Wendy's 2010 Annual Report Download - page 58

Benefit from Income Taxes
Change
Wendy’s/Arby’s
Wendy’s/Arby’s
Restaurants
2010 2009 2010 2009
Federal and state benefit (provision) on variance in (loss) income from
continuing operations before tax ................................... $(3.3) $(200.8) $ 7.3 $(156.7)
Foreign tax credits net of tax on distribution of foreign earnings ............. 6.6 (9.2) 6.6 (9.2)
Recognition of tax benefit of state net operating losses as a result of dissolution of
our captive insurance company .................................... (9.6) 9.6 (9.6) 9.6
Goodwill impairment ............................................. — 99.7 — 99.7
DFR common stock .............................................. — 20.3 — —
Other ......................................................... 0.4 4.7 2.5 1.5
$(5.9) $ (75.7) $ 6.8 $ (55.1)
Our income taxes in 2010, 2009 and 2008 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 2010 and
2008 tax benefit of foreign tax credits net of related taxes on the distribution of foreign earnings, (2) 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, (3) 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 and (4) 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”.
Income from Discontinued Operations, Net of Income Taxes
(Wendy’s/Arby’s)
Change
2010 2009
Income from discontinued operations before income taxes ........................ $(0.7) $ 0.5
Income tax changes due to settlements of income tax matters ...................... (1.1) (0.6)
(Provision for) benefit from income taxes ................................. 0.2 (0.5)
$(1.6) $(0.6)
The changes in the income from discontinued operations for 2010 and 2009 represent transactions in 2009 and
2008, respectively, 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 2011
Sales
We anticipate that certain of the factors described above which affected our 2010 company-owned same-store
sales, including current restaurant industry-wide sales trends, the uncertain economic environment, high
unemployment and competitive discounting, will continue to have an impact on sales for 2011. We expect that
Wendy’s sales will be favorably impacted by (1) product innovation, (2) expanding dayparts, and (3) modernizing our
facilities. We anticipate that Arby’s sales in 2011 will be favorably impacted by (1) our new brand positioning
highlighted by a new marketing campaign, (2) the introduction of new premium products, and (3) continued focus
on everyday value. For 2011, the net impact of new store openings and closings is not expected to have a significant
impact on consolidated sales.
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