Wendy's 2009 Annual Report Download - page 54

Benefit from Income Taxes
2009 2008
Change
(In Millions)
Federal and state benefit (provision) on variance in (loss) income from
continuing operations before tax ........................................ $(200.8) $212.9
Foreign tax credits net of tax on distribution of foreign earnings . . . . . . . . . . . . . (9.2) 9.2
Recognition of tax benefit of state net operating losses as a result of
dissolution of our captive insurance company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.6 —
Goodwill impairment .................................................... 99.7 (99.7)
DFR common stock...................................................... 20.3 (20.3)
Canadian tax rate changes ................................................ 2.0 —
Recognition of tax benefit from settlement of certain obligations to the
Former Executives..................................................... — (12.5)
Other................................................................... 2.7 1.3
$ (75.7) $ 90.9
Our income taxes in 2009, 2008 and 2007 were impacted by variations in (loss) income from continuing
operations before tax adjusted for recurring items, such as non-deductible expenses, state income taxes and
adjustments related to prior year tax matters, as well as non-recurring, discrete items. Discrete items may occur
in any given year, but are not consistent from year to year. Taxes changed as a result of discrete items of (1) the
2009 tax benefit on recognizing previously unrecognized state net operating losses, net of valuation allowances,
in connection with the dissolution of our captive insurance company, (2) the 2008 tax provision on the
impairment of goodwill as described above in ‘Goodwill Impairment” as a result of non-deductible financial
reporting goodwill in excess of tax goodwill, (3) the 2008 tax provision on a loss which is not deductible for
tax purposes in connection with the decline in value of our investment in the common stock of DFR and
related declared dividend as described in “Introduction and Executive Overview—Deerfield”, (4) the 2008 tax
benefit on foreign tax credits net of related taxes on the distribution of foreign earnings and (5) the 2007 tax
benefit on recognizing a previously unrecognized contingent tax benefit in connection with the settlement of
certain obligations to the Former Executives.
Income from Discontinued Operations, Net of Income Taxes
2009 2008
Change
(In Millions)
Income from discontinued operations before income taxes . . . . . . . . . . . . . . . . . . . . . . . . $ 0.5 $0.4
Income tax changes due to settlements of income tax matters . . . . . . . . . . . . . . . . . . . . (0.6) 0.6
(Provision for) benefit from income taxes....................................... (0.5) 0.2
$(0.6) $1.2
The changes in the income from discontinued operations for 2009 and 2008 represent transactions related
to the settlement of income tax and other matters from our former premium beverage and soft drink
concentrate business and our former utility and municipal services and refrigeration business segments.
Outlook for 2010
Sales
We anticipate that certain of the negative factors described above which affected our 2009 Company-
owned same-store sales, including current restaurant industry-wide sales trends, the uncertain economic
environment, high unemployment and competitive discounting, will continue to negatively impact sales for
2010. We expect that Wendy’s increasing emphasis on everyday value products, as well as anticipated menu
mix in 2010, which includes the introduction of new premium products, will have a favorable impact on sales.
In addition, we anticipate that Arby’s increasing emphasis on everyday value menu items will have a favorable
impact on sales. For 2010, the net impact of new store openings and closings is not expected to have a
significant impact on consolidated sales.
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