Wendy's 2009 Annual Report Download - page 107

ratio tests and (3) restrict, among other matters, (a) the incurrence of indebtedness, (b) certain asset
dispositions, (c) certain affiliate transactions, (d) certain investments, (e) certain capital expenditures and (f)
the payment of dividends indirectly to Wendy’s/Arby’s. The Company was in compliance with all of the
covenants as of January 3, 2010. As of January 3, 2010 there was $306,523 available for the payment of
dividends indirectly to Wendy’s/Arby’s under the covenants of the Credit Agreement which includes the
net proceeds, as defined, from the Senior Notes less any dividends paid since their issuance.
During 2009, we borrowed a total of $51,182 under the Amended Revolver; however, no amounts were
outstanding as of January 3, 2010. The Amended Revolver includes a sub-facility for the issuance of letters
of credit up to $50,000. The availability under the Amended Revolver as of January 3, 2010 was
$136,413, which is net of $33,587 for outstanding letters of credit.
(c) Wendy’s senior notes were reduced to fair value at the date of and in connection with the Wendy’s Merger
based on outstanding principal of $225,000 and $200,000 and effective interest rates of 7.0% and 6.6%
for the 6.20% senior notes and 6.25% senior notes, respectively. The fair value adjustment is being
accreted and the related charge included in “Interest expense” until the notes mature. The value of the
Wendy’s senior notes is adjusted to reflect the fair value of interest rate swaps associated with this debt (the
“Interest Rate Swaps”). As of January 3, 2010, this adjustment increased the value of the 6.20% senior
notes and the 6.25% senior notes by $682 and $907, respectively. These notes are unsecured and are
redeemable prior to maturity at our option. The Wendy’s senior notes contain covenants that restrict the
incurrence of indebtedness secured by liens and sale-leaseback transactions. The Company was in
compliance with these covenants as of January 3, 2010.
(d) The sale-leaseback obligations (the “Sale-Leaseback Obligations”), which extend through 2029, relate to
capitalized restaurant leased assets with an aggregate net book value of $102,583 as of January 3, 2010.
(e) The capitalized lease obligations (the “Capitalized Lease Obligations”), which extend through 2036, relate
to Arby’s capitalized restaurant leased assets and software with aggregate net book values of $58,512 and
$6,388 respectively, as of January 3, 2010 and Wendy’s capitalized leased buildings with aggregate net
book value of $20,317.
(f) Wendy’s 7% Debentures (the “Debentures”) are unsecured and were reduced to fair value at the date of and
in connection with the Wendy’s Merger based on their outstanding principal of $100,000 and an effective
interest rate of 8.6%. The fair value adjustment is being accreted and the related charge included in
“Interest expense” until the Debentures mature. These Debentures contain covenants that restrict the
incurrence of indebtedness secured by liens and sale-leaseback transactions. The Company was in
compliance with these covenants as of January 3, 2010.
(g) During 2008 we entered into a $20,000 financing facility for one of our existing aircraft (the “Equipment
Term Loan”). Subsequent to year end we made a $5,000 prepayment on the Equipment Term Loan. The
facility requires monthly payments, including interest, of approximately $180 through August 2013 with
a final balloon payment of approximately $10,180 due September 2013. This loan is secured by an airplane
with a net book value of $10,812 as of January 3, 2010.
A significant number of the underlying leases in the Arby’s restaurants segment for sale-leaseback
obligations and capitalized lease obligations, as well as the operating leases, require or required periodic
financial reporting of certain subsidiary entities within ARG or of individual restaurants, which in many cases
have not been prepared or reported. The Company has negotiated waivers and alternative covenants with its
most significant lessors which substitute consolidated financial reporting of ARG for that of individual
subsidiary entities and which modify restaurant level reporting requirements for more than half of the affected
leases. Nevertheless, as of January 3, 2010, the Company was not in compliance, and remains not in
compliance, with the reporting requirements under those leases for which waivers and alternative financial
reporting covenants have not been negotiated. However, none of the lessors has asserted that the Company is in
default of any of those lease agreements. The Company does not believe that such non-compliance will have a
material adverse effect on its consolidated financial position or results of operations.
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Wendy’s/Arby’s Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(In Thousands Except Per Share Amounts)