Wendy's 2012 Annual Report Download - page 23

• reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions and
other general corporate purposes, and limiting our ability to obtain additional financing for these purposes;
• subjecting us to the risk of increased sensitivity to interest rate increases on our indebtedness with variable
interest rates, including borrowings under the Credit Agreement;
• limiting our flexibility in planning for, or reacting to, and increasing our vulnerability to, changes in our
business, the industry in which we operate and the general economy; and
• placing us at a competitive disadvantage compared to our competitors that are less leveraged.
In addition, certain of our subsidiaries also have significant contractual requirements for the purchase of soft
drinks. Wendy’s has also provided loan guarantees to various lenders on behalf of franchisees entering into pooled
debt facility arrangements for new store development and equipment financing, and one guarantee to a lender for a
franchisee, in connection with the refinancing of the franchisees debt. Certain subsidiaries also guarantee or are
contingently liable for certain leases of their respective franchisees for which they have been indemnified. In addition,
certain subsidiaries also guarantee or are contingently liable for certain leases of their respective franchisees for which
they have not been indemnified. These commitments could have an adverse effect on our liquidity and the ability of
our subsidiaries to meet payment obligations.
The ability to meet payment and other obligations under the debt instruments of our subsidiaries depends on
their ability to generate significant cash flow in the future. This, to some extent, is subject to general economic,
financial, competitive, legislative and regulatory factors as well as other factors that are beyond our control. We cannot
assure you that our business will generate cash flow from operations, or that future borrowings will be available to us
under existing or any future credit facilities or otherwise, in an amount sufficient to enable our subsidiaries to meet
their debt payment obligations 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, 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 debt payment 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 Credit Agreement restrict, but do not completely prohibit, us or our
subsidiaries from doing so. 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 will require a significant amount of cash, which may not
be generated or available to it.
The ability of Wendy’s to make payments on, or repay or refinance, its debt, including 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 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 Credit Agreement and other agreements it may enter into in the future.
Specifically, Wendy’s will need to maintain specified financial ratios and satisfy financial condition tests. There is no
assurance that the Wendy’s 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 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
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