Wendy's 2008 Annual Report Download - page 61

Benefit from (provision for) Income Taxes
Our effective tax rate for 2007 and 2006 was 89% and (86%), respectively. Our effective rates are
impacted by recurring items, such as non-deductible expenses relative to pre-tax income (loss), adjustments
related to prior year tax matters, 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 and
state income taxes, 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 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
Minority interests in income of consolidated subsidiaries decreased by $8.8 million principally reflecting a
decrease of $9.1 million as a result of lower income of Deerfield through December 21, 2007, the date of the
Deerfield Sale, as compared with 2006.
Income (Loss) From Discontinued Operations, Net of Income Taxes
The income from discontinued operations 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 the two closed
restaurants mentioned below. The loss from discontinued operations of $0.1 million in 2006 consists of a $1.3
million loss from operations related to our closing two underperforming restaurants, substantially offset by (1)
the release of $0.7 million of reserves for state income taxes no longer required upon the expiration of a state
income tax statute of limitations and (2) the release of $0.5 million of certain other accruals as a result of
revised estimates to liquidate the remaining liabilities.
Net Income (Loss)
Our net results improved $27.0 million to income of $16.1 million in 2007 from a loss of $10.9 million
in 2006. This increase is a result of the after-tax and applicable minority interest effects of the variances
discussed above, including the facilities relocation and corporate restructuring charge as offset by the gain on
sale of consolidated business recorded in 2008.
Liquidity and Capital Resources
Sources and Uses of Cash for 2008
Cash and cash equivalents (“Cash”) totaled $90.1 million at December 28, 2008 compared to $78.1
million at December 30, 2007. For the year ended December 28, 2008, net cash provided by operating
activities totaled $72.9 million, primarily from the following significant items:
•Our net loss of $479.7 million;
•Arby’s Company-owned restaurants non-cash goodwill impairment of $460.1 million;
•Net non-cash operating investment adjustments of $105.4 million principally reflecting our other than
temporary losses on investments in our common stock of DFR and an allowance for doubtful accounts
for our DFR Notes investment. To a lesser extent, there were also other than temporary losses on
investments related to our investments in Jurlique, certain available-for-sale equity securities and other
cost investments;
•Depreciation and amortization of $88.3 million;
•Impairment of other long-lived assets charges of $19.2 million;
•The write off of deferred costs related to a financing alternative that is no longer being pursued and
amortization of deferred financing costs which totaled $8.9 million;
•Our deferred income tax benefit of $105.3 million;
•The recognition of deferred vendor incentives, net of amount received, of $6.5 million and
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