Wendy's Co

Previous wording

Wendy’s is primarily engaged in the business of operating, developing and franchising a system of distinctive quick-service restaurants serving high quality food. Wendy’s opened its first restaurant in Columbus, Ohio in 1969. Today, Wendy’s is the second largest quick-service restaurant company in the hamburger sandwich segment in the U.S. based on traffic and dollar share, and the third largest globally with 7,363 restaurants in the U.S. and 35 foreign countries and U.S. territories as of September 28, 2025.

Current wording

Wendy’s is primarily engaged in the business of operating, developing and franchising a system of distinctive quick-service restaurants serving high quality food. Wendy’s opened its first restaurant in Columbus, Ohio in 1969. Today, Wendy’s is the second largest quick-service restaurant company in the hamburger sandwich segment in the U.S. based on traffic and dollar share, and the third largest globally with 7,251 restaurants in the U.S. and 38 foreign countries and U.S. territories as of March 29, 2026.

Previous wording

Each Wendy’s restaurant offers an extensive menu specializing in hamburger sandwiches and featuring chicken sandwiches, which are prepared to order with the customer’s choice of toppings and condiments. Wendy’s menu also includes chicken nuggets, chili, french fries, baked potatoes, freshly prepared salads, soft drinks, Frosty® desserts and kids’ meals. In addition, Wendy’s restaurants sell a variety of promotional products on a limited time basis. Wendy’s also offers breakfast across the U.S. system and in Canada. Wendy’s breakfast menu features a variety of breakfast sandwiches such as the Breakfast Baconator® and sides such as seasoned potatoes.

Current wording

Each Wendy’s restaurant offers an extensive menu specializing in hamburger sandwiches and featuring chicken sandwiches, which are prepared to order with the customer’s choice of toppings and condiments. Wendy’s menu also includes chicken tenders and nuggets, chili, french fries, baked potatoes, salads, soft drinks, Frosty® desserts and kids’ meals. In addition, Wendy’s restaurants sell a variety of promotional products on a limited time basis. Wendy’s also offers breakfast in the U.S. and Canada. Wendy’s breakfast menu features a variety of breakfast sandwiches such as the Breakfast Baconator® and sides such as seasoned potatoes.

Previous wording

The Company’s fiscal reporting periods consist of 52 or 53 weeks ending on the Sunday closest to December 31. All three- and nine-month periods presented herein contain 13 weeks and 39 weeks, respectively. All references to years, quarters and months relate to fiscal periods rather than calendar periods.

Current wording

The Company’s fiscal reporting periods consist of 52 or 53 weeks ending on the Sunday closest to December 31. All three-month periods presented herein contain 13 weeks. All references to years, quarters and months relate to fiscal periods rather than calendar periods.

Previous wording

As of September 28, 2025, the Wendy’s restaurant system was comprised of 7,363 restaurants, with 5,979 Wendy’s restaurants in operation in the U.S. Of the U.S. restaurants, 421 were operated by the Company and 5,558 were operated by a total of 202 franchisees. In addition, at September 28, 2025, there were 1,384 Wendy’s restaurants in operation in 35 foreign countries and U.S. territories. Of the international restaurants, 1,370 were operated by a total of 113 franchisees and 14 were operated by the Company in the United Kingdom (the “U.K.”).

Current wording

As of March 29, 2026, the Wendy’s restaurant system was comprised of 7,251 restaurants, with 5,805 Wendy’s restaurants in operation in the U.S. Of the U.S. restaurants, 420 were operated by the Company and 5,385 were operated by a total of 205 franchisees. In addition, at March 29, 2026, there were 1,446 Wendy’s restaurants in operation in 38 foreign countries and U.S. territories. Of the international restaurants, 1,435 were operated by a total of 116 franchisees and 11 were operated by the Company in the United Kingdom (the “U.K.”).

Previous wording

The revenues from our restaurant business are derived from two principal sources: (1) sales at Company-operated restaurants and (2) franchise-related revenues, including royalties, national advertising funds contributions, rents and franchise fees received from Wendy’s franchised restaurants. Company-operated restaurants comprised approximately 5% of the total Wendy’s system as of September 28, 2025.

Current wording

The revenues from our restaurant business are derived from two principal sources: (1) sales at Company-operated restaurants and (2) franchise-related revenues, including royalties, national advertising funds contributions, rents and franchise fees received from Wendy’s franchised restaurants.

