Wendy's 2010 Annual Report Download - page 74

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Year End 2009
Carrying
Value
Interest
Rate
Risk
Equity
Price
Risk
Foreign
Currency
Risk
Non-current equity investment ........................ $ 97.5 $— $(9.8) $(9.8)
Interest rate swaps .................................. 1.6 (5.6) — —
Long-term debt, excluding capitalized lease and sale-leaseback
obligations-variable rate ........................... (251.5) (5.3) — —
Long-term debt, excluding capitalized lease and sale-leaseback
obligations-fixed rate:
Wendy’s/Arby’s Restaurants ...................... (1,035.3) (36.6) — —
Corporate .................................... (21.0) (0.1) — —
Wendy’s/Arby’s ........................... $(1,056.3) $(36.7) — —
The sensitivity analysis of financial instruments held at January 2, 2011 and January 3, 2010 assumes an
instantaneous one percentage point adverse change in market interest rates, and an instantaneous 10% adverse change
in the foreign currency exchange rates versus the U.S. dollar, each from their levels at January 2, 2011 and January 3,
2010, respectively, and with all other variables held constant. The equity price risk reflects the impact of a 10%
decrease in the carrying value of our non-current equity investment in the tables above. The sensitivity analysis also
assumes that the decreases in the equity markets and foreign exchange rates are other than temporary.
As of January 2, 2011, the Companies had amounts of both fixed-rate debt and variable interest rate debt. On
the fixed-rate debt, the interest rate risk presented with respect to long-term debt, excluding capitalized lease and sale-
leaseback obligations, primarily relates to the potential impact a decrease in interest rates of one percentage point has
on the fair value of $868.6 million of fixed-rate debt for Wendy’s/Arby’s and $855.9 million of fixed-rate debt for
Wendy’s/Arby’s Restaurants and not on the Companies’ financial position or results of operations. However, as
discussed above under “Interest Rate Risk,” the Companies have interest rate swap agreements on a portion of their
fixed-rate debt. The interest rate risk of fixed-rate debt presented in the tables above excludes the effect of the
$225.0 million for which we designated interest rate swap agreements as fair value hedges for the terms of the swap
agreements. As interest rates decrease, the fair market values of the interest rate swap agreements increase. The interest
rate risk presented with respect to the interest rate swap agreements represents the potential impact the indicated
change has on our results of operations. On the variable interest rate debt, the interest rate risk presented with respect
to long-term debt, excluding capitalized lease and sale-leaseback obligations, represents the potential impact an
increase in interest rates of one percentage point has on our results of operations related to our $495.2 million of
variable interest rate long-term debt outstanding as of January 2, 2011. The Companies’ variable-rate long-term debt
outstanding as of January 2, 2011 had a weighted average remaining maturity of approximately six years.
68