Wendy's 2009 Annual Report Download - page 32

regulations and fluctuations, diverse government regulations and tax systems, uncertain or differing
interpretations of rights and obligations in connection with international franchise agreements and the
collection of royalties from international franchisees, the availability and cost of land and construction costs,
and the availability of experienced management, appropriate franchisees, and joint venture partners. Although
we believe we have developed the support structure required for international growth, there is no assurance that
such growth will occur or that international operations will be profitable.
We rely on computer systems and information technology to run our business. Any material failure,
interruption or security breach of our computer systems or information technology may adversely affect
the operation of our business and results of operations.
We are significantly dependent upon our computer systems and information technology to properly
conduct our business. A failure or interruption of computer systems or information technology could result in
the loss of data, business interruptions or delays in business operations. Also, despite our considerable efforts
and technological resources to secure our computer systems and information technology, security breaches, such
as unauthorized access and computer viruses, may occur resulting in system disruptions, shutdowns or
unauthorized disclosure of confidential information. Any security breach of our computer systems or
information technology may result in adverse publicity, loss of sales and profits, penalties or loss resulting from
misappropriation of information.
We may be required to recognize additional asset impairment and other asset-related charges.
We have significant amounts of long-lived assets, goodwill and intangible assets and have incurred
impairment charges in the past with respect to those assets. In accordance with applicable accounting
standards, we test for impairment generally annually, or more frequently, if there are indicators of impairment,
such as:
•significant adverse changes in the business climate;
•current period operating or cash flow losses combined with a history of operating or cash flow
losses or a projection or forecast that demonstrates continuing losses associated with long-lived
assets;
•a current expectation that more-likely-than-not (e.g., a likelihood that is more than 50%) long-
lived assets will be sold or otherwise disposed of significantly before the end of their previously
estimated useful life; and
•a significant drop in our stock price.
Based upon future economic and capital market conditions, as well as the operating performance of our
reporting units, future impairment charges could be incurred.
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 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. No additional allowance was recorded in 2009. 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.
Item 1B. Unresolved Staff Comments.
None.
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