Wendy's 2013 Annual Report Download - page 99

THE WENDY’S COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(In Thousands Except Per Share Amounts)
The amounts and expiration dates of net operating loss and tax credit carryforwards are as follows:
Amount Expiration
Tax credit carryforwards:
U.S. federal credits (primarily foreign tax credits and jobs credits) . . . $ 101,208 2015-2033
Foreign tax credits of non-U.S. subsidiaries .................... 1,575 2021-2022
Total ................................................. $ 102,783
Net operating loss carryforwards:
U.S federal net operating loss carryforwards .................... $ 77,153 2031-2032
State net operating loss carryforwards ......................... 986,684 2014-2032
Total ................................................. $1,063,837
As of December 29, 2013, the Company had a deferred tax asset of $61,799 related to the federal and state net
operating loss carryforwards before reduction for unrecognized tax benefits related to excess share-based compensation
deductions. In 2013 and prior years, we deducted $134,156 in excess of cumulative compensation costs relating to
the exercise of stock options and vesting of restricted stock. The Company has not recognized the $48,672 tax benefit
relating to these deductions because it has no income taxes currently payable against which the benefits can be realized
as a result of its net operating loss and credit carryforwards. When such benefits are realized against future income
taxes payable, the Company will recognize them in future periods as a reduction of current income taxes payable with
an equal offsetting increase in “Additional paid-in capital.”
The Company’s valuation allowances of $10,548, $21,052 and $17,397 as of December 29, 2013,
December 30, 2012 and January 1, 2012, respectively, relate to capital loss and state net operating loss carryforwards.
Valuation allowances decreased $10,504 in 2013 primarily as a result of changes to the legal form of certain subsidiaries
resulting in changes in expected future state taxable income available to utilize certain state net operating loss
carryforwards. Valuation allowances increased $3,655 in 2012 primarily as a result of changes in state net operating
losses. Valuation allowances decreased by $70,966 in 2011 primarily as a result of a $65,105 reduction related to capital
losses utilized to offset 2011 capital gains, primarily as a result of the reorganization of our business entity structure
outside of the U.S. and a $4,565 reduction related to expiring capital losses.
During the first quarter of 2013, the Company finalized its long-term investment plan with respect to the
Company’s non-U.S. earnings. There are no plans to repatriate cash from, and the Company intends to indefinitely
reinvest undistributed earnings of, its non-U.S. subsidiaries. As such, the Company has reversed $1,832 of deferred
tax liabilities during the year ended December 29, 2013, relating to investments in foreign subsidiaries which the
Company now considers permanently invested outside of the U.S.
Consequently, deferred income taxes have not been recorded for temporary differences related to investments in
non-U.S. subsidiaries. These temporary differences were approximately $35,200 at December 29, 2013 and consisted
primarily of undistributed earnings considered permanently invested in operations outside the U.S. Determination of
the incremental income tax liability on these unremitted earnings is dependent on circumstances existing if, and when
remittance occurs. However, we estimate that if unremitted earnings were to have been remitted at December 29,
2013, the additional tax liability would have been approximately $4,000.
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