Wendy's 2008 Annual Report Download - page 141

$2,275 accounted for as a decrease to the January 1, 2007 balance of retained earnings. A reconciliation of the
beginning and ending amount of unrecognized tax benefits is as follows:
2008 2007
Beginning balance...................................................... $12,266 $13,157
Additions:
Wendy’s unrecognized tax benefits at the Wendy’s Merger date........ 16,816 —
Tax positions related to the current year ............................. 996 387
Tax positions of prior years......................................... 4,362 108
Reductions:
Tax positions of prior years......................................... (2,982) (976)
Settlements ....................................................... (578) (72)
Lapse of statute of limitations ...................................... (559) (338)
Ending balance ........................................................ $30,321 $12,266
Included in the balance of unrecognized tax benefits at December 28, 2008 and December 30, 2007
respectively, are $22,155 and $9,482 (net of U.S. Federal benefit on state issues) of tax benefits that, if resolved
favorably would reduce the Company’s tax expense.
During 2009, the Company believes it is reasonably possible it will reduce unrecognized tax benefits by
up to $8,500, primarily as a result of the completion of certain state tax audits. Any increases in unrecognized
tax benefits will result primarily from state tax positions expected to be taken on tax returns for 2009. As a
result of our participation in the CAP program described above, the Company has no unrecognized tax benefits
related to its U.S. Federal income tax for the period ended December 28, 2008.
The Company recognizes interest accrued related to unrecognized tax benefits in “Interest expense” and
penalties in “General and administrative expenses”. As a result of the implementation of FIN 48, the Company
recognized a $487 increase in the liability for interest and a $247 increase in the liability for penalties which
was a reduction to the January 1, 2007 balance of retained earnings. During 2008 and 2007 the Company
recognized $390 and $1,619 of interest expense and $1,307 and $0 of penalties, both respectively related to
uncertain tax positions. The Company has approximately $6,157 and $3,328 accrued for interest and $1,914
and $247 accrued for penalties as of December 28, 2008 and December 30, 2007, both respectively.
Discontinued Operations
The Company includes unrecognized tax benefits and related interest and penalties for discontinued
operations in “Liabilities related to discontinued operations” in the accompanying consolidated balance sheets.
During 2008 and 2007, certain state tax matters of discontinued operations were either settled or the statute of
limitations for examination expired. In connection with these matters, the Company recognized income tax
benefits and released related interest and penalty accruals of $1,701, $1,144 and $688 in 2008, 2007 and
2006, respectively, included in “Income (loss) from discontinued operations” in the accompanying consolidated
statements of operations. At December 28, 2008, the Company has unrecognized tax benefits, interest and
penalties of $3,633 for state tax matters related to discontinued operations. If these tax benefits were to be
recognized, they would affect the gain or loss on disposal of discontinued operations.
(15) Stockholders’ Equity
As discussed in Note 3, in connection with the September 29, 2008 Wendy’s Merger, Wendy’s/Arby’s
stockholders approved a charter amendment to convert each of the then existing Triarc Class B common stock
into one share of Wendy’s/Arby’s Class A common stock (the “Conversion”). Prior to the merger date, there
were no changes in the 29,551 issued shares of Class A common stock during the periods presented below. As
of the date of the Wendy’s Merger, 376,776 shares of Wendy’s/Arby’s Class A common stock were issued to
133
Wendy’s/Arby’s Group, Inc. and Subsidiaries
(Formerly Triarc Companies, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(In Thousands Except Per Share Amounts)