Wendy's 2014 Annual Report Download - page 98

THE WENDY’S COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(In Thousands Except Per Share Amounts)
expected future state taxable income available to utilize certain state net operating loss carryforwards. Valuation
allowances increased $3,655 during the year ended December 30, 2012 primarily as a result of changes in state net
operating losses.
During the first quarter of 2013, the Company finalized its long-term investment plan with respect to the
Company’s non-U.S. earnings. There are no plans to repatriate cash from, and the Company intends to indefinitely
reinvest undistributed earnings of, its non-U.S. subsidiaries. As such, the Company reversed $1,832 of deferred tax
liabilities during the year ended December 29, 2013, relating to investments in foreign subsidiaries which the
Company now considers permanently invested outside of the U.S.
Consequently, deferred income taxes have not been recorded for temporary differences related to investments in
non-U.S. subsidiaries. These temporary differences were approximately $63,800 at December 28, 2014 and consisted
primarily of undistributed earnings considered permanently invested in operations outside the U.S. Determination of
the incremental income tax liability on these unremitted earnings is dependent on circumstances existing if, and when
remittance occurs. However, we estimate that if unremitted earnings were to have been remitted, the additional tax
liability would have been approximately $6,100 at December 28, 2014.
The reconciliation of income tax computed at the U.S. Federal statutory rate to reported income tax is set forth
below:
Year Ended
2014 2013 2012
Income tax (provision) benefit at the U.S. Federal statutory rate ...... $(70,444) $(20,668) $ 4,594
State income tax (provision) benefit, net of U.S. Federal income tax
effect ................................................. (5,309) (1,370) 11,364
Foreign and U.S. tax effects of foreign operations (a) .............. 4,089 2,886 347
Jobs tax credits, net ........................................ 2,084 4,384 970
Dividends received deduction (b) ............................. — 1,424 1,133
Corrections related to prior years’ tax matters (c) ................. — — 7,620
Non-deductible goodwill (d) ................................ (9,389) (9,875) —
Valuation allowances (e) .................................... (665) 10,504 (3,655)
Non-deductible expenses and other, net ........................ (201) (1,439) (1,290)
$(79,835) $(14,154) $21,083
(a) 2013 includes reversal of deferred taxes on investments in foreign subsidiaries now considered permanently
invested outside of the U.S.
(b) We received dividends of $40,145 and $4,625 during 2013 and 2012, respectively, from our investment in
Arby’s. See Note 6 for further information.
(c) 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 $3,300, the effects of a one-time federal employment tax credit in 2011 of $2,220 and a
correction to certain deferred tax assets and liabilities of $2,100.
(d) Substantially all of the goodwill included in the gain on sales of restaurants in 2014 and 2013, including under
our system optimization initiative as noted below, and the impairment of international goodwill in 2013 was
non-deductible for tax purposes. See Notes 2, 3 and 8 for further information.
(e) Includes changes for deferred tax assets generated or utilized during the current year and changes in our judgment
regarding the likelihood of the utilization of deferred tax assets. 2013 primarily relates to changes in the likelihood
of the utilization of deferred tax assets related to state net operating loss carryforwards.
The Company’s system optimization initiative described in Note 2 impacted our tax provision due to the
following: 1) goodwill disposed of in connection with the sale of restaurants during 2014 and 2013 of $4,914 and
$7,471, respectively, substantially all of which was non-deductible for tax purposes, (2) changes to the Canadian
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