Wendy's 2009 Annual Report Download - page 29

Due to the concentration of Wendy’s and Arby’s restaurants in particular geographic regions, our
business results could be impacted by the adverse economic conditions prevailing in those regions
regardless of the state of the national economy as a whole.
As of January 3, 2010, we and our franchisees operated Wendy’s or Arby’s restaurants in 50 states and 21
foreign countries. As of January 3, 2010 as detailed in “Item 2. Properties”, the 7 leading states by number of
operating units were: Ohio, Florida, Texas, Michigan, Georgia, Pennsylvania and California. This geographic
concentration can cause economic conditions in particular areas of the country to have a disproportionate
impact on our overall results of operations. It is possible that adverse economic conditions in states or regions
that contain a high concentration of Wendy’s and Arby’s restaurants could have a material adverse impact on
our results of operations in the future.
Wendy’s and its subsidiaries, and ARG and its subsidiaries, are subject to various restrictions, and
substantially all of their non-real estate assets are pledged subject to certain restrictions, under a
Credit Agreement.
Under the amended and restated Arby’s Credit Agreement entered into as of March 11, 2009 by Wendy’s
and its subsidiaries and ARG and its subsidiaries (collectively, the “Borrowers”), as amended on June 10, 2009
(as so amended, the “Credit Agreement”), substantially all of the assets of the Borrowers (other than real
property) are pledged as collateral security. The Credit Agreement also contains financial covenants that,
among other things, require the Borrowers to maintain certain aggregate leverage and interest coverage ratios
and restrict their ability to incur debt, pay dividends or make other distributions, make certain capital
expenditures, enter into certain fundamental transactions (including sales of assets and certain mergers and
consolidations) and create or permit liens. If the Borrowers are unable to generate sufficient cash flow or
otherwise obtain the funds necessary to make required payments of interest or principal under, or are unable to
comply with covenants of, the Credit Agreement, then they would be in default under the terms of the
agreement, which would preclude the payment of dividends to Wendy’s/Arby’s Group, Inc., restrict access to
their revolving lines of credit and, under certain circumstances, permit the lenders to accelerate the maturity of
the indebtedness. See Note 8 of the Financial Statements and Supplementary Data included in Item 8 herein,
for further information regarding the Credit Agreement.
As a result of the Senior Notes issued by Wendy’s/Arby’s Restaurants on June 23, 2009, we and our
subsidiaries have a significant amount of debt outstanding. Such indebtedness, along with the other
contractual commitments of our subsidiaries, could adversely affect our business, financial condition
and results of operations, as well as the ability of certain of our subsidiaries to meet payment
obligations under the Senior Notes and other debt.
As a result of the Senior Notes issued by Wendy’s/Arby’s Restaurants on June 23, 2009, certain of our
subsidiaries have a significant amount of debt and debt service requirements. As of January 3, 2010, on a
consolidated basis, there was approximately $1.5 billion of outstanding debt.
This level of debt could have significant consequences on our future operations, including:
•making it more difficult to meet payment and other obligations under the Senior Notes and other
outstanding debt;
•resulting in an event of default if our subsidiaries fail to comply with the financial and other
restrictive covenants contained in debt agreements, which event of default could result in all of our
subsidiaries’ debt becoming immediately due and payable;
•reducing the availability of our cash flow to fund working capital, capital expenditures,
acquisitions and other general corporate purposes, and limiting our ability to obtain additional
financing for these purposes;
•subjecting us to the risk of increased sensitivity to interest rate increases on our indebtedness with
variable interest rates, including borrowings under the Credit Agreement;
•limiting our flexibility in planning for, or reacting to, and increasing our vulnerability to, changes
in our business, the industry in which we operate and the general economy; and
•placing us at a competitive disadvantage compared to our competitors that are less leveraged.
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