Previous wording

The Company recently announced Project Fresh, a comprehensive plan to drive profitable growth and long-term value across our U.S. system. The four strategic pillars of Project Fresh include (1) brand revitalization, (2) operational excellence, (3) system optimization and (4) capital allocation. These pillars are designed to attract new customers to Wendy’s through more compelling marketing and to increase traffic by providing an exceptional customer experience. Internationally, the Company’s strategic priorities also include sustaining strong net unit growth.

Current wording

During 2025, the Company announced Project Fresh, a comprehensive plan to drive profitable growth and long-term value across our U.S. system. The four strategic pillars of Project Fresh include (1) brand revitalization, (2) operational excellence, (3) system optimization and (4) capital allocation. These pillars are designed to drive profitable average unit volume growth and increase traffic in the U.S. by improving marketing effectiveness, menu offerings and the customer experience, and to enhance franchisee economics. Internationally, the Company’s strategic priorities also include sustaining strong net unit growth and driving profitable average unit volume growth.

Previous wording

•Systemwide Sales – Systemwide sales includes sales by both Company-operated restaurants and franchised restaurants. Franchised restaurants’ sales are reported by our franchisees and represent their revenues from sales at franchised Wendy’s restaurants. The Company’s consolidated financial statements do not include sales by franchised restaurants to their customers. The Company’s royalty and advertising funds revenues are computed as percentages of sales made by Wendy’s franchisees. As a result, sales by Wendy’s franchisees have a direct effect on the Company’s royalty and advertising funds revenues and profitability.

Current wording

•Systemwide Sales – Systemwide sales includes sales by both Company-operated restaurants and franchised restaurants. Franchised restaurants’ sales are reported by our franchisees and represent their revenues from sales at franchised Wendy’s restaurants. The Company’s condensed consolidated financial statements do not include sales by franchised restaurants to their customers. The Company’s royalty and advertising funds revenues are computed as percentages of sales made by Wendy’s franchisees. As a result, sales by Wendy’s franchisees have a direct effect on the Company’s royalty and advertising funds revenues and profitability.

Previous wording

The Company believes its presentation of same-restaurant sales, Company-operated restaurant margin and systemwide sales provide a meaningful perspective of the underlying operating performance of the Company’s current business and enables investors to better understand and evaluate the Company’s historical and prospective operating performance. The Company believes that these metrics are important supplemental measures of operating performance because they highlight trends in the Company’s business that may not otherwise be apparent when relying solely on GAAP financial measures. The Company believes investors, analysts and other interested parties use these metrics in evaluating issuers and that the presentation of these measures facilitates a comparative assessment of the Company’s operating performance. With respect to same-restaurant sales and systemwide sales, the Company also believes that the data is useful in assessing consumer demand for the Company’s products and the overall success of the Wendy’s brand.

Current wording

The Company believes its presentation of same-restaurant sales, Company-operated restaurant margin and systemwide sales provide a meaningful perspective of the underlying operating performance of the Company’s current business and enables investors to better understand and evaluate the Company’s historical and prospective operating performance. The Company believes that these metrics are important supplemental measures of operating performance because they highlight trends in the Company’s business that may not otherwise be apparent when relying solely on our condensed consolidated financial statements. The Company believes investors, analysts and other interested parties use these metrics in evaluating issuers and that the presentation of these measures facilitates a comparative assessment of the Company’s operating performance. With respect to same-restaurant sales and systemwide sales, the Company also believes that the data is useful in assessing consumer demand for the Company’s products and the overall success of the Wendy’s brand.

Previous wording

•Global same-restaurant sales decreased 3.7%, U.S. same-restaurant sales decreased 4.7% and international same-restaurant sales increased 3.0% compared with the third quarter of 2024. On a two-year basis, global same-restaurant sales decreased 3.5%;

Current wording

•Global same-restaurant sales decreased 6.8%, U.S. same-restaurant sales decreased 7.8% and international same-restaurant sales decreased 0.4% compared with the first quarter of 2025;

Previous wording

•Global Company-operated restaurant margin was 12.4% in the third quarter of 2025, a decrease of 270 basis points compared with the third quarter of 2024;

Current wording

•Global Company-operated restaurant margin was 10.8% in the first quarter of 2026, a decrease of 350 basis points compared with the first quarter of 2025;

Previous wording

•Digital sales increased to approximately 21.0% of global systemwide sales in the third quarter of 2025 compared with approximately 17.6% in the third quarter of 2024; and

Current wording

•Digital sales increased to approximately 23.6% of global systemwide sales in the first quarter of 2026 compared with approximately 20.3% in the first quarter of 2025; and

Previous wording

The tables included throughout this Results of Operations section set forth in millions the Company’s condensed consolidated results of operations for the third quarter and first nine months of 2025 and 2024.

