Wendy's 2011 Annual Report Download - page 108

THE WENDY’S COMPANY AND SUBSIDIARIES
WENDY’S RESTAURANTS, LLC AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(In Thousands Except Per Share Amounts)
Our September 29, 2008 U.S. Federal income tax return (the period prior to the merger with Wendy’s) is not
currently under examination. Certain of the Companies’ 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.
Wendy’s Restaurants is included in the consolidated Federal and certain state income tax returns of The
Wendy’s Company. However, Wendy’s Restaurants provides for Federal and state income taxes on the same basis as
if consolidated returns were filed separate from The Wendy’s Company. Amounts payable for Federal and certain
state income taxes are settled by Wendy’s Restaurants to The Wendy’s Company under a tax sharing agreement.
During 2011, 2010 and 2009, Wendy’s Restaurants made tax sharing payments to The Wendy’s Company of
$13,078, $0, and $10,417, respectively. As of January 1, 2012 and January 2, 2011, the net amount due to The
Wendy’s Company for Federal and state income taxes was $26,556 and $37,977, respectively.
Uncertain Tax Positions
As of January 1, 2012, The Wendy’s Company and Wendy’s Restaurants had unrecognized tax benefits of
$30,614 and $20,429, respectively, which, if resolved favorably would reduce income tax expense by $21,604 and
$13,475, respectively. A reconciliation of the beginning and ending amount of unrecognized tax benefits follows:
The Wendy’s Company
2011 2010 2009
Beginning balance ................................................... $36,434 $39,118 $38,421
Additions:
Tax positions related to the current year .......................... — 19 6,627
Tax positions of prior years .................................... 948 4,921 1,857
Reductions:
Tax positions of prior years .................................... (3,410) (4,419) (4,241)
Settlements ................................................ (1,922) (416) (1,407)
Lapse of statute of limitations .................................. (1,436) (2,789) (2,139)
Ending balance ..................................................... $30,614 $36,434 $39,118
Wendy’s Restaurants
2011 2010 2009
Beginning balance ................................................... $26,249 $28,414 $31,717
Additions:
Tax positions related to the current year .......................... — 19 613
Tax positions of prior years .................................... 948 4,921 1,651
Reductions:
Tax positions of prior years .................................... (3,410) (3,900) (2,383)
Settlements ................................................ (1,922) (416) (1,045)
Lapse of statute of limitations .................................. (1,436) (2,789) (2,139)
Ending balance ..................................................... $20,429 $26,249 $28,414
During 2012, we believe it is reasonably possible the Companies will reduce unrecognized tax benefits by up to
$3,889, primarily as a result of the completion of certain state tax audits.
During 2011, 2010 and 2009, The Wendy’s Company recognized $501, $1,004 and $(414) of interest
(reductions) expense and $337, $425 and $(888) of penalty (reductions) expense, respectively, related to uncertain tax
positions. The Wendy’s Company has approximately $4,923 and $5,005 accrued for interest and $1,912 and $1,451
accrued for penalties as of January 1, 2012 and January 2, 2011, respectively.
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