			—			—			4,985
Tax charge from share-based compensation	—		(2,092		)	—			—			—			—			(2,092		)
Other	—		4			(25		)	97			—			—			76
Balance at June 30, 2013	$	47,042	$	2,785,952		$	(484,115	)	$	(376,159	)	$	(6,587	)	$	(2,331	)	$	1,963,802



	Attributable to The Wendy’s Company
	Common Stock		Additional Paid-In Capital			Accumulated Deficit			Common Stock Held in Treasury			Accumulated Other Comprehensive Income (Loss)			Noncontrolling Interest			Total
Balance at January 1, 2012	$	47,042	$	2,779,871		$	(434,999	)	$	(395,947	)	$	102		$	—		$	1,996,069
Net income	—		—			6,857			—			—			2,384			9,241
Distribution to noncontrolling interests	—		—			—			—			—			(2,384		)	(2,384		)
Foreign currency translation adjustment	—		—			—			—			1,389			—			1,389
Unrecognized pension loss	—		—			—			—			(217		)	—			(217		)
Cash dividends	—		—			(15,597		)	—			—			—			(15,597		)
Share-based compensation expense	—		5,164			—			—			—			—			5,164
Common stock issued related to share-based compensation	—		(2,561		)	—			3,595			—			—			1,034
Tax charge from share-based compensation	—		(1,186		)	—			—			—			—			(1,186		)
Other	—		(22		)	(23		)	106			—			—			61
Balance at July 1, 2012	$	47,042	$	2,781,266		$	(443,762	)	$	(392,246	)	$	1,274		$	—		$	1,993,574

1418

Table of Contents

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

~~(10)~~(11) Guarantees and Other Commitments and Contingencies

Except as described below, the Company did not have any significant changes to its guarantees, other commitments and contingencies as disclosed in the notes to our consolidated financial statements included in the Form 10-K.

Franchisee Image Activation Financing Program

In order to encourage franchisees to participate in our Image Activation program, Wendy’s has executed an agreement to partner with a third party lender to establish a financing program. Under the program, the lender will provide loans to franchisees to be used for the reimaging of restaurants according to the guidelines and specifications under the Image Activation initiative. To support the program, Wendy’s has provided to the lender a $6,000 irrevocable stand-by letter of credit, which was issued on July 1, 2013.

Japan JV Guarantee

Wendy’s and the Higa Partners have provided guarantees to certain lenders to the Japan JV. Both Wendy’s and Higa Partners have agreed to reimburse and indemnify the other party, should it become necessary, for their respective share of each other’s guarantees. Wendy’s and the Higa Partners’ share of each guarantee is based upon ownership percentages in effect at the time of the agreement. As of June 30, 2013, our portion of these contingent obligations totaled approximately $2,800 based upon then current rates of exchange. The fair value of our guarantees is immaterial.

In January 2013, Wendy’s and the Higa Partners agreed to finance approximately $3,000 and $657, respectively, of future anticipated cash requirements of the Japan JV, of which $1,000 and $219, respectively, were contributed in April 2013.

Our obligations, including the remaining funding of anticipated future cash requirements of the Japan JV of approximately $2,000, could total up to approximately $6,600 if the Higa Partners are unable to perform their reimbursement and indemnify obligations to us.

(12) Transactions with Related Parties

Except as described below, the Company did not have any changes in or transactions with its related parties during the current fiscal period since those reported in the Form 10-K.

Transactions with Purchasing Cooperative

Wendy’s received $4995 of lease income from its purchasing cooperative, Quality Supply Chain Co-op, Inc. (“QSCC”) during both the ~~three~~six months ended ~~March 31,~~June 30, 2013 and ~~April~~July 1, 2012, which has been recorded as a reduction of “General and administrative.”

Transactions with ~~the~~a Management Company

The Wendy’s Company, through a wholly-owned subsidiary, is party to an aircraft management and lease agreement, which is expected to expire in March 2014, with CitationAir, a subsidiary of Cessna Aircraft Company, pursuant to which the Company leases a corporate aircraft to CitationAir to use as part of its Jet Card program fleet. The Company entered into the lease agreement as a means of offsetting the cost of owning and operating the corporate aircraft by receiving revenue from third parties’ use of such aircraft. Under the terms of the lease agreement, the Company pays annual management and flight crew fees to CitationAir and reimburses CitationAir for maintenance costs and fuel usage related to the corporate aircraft. In return, CitationAir pays a negotiated fee to the Company based on the number of hours that the corporate aircraft is used by Jet Card members. This fee is reduced based on the number of hours that (1) the Company uses other aircraft in the Jet Card program fleet and (2) Jet Card members who are affiliated with the Company use the corporate aircraft or other aircraft in the Jet Card program fleet. The Company’s participation in the aircraft management and lease agreement ~~during 2012 reduced~~reduces the aggregate costs that the Company would ~~have~~ otherwise ~~incurred~~incur in connection with owning and operating the corporate aircraft. Under the terms of the lease agreement, the Company’s directors have the opportunity to become Jet Card members and to use aircraft in the Jet Card program fleet at the same negotiated fee paid by the Company as provided for under the lease agreement. During the ~~first quarter of~~six months ended June 30, 2013 and July 1, 2012, the Former Executives and a director, who was our former Vice Chairman, and members of their immediate families, used their Jet Card agreements for business and personal travel on aircraft in the Jet Card program fleet. A management company formed by the Former Executives and a director, who was our former Vice Chairman, paid CitationAir directly, and the

Table of Contents

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Company received credit from CitationAir for charges related to such travel of approximately $~~499~~897 and $~~258~~502 during the ~~first quarter of~~six months ended June 30, 2013 and July 1, 2012, respectively.

~~(11)~~(13) Legal, Environmental and Other Matters

We are involved in litigation and claims incidental to our current and prior businesses. We provide reserves for such litigation and claims when payment is probable and reasonably estimable. As of ~~March 31,~~June 30, 2013, the Company had reserves for all of its legal and environmental matters aggregating $~~5,799~~3,770. We cannot estimate the aggregate possible range of loss due to most proceedings being in preliminary stages, with various motions either yet to be submitted or pending, discovery yet to occur, and significant factual matters unresolved. In addition, most cases seek an indeterminate amount of damages and many involve multiple parties. Predicting the outcomes of settlement discussions or judicial or arbitral decisions is thus inherently difficult. Based on currently available information, including legal defenses available to us, and given the aforementioned reserves and our insurance coverage, we do not believe that the outcome of these legal and environmental matters will have a material effect on our consolidated financial position or results of operations.

The Company had previously described in the Form 10-K a dispute between Wendy’s and Tim Hortons Inc. related to a tax sharing agreement entered into in 2006. ~~The~~As described in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2013, the dispute was resolved by mutual agreement of the parties on April 25, 2013 and was recorded in the first quarter ~~2013 Financial Statements contained herein.~~of 2013. The terms of the agreement were not material to the Company.

~~Table of Contents~~

~~THE WENDY’S COMPANY AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(In Thousands Except Per Share Amounts)~~

~~(12)~~(14) Multiemployer Pension Plan

As further described in the Form 10-K, the unionized employees at The New Bakery Co. of Ohio, Inc. (the “Bakery”), a 100% owned subsidiary of Wendy’s, are covered by the Bakery and Confectionery Union and Industry International Pension Fund (the “Union Pension Fund”), a multiemployer pension plan with a plan year end of December 31 that provides defined benefits to certain employees covered by a collective bargaining agreement (the “CBA”) which expired on March 31, 2013. The completion of the current negotiations for a new CBA will determine our future pension costs.

There have been no changes to the critical status of the Union Pension Fund as further described in the Form 10-K.

~~(13) New~~(15) Recent Accounting ~~Standards Adopted~~Pronouncements

In ~~February~~July 2013, the Financial Accounting Standards Board issued an amendment ~~adding new disclosure requirements for items reclassified out of accumulated other comprehensive income (“AOCI”).~~that requires companies to present unrecognized tax benefits as a reduction to deferred tax assets when a net operating loss carryforward, a similar tax loss or a tax credit carryforward exists, with limited exceptions. The amendment ~~requires presentation of changes in AOCI balances by component and significant items reclassified out of AOCI by component either (1)~~is effective commencing with our 2014 fiscal year. The Company does not expect the adoption to have a material impact on the ~~face of the statement of operations or (2) as a separate disclosure in the notes to the~~consolidated financial statements. ~~The Company adopted this amendment during the first quarter of 2013; however, no amounts have been reclassified out of AOCI during the periods presented in our Financial Statements.~~

~~(14) Subsequent Event~~

~~Debt Refinancing~~

On April 16, 2013, Wendy’s entered into an amendment (the “Amendment”) to refinance its Credit Agreement dated as of May 15, 2012 (the “Credit Agreement”). The Amendment provides that, subject to the satisfaction of certain closing conditions, the Credit Agreement, and certain other loan documents, will be amended and restated in the form attached to the Amendment (the “Restated Credit Agreement”). The closing is expected to occur on or after ~~May 16, 2013. The Restated Credit Agreement is comprised of (1) a~~ ~~$350,000~~ ~~senior secured term loan facility (“Term Loan A”) which will mature on May 15,~~ ~~2018~~ ~~and bear interest at~~ ~~LIBOR~~ ~~plus~~ ~~2.25%, (2) a~~ ~~$769,375~~ ~~senior secured term loan facility (“Term Loan B”) which will mature on May 15,~~ ~~2019~~ ~~and bear interest at~~ ~~LIBOR~~ ~~plus~~ ~~2.50%~~ ~~with a floor of~~ ~~0.75%~~ ~~and (3) a~~ ~~$200,000~~ ~~senior secured revolving credit facility which will mature on May 15,~~ ~~2018~~. The Restated Credit Agreement does not contain any material changes to existing covenants or other terms of the Credit Agreement, except as described herein. Wendy’s anticipates that it will incur approximately ~~$5,500~~ ~~in fees related to the refinancing.~~

~~In connection with the refinancing of its existing Credit Agreement, Wendy’s anticipates it will record debt extinguishment costs of up to approximately~~ ~~$21,100~~ ~~in the second quarter of 2013.~~

1620

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Introduction

This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of The Wendy’s Company (“The Wendy’s Company” and, together with its subsidiaries, the “Company,” “we,” “us,” or “our”) should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and the related notes included elsewhere herein and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 30, 2012 (the “Form 10-K”). There have been no material changes as of ~~March 31,~~June 30, 2013 to the application of our critical accounting policies as described in Item 7 of the Form 10-K. Certain statements we make under this Item 2 constitute “forward-looking statements” under the Private Securities Litigation Reform Act of 1995. See “Special Note Regarding Forward-Looking Statements and Projections” in “Part II - Other Information” preceding “Item 1.” You should consider our forward-looking statements in light of our unaudited condensed consolidated financial statements, related notes and other financial information appearing elsewhere in this report, the Form 10-K and our other filings with the Securities and Exchange Commission.

