Wendy's 2009 Annual Report Download - page 108

On January 14, 2009, Wendy’s executed a new $200,000 revolving credit facility (the “Wendy’s
Revolver”), borrowings under which were secured by substantially all of Wendy’s current assets, intangibles,
stock of Wendy’s subsidiaries and a portion of their real and personal property. The Wendy’s Revolver was
terminated effective March 11, 2009, in connection with the execution of the amended and restated Credit
Agreement described above.
AFA Service Corporation (“AFA”), an independently controlled advertising cooperative for the Arby’s
restaurant system, in which we have voting interests of substantially less than 50%, had a bank line of credit
that matured and was not renewed as of January 2010. In connection with the establishment of a revolving
loan agreement with ARG discussed further in Related Party Transactions, AFA utilized the revolving line
with ARG and repaid all amounts outstanding under its bank line of credit on December 28, 2009.
Wendy’s U.S. advertising fund has a revolving line of credit of $25,000. Neither the Company, nor
Wendy’s, is the guarantor of the debt. The advertising fund facility was established to fund the advertising
fund operations. The availability under this line of credit as of January 3, 2010 was $20,344.
At January 3, 2010, one of Wendy’s Canadian subsidiaries had a revolving credit facility of C$6,000
which bears interest at the Bank of Montreal Prime Rate. Wendy’s guarantees this debt. The availability under
this facility as of January 3, 2010 was C$5,698.
(9) Derivative Instruments
During the third quarter of 2009, we entered into the Interest Rate Swaps with notional amounts totaling
$361,000 that swap the fixed rate interest rates on our 6.20% and 6.25% Wendy’s senior notes for floating
rates. The Company’s primary objective for entering into derivative instruments is to manage its exposure to
changes in interest rates, as well as to maintain an appropriate mix of fixed and variable rate debt. The Interest
Rate Swaps are accounted for as fair value hedges and qualify for the short-cut method under the applicable
guidance. At January 3, 2010, the fair value of our Interest Rate Swaps was $1,589 and has been included in
“Deferred costs and other assets” and as an adjustment to the carrying amount of the 6.20% and 6.25%
Wendy’s senior notes.
At December 28, 2008, we also had the following derivative instruments: (1) put options on equity
securities and (2) total return swaps on equity securities. The Company did not designate these derivatives as
hedging instruments, and accordingly, these derivative instruments were recorded at fair value with changes in
fair value recorded in the Company’s results of operations. Prior to their expiration through October 2008, we
also had three interest rate swap agreements (the “Term Loan Swap Agreements”) related to our Term Loan.
The Term Loan Swap Agreements hedged a portion of the related Term Loan interest rate risk exposure.
Interest payments under Arby’s Term Loan are based on LIBOR plus a spread. These hedges of interest rate
risk relating to Arby’s Term Loan had been designated as effective cash flow hedges at inception and on an
ongoing quarterly basis through their expiration dates. There was no ineffectiveness from these hedges through
their expiration in 2008. Accordingly, gains and losses from changes in the fair value of the hedges were
included in the “Unrealized gains (loss) on cash flow hedges” component of “Accumulated other comprehensive
income (loss).” If a hedge or portion thereof had been determined to be ineffective, any changes in fair value
would have been recognized in the Company’s results of operations.
In addition, prior to the Deerfield sale, we had a derivative instrument related to the vested portion of
stock options owned by the Company in DFR.
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Wendy’s/Arby’s Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(In Thousands Except Per Share Amounts)