Wendy's 2010 Annual Report Download - page 120

WENDY’S/ARBY’S GROUP, INC. AND SUBSIDIARIES
WENDY’S/ARBY’S RESTAURANTS, LLC AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(In Thousands Except Per Share Amounts)
Wendy’s/Arby’s Restaurants
2010 2009 2008
Income tax benefit (provision) at the U.S. Federal statutory rate .... $ 6,098 $ (555) $149,872
State income taxes (provision) benefit, net of U.S. Federal
income tax effect .................................. (2,242) (2,935) 3,352
Previously unrecognized state net operating losses, net of related
valuation allowance (a) .............................. — 9,629 —
Foreign and U.S. tax effects of foreign operations (b) ......... 7,692 623 9,241
Impairment of non-deductible goodwill ................... — — (99,696)
Canadian tax rate changes ............................. — 2,000 —
Jobs tax credits, net .................................. 3,469 3,792 1,805
Valuation allowance changes ........................... (198) (581) —
Non-deductible expenses .............................. (607) (792) (676)
Adjustments related to prior year tax matters ............... (126) (3,279) (1,152)
Other, net ......................................... 699 160 375
$14,785 $ 8,062 $ 63,121
(a) In connection with the fourth quarter 2009 dissolution of our captive insurance company, the likelihood of
realization of certain previously unrecognized state net operating losses is no longer remote. Accordingly, a
$18,152 deferred tax asset and related $8,523 partial valuation allowance was recognized.
(b) Includes previously unrecognized benefit in 2010 and 2008 of foreign tax credits, net of foreign income and
withholding taxes on the repatriation of foreign earnings.
Wendy’s/Arby’s participates in the Internal Revenue Service (the “IRS”) Compliance Assurance Process
(“CAP”). As part of CAP, tax years are audited on a contemporaneous basis so that all or most issues are resolved prior
to the filing of the tax return. As such, our December 28, 2008 and January 3, 2010 tax returns along with the
Wendy’s pre-merger tax returns have been settled. Our U.S. Federal income tax returns for 2007 and September 29,
2008 are not currently under examination. Certain of Wendy’s/Arby’s state income tax returns from its 1998 fiscal
year and forward remain subject to examination. We believe that adequate provisions have been made for any
liabilities, including interest and penalties that may result from the completion of these examinations.
As disclosed in Note 1, Wendy’s/Arby’s Restaurants is included in the consolidated Federal and certain state
income tax returns of Wendy’s/Arby’s. However, Wendy’s/Arby’s Restaurants provides for Federal and state income
taxes on the same basis as if consolidated returns were filed separate from Wendy’s/Arby’s. Amounts payable for
Federal and certain state income taxes are settled by Wendy’s/Arby’s Restaurants to Wendy’s/Arby’s under a tax
sharing agreement. During 2010 and 2009, Wendy’s/Arby’s Restaurants made tax sharing payments to Wendy’s/
Arby’s of $0 and $10,417, respectively. As of January 2, 2011 and January 3, 2010, the net amount due to Wendy’s/
Arby’s for Federal and state income taxes was $37,977 and $41,841, respectively.
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