The Wendy’s Company is the parent company of its 100% owned subsidiary holding company, Wendy’s Restaurants, LLC (“Wendy’s Restaurants”). The principal 100% owned subsidiary of Wendy’s Restaurants is Wendy’s International, Inc. (“Wendy’s”) and its subsidiaries. Wendy’s franchises and operates company-owned Wendy’s^® quick service restaurants throughout North America (defined as the United States of America (the “U.S.”) and Canada) as well as Japan through our joint venture in Japan (the “Japan JV”). Wendy’s also has franchised restaurants in 2625 foreign countries and U.S. territories.

Wendy’s restaurants offer an extensive menu specializing in hamburger sandwiches and featuring filet of chicken breast sandwiches, chicken nuggets, chili, french fries, baked potatoes, freshly prepared salads, soft drinks, Frosty^® desserts and kids’ meals. In addition, the restaurants sell a variety of promotional products on a limited basis.

The Company manages and internally reports its business geographically. The operation and franchising of Wendy’s restaurants in North America comprises virtually all of our current operations and represents a single reportable segment. The revenues and operating results of Wendy’s restaurants outside of North America, including the three restaurants operated by the Japan JV, are not material. The results of operations discussed below may not necessarily be indicative of future results.

Executive Overview

System Optimization Initiative

In July 2013, the Company announced a system optimization initiative, as part of its brand transformation, which includes a plan to sell approximately 425 company-owned restaurants to franchisees by mid-year 2014. The Company’s system optimization initiative also includes the consolidation of regional and divisional territories. As a result of the system optimization initiative, the Company anticipates recognizing the following costs during 2013 and 2014: (1) losses on remeasuring long-lived assets to fair value upon determination that the assets will be leased and/or subleased to franchisees in connection with the sale or anticipated sale of restaurants (“System Optimization Remeasurement”), (2) professional fees and (3) severance and related employee costs. These costs, as well as gains or losses recognized on the sale of restaurants under the system optimization initiative will be recorded to “Facilities action charges, net” in our condensed consolidated statement of operations. The Company estimates severance and related employee costs will total between $7.0 million and $10.0 million. The Company cannot estimate the other components of the system optimization initiative resulting from future sales of restaurants.

The effects of the sale of eight restaurants which occurred prior to the announcement of our system optimization initiative, as well as losses on remeasuring long-lived assets to fair value upon determination that the assets will be leased and/or subleased to franchisees in connection with the anticipated sale of restaurants in the third quarter of 2013 have been presented as system optimization and included in “Facilities action charges, net” in our condensed consolidated statement of operations for the three and six months ended June 30, 2013.

Our Business

As of ~~March 31,~~June 30, 2013, the Wendy’s restaurant system was comprised of ~~6,544~~6,542 restaurants, of which ~~1,427~~1,418 were owned and operated by the Company. Our company-owned restaurants are located principally in the U.S. and to a lesser extent in ~~Canada.~~Canada and Japan through the Japan JV.

Wendy’s operating results have been impacted by a number of external factors, including high unemployment, negative general economic trends and intense price competition, as well as continued increases in commodity costs through the ~~first~~second quarter of 2013.

Wendy’s long-term growth opportunities, which in part will result from our system optimization initiative and as part of our brand transformation, include improving our North America business by elevating the total customer experience through continuing core menu improvement, step-change product innovation and focused execution of operational excellence and brand positioning, which will be supported by (1) investing in our Image Activation program, which includes innovative exterior and interior restaurant designs for our new and reimaged restaurants, (2) employing financial strategies to improve our net income and earnings per share and (3) building the brand worldwide.

Wendy’s revenues for the first ~~quarter~~six months of 2013 include: (1) $~~515.7~~1,070.5 million of sales at company-owned restaurants, (2) $~~15.0~~31.4 million from our company-owned bakery, (3) ~~$66.9~~$139.8 million of royalty revenue from franchisees and (4) ~~$6.1~~$12.5 million of other franchise-related revenue and other revenues. Substantially all of our royalty agreements provide for royalties of 4.0% of franchisees’ sales.

Key Business Measures

We track our results of operations and manage our business using the following key business measures:

Same-Store Sales

We report same-store sales commencing after new restaurants have been open for at least 15 continuous months and after remodeled restaurants have been reopened for three continuous months. This methodology is consistent with the metric used by our management for internal reporting and analysis. Same-store sales exclude the impact of currency translation.

Restaurant Margin

We define restaurant margin as sales from company-owned restaurants less cost of sales divided by sales from company-owned restaurants. Cost of sales includes food and paper, restaurant labor and occupancy, advertising and other operating costs. Sales and cost of sales exclude amounts related to our company-owned bakery. Restaurant margin is influenced by factors such as restaurant openings and closures, price increases, the effectiveness of our advertising and marketing initiatives, featured products, product mix, the level of our fixed and semi-variable costs and fluctuations in food and labor costs.

Refinancing of Credit Agreement

As further described in “Liquidity and Capital Resources - Refinancing of Credit Agreement,” below, on May 16, 2013, Wendy’s amended and restated (the “Restated Credit Agreement”) its Credit Agreement, dated May 15, 2012 (the “Credit Agreement”). The Restated Credit Agreement, among other things, (1) lowered the interest rate margin and floor applicable to the existing term loan, (2) provided for a partial refinancing of the existing term loan with a new tranche of a term loan in an aggregate principal of $350.0 million and (3) extended the maturity date of the revolving credit facility by one year. Wendy’s recognized a loss on the early extinguishment of debt of $21.0 million in the second quarter of 2013 in connection with this refinancing.

Guarantees and Other Commitments

Franchisee Image Activation Financing Program

~~Japan Joint Venture Guarantee~~In order to encourage franchisees to participate in our Image Activation program, Wendy’s has executed an agreement to partner with a third party lender to establish a financing program. Under the program, the lender will provide loans to franchisees to be used for the reimaging of restaurants according to the guidelines and specifications under the Image Activation initiative. To support the program, Wendy’s has provided to the lender a $6.0 million irrevocable stand-by letter of credit, which was issued on July 1, 2013.

~~A wholly-owned subsidiary of~~ Japan JV Guarantee

Wendy’s ~~has a~~ ~~49%~~ ~~share in a joint venture for the operation of Wendy’s restaurants in Japan (the “Japan JV”) with~~and Ernest M. Higa and Higa Industries, Ltd., a corporation organized under the laws of Japan (collectively, the “Higa Partners”)~~. In 2012, Wendy’s (1)~~ have provided ~~a guarantee~~guarantees to certain lenders to the Japan ~~JV for which the~~JV. Both Wendy’s and Higa Partners have agreed to reimburse and indemnify the other party, should it become necessary, ~~to reimburse and otherwise indemnify us~~ for their ~~51%~~respective share of ~~the guarantee~~ each other’s guarantees. Wendy’s

and ~~(2) agreed to reimburse and otherwise indemnify~~ the Higa ~~Partners for our~~ ~~49%~~Partners’ share of ~~their~~each guarantee is based upon ownership percentages in effect at the time of ~~a line of credit granted by a different lender to~~ the ~~Japan JV to fund working capital requirements.~~agreement. As of ~~March 31,~~June 30, 2013,, our portion of these contingent obligations totaled approximately $~~3.1~~2.8 million based upon then current rates of exchange. The fair value of our guarantees is immaterial.

In January 2013, ~~the joint venture partners agreed on a plan to finance anticipated future cash requirements of the Japan JV.~~ Wendy’s and the Higa Partners agreed to ~~fund~~finance approximately ~~$3.0~~$3.0 million and $0.7 million, respectively, of future anticipated cash requirements of the Japan JV, of which ~~$1.0~~$1.0 million and $0.2 million, respectively, were ~~paid~~contributed in April 2013. As determined by the amount of capital contributions by each of the partners, Wendy’s will become the majority owner of the Japan JV. As a result, the Japan JV will be consolidated with and included in Wendy’s consolidated financial statements beginning in the second quarter of 2013.

Our obligations, including the remaining funding of anticipated future cash requirements of the Japan JV of approximately $2.0 million, could total up to approximately $~~6.7~~6.6 million if the Higa Partners are unable to perform their reimbursement and ~~indemnity~~indemnify obligations to us.

