Wendy's 2008 Annual Report Download - page 32

The collectability of the notes receivable due from Deerfield Capital Corp. may affect our financial
position.
Due to significant financial weakness in the credit markets, current publicly available information of
DFR, and our ongoing assessment of the likelihood of full repayment of the principal amount of the DFR
Notes, we recorded an allowance for doubtful collectability of $21.2 million on the DFR Notes for the fourth
quarter of 2008. This charge is included in “Other than temporary losses on investments.” The repayment of
the $48.0 million principal amount of DFR Notes due in 2012 received in connection with the Deerfield Sale
and the payment of related interest are dependent on the cash flow of DFR, including Deerfield. DFR’s
investment portfolio is comprised primarily of fixed income investments, including mortgage-backed securities
and corporate debt and its activities also include the asset management business of Deerfield. Among the
factors that may affect DFR’s ability to continue to pay the notes receivable and related interest are the current
dislocation in the sub-prime mortgage sector and the current weakness in the broader credit market. These
factors could result in increases in its borrowing costs and reductions in its liquidity and in the value of its
investments, which could reduce DFR’s cash flows and may result in an additional provision for uncollectible
notes receivable for us.
Other Risks
One of our subsidiaries remains contingently liable with respect to certain obligations relating to a
business that we have sold.
In July 1999, we sold 41.7% of our then remaining 42.7% interest in National Propane Partners, L.P.
and a sub-partnership, National Propane, L.P. to Columbia Energy Group, and retained less than a 1% special
limited partner interest in AmeriGas Eagle Propane, L.P. (formerly known as National Propane, L.P. and as
Columbia Propane, L.P.). As part of the transaction, our subsidiary, National Propane Corporation, agreed that
while it remains a special limited partner of AmeriGas, it would indemnify the owner of AmeriGas for any
payments the owner makes under certain debt of AmeriGas (aggregating approximately $138.0 million as of
December 28, 2008), if AmeriGas is unable to repay or refinance such debt, but only after recourse to the
assets of AmeriGas. Either National Propane Corporation or AmeriGas Propane, L.P., the owner of AmeriGas,
may require AmeriGas to repurchase the special limited partner interest. However, we believe it is unlikely
that either party would require repurchase prior to July, 19, 2009 as either AmeriGas Propane, L.P. would owe
us tax indemnification payments or we would accelerate payment of deferred taxes, which amount to
approximately $34.7 million as of December 28, 2008, associated with our sale of the propane business if
National Propane required the repurchase. As of December 28, 2008, we have net operating tax loss
carryforwards sufficient to offset substantially all of these deferred taxes.
Although we believe that it is unlikely that we will be called upon to make any payments under the
indemnification described above, if we are required to make such payments it could have a material adverse
effect on our financial position and results of operations. You should read the information in “Item. 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and
Capital Resources” and in Note 26 to the Consolidated Financial Statements.
Changes in environmental regulation may adversely affect our existing and future operations and
results.
Certain of our current and past operations are or have been subject to federal, state and local
environmental laws and regulations concerning the discharge, storage, handling and disposal of hazardous or
toxic substances that provide for significant fines, penalties and liabilities, in certain cases without regard to
whether the owner or operator of the property knew of, or was responsible for, the release or presence of such
hazardous or toxic substances. In addition, third parties may make claims against owners or operators of
properties for personal injuries and property damage associated with releases of hazardous or toxic substances.
Although we believe that our operations comply in all material respects with all applicable environmental laws
and regulations, we cannot predict what environmental legislation or regulations will be enacted in the future
or how existing or future laws or regulations will be administered or interpreted. We cannot predict the
amount of future expenditures that may be required in order to comply with any environmental laws or
regulations or to satisfy any such claims. See “Item 1. Business—General—Environmental Matters.”
24