Incorporating Additional Information

1. Incorporating Additional Information Module 10

2. Wendy’s Overview • One of the largest quick-service restaurants in the hamburger sandwich segment • Operates 6,542 restaurants in 26 countries • 1,418 company owned restaurants • 5,124 franchises

3. Why Seek Further Information? • In prior modules, the basis for Wendy’s forecasting is rather general • Further information allows us to: • Better segregate enterprise and financing activities • Allow for more precise forecasts

4. Balance Sheet (Assets)

5. Balance Sheet (Liabilities + Shareholders’ Equity)

6. Prepaid Expenses and Other Current Assets • Primarily comprised of assets held for sale • Restaurant net assets held for sale • Acquired franchised restaurants • Restricted cash equivalents represent collateral supporting letters of credit

7. Deferred Tax Elements

8. Wendy’s Deferred Taxes • Discrepancy between amount reported on balance sheet and amount reported in footnotes • The implied additional asset quantifies this discrepancy, and occurs from combining deferred taxes with other accounts

9. Advertising Funds Restricted Assets and Liabilities • In the United States and Canada, Wendy’s advertises on a national and regional basis • Contributions to theses advertising funds are required to be made from both company-owned and franchised restaurants and are based on a percent of restaurant retail sales

10. Properties • Capital leases principally include buildings and improvements • Includes accelerated depreciation to reflect shortened estimated useful lives for certain long-lived assets as a result of company reimaging

11. Goodwill • Goodwill impairment is wholly applicable to international franchise reporting unit. • This impairment is driven by lower projected growth rates and profitability levels than previously anticipated.

12. Other Intangible Assets • Favorable leases enable Wendy’s to rent property for less than market value

13. Deferred Costs and Other Assets • Largely undefined • Several items were identified throughout the 10-K, as shown below

14. Accrued Expenses and Other Current Liabilities • What makes up other?

15. Other Liabilities • Hoped to find information on this account • Details were not found in 10-K • Account had a value of $176M @ 2013 YE

16. Pension (Implications) • Current retirement plan is a 401(k) defined contribution plan • Wendy’s contributions classified as compensation expense within general and administrative expenses • Maintains two domestic qualified defined benefit plans • Benefits were frozen in 1988 • No unrecognized prior service cost • Future required contributions to the plan expected to be insignificant

17. Income Statement

18. Sales • “Wendy’s” sales represent the revenue generated by company-owned restaurants • “Bakery and other” sales represent the sales of bakery items and kids’ meal promotional items to franchisees and others

19. Franchise Revenues • No specific quantitative details beyond figures on P&L • Franchise revenues include: • Royalties • Continuing source of revenue; based on a percentage of net sales of the franchised restaurant • Franchise fees • One-time source of revenue (generally) • Franchise renewal fees generate a periodic revenue source • Rental income • Continuing source of revenue earned from properties owned and leased by Wendy’s and leased or subleased to franchisees.

20. General and Administrative Expenses • Largely undefined • Known figures include: • Share-based compensation • 2013: $19,613 • 2012: $11,473 • Employee compensation and related expenses (portion related to 401(k)) • 2013: $8,235 • 2012: $8,887 • Changes are shown

21. Facilities Action Charges, Net • The “System optimization initiative” is a brand transformation, which includes a plan to sell approximately 425 company-owned restaurants to franchisees by the end of the first quarter of 2014. • “Facilities relocation and other transition costs” are related to the relocation of the Atlanta restaurant support center to Ohio.

22. Expanded Income Statement

23. End • Questions?