Related Party Transactions

Transactions with ~~the~~a Management Company

The Wendy’s Company, through a wholly-owned subsidiary, is party to an aircraft management and lease agreement, which is expected to expire in March 2014, with CitationAir, a subsidiary of Cessna Aircraft Company, pursuant to which the Company leases a corporate aircraft to CitationAir to use as part of its Jet Card program fleet. The Company entered into the lease agreement as a means of offsetting the cost of owning and operating the corporate aircraft by receiving revenue from third parties’ use of such aircraft. Under the terms of the lease agreement, the Company pays annual management and flight crew fees to CitationAir and reimburses CitationAir for maintenance costs and fuel usage related to the corporate aircraft. In return, CitationAir pays a negotiated fee to the Company based on the number of hours that the corporate aircraft is used by Jet Card members. This fee is reduced based on the number of hours that (1) the Company uses other aircraft in the Jet Card program fleet and (2) Jet Card members who are affiliated with the Company use the corporate aircraft or other aircraft in the Jet Card program fleet. The Company’s participation in the aircraft management and lease agreement ~~during 2012 reduced~~reduces the aggregate costs that the Company would ~~have~~ otherwise ~~incurred~~incur in connection with owning and operating the corporate aircraft. Under the terms of the lease agreement, the Company’s directors have the opportunity to become Jet Card members and to use aircraft in the Jet Card program fleet at the same negotiated fee paid by the Company as provided for under the lease agreement. During the first ~~quarter~~six months of 2013 and 2012, ~~the Former Executives~~our Chairman, who was our former Chief Executive Officer, and our Vice Chairman, who was our former President and Chief Operating Officer (the “Former Executives”) and a director, who was our former Vice Chairman, and members of their immediate families,

used their Jet Card agreements for business and personal travel on aircraft in the Jet Card program fleet. A management company formed by the Former Executives and a director, who was our former Vice Chairman, paid CitationAir directly, and the Company received credit from CitationAir for charges related to such travel of approximately $~~0.5~~0.9 million and $~~0.3~~0.5 million during the first ~~quarter~~six months of 2013 and 2012, respectively.

Presentation of Financial Information

The Company reports on a fiscal year consisting of 52 or 53 weeks ending on the Sunday closest to December 31. All quarters presented contain 13 weeks. All references to years and quarters relate to fiscal periods rather than calendar periods. Certain percent changes between fiscal periods are considered not measurable or not meaningful (“n/m”).

Results of Operations

The following tables included throughout Results of Operations set forth in millions the Company’s consolidated results of operations for the three months ended ~~March 31,~~June 30, 2013 and ~~April~~July 1, 2012:


	Three Months Ended											Three Months Ended
	March 31, 2013			April 1, 2012			$ Change			% Change		June 30, 2013			July 1, 2012			$ Change			% Change
Revenues:
Sales	$	530.7		$	519.9		$	10.8		2.1	%	$	571.2		$	566.1		$	5.1		0.9	%
Franchise revenues	73.0			73.3			(0.3		)	(0.4	)	79.3			79.8			(0.5		)	(0.6	)
	603.7			593.2			10.5			1.8		650.5			645.9			4.6			0.7
Costs and expenses:
Cost of sales	460.8			455.5			5.3			1.2		473.3			483.1			(9.8		)	(2.0	)
General and administrative	65.3			72.3			(7.0		)	(9.7	)	74.8			73.3			1.5			2.0
Depreciation and amortization	51.8			32.3			19.5			60.4		38.7			35.9			2.8			7.8
Impairment of long-lived assets	—			4.5			(4.5		)	n/m		—			3.3			(3.3		)	n/m
Facilities relocation costs and other transactions	3.0			6.1			(3.1		)	(50.8	)
Facilities action charges, net												6.4			10.0			(3.6		)	(36.0	)
Other operating expense, net	0.3			1.6			(1.3		)	(81.3	)	0.3			1.9			(1.6		)	(84.2	)
	581.2			572.3			8.9			1.6		593.5			607.5			(14.0		)	(2.3	)
Operating profit	22.5			20.9			1.6			7.7		57.0			38.4			18.6			48.4
Interest expense	(21.0		)	(28.2		)	7.2			(25.5	)	(19.0		)	(28.0		)	9.0			(32.1	)
Other expense, net and investment income, net	(2.3		)	28.9			(31.2		)	n/m
(Loss) income before income taxes and noncontrolling interests	(0.8		)	21.6			(22.4		)	n/m
Benefit from (provision for) income taxes	2.9			(6.9		)	9.8			n/m
Net income	2.1			14.7			(12.6		)	(85.7	)
Net income attributable to noncontrolling interests	—			(2.3		)	2.3			n/m
Net income attributable to The Wendy’s Company	$	2.1		$	12.4		$	(10.3	)	(83.1	)%
Loss on early extinguishment of debt												(21.0		)	(25.2		)	4.2			(16.7	)
Investment income and other income (expense), net												0.1			0.6			(0.5		)	(83.3	)%
Income (loss) before income taxes and noncontrolling interests												17.1			(14.2		)	31.3			n/m
(Provision for) benefit from income taxes												(5.1		)	8.7			(13.8		)	n/m
Net income (loss)												12.0			(5.5		)	17.5			n/m
Net loss attributable to noncontrolling interests												0.2			—			0.2			n/m
Net income (loss) attributable to The Wendy’s Company												$	12.2		$	(5.5	)	$	17.7		n/m

1924


	First Quarter			First Quarter
	2013			2012			Second Quarter 2013			Second Quarter 2012
Sales:
Wendy’s	$	515.7		$	501.8		$	554.8		$	547.9
Bakery	15.0			18.1			16.4			18.2
Total sales	$	530.7		$	519.9		$	571.2		$	566.1


			% of Sales			% of Sales			% of Sales			% of Sales
Cost of sales:
Wendy’s
Food and paper	$	169.8	32.9%	$	168.7	33.6%	$	181.9	32.8%	$	181.4	33.1%
Restaurant labor	158.8		30.8%	154.7		30.8%	161.6		29.1%	162.9		29.7%
Occupancy, advertising and other operating costs	121.1		23.5%	119.4		23.8%	118.9		21.4%	126.4		23.1%
Total cost of sales	449.7		87.2%	442.8		88.2%	462.4		83.3%	470.7		85.9%
Bakery	11.1		n/m	12.7		n/m	10.9		n/m	12.4		n/m
Total cost of sales	$	460.8	86.8%	$	455.5	87.6%	$	473.3	82.9%	$	483.1	85.3%


	First Quarter			First Quarter
	2013			2012			Second Quarter 2013			Second Quarter 2012
Margin $:
Wendy’s	$	66.0		$	59.0		$	92.4		$	77.2
Bakery	3.9			5.4			5.5			5.8
Total margin	$	69.9		$	64.4		$	97.9		$	83.0

Wendy’s restaurant margin %	12.8		%	11.8		%	16.7		%	14.1		%


	First Quarter		First Quarter
	2013		2012		Second Quarter 2013		Second Quarter 2012
Wendy’s restaurant statistics:
North America same-store sales:
Company-owned restaurants	1.0	%	0.8	%	0.4	%	3.2	%
Franchised restaurants	0.6	%	0.7	%	0.3	%	3.2	%
Systemwide	0.7	%	0.7	%	0.4	%	3.2	%

Total same-store sales:
Company-owned restaurants	1.0	%	0.8	%	0.4	%	3.2	%
Franchised restaurants (a)	0.8	%	0.8	%	0.3	%	3.3	%
Systemwide (a)	0.8	%	0.8	%	0.3	%	3.3	%

________________

(a) Includes international franchised restaurants same-store sales.

2025


	Company-owned		Franchised		Systemwide		Company-owned		Franchised		Systemwide
Restaurant count:
Restaurant count at December 30, 2012	1,427		5,133		6,560
Restaurant count at March 31, 2013							1,427		5,117		6,544
Opened	3		13		16		4		12		16
Closed	(4	)	(28	)	(32	)	(5	)	(13	)	(18	)
Net purchased from (sold by) franchisees	1		(1	)	—
Restaurant count at March 31, 2013	1,427		5,117		6,544
Net (sold to) purchased by franchisees							(8	)	8		—
Restaurant count at June 30, 2013							1,418		5,124		6,542


Sales	Change			Change
Wendy’s	$	13.9		$	6.9
Bakery	(3.1		)	(1.8		)
	$	10.8		$	5.1

The increase in sales induring the ~~first~~second quarter of 2013 was partially due to an increase in our average per customer check amount, in part offset by a decrease in customer transactions. Our average per customer check amount increased primarily due to a benefit from strategic price increases on our menu items implemented in 2012 subsequent to the ~~first~~second quarter, as well as changes in the composition of our sales. ~~In addition, sales were negatively impacted by the New Year and Easter holiday shifts, as well as adverse weather conditions.~~ Wendy’s company-owned restaurants opened or acquired ~~subsequent to~~during the ~~first~~second quarter of 2012 and thereafter resulted in incremental sales of ~~$28.5~~$26.7 million in the ~~first~~second quarter of 2013, which were partially offset by a reduction in sales of ~~$15.8~~$18.0 million from locations closed or sold ~~after~~during that same time period. Sales during the ~~first~~second quarter of ~~2012.~~2013 were negatively impacted by temporary closures of restaurants being remodeled under our Image Activation program. Sales were also negatively impacted by ~~$0.3~~$0.8 million due to changes in Canadian foreign currency rates.


Franchise Revenues	Change			Change
Franchise revenues	$	(0.3	)	$	(0.5	)

The decrease in franchise revenues induring the ~~first~~second quarter of 2013 was primarily due to a net decrease in the number of franchise restaurants in operation during the second quarter of 2013 compared to 2012, as a result of the ~~first quarter~~timing of ~~2012.~~openings and closures. The decrease in ~~the number of~~ franchise ~~restaurants was partially the result of Wendy’s net purchase of 26 franchised restaurants since the first quarter of 2012. This decrease~~revenues was partially offset by a ~~0.6%~~0.3% increase in franchise restaurant same-store sales, which was primarily impacted by the same factors described above for company-owned restaurants.