Current wording

The tables included throughout this Results of Operations section set forth in millions the Company’s condensed consolidated results of operations for the first quarter of 2026 and 2025.

Previous wording

The increase in sales during the third quarter of 2025 was primarily due to the Company’s acquisition of 35 franchise-operated restaurants of $6.4 million, partially offset by (1) a 0.7% decrease in global Company-operated same-restaurant sales of $2.4 million and (2) net closures of Company-operated restaurants of $0.6 million. The decrease in sales during the first nine months of 2025 was primarily due to (1) a 0.9% decrease in global Company-operated same-restaurant sales of $7.9 million and (2) net closures of Company-operated restaurants of $3.8 million, partially offset by the Company’s acquisition of 35 franchise-operated restaurants of $6.4 million. Company-operated same-restaurant sales decreased due to a decrease in traffic, partially offset by higher average check.

Current wording

The increase in sales during the first quarter of 2026 was primarily due to (1) the Company’s acquisition of franchise-operated restaurants during the third quarter of 2025 of $13.6 million and (2) net new restaurant development of $3.1 million. These impacts were partially offset by (1) a 4.8% decrease in global Company-operated same-restaurant sales of $9.4 million and (2) the sale of Company-operated restaurants to franchisees of $2.1 million. Company-operated same-restaurant sales during the first quarter of 2026 decreased due to a decrease in traffic, partially offset by higher average check.

Previous wording

Franchise royalty revenue during the third quarter and the first nine months of 2025 decreased primarily due to a 3.9% and 3.0% decrease in global franchise same-restaurant sales, respectively. Franchise same-restaurant sales during the third quarter and the first nine months of 2025 decreased due to a decrease in traffic, partially offset by higher average check.

Current wording

Franchise royalty revenue during the first quarter of 2026 decreased primarily due to a 7.0% decrease in global franchise same-restaurant sales of $8.1 million, partially offset by net new restaurant development of $0.7 million. Franchise same-restaurant sales during the first quarter of 2026 decreased due to a decrease in traffic, partially offset by higher average check.

Previous wording

The increase in franchise fees during the third quarter and the first nine months of 2025 was primarily due to higher fees for providing information technology services to franchisees.

Current wording

The increase in franchise fees during the first quarter of 2026 was primarily due to the impact of system optimization related to hours of operation flexibility and restaurant closures.

Previous wording

The decrease in franchise rental income during the third quarter and the first nine months of 2025 was primarily due to the impact of assigning certain existing leases to franchisees of $2.9 million and $4.9 million, respectively. This impact during the first nine months of 2025 was partially offset by (1) entering into new leases of $1.7 million and (2) amending certain existing leases of $1.7 million.

Current wording

The increase in franchise rental income during the first quarter of 2026 was primarily due to entering into new leases.

Previous wording

The decrease in advertising funds revenue during the third quarter and the first nine months of 2025 was primarily due to (1) promotional activity in the prior year of $12.0 million and (2) a decrease in franchise same-restaurant sales in the U.S. of $5.7 million and $12.3 million, respectively.

Current wording

The increase in advertising funds revenue during the first quarter of 2026 was primarily due to local and regional advertising funds being reallocated to U.S. national advertising of approximately $15.0 million, partially offset by a decrease in franchise same-restaurant sales of $7.1 million.

Previous wording

The increase in cost of sales, as a percent of sales, during the third quarter and the first nine months of 2025 was primarily due to (1) higher commodity costs, (2) a decrease in traffic and (3) an increase in restaurant labor rates. These changes were partially offset by (1) higher average check and (2) labor efficiencies.

Current wording

The increase in cost of sales, as a percent of sales, during the first quarter of 2026 was primarily due to (1) a decrease in traffic, (2) higher commodity costs and (3) an increase in restaurant labor rates. These changes were partially offset by (1) higher average check and (2) labor efficiencies.

