Wendy's 2011 Annual Report Download - page 50

Download and view the complete annual report

Please find page 50 of the 2011 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 168

  • 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
  • 167
  • 168

Our income taxes in 2011, 2010 and 2009 were impacted by variations in 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 tax benefit of foreign tax
credits net of related taxes on the distribution of foreign earnings and (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.
Net Loss from Discontinued Operations
2011 Change
Wendy’s
Restaurants Corporate
The Wendy’s
Company
Income from discontinued operations before income taxes ................. $37.2 $— $ 37.2
Provision for income taxes .......................................... (14.0) — (14.0)
23.2 — 23.2
Loss on disposal, net of income taxes .................................. (8.8) — (8.8)
$ 14.4 $— $ 14.4
2010 Change
Wendy’s
Restaurants Corporate
The Wendy’s
Company
Loss from discontinued operations before income taxes .................... $(31.6) $(0.7) $(32.3)
Benefit from income taxes .......................................... 11.1 (0.9) 10.2
$(20.5) $(1.6) $(22.1)
The increase in income (loss) from discontinued operations of $23.2 million during 2011 was primarily due to
the sale of Arby’s on July 4, 2011 (the first day of our third quarter). Net loss from discontinued operations for 2011
also includes a loss on disposal of $8.8 million, net of income tax expense of $3.6 million.
The increase in loss from discontinued operations of $20.5 million during 2010 was primarily due to a decline
in Arby’s company-owned same-store sales of 7.1%. Additionally, income (loss) from discontinued operations for
Corporate decreased $1.6 million due to the settlement of income tax and other matters in 2009 related to our former
premium beverage and soft drink concentrate business and our former utility and municipal services and refrigeration
business segments which did not recur.
Outlook for 2012
Sales
We expect that sales will be favorably impacted primarily by improving our North America business by
elevating the total customer experience through core menu improvement, step-change product innovation and
focused execution of its brand positioning. The net impact of new store openings and closings is not expected to have
a significant impact on sales.
Franchise Revenues
We expect that the sales trends for franchised restaurants will continue to be generally impacted by factors
described above under “Sales” related to the improvements in the North America business and development of the
breakfast program. The net impact of new store openings and closings is not expected to have a significant impact on
franchise revenues.
Cost of Sales
We expect cost of sales as a percent of sales will be favorably impacted by the same factors described above for
sales; however, this favorable impact is expected to be negatively impacted by an increase in overall commodity costs.
46