Wendy’s Cost of Sales	Change
Food and paper	(~~0.7~~0.3	)%
Restaurant labor	—(0.6	)%
Occupancy, advertising and other operating costs	(~~0.3~~1.7	)%
	(2.6	)%

The decrease in cost of sales, as a percent of sales, during the second quarter of 2013 was due to benefits from (1) strategic price increases on our menu items implemented in 2012 subsequent to the second quarter, (2) optimization of restaurant labor through changes in the composition of staffing, (3) a decrease in breakfast advertising expenses and (4) changes in the composition of our sales. As a percent of sales, these decreases in costs were partially offset by increased commodity costs.



General and Administrative	Change
Severance expense	$	3.3
Incentive compensation	2.2
Capitalized internal labor costs	(1.4		)
Employee compensation and related expenses	(1.0		)
Other, net	(1.6		)
	$	1.5

The increase in general and administrative expenses during the second quarter of 2013 was primarily due to increases in (1) severance expense as a result of the terms of a separation agreement with an executive and (2) incentive compensation accruals due to stronger operating performance as compared to plan in 2013 versus 2012. These increases were substantially offset by (1) an increase in capitalized internal labor costs as a result of our Image Activation program and (2) a decrease in employee compensation and related expenses primarily due to changes in staffing, partially offset by an increase in share-based compensation expense.



Depreciation and Amortization	Change
Restaurants	$	3.8
Other	(1.0		)
	$	2.8

Depreciation and amortization during the second quarter of 2013 includes accelerated depreciation of $4.2 million on existing assets that will be replaced in 2013 as part of our Image Activation program, compared to $2.4 million of similar accelerated depreciation during the second quarter of 2012. The increase in restaurant depreciation and amortization during the second quarter of 2013 also includes a $1.8 million increase on new and reimaged Image Activation restaurants.



Impairment of Long-Lived Assets	Second Quarter 2012
Restaurants, primarily properties	$	3.3

During the second quarter of 2012, we closed 15 company-owned restaurants in connection with our review of certain underperforming locations, which resulted in an impairment charge of $3.3 million.



Facilities Action Charges, Net	Second Quarter
	2013		2012
System optimization	$	4.8	$	—
Facilities relocation and other transition costs	1.2		9.4
Breakfast discontinuation	0.4		—
Arby’s transaction related costs	—		0.6
	$	6.4	$	10.0

During the second quarter of 2013, the Company recorded net expense totaling $4.8 million related to its system optimization initiative which is primarily comprised of System Optimization Remeasurement of $5.9 million partially offset by a $1.3 million gain on the sale of restaurants.

During the second quarter of 2013 and 2012, the Company incurred costs aggregating $1.2 million and $9.4 million, respectively, related to the relocation of the Atlanta restaurant support center to Ohio, which was substantially completed during 2012.

of the agreement. In accordance with the terms of a separation agreement with such executive, the remaining unamortized costs were recorded to severance expense and included in “General and administrative” during the second quarter of 2013.



Interest Expense	Change
Senior Notes	$	(13.5	)
Term loans	4.8
Other, net	(0.3		)
	$	(9.0	)

The decrease in interest expense during the second quarter of 2013 was primarily due to the purchase and redemption of the Wendy’s Restaurants 10.00% Senior Notes (the “Senior Notes”) in May and July 2012, respectively. This decrease in interest expense was partially offset by the net effect of higher weighted average principal amounts outstanding and lower effective interest rates on the current term loans compared to the prior term loan. The decrease in our effective interest rates on our current term loans compared to the prior term loan is a result of the execution of the Credit Agreement in May 2012 and the Restated Credit Agreement in May 2013. See “Liquidity and Capital Resources - Refinancing of Credit Agreement” below for further discussion.

Loss on Early Extinguishment of Debt

Wendy’s incurred a loss on the early extinguishment of debt as a result of refinancing its existing Credit Agreement on May 16, 2013, as described below in “Liquidity and Capital Resources - Refinancing of Credit Agreement,” as follows:



	Second Quarter 2013
Unaccreted discount on Term Loan B	$	9.6
Deferred costs associated with the Credit Agreement	11.4
Loss on early extinguishment of debt	$	21.0

Wendy’s incurred a loss on the early extinguishment of debt in 2012 of $25.2 million and $49.9 million in the second and third quarters of 2012, respectively, related to the repayment of debt with the proceeds of the 2012 term loan under the Credit Agreement. The components of the loss on the early extinguishment of debt incurred during the second quarter of 2012 were as follows:



	Second Quarter 2012
Premium payment to purchase the Senior Notes	$	10.1
Unaccreted discount on the Senior Notes	2.1
Deferred costs associated with the Senior Notes	2.8
Unaccreted discount on the 2010 term loan	1.7
Deferred costs associated with the 2010 term loan	8.5
Loss on early extinguishment of debt	$	25.2



(Provision for) Benefit from Income Taxes	Change
Federal and state (expense) benefit on variance in income (loss) before income taxes and noncontrolling interests	$	(9.1	)
State income taxes net of federal benefit	(4.0		)
Other	(0.7		)
	$	(13.8	)

Our income taxes in 2013 and 2012 were impacted by variations in income (loss) before income taxes and noncontrolling interests, adjusted for recurring items and state income taxes net of federal benefit.

Net Loss Attributable to Noncontrolling Interests

We have reflected a net loss attributable to noncontrolling interests of $0.2 million in the second quarter of 2013 in connection with the consolidation of the Japan JV. A wholly-owned subsidiary of Wendy’s owned a 49% share in a joint venture for the operation of Wendy’s restaurants in Japan with the Higa Partners. In conjunction with the additional capital contributions in April 2013, the partners executed an amendment to the original joint venture agreement which includes revised rights and obligations of the partners and changes to the ownership and profit distribution percentages. The ownership and profit distribution percentages, as defined, are 60.9% and 58.5% and 39.1% and 41.5%, respectively for Wendy’s and the Higa Partners and will change as future contributions are made to fund the Japan JV. As a result of the changes in the ownership rights and obligations of the partners, Wendy’s is consolidating the Japan JV beginning in the second quarter of 2013. Prior to our acquisition of this additional interest, the Japan JV was accounted for as an unconsolidated affiliate under the equity method of accounting.

Under the equity method of accounting, we previously reported our 49% share of the net loss of the Japan JV in “Other operating expense, net.” Beginning in the second quarter of 2013, we have reported its results of operations in the appropriate line items in our condensed consolidated statements of operations. Net loss attributable to the Higa Partners’ ownership percentage is recorded in “Net loss attributable to noncontrolling interests.”

Results of Operations

The following tables included throughout this Results of Operations set forth in millions the Company’s consolidated results of operations for the six months ended June 30, 2013 and July 1, 2012:



	Six Months Ended
	June 30, 2013			July 1, 2012			$ Change			% Change
Revenues:
Sales	$	1,101.9		$	1,086.0		$	15.9		1.5	%
Franchise revenues	152.3			153.1			(0.8		)	(0.5	)
	1,254.2			1,239.1			15.1			1.2
Costs and expenses:
Cost of sales	934.1			938.5			(4.4		)	(0.5	)
General and administrative	140.1			145.6			(5.5		)	(3.8	)
Depreciation and amortization	90.5			68.3			22.2			32.5
Impairment of long-lived assets	—			7.8			(7.8		)	n/m
Facilities action charges, net	9.4			16.2			(6.8		)	(42.0	)
Other operating expense, net	0.6			3.4			(2.8		)	(82.4	)
	1,174.7			1,179.8			(5.1		)	(0.4	)
Operating profit	79.5			59.3			20.2			34.1
Interest expense	(39.9		)	(56.2		)	16.3			(29.0	)
Loss on early extinguishment of debt	(21.0		)	(25.2		)	4.2			(16.7	)
Investment income and other income (expense), net	(2.3		)	29.5			(31.8		)	n/m
Income before income taxes and noncontrolling interests	16.3			7.4			8.9			n/m
(Provision for) benefit from income taxes	(2.1		)	1.8			(3.9		)	n/m
Net income	14.2			9.2			5.0			54.3	%
Net loss (income) attributable to noncontrolling interests	0.2			(2.3		)	2.5			n/m
Net income attributable to The Wendy’s Company	$	14.4		$	6.9		$	7.5		n/m



	Six Months 2013			Six Months 2012
Sales:
Wendy’s	$	1,070.5		$	1,049.7
Bakery	31.4			36.3
Total sales	$	1,101.9		$	1,086.0

			% of Sales			% of Sales
Cost of sales:
Wendy’s
Food and paper	$	351.8	32.9%	$	350.1	33.4%
Restaurant labor	320.3		29.9%	317.5		30.2%
Occupancy, advertising and other operating costs	240.0		22.4%	245.8		23.4%
Total cost of sales	912.1		85.2%	913.4		87.0%
Bakery	22.0		n/m	25.1		n/m
Total cost of sales	$	934.1	84.8%	$	938.5	86.4%



	Six Months 2013			Six Months 2012
Margin $:
Wendy’s	$	158.4		$	136.3
Bakery	9.4			11.2
Total margin	$	167.8		$	147.5

Wendy’s restaurant margin %	14.8		%	13.0		%



	Six Months 2013		Six Months 2012
Wendy’s restaurant statistics:
North America same-store sales:
Company-owned restaurants	0.7	%	2.1	%
Franchised restaurants	0.5	%	2.0	%
Systemwide	0.5	%	2.0	%

Total same-store sales:
Company-owned restaurants	0.7	%	2.1	%
Franchised restaurants (a)	0.5	%	2.1	%
Systemwide (a)	0.6	%	2.1	%

________________


(a)	Includes international franchised restaurants same-store sales.