Previous wording

The increase in franchise support and other costs during the third quarter and the first nine months of 2025 was primarily due to an increase in costs incurred to provide information technology services and other services to franchisees.

Current wording

The increase in franchise support and other costs during the first quarter of 2026 was primarily due to an increase in the provision for doubtful accounts.

Previous wording

The decrease in franchise rental expense during the third quarter and the first nine months of 2025 was primarily due to the impact of assigning certain existing leases to franchisees.

Current wording

The decrease in franchise rental expense during the first quarter of 2026 was primarily due to the impact of amending certain existing leases.

Previous wording

On an interim basis, advertising funds expense is recognized in proportion to advertising funds revenue. The decrease in advertising funds expense during the third quarter and the first nine months of 2025 was primarily due to (1) the same factors as described above for “Advertising Funds Revenue” and (2) a decrease in the recognition of the Company breakfast advertising spend in excess of advertising funds revenue when compared to the prior year.

Current wording

On an interim basis, advertising funds expense is recognized in proportion to advertising funds revenue. The increase in advertising funds expense during the first quarter of 2026 was primarily due to the same factors as described above for “Advertising Funds Revenue.”

Previous wording

The increase in depreciation and amortization during the third quarter and the first nine months of 2025 was primarily due to asset additions for new and remodeled restaurants.

Current wording

The increase in depreciation and amortization during the first quarter of 2026 was primarily due to (1) depreciation and amortization on restaurant assets acquired from a franchisee during the third quarter of 2025, (2) asset additions for new and remodeled restaurants and (3) restaurant-related asset disposals.

Previous wording

The increase in amortization of cloud computing arrangements during the third quarter and the first nine months of 2025 was primarily due to amortization of assets associated with the Company’s digital investments.

Current wording

The increase in amortization of cloud computing arrangements during the first quarter of 2026 was primarily due to amortization of assets associated with the Company’s digital investments.

Previous wording

During the first nine months of 2025, the Company recognized costs under the Organizational Redesign Plan of ($0.8) million, which primarily included a reversal of a severance accrual as a result of a change in estimate. During the first nine months of 2024, the Company recognized costs under the Organizational Redesign Plan of $8.3 million, which primarily included severance and related employee costs. See Note 12 to the Condensed Consolidated Financial Statements contained in Item 1 herein for further information on the Organizational Redesign Plan.

Current wording

During the first quarter of 2026 and 2025, the Company recognized costs under the Organizational Redesign Plan of $(0.2) million and $(1.0) million, respectively, which primarily included reversals of severance accruals resulting from changes in estimates. See Note 11 to the Condensed Consolidated Financial Statements contained in Item 1 herein for further information on the Organizational Redesign Plan.

Previous wording

The increase in impairment of long-lived assets during the third quarter and the first nine months of 2025 was primarily due to higher impairment charges as a result of the deterioration in operating performance of certain Company-operated restaurants.

Current wording

The increase in impairment of long-lived assets during the first quarter of 2026 was primarily due to losses from the remeasurement to fair value of assets leased and/or subleased to franchisees in connection with the closure of franchise-operated restaurants.

Previous wording

The increase in other operating income, net during the third quarter of 2025 was primarily due to an increase in lease buyout activity. The increase in other operating income, net during the first nine months of 2025 was primarily due to the settlement of a claim.

Current wording

The decrease in other operating income, net during the first quarter of 2026 was primarily due to the settlement of a claim in the first quarter of 2025. This decrease was partially offset by gains on new and modified sales-type leases.

Previous wording

During the first nine months of 2025, the Company recorded a loss of $1.7 million due to impairment charges for the difference between the estimated fair value and the carrying value of an investment in equity securities.

Current wording

During the first quarter of 2025, the Company recorded a loss of $1.7 million due to impairment charges for the difference between the estimated fair value and the carrying value of an investment in equity securities.

Previous wording

The decrease in other income, net during the third quarter and the first nine months of 2025 was primarily due to a decrease in interest income, reflecting lower balances of cash equivalents.

Current wording

The decrease in other income, net during the first quarter of 2026 was primarily due to a decrease in interest income, reflecting lower balances of cash equivalents and lower interest rates.

