Wendy's 2009 Annual Report Download - page 114

Download and view the complete annual report

Please find page 114 of the 2009 Wendy's annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 166

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159
  • 160
  • 161
  • 162
  • 163
  • 164
  • 165
  • 166

Additionally, the Company has carryforwards other than Federal net operating losses and related valuation
allowances principally consisting of:
(1) As of January 3, 2010, $199,057 capital loss resulting from Wendy’s sale of Fresh Enterprises, Inc.
and Subsidiaries “Baja Fresh” in 2006. U.S. Federal capital losses may be carried forward for five years
and are subject to certain limitations as a result of the Wendy’s Merger. As of January 3, 2010, we
have provided a full valuation allowance on the $73,850 deferred tax asset related to this capital loss
carryforward as we believe it is more likely than not that the capital loss carryforward will expire
unused in 2011. As of December 28, 2008, our capital loss carryforward was $209,860 and the related
full valuation allowance on the deferred tax asset was $77,663. We utilized a small portion of this
capital loss carryforward to offset capital gains generated subsequent to the merger in 2008. As a
result, this valuation allowance was reduced by $3,265 and this reduction was considered in merger
related fair value (see Note 2).
(2) As of January 3, 2010, tax credits aggregating $33,310 principally consisting of foreign tax credits
generated in 2008 and jobs credits from 2009, 2008, and 2007. The tax credits may be carried
forward for periods of 10 to 20 years.
(3) State net operating loss carryforwards subject to various limitations and carryforward periods that
begin expiring in 2010. As of January 3, 2010, we have a deferred tax asset of $25,217 and a
valuation allowance of $11,656 related to these assets. As of December 28, 2008, our deferred tax
asset for state net operating loss carryforwards was $5,176 and the related valuation allowance was
$1,931. Changes during 2009 in the state net operating loss carryforwards and related valuation
allowances are principally the result of the recognition of an $18,152 deferred tax asset and an $8,523
valuation allowance for certain state net operating losses in connection with the fourth quarter 2009
dissolution of our captive insurance company as realization of these net operating losses is no longer
remote.
In summary, as of January 3, 2010 and December 28, 2008, the Company had valuation allowances
aggregating $87,231 and $80,886 resulting in a change of $6,345 in 2009 as described above. As of
December 30, 2007, our valuation allowance was $0. The 2008 increase due to the Wendy’s Merger was
$77,663 and the remaining increase was due to state deferred tax assets generated in 2008. In making our
determination of the need for valuation allowances, we reviewed available positive and negative evidence as well
as prudent and feasible tax planning strategies regarding our ability to realize the benefit of the related deferred
tax assets.
107
Wendy’s/Arby’s Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(In Thousands Except Per Share Amounts)