	Company-owned		Franchised		Systemwide
Restaurant count:
Restaurant count at December 30, 2012	1,427		5,133		6,560
Opened	7		25		32
Closed	(9	)	(41	)	(50	)
Net (sold to) purchased by franchisees	(7	)	7		—
Restaurant count at June 30, 2013	1,418		5,124		6,542



Sales	Change
Wendy’s	$	20.8
Bakery	(4.9		)
	$	15.9

The increase in sales during the first six months of 2013 was partially due to an increase in our average per customer check amount, in part offset by a decrease in customer transactions. Our average per customer check amount increased primarily due to a benefit from strategic price increases on our menu items implemented in 2012 subsequent to the second quarter, as well as changes in the composition of our sales. Wendy’s company-owned restaurants opened or acquired during the second quarter of 2012 and thereafter resulted in incremental sales of $55.4 million in the first six months of 2013, which were partially offset by a reduction in sales of $34.3 million from locations closed or sold during that same time period. Sales during the first six months of 2013 were negatively impacted by temporary closures of restaurants being remodeled under our Image Activation program. Sales were also negatively impacted by $1.1 million due to changes in Canadian foreign currency rates.



Franchise Revenues	Change
Franchise revenues	$	(0.8	)

The decrease in franchise revenues during the first six months of 2013 was primarily due to a net decrease in the number of franchise restaurants in operation during the first six months of 2013 compared to the first six months of 2012, as a result of the timing of openings and closures. The decrease in franchise revenues was partially offset by a 0.5% increase in franchise restaurant same-store sales, which was primarily impacted by the same factors described above for company-owned restaurants.



Wendy’s Cost of Sales	Change
Food and paper	(0.5	)%
Restaurant labor	(0.3	)%
Occupancy, advertising and other operating costs	(1.0	)%
	(1.8	)%

The decrease in cost of sales, as a percent of sales, during the first ~~quarter~~six months of 2013, was primarily due to a benefit from strategic price increases on our menu items implemented in 2012 subsequent to the ~~first~~second quarter, changes in the composition of our sales and a decrease in breakfast advertising ~~expenses and the favorable impact of new beverage contracts.~~expenses. As a percent of sales, these decreases in costs were partially offset by increased commodity ~~costs as well as increased labor~~ costs.


General and Administrative	Change			Change
Employee compensation and related expenses	$	(3.8	)	$	(4.9	)
Capitalized internal labor costs				(1.5		)
Franchise taxes				(1.5		)
Professional services	(1.5		)	(1.1		)
Severance expense				3.5
Incentive compensation				2.5
Other, net	(1.7		)	(2.5		)
	$	(7.0	)	$	(5.5	)

The decrease in general and administrative expenses induring the first ~~quarter~~six months of 2013 was primarily due to (1) a decrease in employee compensation and related expenses ~~principally~~primarily due to changes in staffing, partially offset by an increase in share-based compensation, (2) an increase in capitalized internal labor costs as a result of ~~changes~~our Image Activation program, (3) a decrease in ~~staffing~~franchise taxes and (4) a decrease in professional services mostly resulting from lower legal fees and information technology consulting fees. These decreases were partially offset by increases in (1) severance expense as a result of the terms of a separation agreement with an executive and (2) incentive compensation accruals due to stronger operating performance as compared to plan in 2013 versus 2012.


Depreciation and Amortization	Change		Change
Restaurants	$	17.5	$	21.3
Other	2.0		0.9
Total	$	19.5
			$	22.2

~~The increase in restaurant depreciation~~Depreciation and amortization induring the first ~~quarter~~six months of 2013 ~~was primarily due to~~includes accelerated depreciation of ~~$14.5~~$18.8 million on existing assets that will be replaced in 2013 as part of our Image Activation program, ~~as well as~~compared to $2.5 million of similar accelerated depreciation during the first six months of ~~$1.7~~2012. The increase in restaurant depreciation and amortization during the first six months of 2013 also includes a $3.5 million increase on new and reimaged Image Activation restaurants. Other depreciation and amortization increased during the first ~~quarter~~six months of 2013 in part due to depreciation on a new building and renovations at our corporate headquarters.

Interest Expense Change
Senior Notes $ (15.3 )
Term loans 8.1
$ (7.2 )



Impairment of Long-Lived Assets	Six Months 2012
Restaurants, primarily properties	$	6.2
Other	1.6
	$	7.8

During the first six months of 2012, the Company recorded an impairment charge of $6.2 million primarily on restaurant-level assets resulting from the deterioration in operating performance of certain restaurants and the closing of 15 company-owned restaurants in connection with our review of certain underperforming locations.

During the first quarter 2012, the Company reclassified a company-owned aircraft as held and used from its previous held for sale classification and recorded an impairment charge of $1.6 million on the company-owned aircraft.



Facilities Action Charges, Net	Six Months
	2013		2012
System optimization	$	4.8	$	—
Facilities relocation and other transition costs	3.3		15.0
Breakfast discontinuation	1.0		—
Arby’s transaction related costs	0.3		1.2
	$	9.4	$	16.2

During the first six months of 2013, the Company recorded net expense totaling $4.8 million related to its system optimization initiative which is primarily comprised of System Optimization Remeasurement of $5.9 million partially offset by a $1.3 million gain on the sale of restaurants.

During the first six months of 2013 and 2012, the Company incurred facilities relocation and other transition costs aggregating $3.3 million and $15.0 million, respectively, related to the relocation of the Atlanta restaurant support center to Ohio, which was substantially completed during 2012.



Interest Expense	Change
Senior Notes	$	(28.8	)
Term loans	12.9
Other, net	(0.4		)
	$	(16.3	)

The decrease in interest expense during the first ~~quarter~~six months of 2013 was primarily due to the purchase and redemption of the ~~Wendy’s Restaurants 10.00%~~ Senior Notes in May and July 2012, respectively. This decrease in interest expense was partially offset by the net effect of higher weighted average principal amounts outstanding and a lower effective interest ~~rate~~rates on the current term ~~loan~~loans compared to the prior term loan. ~~On April 16, 2013, Wendy’s entered into an agreement~~The decrease in our effective interest rates on our current term loans compared to ~~refinance its existing credit agreement, which~~the prior term loan is ~~expected to generate approximately $20.0 million~~a result of the execution of the Credit Agreement in ~~future annual interest savings.~~May 2012 and the Restated Credit Agreement in May 2013. See ~~“Refinancing~~“Liquidity and Capital Resources - Refinancing of Credit Agreement” ~~below.~~below for further discussion.

Loss on Early Extinguishment of Debt



	Six Months 2013
Unaccreted discount on Term Loan B	$	9.6
Deferred costs associated with the Credit Agreement	11.4
Loss on early extinguishment of debt	$	21.0

Benefit from (Provision for) Income Taxes Change
Federal and state benefit on variance in (loss) income
before income taxes and noncontrolling interests
$ 7.9
Reversal of deferred taxes on investment in foreign subsidiaries now considered permanently invested outside of the U.S. 1.9
$ 9.8



	Six Months 2012
Premium payment to purchase the Senior Notes	$	10.1
Unaccreted discount on the Senior Notes	2.1
Deferred costs associated with the Senior Notes	2.8
Unaccreted discount on the 2010 term loan	1.7
Deferred costs associated with the 2010 term loan	8.5
Loss on early extinguishment of debt	$	25.2



(Provision for) Benefit from Income Taxes	Change
Federal and state (expense) benefit on variance in income before income taxes and noncontrolling interests	$	(2.0	)
State income taxes net of federal benefit	(3.6		)
Reversal of deferred taxes on investment in foreign subsidiaries now considered permanently invested outside of the U.S.	1.9
Other	(0.2		)
	$	(3.9	)

Our income taxes in 2013 and 2012 were impacted by variations in ~~(loss)~~ income before income taxes and noncontrolling interests, adjusted for recurring items, state income taxes net of federal benefit and a reversal of deferred taxes on investments in foreign subsidiaries now considered permanently invested outside of the ~~U.S.~~United States.

During the first quarter of 2013, the Company finalized its long-term investment plan with respect to the Company’s non-U.S. earnings. There are no plans to repatriate cash from, and Wendy’s intends to indefinitely reinvest undistributed earnings of, its non-U.S. subsidiaries. As such, the Company reversed $1.9 million of deferred tax liabilities relating to investments in foreign subsidiaries which the Company now considers permanently invested outside of the U.S.

Net Loss (Income) Attributable to Noncontrolling Interests

We have reflected net loss attributable to noncontrolling interests of $0.2 million during the first six months of 2013 in connection with the consolidation of the Japan JV. A wholly-owned subsidiary of Wendy’s owned a 49% share in a joint venture for the operation of Wendy’s restaurants in Japan with the Higa Partners. In conjunction with the additional capital contributions in April 2013, the partners executed an amendment to the original joint venture agreement which includes revised rights and obligations of the partners and changes to the ownership and profit distribution percentages. The ownership and profit distribution percentages, as defined, are 60.9% and 58.5% and 39.1% and 41.5%, respectively for Wendy’s and the Higa Partners and will change as future contributions are made to fund the Japan JV. As a result of the changes in the ownership rights and obligations

of the partners, Wendy’s is consolidating the Japan JV beginning in the second quarter of 2013. Prior to our acquisition of this additional interest, the Japan JV was accounted for as an unconsolidated affiliate under the equity method of accounting.

Under the equity method of accounting, we previously reported our 49% share of the net loss of the Japan JV in “Other operating expense, net.” Beginning in the second quarter of 2013, we have reported its results of operations in the appropriate line items in our condensed consolidated statements of operations. Net loss attributable to the Higa Partners’ ownership percentage is recorded in “Net loss (income) attributable to noncontrolling interests.”

