Wendy's 2013 Annual Report Download - page 100

THE WENDY’S COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(In Thousands Except Per Share Amounts)
The reconciliation of income tax computed at the U.S. Federal statutory rate to reported income tax is set forth
below:
Year Ended
2013 2012 2011
Income tax (provision) benefit at the U.S. Federal statutory rate ....... $(20,668) $ 4,594 $(8,554)
State income tax (provision) benefit, net of U.S. Federal income tax
effect .................................................. (1,370) 11,364 (2,848)
Valuation allowances (a) ..................................... 10,504 (3,655) 597
Jobs tax credits, net ......................................... 4,384 970 1,914
Foreign and U.S. tax effects of foreign operations (b) ............... 2,886 347 1,147
Dividends received deduction (c) .............................. 1,424 1,133 —
Corrections related to prior years’ tax matters (d) .................. — 7,620 —
Non-deductible goodwill (e) .................................. (9,875) — —
Non-deductible expenses and other, net ......................... (1,439) (1,290) 1,216
$(14,154) $21,083 $(6,528)
(a) Includes changes for deferred tax assets generated or utilized during the current year and changes in our judgment
regarding the likelihood of the utilization of deferred tax assets, primarily state net operating loss carryforwards
that existed at the beginning of the year.
(b) 2013 includes reversal of deferred taxes on investments in foreign subsidiaries now considered permanently
invested outside of the U.S.
(c) We received dividends of $40,145 and $4,625 during 2013 and 2012, respectively, from our investment in
Arby’s. See Note 6 for further information.
(d) Corrections in 2012 related to tax matters in prior years for the effects of tax depreciation in states that do not
follow federal law of $3,300, the effects of a one-time federal employment tax credit in 2011 of $2,220 and a
correction to certain deferred tax assets and liabilities of $2,100. See Note 26 for further information.
(e) Substantially all of the goodwill included in the gain on sales of restaurants, as noted below, and the impairment
of international goodwill was non-deductible for tax purposes. See Notes 2 and 8 for further information.
The system optimization initiative described in Note 2 resulted in a tax provision of $5,122 for the effects of
changes to the state deferred tax rate and $7,471 related to the goodwill included in the gain on sales of restaurants,
substantially all of which was non-deductible for tax purposes. These amounts are included in the 2013 state income
tax provision and the non-deductible goodwill amounts presented in the table above.
The Company participates in the Internal Revenue Service (the “IRS”) Compliance Assurance Process (“CAP”).
As part of CAP, tax years are examined on a contemporaneous basis so that all or most issues are resolved prior to the
filing of the tax return. As such, our December 30, 2012, January 1, 2012, January 2, 2011 and January 3, 2010 tax
returns have been settled. Certain of the Company’s state income tax returns from its 2001 fiscal year and forward
remain subject to examination. We believe that adequate provisions have been made for any liabilities, including
interest and penalties that may result from the completion of these examinations.
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