Wendy's 2008 Annual Report Download - page 55

Benefit from Income Taxes
Our effective tax rates for 2008 and 2007 were 17% and 89%, respectively. Our effective rates are
impacted by recurring items, such as non-deductible expenses relative to pre-tax income (loss), state income
taxes, adjustments related to prior year tax matters and the minority interests in income of consolidated
subsidiaries which are not taxable to us but which are not deducted from the pre-tax income used to calculate
the effective tax rates, as well as non-recurring, discrete items. Discrete items may occur in any given year, but
are not consistent from year to year. Our U.S. Federal effective tax rates in both years were principally affected
by the following tax (provision) benefit items: (1) the 2008 tax effect of ($99.7) million on the impairment of
goodwill as described above in “Goodwill Impairment” as a result of non-deductible financial reporting
goodwill in excess of tax goodwill, (2) the 2008 tax effect of ($20.3) million on a loss which is not deductible
for tax purposes in connection with the decline in value of our investment in the common stock of DFR and
related declared dividend as described above in “Introduction and Executive Overview—The Deerfield Sale,”
(3) the 2008 tax effect of $9.2 million on the distribution of foreign earnings net of related foreign tax credits
and (4) the 2007 tax effect of $12.5 million on recognizing a previously unrecognized contingent tax benefit in
connection with the settlement of certain obligations to the Former Executives.
Minority Interests in Income of Consolidated Subsidiaries
The minority interests in income of consolidated subsidiaries decreased $2.4 million primarily as a result
of the effect of the Deerfield Sale.
Income from Discontinued Operations, Net of Income Taxes
The $2.2 million income from discontinued operations, net of income taxes, in 2008 primarily relates to a
release of an accrual for state income taxes no longer required after the settlement of state income tax liabilities
in three jurisdictions. The income from discontinued operations, net of income taxes, of $1.0 million in 2007
consists of a $1.1 million release of an accrual for state income taxes no longer required after the settlement of a
state income tax audit partially offset by an additional $0.1 million loss relating to the finalization of the
leasing arrangements of two closed restaurants.
Net (Loss) Income
Our net results decreased $495.8 million to a net loss of $479.7 million in 2008 from net income of
$16.1 million in 2007. This decrease is primarily due to the after-tax and applicable minority interest effects of
the variances discussed above, including the goodwill and long-lived assets impairments and the other than
temporary losses recorded during 2008.
2007 Compared to 2006
Presented below is a table that summarizes our results of operations and compares the amount of the
change between 2007 and 2006 (the “2007 Change”). Certain percentage changes between these years are
considered not measurable or not meaningful (“n/m”).
47