We have reflected net income attributable to noncontrolling interests of $2.3 million, net of an income tax benefit of $1.3 million during the first six months of 2012 in connection with the equity and profit interests in Jurl Holdings, LLC (“Jurl”), a 99.7% owned subsidiary, which held our investment in Jurlique International Pty Ltd. (“Jurlique”). Prior to 2009 when our predecessor entity was a diversified company active in investments, we had provided the Former Executives and certain other former employees, equity and profits interests in Jurl. In connection with the gain on sale of Jurlique, we distributed, based on the related agreement, approximately $3.7 million to Jurl’s minority shareholders, including approximately $2.3 million to the Former Executives in the first quarter of 2012. As a result of this sale and distributions to the minority shareholders, there are no remaining noncontrolling interests in this consolidated subsidiary.

2235

Liquidity and Capital Resources

Net Cash Provided by ~~(Used in)~~ Operating Activities

Cash provided by ~~(used in)~~ operating activities increased $~~47.7~~74.8 million in the first ~~quarter~~six months of 2013 as compared to the first ~~quarter~~six months of 2012, primarily due to changes in our net income and non-cash items as well as the following:

a $~~19.5 millionfavorable~~ impact in accrued expenses and other current liabilities for the comparable periods. This favorable impact was primarily due to decreases in (1) interest accruals and payments due to the net effect of the May 15, 2012 Credit Agreement and the related purchase and redemption of the Wendy’s Restaurants 10.00% Senior Notes in May and July of 2012, respectively and (2) income taxes paid. These favorable changes were partially offset by an increase in incentive compensation paid; and

a ~~$9.9~~7.9 million favorable impact in accounts payable for the comparable periods. This favorable impact was primarily due to (1) an increase in accruals for capital expenditures due to the timing of restaurant construction activity in the first ~~quarter~~six months of 2013 versus 2012 and (2) changes in accounts payable due to the timing of payments between comparable periods; and

a $3.2 millionfavorable impact in accrued expenses and other current liabilities for the comparable periods. This favorable impact was primarily due to decreases in (1) payments for severance, retention and relocation associated with the sale of Arby’s and the relocation of the Company’s Atlanta restaurant support center to Ohio and (2) payments for income taxes, net of refunds. These favorable changes were partially offset by (1) a decrease in interest accruals partially offset by a decrease in payments due to the net effect of the May 15, 2012 Credit Agreement and the related purchase and redemption of the Wendy’s Restaurants 10.00% Senior Notes in May and July 2012, respectively and (2) an increase in incentive compensation payments for the 2012 fiscal year partially offset by an increase in the accrual for the 2013 fiscal year due to stronger operating performance.

Additionally, during the first ~~quarter~~six months of 2013, the Company had the following significant uses and sources of cash other than from operating activities:

Cash capital expenditures totaling $~~40.0~~81.8 million, which included ~~$20.1~~$44.6 million for Image Activation restaurants, ~~$1.1~~$1.6 million for other restaurants, ~~$4.0~~$5.2 million for the construction of a new building and renovations at our corporate headquarters and ~~$14.8~~$30.4 million for various capital projects;

~~Repayments~~Proceeds from dispositions of ~~$6.5~~$16.0 million, ofincluding $2.8 million from restaurant dispositions under our system optimization initiative;

Proceeds from long-term debt of $350.0 million which were offset by repayments of $357.4 million primarily ~~related~~due to the partial refinancing of our existing term ~~loan;~~loan in connection with the Restated Credit Agreement;

Dividend payments of $31.4 million; and

~~Dividend payment~~Financing cost payments of ~~$15.7 million.~~$5.8 million resulting from the refinancing of our Credit Agreement.

The net cash ~~used in~~provided by our business before the effect of exchange rate changes on cash was approximately $~~23.6~~38.3 million.

Sources and Uses of Cash for the Remainder of 2013

Our anticipated sources of cash and cash requirements for the remainder of 2013, exclusive of operating cash flow requirements, consist principally of:

Capital expenditures of approximately ~~$205.0~~$163.2 million, which would result in total cash capital expenditures for the year of approximately $245.0 million;

Quarterly cash dividends aggregating up to approximately ~~$47.2~~$39.3 million as discussed below in “Dividends;”

~~The costs associated with the anticipated financing activities discussed below in “Refinancing of Credit Agreement;”~~Restaurant dispositions under our system optimization initiative;

~~Potential restaurant acquisitions and dispositions; and~~

~~Potential stock~~Stock repurchases of up to $100.0 ~~million.~~million, which includes repurchases of $13.3 million made subsequent to the second quarter through August 2, 2013; and

The cost of any potential financing activities.

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

Refinancing of Credit Agreement

On ~~April~~May 16, 2013, Wendy’s ~~entered into an amendment (the “Amendment”) to refinance~~amended and restated its Credit Agreement, dated as of May 15, 2012 (the “Credit Agreement”). The Amendment provides that, subject to the satisfaction of certain closing conditions, the Credit Agreement, and certain other loan documents, will be amended and restated in the form attached to the Amendment (the “Restated Credit Agreement”). The closing is expected to occur on or after May 16, 2013.2012. The Restated Credit Agreement is comprised of (1) a $350.0 million senior secured term loan facility (“Term Loan A”) which will mature on May 15,

2018 and ~~bear~~bears interest at ~~LIBOR~~Eurodollar Rate (as defined in the Restated Credit Agreement) plus 2.25%, (2) a $769.4 million senior secured term loan facility (“Term Loan B”) which will mature on May 15, 2019 and ~~bear~~bears interest at ~~LIBOR~~Eurodollar Rate plus 2.50% with a floor of 0.75% and (3) a $200.0 million senior secured revolving credit facility which will mature on May 15, ~~2018.~~2018. The proceeds from the Term Loan A were used to refinance a portion of our existing Term Loan B (formerly described in our Form 10-K as the “Term Loan”). The terms and amounts of the senior secured revolving credit facility are unchanged with the exception of the maturity date which was extended from May 15, 2017. The Restated Credit Agreement does not contain any material changes to existing covenants or other terms of the Credit Agreement, except as described ~~herein.~~ above. The interest rates on Term Loan A and Term Loan B were 2.44% and 3.25%, respectively, as of June 30, 2013.

Wendy’s ~~anticipates that it will incur approximately~~incurred $~~5.5~~5.8 million in fees related to the ~~refinancing.~~refinancing, which are being amortized to “Interest expense” utilizing the effective interest rate method through the maturities of the related debt instruments.

In connection with the refinancing of its existing Credit Agreement, Wendy’s ~~anticipates it will record~~recorded debt extinguishment costs of ~~up to approximately $21.1~~$21.0 million in the second quarter of 2013.

Dividends

On March 15, 2013 and June 17, 2013, The Wendy’s Company paid quarterly cash dividends of $0.04 per share on its common stock, aggregating ~~$15.7~~$31.4 million. On ~~May 2,~~July 19, 2013, The Wendy’s Company declared a dividend of ~~$0.04~~$0.05 per share to be paid on ~~June~~September 17, 2013 to shareholders of record as of ~~June~~September 3, 2013. If The Wendy’s Company pays a regular quarterly cash ~~dividends~~dividend for the ~~remainder~~fourth quarter of 2013 at the same rate as declared ~~in our~~on July 19, 2013, ~~first quarter,~~ The Wendy’s Company’s total cash requirement for dividends for the remainder of 2013 would be approximately ~~$47.2~~$39.3 million based on the number of shares of its common stock outstanding at ~~May~~August 2, 2013. The Wendy’s Company currently intends to continue to declare and pay quarterly cash dividends; however, there can be no assurance that any quarterly dividends will be declared or paid in the future or of the amount or timing of such dividends, if any.

Treasury Stock Purchases

Our Board of Directors has authorized the repurchase of up to $100.0 million of our common stock through December 29, 2013, when and if market conditions warrant and to the extent legally permissible. No repurchases were made during the first ~~quarter~~six months of 2013. Subsequent to the second quarter through August 2, 2013, we repurchased 1.9 million shares for an aggregate purchase price of $13.3 million, excluding commissions.

General Inflation, Commodities and Changing Prices

We believe that general inflation did not have a significant effect on our consolidated results of operations, except as mentioned below for certain commodities, during the reporting periods. We manage any inflationary costs and commodity price increases through selective menu price increases. Delays in implementing such menu price increases and competitive pressures may limit our ability to recover such cost increases in the future. Inherent volatility experienced in certain commodity markets, such as those for beef, chicken, corn and wheat continued to have a significant effect on our results of operations through the ~~first~~second quarter of 2013 and is expected to continue to have an adverse effect on us in the future. The extent of any impact will depend in part on our ability to anticipate and react to changes in commodity costs.

Seasonality

Our restaurant operations are moderately impacted by seasonality; Wendy’s restaurant revenues are normally higher during the summer months than during the winter months. Because our business is moderately seasonal, results for any future quarter will not necessarily be indicative of the results that may be achieved for any other quarter or for the full fiscal year.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

As of ~~March 31,~~June 30, 2013, there were no material changes from the information contained in the Company’s Form 10-K for the fiscal year ended December 30, 2012.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The management of the Company, under the supervision and with the participation of its Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of ~~March 31,~~June 30, 2013. Based on such evaluations, the Chief Executive Officer and Chief Financial Officer concluded that, as of ~~March 31,~~June 30, 2013, the disclosure controls and procedures of the Company were effective at a reasonable assurance level in (1) recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act and (2) ensuring that information required to be disclosed by the Company in such reports is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There were no changes to the design or operation of procedures related to internal control over financial reporting during the ~~first~~second quarter of 2013 that materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

There are inherent limitations in the effectiveness of any control system, including the potential for human error and the possible circumvention or overriding of controls and procedures. Additionally, judgments in decision-making can be faulty and breakdowns can occur because of simple error or mistake. An effective control system can provide only reasonable, not absolute, assurance that the control objectives of the system are adequately met. Accordingly, the management of the Company, including its Chief Executive Officer and Chief Financial Officer, does not expect that the control system can prevent or detect all error or fraud. Finally, projections of any evaluation or assessment of effectiveness of a control system to future periods are subject to the risks that, over time, controls may become inadequate because of changes in an entity’s operating environment or deterioration in the degree of compliance with policies or procedures.

