Wendy's 2010 Annual Report Download - page 68

(1) Wendy’s is contingently liable for certain leases and other obligations primarily from company-owned restaurant
locations now operated by franchises amounting to $67.3 million as of January 2, 2011. These leases extend
through 2030. 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 $9.8 million.
These leases expire on various dates through 2021. RTM, one of our subsidiaries, guarantees the lease obligations
of eight RTM restaurants formerly operated by affiliates of RTM as of January 2, 2011 (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 10 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 2020,
could aggregate a maximum of approximately $4.2 million as of January 2, 2011.
(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 Restaurants and Corporate have outstanding letters of credit of $32.4 million and $0.7 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
(Wendy’s/Arby’s)
In December 2008, Wendy’s/Arby’s 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, Wendy’s/Arby’s anticipates 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. Wendy’s/Arby’s has 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.
Seasonality
Our restaurant operations are moderately impacted by seasonality. Wendy’s restaurant revenues are normally
higher during the summer months than during the winter months, and Arby’s restaurant revenues are somewhat
lower in our first quarter. Because our businesses are moderately seasonal, results for any future quarter will not
necessarily be indicative of the results that may be achieved for any other quarter or for the full fiscal year.
Critical Accounting Policies and Estimates
The preparation of our consolidated financial statements in conformity with accounting principles generally
accepted in the United States of America requires us to make estimates and assumptions in applying our critical
accounting policies that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the reported amount of revenues and expenses
during the reporting period. Our estimates and assumptions concern, among other things, goodwill impairment,
impairment of long-lived assets, Federal and state income tax uncertainties, and allowance for doubtful accounts. We
evaluate those estimates and assumptions on an ongoing basis based on historical experience and on various other
factors which we believe are reasonable under the circumstances.
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