CarMax 2011 Annual Report Download - page 72

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62
EFFECTIVE INCOME TAX RATE RECONCILIATION
Federal statutory income tax rate 35.0 % 35.0 % 35.0%
State and local income taxes, net of federal benefit 3.3 3.0 2.7
Nondeductible and other items (0.2) (0.2) 0.3
Valuation allowance (0.2) ―0.8
Effective income tax rate 37.9 % 37.8 % 38.8%
2011
2010
2009
Years Ended February 28
TEMPORARY DIFFERENCES RESULTING IN DEFERRED TAX ASSETS AND LIABILITIES
(In thousands)
Deferred tax assets:
Accrued expenses 38,287$ 33,795$
Partnership basis 47,798 15,286
Inventory ― 1,960
Stock compensation 45,726 44,526
Capital loss carry forward 1,445 2,514
Total gross deferred tax assets 133,256 98,081
Less: valuation allowance (1,445) (2,514)
Net gross deferred tax assets 131,811 95,567
Deferred tax liabilities:
Prepaid expenses 6,394 8,832
Inventory 3,668 ―
Depreciation and amortization 22,116 21,763
Other 2,164 2,143
Total gross deferred tax liabilities 34,342 32,738
Net deferred tax asset 97,469$ 62,829$
As of February 28
2011
2010
As discussed in Note 2(E), as of March 1, 2010, we adopted FASB ASU Nos. 2009-16 and 2009-17 and amended
our existing warehouse facility. As a result, we wrote-off the deferred tax liability applicable to the remaining
interest-only strip receivables related to term securitizations, previously recorded in retained interest in securitized
receivables, and we recorded a net deferred tax asset, primarily related to the establishment of the allowance for loan
losses. The combined effect of these adjustments was $54.9 million.
Except for amounts for which a valuation allowance has been provided, we believe it is more likely than not that the
results of future operations will generate sufficient taxable income to realize the deferred tax assets. The valuation
allowance as of February 28, 2011, relates to capital loss carryforwards that are not more likely than not to be
utilized prior to their expiration.
RECONCILIATION OF UNRECOGNIZED TAX BENEFITS
(In thousands)
Balance at beginning of year 21,952$ 25,584$ 32,669$
Increases for tax positions of prior years 10,183 4,756 10,757
Decreases for tax positions of prior years (17,017) (5,114) (10,265)
Increases based on tax positions related to the current year 6,712 6,186 136
Settlements (3,168) (9,460) (7,713)
Balance at end of year 18,662$ 21,952$ 25,584$
Years Ended February 28
2011
2010
2009
As of February 28, 2011, we had $18.7 million of gross unrecognized tax benefits, $3.5 million of which, if
recognized, would affect our effective tax rate. It is reasonably possible that the amount of the unrecognized tax