Wendy's 2011 Annual Report Download - page 24

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.
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
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 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 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.
To service debt and meet its other cash needs, Wendy’s Restaurants will require a significant amount of cash,
which may not be generated or available to it.
The ability of Wendy’s Restaurants to make payments on, or repay or refinance, its debt, including the Senior
Notes and the Credit Agreement, and to fund planned capital expenditures, dividends and other cash needs will
depend largely upon its future operating performance. Future performance, to a certain extent, is subject to general
economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. In addition, the
ability of Wendy’s Restaurants to borrow funds in the future to make payments on its debt will depend on the
satisfaction of the covenants in its credit facilities and other debt agreements, including the indenture governing the
Senior Notes, the Credit Agreement and other agreements it may enter into in the future. Specifically, Wendy’s
Restaurants will need to maintain specified financial ratios and satisfy financial condition tests. There is no assurance
that the Wendy’s Restaurants business will generate sufficient cash flow from operations or that future borrowings will
be available under its credit facilities or from other sources in an amount sufficient to enable it to pay its debt,
including the Senior Notes and Credit Agreement, or to fund its or The Wendy’s Company’s dividend and other
liquidity needs.
As a result of the indemnification provisions of the Purchase and Sale Agreement pursuant to which the sale of
Arby’s occurred on July 4, 2011, Wendy’s Restaurants may incur expenses and liabilities for taxes related to
periods up to the date of sale.
As a result of the indemnification provisions of the Purchase and Sale Agreement pursuant to which the sale of
Arby’s occurred on July 4, 2011, Wendy’s Restaurants may incur expenses and liabilities for taxes related to periods
up to the date of sale, such as income, sales and use, and other operating taxes. Discontinued operations for the 2011
third and fourth quarters included $2.1 million for amounts accrued for certain tax liabilities related to Arby’s which
are the obligations of Wendy’s Restaurants pursuant to the indemnification provisions of the Purchase and Sale
Agreement and it is possible that further accruals may occur in future periods as audits by various taxing authorities
are resolved. Further accruals in future periods would adversely affect our results of operations.
Risks Related to The Wendy’s Company
There can be no assurance regarding whether or to what extent The Wendy’s Company will pay dividends on its
Common Stock in the future.
Holders of The Wendy’s Company Common Stock will only be entitled to receive such dividends as its Board
of Directors may declare out of funds legally available for such payments. Any dividends will be made at the discretion
of the Board of Directors and will depend on The Wendy’s Company’s earnings, financial condition, cash
requirements and such other factors as the Board of Directors may deem relevant from time to time.
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