Wendy's 2009 Annual Report Download - page 62

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Wendy’s/Arby’s U.S. Federal income tax returns for 2005 to September 29, 2008 are not currently under
examination by the IRS. However, some of Wendy’s/Arby’s state income tax returns and some of the Wendy’s
state income tax returns for periods prior to the Wendy’s Merger are currently under examination. Certain of
these states have issued notices of proposed tax assessments aggregating $4.3 million. We dispute these notices
and believe ultimate resolution will not have a material adverse impact on our consolidated financial position
or results of operations.
Guarantees and Other Contingencies
As of January 3, 2010
(In Millions)
Lease guarantees and contingent rent on leases (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $108.6
Loan guarantees (2) ............................................................. $ 25.8
Letters of credit (3)............................................................. $ 34.7
(1) Wendy’s is contingently liable for certain leases and other obligations primarily from Company-owned
restaurant locations now operated by franchises amounting to $81.9 million as of January 3, 2010. These
leases extend through 2030, including all existing extension or renewal option periods. In addition,
Wendy’s is contingently liable for certain leases which have been assigned to unrelated third parties, who
have indemnified Wendy’s against future liabilities arising under the leases of $12.2 million. These leases
expire on various dates through 2022, including all existing extension or renewal option periods. RTM,
one of our subsidiaries, guarantees the lease obligations of 10 RTM restaurants formerly operated by
affiliates of RTM as of January 3, 2010 (the “Affiliate Lease Guarantees”). Certain former stockholders of
RTM have indemnified us with respect to the Affiliate Lease Guarantees. In addition, RTM remains
contingently liable for 12 leases for restaurants sold by RTM prior to the acquisition of RTM in 2005 if
the respective purchasers do not make the required lease payments (collectively with the Affiliate Lease
Guarantees, the “Lease Guarantees”). The Lease Guarantees, which extend through 2025, including all
existing extension or renewal option periods could aggregate a maximum of approximately $14.5 million
as of January 3, 2010.
(2) Wendy’s provided loan guarantees to various lenders on behalf of franchisees under debt arrangements for
new store development and equipment financing. Recourse on the majority of these loans is limited,
generally to a percentage of the original loan amount or the current loan balance on individual franchisee
loans or an aggregate minimum for the entire loan arrangement.
(3) Wendy’s/Arby’s, Wendy’s/Arby’s Restaurants and Wendy’s have outstanding letters of credit of $0.8
million, $33.6 million and $0.3 million, respectively, with various parties; however, our management does
not expect any material loss to result from these letters of credit because we do not believe performance
will be required.
Universal Shelf Registration Statement
In December 2008, the Company filed a universal shelf registration statement with the Securities and
Exchange Commission in connection with the possible future offer and sale, from time to time, of an
indeterminate amount of our common stock, preferred stock, debt securities and warrants to purchase any of
these types of securities. This registration statement became effective automatically upon filing. Unless
otherwise described in the applicable prospectus supplement relating to any offered securities, we anticipate
using the net proceeds of each offering for general corporate purposes, including financing of acquisitions and
capital expenditures, additions to working capital and repayment of existing debt. We have not presently made
any decision to issue any specific securities under this universal shelf registration statement.
Inflation and Changing Prices
We believe that inflation did not have a significant effect on our consolidated results of operations during
the reporting periods since inflation rates generally remained at relatively low levels.
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