Previous wording

The effective tax rates for the third quarter and the first nine months of 2025 and 2024 were impacted by variations in income before income taxes, adjusted for recurring items such as non-deductible expenses and state income taxes, as well as non-recurring discrete items. The increase in the effective tax rate for the third quarter and the first nine months of 2025 was primarily due to state income taxes and the tax effects of our foreign operations, partially offset by the tax effects of share-based compensation.

Current wording

The effective tax rates for the first quarter of 2026 and 2025 were impacted by variations in income before income taxes, adjusted for recurring items such as non-deductible expenses and state income taxes, as well as non-recurring discrete items. The increase in the effective tax rate for the first quarter of 2026 was primarily due to lower income before income taxes and the tax effects of share-based compensation.

Previous wording

The decrease in Wendy’s U.S. revenues during the third quarter and the first nine months of 2025 was primarily due to (1) lower advertising fund revenue and (2) a decrease in same-restaurant sales. Same-restaurant sales decreased during the third quarter and the first nine months of 2025 primarily due to a decrease in traffic, partially offset by higher average check. These changes were partially offset by the Company’s acquisition of 35 franchise-operated restaurants.

Current wording

The increase in Wendy’s U.S. revenues during the first quarter of 2026 was primarily due to (1) the Company’s acquisition of 35 franchise-operated restaurants in the third quarter of 2025, (2) an increase in franchise fees, (3) higher advertising fund revenue and (4) net new restaurant development. These impacts were partially offset by a decrease in same-restaurant sales. Same-restaurant sales decreased during the first quarter of 2026 primarily due to a decrease in traffic, partially offset by higher average check.

Previous wording

The decrease in Wendy’s U.S. segment profit during the third quarter and the first nine months of 2025 was primarily due to (1) lower revenues, (2) higher cost of sales, as a percent of sales for Company-operated restaurants driven by the same factors as described above for “Cost of Sales, as a Percent of Sales,” (3) higher general and administrative expense and (4) higher franchise support and other costs. These changes were partially offset by a decrease in the Company’s funding of incremental advertising.

Current wording

The decrease in Wendy’s U.S. segment profit during the first quarter of 2026 was primarily due to (1) higher cost of sales, as a percent of sales for Company-operated restaurants, driven by the same factors as described above for “Cost of Sales, as a Percent of Sales,” and (2) higher franchise support and other costs. These changes were partially offset by higher revenues.

Previous wording

The increase in Wendy’s International revenues during the third quarter and the first nine months of 2025 was primarily due to (1) net new restaurant development and (2) an increase in franchise same-restaurant sales. Franchise same-restaurant sales increased during the third quarter and the first nine months of 2025 due to (1) higher average check and (2) an increase in traffic.

Current wording

The increase in Wendy’s International revenues during the first quarter of 2026 was primarily due to net new restaurant development.

Previous wording

The increase in Wendy’s International segment profit during the first nine months of 2025 was primarily due to higher revenues. This increase was partially offset by (1) higher advertising fund expense and (2) higher general and administrative expense.

Current wording

The increase in Wendy’s International segment profit during the first quarter of 2026 was primarily due to higher revenues, partially offset by higher general and administrative expenses.

Previous wording

The increase in Global Real Estate & Development segment profit during the third quarter of 2025 was primarily due to a decrease in franchise rental expense, driven by the same factors as described above for “Franchise Rental Expense.” This change was partially offset by lower revenues.

Current wording

The increase in Global Real Estate & Development revenues during the first quarter of 2026 was primarily due to an increase in franchise rental income, driven by the same factors as described above for “Franchise Rental Income.”

Previous wording

As of September 28, 2025, cash, cash equivalents and restricted cash totaled $352.0 million. In addition, the Company maintains a revolving financing facility, which allows for the drawing of up to $300.0 million. Based on current levels of operations, the Company expects that available cash and cash flows from operations will provide sufficient liquidity to meet operating cash requirements for the next 12 months.

Current wording

As of March 29, 2026, cash, cash equivalents and restricted cash totaled $362.0 million. In addition, the Company maintains a revolving financing facility, which allows for the drawing of up to $300.0 million. Based on current levels of operations, the Company expects that available cash and cash flows from operations will provide sufficient liquidity to meet operating cash requirements for the next 12 months.

