Wendy's 2009 Annual Report Download - page 30

In addition, certain of our subsidiaries also have significant contractual requirements for the purchase of
soft drinks. Wendy’s has also provided loan guarantees to various lenders on behalf of franchisees entering into
pooled debt facility arrangements for new store development and equipment financing. Certain subsidiaries also
guarantee or are contingently liable for certain leases of their respective franchisees for which they have been
indemnified. In addition, certain subsidiaries also guarantee or are contingently liable for certain leases of their
respective franchisees for which they have not been indemnified. These commitments could have an adverse
effect on our liquidity and ability of our subsidiaries to meet payment obligations under the Senior Notes and
other debt.
Any of the above-listed factors could have an adverse effect on our business, financial condition and results
of operations and the ability of our subsidiaries to meet their payment obligations under the Senior Notes and
other debt.
The ability to meet payment and other obligations under the debt instruments of our subsidiaries depends
on their ability to generate significant cash flow in the future. This, to some extent, is subject to general
economic, financial, competitive, legislative and regulatory factors as well as other factors that are beyond our
control. We cannot assure you that our business will generate cash flow from operations, or that future
borrowings will be available to us under existing or any future credit facilities or otherwise, in an amount
sufficient to enable our subsidiaries to meet their payment obligations under the Senior Notes and other debt
and to fund other liquidity needs. If our subsidiaries are not able to generate sufficient cash flow to service
their debt obligations, they may need to refinance or restructure debt, including the Senior Notes, sell assets,
reduce or delay capital investments, or seek to raise additional capital. If our subsidiaries are unable to
implement one or more of these alternatives, they may not be able to meet payment obligations under the
Senior Notes and other debt and other obligations.
Despite our current consolidated indebtedness levels, we and our subsidiaries may still be able to incur
substantially more debt. This could exacerbate further the risks associated with our substantial
leverage.
We and our subsidiaries may be able to incur substantial additional indebtedness, including additional
secured indebtedness, in the future. The terms of the Senior Notes indenture and the Credit Agreement
restrict, but do not completely prohibit, us or our subsidiaries from doing so. In addition, the Senior Notes
indenture allows Wendy’s/Arby’s Restaurants to issue additional Senior Notes under certain circumstances,
which will also be guaranteed by the guarantors of the Senior Notes. The indenture also allows Wendy’s/Arby’s
Restaurants to incur certain secured debt and allows our foreign subsidiaries to incur additional debt, which
would be effectively senior to the Senior Notes. In addition, the indenture does not prevent Wendy’s/Arby’s
Restaurants from incurring other liabilities that do not constitute indebtedness. If new debt or other liabilities
are added to our current consolidated debt levels, the related risks that we now face could intensify.
The current decline in the global economy and credit crisis may significantly inhibit our ability to
reduce and refinance our subsidiaries’ current indebtedness.
As of January 3, 2010, within 37 months our subsidiaries had approximately $251.5 million of
indebtedness that is due under the Credit Agreement and $200.0 million of indebtedness due under the
outstanding Wendy’s 6.25% senior notes due 2011. Depending on current and expected cash flows, our
subsidiaries may need to refinance a significant portion of this indebtedness. During the third quarter of 2008,
the global credit markets suffered a significant contraction, including the failure of some large financial
institutions. This resulted in a significant decline in the credit markets and the overall availability of credit.
Market disruptions, such as those experienced in 2008 and 2009, as well as our subsidiaries’ significant debt
levels, may increase the cost of borrowing or adversely affect the ability to refinance the obligations of our
subsidiaries as they become due. If we are unable to refinance our subsidiaries’ indebtedness or access additional
credit, or if short-term or long-term borrowing costs of our subsidiaries dramatically increase, their ability to
finance current operations and meet their short-term and long-term obligations could be adversely affected.
To service debt and meet its other cash needs, Wendy’s/Arby’s Restaurants will require a significant
amount of cash, which may not be available to it.
The ability of Wendy’s/Arby’s Restaurants to make payments on, or repay or refinance, its debt, including
the Senior Notes, and to fund planned capital expenditures, dividends and other cash needs will depend largely
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