Wendy's 2014 Annual Report Download - page 97

THE WENDY’S COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(In Thousands Except Per Share Amounts)
Deferred tax assets (liabilities) are set forth below:
Year End
2014 2013
Deferred tax assets:
Net operating loss and credit carryforwards ............... $ 82,143 $ 115,910
Accrued compensation and related benefits ............... 40,268 40,289
Unfavorable leases .................................. 34,140 13,913
Accrued expenses and reserves ......................... 23,336 31,555
Deferred rent ...................................... 15,214 13,121
Other ............................................ 9,122 8,682
Valuation allowances ................................ (11,213) (10,548)
Total deferred tax assets .................................. 193,010 212,922
Deferred tax liabilities:
Intangible assets .................................... (506,251) (473,011)
Owned and leased fixed assets net of related obligations ...... (89,117) (83,352)
Other ............................................ (17,824) (18,996)
Total deferred tax liabilities ............................... (613,192) (575,359)
$(420,182) $(362,437)
Changes in the Company’s deferred tax asset and liability balances were primarily the result of the utilization of
net operating loss and credit carryforwards and the impact of the system optimization initiative, as described in
Note 2, primarily related to favorable and unfavorable leases and compensation accruals.
The amounts and expiration dates of net operating loss and tax credit carryforwards are as follows:
Amount Expiration
Tax credit carryforwards:
U.S. federal credits (primarily foreign tax credits and jobs credits) . . . $ 90,136 2018-2034
State tax credits ......................................... 504 2019-2023
Foreign tax credits of non-U.S. subsidiaries .................... 2,313 2021-2023
Total ................................................. $ 92,953
Net operating loss carryforwards:
State net operating loss carryforwards ......................... $1,087,272 2015-2033
As of December 28, 2014, the Company had a deferred tax asset of $124,566 related to the state net operating
loss carryforwards and federal, foreign and state tax credits before reduction for unrecognized tax benefits related to
excess share-based compensation deductions. In 2014 and prior years, we deducted $142,422 in excess of cumulative
compensation costs relating to the exercise of stock options and vesting of restricted stock. In 2014, the Company has
recognized $9,363 of the $51,786 tax benefit relating to these deductions and will continue to do so in future periods
as it continues to have income taxes currently payable against which the benefits can be realized as a result of utilizing
its net operating loss and credit carryforwards. The Company has recognized the $9,363 tax benefit as a reduction of
current income taxes payable with an equal offsetting increase in “Additional paid-in capital.”
The Company’s valuation allowances of $11,213, $10,548 and $21,052 as of December 28, 2014,
December 29, 2013 and December 30, 2012, respectively, relate to state net operating loss and foreign and state tax
credit carryforwards. Valuation allowances increased $665 during the year ended December 28, 2014 primarily as a
result of generating foreign tax credits with a limited carryforward period in 2014 that are in excess of what the
Company expects to utilize prior to their expiration. Valuation allowances decreased $10,504 during the year ended
December 29, 2013 primarily as a result of changes to the legal form of certain subsidiaries resulting in changes in
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