CarMax 2013 Annual Report Download - page 61

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TEMPORARY DIFFERENCES RESULTING IN DEFERRED TAX ASSETS AND LIABILITIES
As of February 28 or 29
(In thousands)
2013 2012
Deferred tax assets:
Accrued expenses
$ 35,270 $ 33,888
Partnership basis
70,737 55,710
Property and equipment (1)
3,510 12,038
Stock compensation
53,297 53,635
Derivatives (2)
3,904 ―
Capital loss carry forward
1,110 2,152
Total gross deferred tax assets 167,828
157,423
Less: valuation allowance (1,110) (2,152)
N
et gross deferred tax assets 166,718
155,271
Deferred tax liabilities:
Prepaid expenses 9,429
6,892
Inventory
6,221 3,240
Derivatives
― 2,067
Total gross deferred tax liabilities 15,650
12,199
N
et deferred tax asset $ 151,068 $ 143,072
(1) Includes temporary differences related to our sale-leaseback transactions accounted for as financings.
(2) The year ended February 28, 2013, includes a tax benefit adjustment of $8,518 related to prior years.
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, 2013, relates to capital loss carryforwards that are not more likely than not to be
utilized prior to their expiration.
RECONCILIATION OF UNRECOGNIZED TAX BENEFITS
Years Ended February 28 or 29
(In thousands) 2013 2012 2011
Balance at beginning of year $ 20,930 $ 18,662 $ 21,952
Increases for tax positions of prior years 1,685 5,403 10,183
Decreases for tax positions of prior years (596) (6,918) (17,017)
Increases based on tax positions related to the current year 7,491 4,754 6,712
Settlements (4,136) (334) (3,168)
Lapse of statute (315) (637) ―
Balance at end of year $ 25,059 $ 20,930 $ 18,662
As of February 28, 2013, we had $25.1 million of gross unrecognized tax benefits, $5.4 million of which, if
recognized, would affect our effective tax rate. It is reasonably possible that the amount of the unrecognized tax
benefit with respect to certain of our uncertain tax positions will increase or decrease during the next 12 months;
however, we do not expect the change to have a significant effect on our results of operations, financial condition or
cash flows. As of February 29, 2012, we had $20.9 million of gross unrecognized tax benefits, $3.9 million of
which, if recognized, would affect our effective tax rate. 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.
Our continuing practice is to recognize interest and penalties related to income tax matters in SG&A expenses. Our
accrual for interest increased $0.2 million to $1.3 million as of February 28, 2013, from $1.1 million as of
February 29, 2012. Our accrual for interest increased $0.6 million to $1.1 million as of February 29, 2012, from
$0.5 million as of February 28, 2011.
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