Previous wording

In January 2023, our Board of Directors authorized a repurchase program for up to $500.0 million of our common stock through February 28, 2027, when and if market conditions warrant and to the extent legally permissible (the “January 2023 Authorization”). During the nine months ended September 28, 2025, the Company repurchased 14.4 million shares under the January 2023 Authorization with an aggregate purchase price of $200.0 million, excluding excise tax of $1.9 million and commissions of $0.2 million. As of September 28, 2025, the Company had $35.0 million of availability remaining under the January 2023 Authorization.

Current wording

In January 2023, our Board of Directors authorized a repurchase program for up to $500.0 million of our common stock through February 28, 2027, when and if market conditions warrant and to the extent legally permissible (the “January 2023 Authorization”). During the three months ended March 29, 2026, no shares were repurchased under the January 2023 Authorization. As of March 29, 2026, the Company had $35.0 million of availability remaining under the January 2023 Authorization.

Previous wording

On March 17, 2025, June 16, 2025, and September 16, 2025, the Company paid quarterly cash dividends per share of $.25 $.14, and $.14, respectively, aggregating $103.0 million. On November 7, 2025, the Company announced a dividend of $.14 per share to be paid on December 15, 2025 to stockholders of record as of December 1, 2025. As a result, the Company expects that its total cash requirement for the fourth quarter of 2025 will be approximately $26.6 million based on the number of shares of its common stock outstanding at October 30, 2025. The Company currently intends to continue to declare and pay quarterly cash dividends; however, there can be no assurance that any additional quarterly dividends will be declared or paid or of the amount or timing of such dividends, if any.

Current wording

On March 16, 2026, the Company paid a quarterly cash dividend per share of $.14, aggregating $26.6 million. On May 8, 2026, the Company announced a dividend of $.14 per share to be paid on June 15, 2026 to stockholders of record as of June 1, 2026. If the Company pays regular quarterly cash dividends for the remainder of 2026 at the same rate declared in the second quarter of 2026, the Company’s total cash requirement for dividends for the remainder of 2026 will be approximately $80.0 million based on the number of shares of its common stock outstanding at May 1, 2026. The Company currently intends to continue to declare and pay quarterly cash dividends; however, there can be no assurance that any additional quarterly dividends will be declared or paid or of the amount or timing of such dividends, if any.

Previous wording

Wendy’s U.S. advertising fund has a revolving line of credit of $15.0 million, which was established to support the Company’s advertising fund operations. During the three months ended March 30, 2025, the Company borrowed and repaid $15.0 million and $8.5 million, respectively, under the revolving line of credit. During the three months ended June 29, 2025, the Company borrowed an additional $8.5 million under the revolving line of credit. There were no new borrowings or repayments under the revolving line of credit during the three months ended September 28, 2025. As a result, as of September 28, 2025, the Company had outstanding borrowings of $15.0 million under the revolving line of credit.

Current wording

Wendy’s U.S. advertising fund has a revolving line of credit of $15.0 million, which was established to support the Company’s advertising fund operations. During the three months ended March 29, 2026, the Company borrowed and repaid $11.5 million under the revolving line of credit, then subsequently borrowed and repaid $3.6 million under the revolving line of credit. As a result, as of March 29, 2026, the Company had no outstanding borrowings under the revolving line of credit.

Previous wording

The table below summarizes our cash flows from operating, investing and financing activities for the first nine months of 2025 and 2024:

Current wording

The table below summarizes our cash flows from operating, investing and financing activities for the first three months of 2026 and 2025:

Previous wording

Cash provided by operating activities consists primarily of net income, adjusted for non-cash expenses such as depreciation and amortization, deferred income tax and share-based compensation, and the net change in operating assets and liabilities. Cash provided by operating activities was $275.3 million and $286.7 million in the first nine months of 2025 and 2024, respectively. The change was primarily due to (1) an increase in cash paid for cloud computing arrangements and (2) the timing of payments for marketing expenses of the national advertising funds.

Current wording

Cash provided by operating activities consists primarily of net income, adjusted for non-cash expenses such as depreciation and amortization, deferred income tax and share-based compensation, and the net change in operating assets and liabilities. Cash provided by operating activities was $59.4 million and $85.4 million in the first three months of 2026 and 2025, respectively. The change was primarily due to (1) the timing of receipt of vendor incentives, (2) the timing of the collection of royalty receivables and (3) lower net income, adjusted for non-cash expenses. These changes were partially offset by the timing of payments for marketing expenses of the national advertising funds.