Wendy's 2014 Annual Report Download - page 47

Download and view the complete annual report

Please find page 47 of the 2014 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 148

  • 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

(Provision for) Benefit from Income Taxes
Change
2014 2013
Federal and state (provision) benefit on variance in income (loss) from
continuing operations before income taxes and noncontrolling interests . . .
$(59.7) $(32.2)
Valuation allowances .......................................... (11.2) 14.2
Non-deductible goodwill on dispositions ........................... (4.5) —
Federal employment tax credits .................................. (2.3) 3.4
System optimization initiative ................................... 7.7 (12.6)
Non-deductible international goodwill impairment ................... 3.1 (3.1)
Foreign and U.S. tax effects of foreign operations ..................... 1.2 2.5
Corrections related to prior years’ tax matters ........................ — (7.6)
Other ...................................................... — 0.1
$(65.7) $(35.3)
Our income taxes in 2014, 2013 and 2012 were impacted by variations in income from continuing operations
before income taxes and noncontrolling interests, adjusted for recurring items such as non-deductible expenses and state
income taxes, as well as non-recurring discrete items. Discrete items, which may occur in any given year but are not
consistent from year to year include the following: (1) valuation allowances decreased in 2013 primarily as a result of
changes in expected future state taxable income available to offset certain state net operating loss carryforwards,
(2) non-deductible goodwill included in the gain on sale of restaurants in 2014 not included in our system optimization
initiative of $4.5 million, (3) non-deductible goodwill included in the gain on sale of restaurants in connection with our
system optimization initiative of $4.9 million and $7.5 million in 2014 and 2013, respectively, and a related increase in
net deferred state taxes of $5.1 million in 2013 and (4) certain corrections in 2012 related to tax matters in prior years for
the effects of tax depreciation in states that do not follow federal law of $3.3 million, the effects of a one-time federal
employment tax credit of $2.2 million and a correction to certain deferred tax assets and liabilities of $2.1 million.
Net (Loss) Income from Discontinued Operations
Net (loss) income from discontinued operations related to our sale of Arby’s includes (loss) income from
discontinued operations of $(0.3) million and $2.0 million in 2013 and 2012, respectively, net of a benefit from
income taxes of $0.2 million and $1.0 million, respectively. Net income from discontinued operations in 2012 also
includes a loss on disposal of $0.5 million net of a benefit from income taxes of $0.3 million.
Net Loss (Income) Attributable to Noncontrolling Interests
A wholly-owned subsidiary of Wendy’s entered into a joint venture for the operation of Wendy’s restaurants in
Japan (the “Japan JV”) with Ernest M. Higa and Higa Industries, Ltd., a corporation organized under the laws of
Japan (collectively, the “Higa Partners”) during the second quarter of 2011. We have reflected a net loss attributable
to noncontrolling interests of $0.9 million in 2013 as a result of the consolidation of the Japan JV in the second
quarter of 2013. Prior to the consolidation, the Japan JV was accounted for as an equity method investment and we
reported our 49% share of the net loss of the Japan JV in “Other operating expense, net.” On December 27, 2013,
Wendy’s transferred its interest in the Japan JV to Higa Industries, Ltd. for nominal consideration, terminating the
joint venture, and establishing the Japan JV as a wholly-owned entity of the Higa Partners. Therefore, Wendy’s
deconsolidated the Japan JV and recognized a loss of $1.7 million in 2013, which was included in “Other operating
expense, net.”
Jurl, a 99.7% owned subsidiary, completed the sale of our investment in Jurlique in February 2012. In 2012, we
reflected net income attributable to noncontrolling interests of $2.4 million, net of an income tax benefit of
$1.3 million, in connection with the equity and profit interests discussed below. As a result of this sale and distributions
to the minority shareholders, there are no remaining noncontrolling interests in this consolidated subsidiary.
Prior to 2009 when our predecessor entity was a diversified company active in investments, we had provided
the Former Executives and certain other former employees, equity and profit interests in Jurl. In connection with the
gain on sale of Jurlique, we distributed, based on the related agreement, approximately $3.7 million in 2012 to Jurl’s
minority shareholders, including approximately $2.3 million to the Former Executives.
43