2538

PART II. OTHER INFORMATION

Special Note Regarding Forward-Looking Statements and Projections

This Quarterly Report on Form 10-Q and oral statements made from time to time by representatives of the Company may contain or incorporate by reference certain statements that are not historical facts, including, most importantly, information concerning possible or assumed future results of operations of the Company. Those statements, as well as statements preceded by, followed by, or that include the words “may,” “believes,” “plans,” “expects,” “anticipates,” or the negation thereof, or similar expressions, constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Reform Act”). All statements that address future operating, financial or business performance; strategies, initiatives or expectations; future synergies, efficiencies or overhead savings; anticipated costs or charges; future capitalization; and anticipated financial impacts of recent or pending transactions are forward-looking statements within the meaning of the Reform Act. The forward-looking statements are based on our expectations at the time such statements are made, speak only as of the dates they are made and are susceptible to a number of risks, uncertainties and other factors. Our actual results, performance and achievements may differ materially from any future results, performance or achievements expressed or implied by our forward-looking statements. For all of our forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the Reform Act. Many important factors could affect our future results and could cause those results to differ materially from those expressed in or implied by the forward-looking statements contained herein. Such factors, all of which are difficult or impossible to predict accurately, and many of which are beyond our control, include, but are not limited to, the following:

competition, including pricing pressures, couponing, aggressive marketing and the potential impact of competitors’ new unit openings on sales of Wendy’s restaurants;

consumers’ perceptions of the relative quality, variety, affordability and value of the food products we offer;

food safety events, including instances of food-borne illness (such as salmonella or E. coli) involving Wendy’s or its supply chain;

consumer concerns over nutritional aspects of beef, poultry, french fries or other products we sell, or concerns regarding the effects of disease outbreaks such as “mad cow disease” and avian influenza or “bird flu”;

the effects of negative publicity that can occur from increased use of social media;

success of operating and marketing initiatives, including advertising and promotional efforts and new product and concept development by us and our competitors;

the impact of general economic conditions and high unemployment rates on consumer spending, particularly in geographic regions that contain a high concentration of Wendy’s restaurants;

changes in consumer tastes and preferences, and in discretionary consumer spending;

changes in spending patterns and demographic trends, such as the extent to which consumers eat meals away from home;

certain factors affecting our franchisees, including the business and financial viability of franchisees, the timely payment of such franchisees’ obligations due to us or to national or local advertising organizations, and the ability of our franchisees to open new restaurants in accordance with their development commitments, including their ability to finance restaurant development and remodels;

changes in commodity costs (including beef, chicken and corn), labor, supply, fuel, utilities, distribution and other operating costs;

availability, location and terms of sites for restaurant development by us and our franchisees;

development costs, including real estate and construction costs;

delays in opening new restaurants or completing reimages of existing restaurants, including risks associated with the Image Activation program;

2639

the timing and impact of acquisitions and dispositions of restaurants;

our ability to successfully integrate acquired restaurant operations;

anticipated or unanticipated restaurant closures by us and our franchisees;

our ability to identify, attract and retain potential franchisees with sufficient experience and financial resources to develop and operate Wendy’s restaurants successfully;

availability of qualified restaurant personnel to us and to our franchisees, and the ability to retain such personnel;

our ability, if necessary, to secure alternative distribution of supplies of food, equipment and other products to Wendy’s restaurants at competitive rates and in adequate amounts, and the potential financial impact of any interruptions in such distribution;

availability and cost of insurance;

adverse weather conditions;

availability, terms (including changes in interest rates) and deployment of capital;

changes in, and our ability to comply with, legal, regulatory or similar requirements, including franchising laws, payment card industry rules, overtime rules, minimum wage rates, wage and hour laws, government-mandated health care benefits, tax legislation, federal ethanol policy and accounting standards;

the costs, uncertainties and other effects of legal, environmental and administrative proceedings;

the effects of charges for impairment of goodwill or for the impairment of other long-lived assets;

the effects of war or terrorist activities;

expenses and liabilities for taxes related to periods up to the date of sale of Arby’s as a result of the indemnification provisions of the Arby’s Purchase and Sale Agreement;

the difficulty in predicting the ultimate costs associated with the sale of restaurants under the Company’s system optimization initiative, employee termination costs, the timing of payments made and received, the results of negotiations with landlords, the impact of the sale of restaurants on ongoing operations, any tax impact from the sale of restaurants and the future benefits to the Company’s earnings, restaurant operating margins, cash flow and depreciation; and

other risks and uncertainties affecting us and our subsidiaries referred to in our Annual Report on Form 10-K for the fiscal year ended December 30, 2012 (the “Form 10-K”) (see especially “Item 1A. Risk Factors” and “Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations”) and in our other current and periodic filings with the Securities and Exchange Commission.

All future written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. New risks and uncertainties arise from time to time, and it is impossible for us to predict these events or how they may affect us. We assume no obligation to update any forward-looking statements after the date of this Quarterly Report on Form 10-Q as a result of new information, future events or developments, except as required by Federal securities laws. In addition, it is our policy generally not to endorse any projections regarding future performance that may be made by third parties.

Item 1. Legal Proceedings.

We are involved in litigation and claims incidental to our current and prior businesses. We provide reserves for such litigation and claims when payment is probable and reasonably estimable. We believe we have adequate reserves for all of our legal and environmental matters. We cannot estimate the aggregate possible range of loss due to most proceedings being in preliminary stages, with various motions either yet to be submitted or pending, discovery yet to occur, and significant factual matters unresolved. In addition, most cases seek an indeterminate amount of damages and many involve multiple parties. Predicting the outcomes of

settlement discussions or judicial or arbitral decisions is thus inherently difficult. Based on currently available information, including legal defenses available to us, and given the aforementioned reserves and our insurance coverage, we do not believe that the outcome of these legal and environmental matters will have a material effect on our consolidated financial position or results of operations.

The Company had previously described in the Form 10-K a dispute between Wendy’s International, Inc., an indirect subsidiary of the Company, and Tim Hortons Inc. related to a tax sharing agreement entered into in 2006. The dispute was resolved by mutual agreement of the parties on April 25, 2013. The terms of the agreement were not material to the Company.

Item 1A. Risk Factors.

In addition to the information contained in this report, you should carefully consider the risk factors disclosed in our Form 10-K, which could materially affect our business, financial condition or future results. Except as described elsewhere in this report, there have been no material changes from the risk factors previously disclosed in our Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

The following table provides information with respect to repurchases of shares of our common stock by us and our “affiliated purchasers” (as defined in Rule 10b-18(a)(3) under the Exchange Act) during the ~~first~~second quarter of 2013:

Issuer Repurchases of Equity Securities

Period Total Number of Shares Purchased (1)
Average
Price Paid
per Share
Total Number of
Shares Purchased
as Part of
Publicly Announced
Plan
Approximate Dollar
Value of Shares
that May Yet Be
Purchased Under
the Plan (2)
December 31, 2012
through
February 3, 2013 15,799
$ 4.81
—
$ 100,000,000
February 4, 2013
through
March 3, 2013 919
$ 5.03
—
$ 100,000,000
March 4, 2013
through
March 31, 2013 68,199
$ 5.63
—
$ 100,000,000
Total 84,917
$ 5.47
—
$ 100,000,000



Period	Total Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plan	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plan (2)
April 1, 2013 through May 5, 2013	30,083	$	5.56	—	$	100,000,000
May 6, 2013 through June 2, 2013	—	$	—	—	$	100,000,000
June 3, 2013 through June 30, 2013	14,902	$	5.72	—	$	100,000,000
Total	44,985	$	5.62	—	$	100,000,000


(1)	All shares were reacquired by The Wendy’s Company from holders of share-based awards to satisfy certain requirements associated with the vesting or exercise of the respective award. The shares were valued at the average of the high and low trading prices of our common stock on the vesting or exercise date of such awards.

(2) In November 2012, our Board of Directors authorized the repurchase of up to $100.0 million of our common stock through

December 29, 2013, when and if market conditions warrant and to the extent legally permissible. Subsequent to the second quarter through August 2, 2013, we repurchased 1.9 million shares for an aggregate purchase price of $13.3 million, excluding commissions.

2841

Item 6. Exhibits.



