Wendy's 2013 Annual Report Download - page 47

(Provision for) Benefit from Income Taxes
Change
2013 2012
Federal and state benefit on variance in income (loss) from continuing
operations before income taxes and noncontrolling interests ........... $(32.2) $27.3
Valuation allowances ........................................... 14.2 (4.2)
System optimization initiative .................................... (12.6) —
Corrections related to prior years’ tax matters ........................ (7.6) 7.6
Federal employment tax credits ................................... 3.4 (0.9)
Foreign tax credit, net of tax on foreign earnings ...................... 2.5 (0.8)
Non-deductible international goodwill impairment .................... (3.1) —
Other ...................................................... 0.1 (1.4)
$(35.3) $27.6
Our income taxes in 2013, 2012 and 2011 were impacted by variations in income from continuing operations
before income taxes and noncontrolling interests, adjusted for recurring items such as non-deductible expenses and
state income taxes, as well as non-recurring discrete items. Discrete items, which may occur in any given year but are
not consistent from year to year, include, in part, the following: (1) in connection with the Company’s system
optimization initiative described above, the Company’s tax provision reflects the non-deductibility of goodwill
included in the gain on sale of restaurants of $7.5 million and an increase in net deferred state taxes of $5.1 million,
(2) valuation allowances decreased in 2013 primarily as a result of changes in expected future state taxable income
available to offset certain state net operating loss carryforwards, (3) certain 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 $3.3 million, the effects of a
one-time federal employment tax credit of $2.2 million and a correction to certain deferred tax assets and liabilities of
$2.1 million and (4) reversal of $1.8 million of deferred tax liabilities relating to investments in foreign subsidiaries
which the Company now considers permanently invested outside of the U.S.
Net (Loss) Income from Discontinued Operations
Net (loss) income from discontinued operations includes (loss) income from discontinued operations of
$(0.3) million, $2.0 million and $0.8 million for the years ended December 29, 2013, December 30, 2012 and
January 1, 2012, respectively, net of a benefit from (provision for) income taxes of $0.2 million, $1.0 million and
$(0.9) million, respectively. Net income from discontinued operations for the years ended December 30, 2012 and
January 1, 2012 also includes a loss on disposal of $0.5 million and $8.8 million, respectively, net of a benefit from
(provision for) income taxes of $0.3 million and $(3.6) million, respectively.
Net Loss (Income) Attributable to Noncontrolling Interests
We have reflected a net loss attributable to noncontrolling interests of $0.9 million for the year ended
December 29, 2013 as a result of the consolidation of the Japan JV in the second quarter of 2013. Prior to the
consolidation, the Japan JV was accounted for as an equity method investment and we reported our 49% share of the
net loss of the Japan JV in “Other operating expense, net.” In December 2013, Wendy’s and the Higa Partners agreed
to terminate Wendy’s investment in the joint venture and repay their respective share of the Japan JV’s outstanding
debt and liabilities related to the restaurant closure costs. On December 27, 2013, Wendy’s transferred its interest in
the Japan JV to Higa Industries, Ltd. for nominal consideration, terminating the joint venture, and establishing the
Japan JV as a wholly-owned entity of the Higa Partners. Therefore, Wendy’s deconsolidated the Japan JV and
recognized a loss of $1.7 million, which was included in “Other operating expense, net” in our consolidated
statements of operations for the year ended December 29, 2013.
Jurl, a 99.7% owned subsidiary, completed the sale of our investment in Jurlique in February 2012. We have
reflected net income attributable to noncontrolling interests of $2.4 million, net of an income tax benefit of
$1.3 million, for the year ended December 30, 2012 in connection with the equity and profit interests discussed
below. The net assets and liabilities of the subsidiary that held the investment were not material to the consolidated
financial statements. Therefore, the noncontrolling interest in those assets and liabilities was not previously reported
separately. As a result of this sale and distributions to the minority shareholders, there are no remaining
noncontrolling interests in this consolidated subsidiary.
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