Wendy's 2013 Annual Report Download - page 23

We may be required to recognize additional asset impairment and other asset-related charges.
We have significant amounts of long-lived assets, goodwill and intangible assets and have incurred impairment
charges in the past with respect to those assets. In accordance with applicable accounting standards, we test for
impairment generally annually, or more frequently, if there are indicators of impairment, such as:
• significant adverse changes in the business climate;
• current period operating or cash flow losses combined with a history of operating or cash flow losses or a
projection or forecast that demonstrates continuing losses associated with long-lived assets;
• a current expectation that more-likely-than-not (e.g., a likelihood that is more than 50%) long-lived assets
will be sold or otherwise disposed of significantly before the end of their previously estimated useful life; and
• a significant drop in our stock price.
Based upon future economic and capital market conditions, as well as the operating performance of our
reporting units, future impairment charges could be incurred.
We enter into swaps and other derivative contracts, which expose us to potential losses in the event of
nonperformance by counterparties.
We have entered into interest rate swaps and other derivative contracts as described in Note 11 of the Financial
Statements and Supplementary Data included in Item 8 herein, and we may enter into additional swaps in the future.
We are exposed to potential losses in the event of nonperformance by counterparties on these instruments, which
could adversely affect our results of operations, financial condition and liquidity.
Wendy’s and its subsidiaries are subject to various restrictions, and substantially all of their non-real estate
assets are pledged and subject to certain restrictions, under a credit agreement.
On May 16, 2013, Wendy’s amended and restated its credit agreement, dated May 15, 2012 (the “Restated
Credit Agreement”). The Restated Credit Agreement is comprised of a $350.0 million senior secured term loan
facility (“Term A Loans”), a partial refinancing of our existing term loan resulting in a $769.4 million senior secured
term loan facility (“Term B Loans”) and a $200.0 million senior secured revolving credit facility. The Restated Credit
Agreement also contains provisions for an uncommitted increase of up to $275.0 million principal amount of the
Term B Loans subject to the satisfaction of certain conditions. The revolving credit facility includes a sub-facility for
the issuance of up to $70.0 million of letters of credit and allows for liens in the form of cash collateralized letters of
credit up to an additional $40.0 million. During 2013, Wendy’s transitioned the security for all of its outstanding
letters of credit from the revolving credit facility to cash collateral. Therefore, as of December 29, 2013, there were no
amounts outstanding under the revolving credit facility.
On September 24, 2013, Wendy’s entered into an amendment (the “Amendment”) to its Restated Credit
Agreement to borrow an aggregate principal amount up to $225.0 million of additional Term A Loans (“Incremental
Term Loans”). On October 24, 2013, Wendy’s borrowed $225.0 million of Incremental Term Loans under the
Amendment.
The obligations under the Restated Credit Agreement are secured by substantially all of the non-real estate
assets and stock of Wendy’s and its domestic subsidiaries (other than certain unrestricted subsidiaries) and 65% of the
stock of certain of its foreign subsidiaries, in each case subject to certain limitations and exceptions. The affirmative
and negative covenants in the Restated Credit Agreement include, among others, preservation of corporate existence;
payment of taxes; maintenance of insurance; and limitations on: indebtedness (including guarantee obligations of
other indebtedness); liens; mergers, consolidations, liquidations and dissolutions; sales of assets; dividends and other
payments in respect of capital stock; investments; payments of certain indebtedness; transactions with affiliates;
changes in fiscal year; negative pledge clauses and clauses restricting subsidiary distributions; and material changes in
lines of business. The financial covenants contained in the Restated Credit Agreement are (i) a consolidated interest
coverage ratio, and (ii) a consolidated senior secured leverage ratio. For purposes of these covenants, “consolidated”
means the combined results of Wendy’s and its subsidiaries (other than unrestricted subsidiaries). The covenants
generally do not restrict The Wendy’s Company or any of its subsidiaries that are not subsidiaries of Wendy’s. If
Wendy’s and its subsidiaries are unable to generate sufficient cash flow or otherwise obtain the funds necessary to
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