EXHIBIT NO.	DESCRIPTION

2.1	Agreement and Plan of Merger, dated as of April 23, 2008, by and among Triarc Companies, Inc., Green Merger Sub, Inc. and Wendy’s International, Inc., incorporated herein by reference to Exhibit 2.1 to Triarc’s Current Report on Form 8-K dated April 29, 2008 (SEC file no. 001-02207).
2.2	Side Letter Agreement, dated August 14, 2008, by and among Triarc Companies, Inc., Green Merger Sub, Inc. and Wendy’s International, Inc., incorporated herein by reference to Exhibit 2.3 to Triarc’s Registration Statement on Form S-4, Amendment No.3, filed on August 15, 2008 (Reg. no. 333-151336).
2.3	Purchase and Sale Agreement, dated as of June 13, 2011, by and among Wendy’s/Arby’s Restaurants, LLC, ARG Holding Corporation and ARG IH Corporation, incorporated herein by reference to Exhibit 2.1 of the Wendy’s/Arby’s Group, Inc. and Wendy’s/Arby’s Restaurants, LLC Current Reports on Form 8-K filed on June 13, 2011 (SEC file nos. 001-02207 and 333-161613, respectively).
2.4	Closing letter dated as of July 1, 2011 by and among Wendy’s/Arby’s Restaurants, LLC, ARG Holding Corporation, ARG IH Corporation, and Roark Capital Partners II, LP, incorporated herein by reference to Exhibit 2.2 of the Wendy’s/Arby’s Group, Inc. and Wendy’s/Arby’s Restaurants, LLC Current Reports on Form 8-K filed on July 8, 2011 (SEC file nos. 001-02207 and 333-161613, respectively).
2.5	Asset Purchase Agreement by and among Wendy’s International, Inc., Pisces Foods, L.P., Near Holdings, L.P., David Near and Jason Near dated as of June 5, 2012, incorporated herein by reference to Exhibit 2.1 of The Wendy’s Company Current Report on Form 8-K filed on June 12, 2012 (SEC file no. 001-02207).
2.6	Asset Purchase Agreement by and among Wendy’s Old Fashioned Hamburgers of New York, Inc. and NPC Quality Burgers, Inc., dated as of June 12, 2013, incorporated herein by reference to Exhibit 2.1 of The Wendy’s Company Current Report on Form 8-K filed on July 23, 2013 (SEC file no. 001-02207).
3.1	Restated Certificate of Incorporation of The Wendy’s Company, as filed with the Secretary of State of the State of Delaware on May 24, 2012, incorporated herein by reference to Exhibit 3.1 of The Wendy’s Company Current Report on Form 8-K filed on May 25, 2012 (SEC file no. 001-02207).
3.2	By-Laws of The Wendy’s Company (as amended and restated through May 24, 2012), incorporated herein by reference to Exhibit 3.2 of The Wendy’s Company Current Report on Form 8-K filed on May 25, 2012 (SEC file no. 001-02207).
10.1	Amended and Restated Credit Agreement, dated May 16, 2013, among Wendy’s International, Inc., as borrower, Bank of America, N.A., as administrative agent, swing line lender and L/C issuer, Wells Fargo Bank, National Association, as syndication agent, and Fifth Third Bank, The Huntington National Bank, and Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A., “Rabobank Nederland”, New York Branch, as co-documentation agents, and the lenders and issuers party thereto, incorporated herein by reference to Exhibit 10.1 of The Wendy’s Company Current Report on Form 8-K filed on May 16, 2013 (SEC file no. 001-02207).
10.2	Amended and Restated Security Agreement, dated as of May 15, 2012, and amended and restated as of May 16, 2013, among Wendy’s International, Inc., the guarantors from time to time party thereto, as pledgors, and Bank of America, N.A., as administrative agent, incorporated herein by reference to Exhibit 10.2 of The Wendy’s Company Current Report on Form 8-K filed on May 16, 2013 (SEC file no. 001-02207).
10.3	Form of Restricted Stock Unit Award Agreement for 2013 (ratable vesting) under the Wendy’s/Arby’s Group, Inc. 2010 Omnibus Award Plan.* **
10.4	Form of Restricted Stock Unit Award Agreement for 2013 (cliff vesting) under the Wendy’s/Arby’s Group, Inc. 2010 Omnibus Award Plan.* **
10.5	Form of Non-Employee Director Restricted Stock Award Agreement for 2013 under the Wendy’s/Arby’s Group, Inc. 2010 Omnibus Award Plan.* **
10.6	Amendment No. 2 to the Wendy’s/Arby’s Group, Inc. 2009 Directors’ Deferred Compensation Plan.* **
10.7	Letter Agreement between The Wendy’s Company and Stephen E. Hare dated as of May 7, 2013.* **
10.8	Consulting Agreement between The Wendy’s Company and Stephen E. Hare dated as of May 7, 2013.* **
10.9	Employment Letter between The Wendy’s Company and Todd Penegor dated as of May 8, 2013.* **
31.1	Certification of the Chief Executive Officer of The Wendy’s Company pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31.2	Certification of the Chief Financial Officer of The Wendy’s Company pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1	Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, furnished as an exhibit to this Form 10-Q.*



EXHIBIT NO.	DESCRIPTION

101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

____________________



*	Filed herewith
**	Identifies a management contract or compensatory plan or arrangement.

2943

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



	THE WENDY’S COMPANY (Registrant)
Date: ~~May 8,~~August 7, 2013	By: /s/Stephen E. Hare
	Stephen E. Hare
	Senior Vice President and
	Chief Financial Officer
	(On behalf of the Company)

Date: ~~May 8,~~August 7, 2013	By: /s/Steven B. Graham
	Steven B. Graham
	Senior Vice President and
	Chief Accounting Officer
	(Principal Accounting Officer)

3044

Exhibit Index



EXHIBIT NO.	DESCRIPTION

2.1	Agreement and Plan of Merger, dated as of April 23, 2008, by and among Triarc Companies, Inc., Green Merger Sub, Inc. and Wendy’s International, Inc., incorporated herein by reference to Exhibit 2.1 to Triarc’s Current Report on Form 8-K dated April 29, 2008 (SEC file no. 001-02207).
2.2	Side Letter Agreement, dated August 14, 2008, by and among Triarc Companies, Inc., Green Merger Sub, Inc. and Wendy’s International, Inc., incorporated herein by reference to Exhibit 2.3 to Triarc’s Registration Statement on Form S-4, Amendment No.3, filed on August 15, 2008 (Reg. no. 333-151336).
2.3	Purchase and Sale Agreement, dated as of June 13, 2011, by and among Wendy’s/Arby’s Restaurants, LLC, ARG Holding Corporation and ARG IH Corporation, incorporated herein by reference to Exhibit 2.1 of the Wendy’s/Arby’s Group, Inc. and Wendy’s/Arby’s Restaurants, LLC Current Reports on Form 8-K filed on June 13, 2011 (SEC file nos. 001-02207 and 333-161613, respectively).
2.4	Closing letter dated as of July 1, 2011 by and among Wendy’s/Arby’s Restaurants, LLC, ARG Holding Corporation, ARG IH Corporation, and Roark Capital Partners II, LP, incorporated herein by reference to Exhibit 2.2 of the Wendy’s/Arby’s Group, Inc. and Wendy’s/Arby’s Restaurants, LLC Current Reports on Form 8-K filed on July 8, 2011 (SEC file nos. 001-02207 and 333-161613, respectively).
2.5	Asset Purchase Agreement by and among Wendy’s International, Inc., Pisces Foods, L.P., Near Holdings, L.P., David Near and Jason Near dated as of June 5, 2012, incorporated herein by reference to Exhibit 2.1 of The Wendy’s Company Current Report on Form 8-K filed on June 12, 2012 (SEC file no. 001-02207).
2.6	Asset Purchase Agreement by and among Wendy’s Old Fashioned Hamburgers of New York, Inc. and NPC Quality Burgers, Inc., dated as of June 12, 2013, incorporated herein by reference to Exhibit 2.1 of The Wendy’s Company Current Report on Form 8-K filed on July 23, 2013 (SEC file no. 001-02207).
3.1	Restated Certificate of Incorporation of The Wendy’s Company, as filed with the Secretary of State of the State of Delaware on May 24, 2012, incorporated herein by reference to Exhibit 3.1 of The Wendy’s Company Current Report on Form 8-K filed on May 25, 2012 (SEC file no. 001-02207).
3.2	By-Laws of The Wendy’s Company (as amended and restated through May 24, 2012), incorporated herein by reference to Exhibit 3.2 of The Wendy’s Company Current Report on Form 8-K filed on May 25, 2012 (SEC file no. 001-02207).
10.1	Amended and Restated Credit Agreement, dated May 16, 2013, among Wendy’s International, Inc., as borrower, Bank of America, N.A., as administrative agent, swing line lender and L/C issuer, Wells Fargo Bank, National Association, as syndication agent, and Fifth Third Bank, The Huntington National Bank, and Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A., “Rabobank Nederland”, New York Branch, as co-documentation agents, and the lenders and issuers party thereto, incorporated herein by reference to Exhibit 10.1 of The Wendy’s Company Current Report on Form 8-K filed on May 16, 2013 (SEC file no. 001-02207).
10.2	Amended and Restated Security Agreement, dated as of May 15, 2012, and amended and restated as of May 16, 2013, among Wendy’s International, Inc., the guarantors from time to time party thereto, as pledgors, and Bank of America, N.A., as administrative agent, incorporated herein by reference to Exhibit 10.2 of The Wendy’s Company Current Report on Form 8-K filed on May 16, 2013 (SEC file no. 001-02207).
10.3	Form of Restricted Stock Unit Award Agreement for 2013 (ratable vesting) under the Wendy’s/Arby’s Group, Inc. 2010 Omnibus Award Plan.* **
10.4	Form of Restricted Stock Unit Award Agreement for 2013 (cliff vesting) under the Wendy’s/Arby’s Group, Inc. 2010 Omnibus Award Plan.* **
10.5	Form of Non-Employee Director Restricted Stock Award Agreement for 2013 under the Wendy’s/Arby’s Group, Inc. 2010 Omnibus Award Plan.* **
10.6	Amendment No. 2 to the Wendy’s/Arby’s Group, Inc. 2009 Directors’ Deferred Compensation Plan.* **
10.7	Letter Agreement between The Wendy’s Company and Stephen E. Hare dated as of May 7, 2013.* **
10.8	Consulting Agreement between The Wendy’s Company and Stephen E. Hare dated as of May 7, 2013.* **
10.9	Employment Letter between The Wendy’s Company and Todd Penegor dated as of May 8, 2013.* **
31.1	Certification of the Chief Executive Officer of The Wendy’s Company pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31.2	Certification of the Chief Financial Officer of The Wendy’s Company pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1	Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, furnished as an exhibit to this Form 10-Q.*



EXHIBIT NO.	DESCRIPTION

101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

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*	Filed herewith
**	Identifies a management contract or compensatory plan or arrangement.

3146



Benefit from (Provision for) Income Taxes	Change
Federal and state benefit on variance in (loss) income before income taxes and noncontrolling interests	$	7.9
Reversal of deferred taxes on investment in foreign subsidiaries now considered permanently invested outside of the U.S.	1.9
	$	9.8