Wendy's 2014 Annual Report Download - page 25

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 debt
arrangements for new restaurant development and equipment financing, and two guarantees to lenders for
franchisees, in connection with the refinancing of a franchisee’s debt and the sale of restaurants to a franchisee.
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. Wendy’s has also provided an irrevocable
stand-by letter of credit to a lender to support a financing program for franchisees that participate in our Image
Activation program. 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 have announced that we intend to incur substantially more debt. This would exacerbate further the risks
associated with our substantial leverage.
We have announced that we intend to incur substantial additional indebtedness, including additional secured
indebtedness, in the future. If new debt or other liabilities are added to our current consolidated debt levels, the
related risks that we now face would 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 Restated Credit
Agreement and any additional debt, 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 Restated 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.
There can be no assurance regarding whether or to what extent the Company will pay dividends on its Common
Stock in the future.
Holders of the Company’s 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 Company’s earnings, financial condition, cash requirements and such
other factors as the Board of Directors may deem relevant from time to time.
Because the Company is a holding company, its ability to declare and pay dividends is dependent upon cash,
cash equivalents and short-term investments on hand and cash flows from its subsidiaries. The ability of its
subsidiaries to pay cash dividends and/or make loans or advances to the holding company will be dependent upon
their respective abilities to achieve sufficient cash flows after satisfying their respective cash requirements, including
subsidiary-level debt service and revolving credit agreements, to enable the payment of such dividends or the making
of such loans or advances. The ability of any of its subsidiaries to pay cash dividends or other payments to the
Company will also be limited by restrictions in debt instruments currently existing or subsequently entered into by
such subsidiaries, including the Restated Credit Agreement, which is described earlier in this Item 1A.
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