CarMax 2016 Annual Report Download - page 61
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Temporary Differences Resulting in Deferred Tax Assets and Liabilities
As of February 29 or 28
(In thousands) 2016 2015
Deferred tax assets:
Accrued expenses $ 60,341 $ 52,933
Partnership basis 97,586 95,443
Stock compensation 56,606 63,148
Derivatives 8,320 4,010
Capital loss carry forward 1,807 1,597
Total deferred tax assets 224,660 217,131
Less: valuation allowance (1,807)(1,597)
Total deferred tax assets after valuation allowance 222,853 215,534
Deferred tax liabilities:
Prepaid expenses 19,496 17,935
Property and equipment 32,691 14,816
Inventory 8,804 7,045
Total deferred tax liabilities 60,991 39,796
Net deferred tax asset $ 161,862 $ 175,738
Except for amounts for which a valuation allowance has been provided, we believe it is more likely than not that the availability
of loss carrybacks and the results of future operations will generate sufficient taxable income to realize the deferred tax assets. The
valuation allowance as of February 29, 2016, 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 29 or 28
(In thousands) 2016 2015 2014
Balance at beginning of year $ 24,951 $ 26,330 $ 25,059
Increases for tax positions of prior years 125 1,549 1,523
Decreases for tax positions of prior years (853)(5,999)(4,658)
Increases based on tax positions related to the current year 5,256 5,467 5,960
Settlements (830)(612)(809)
Lapse of statute (1,878)(1,784)(745)
Balance at end of year $ 26,771 $ 24,951 $ 26,330
As of February 29, 2016, we had $26.8 million of gross unrecognized tax benefits, $10.3 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 28, 2015, we had $25.0 million
of gross unrecognized tax benefits, $9.6 million of which, if recognized, would affect our effective tax rate. As of February 28,
2014, we had $26.3 million of gross unrecognized tax benefits, $7.6 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 and penalties increased $0.6 million to $2.0 million as of February 29, 2016, from $1.4 million as of February 28, 2015. Our
accrual for interest and penalties decreased $0.2 million to $1.4 million as of February 28, 2015, from $1.6 million as of February 28,
2014.
CarMax is subject to U.S. federal income tax as well as income tax of multiple states and local jurisdictions. With a few insignificant
exceptions, we are no longer subject to U.S. federal, state and local income tax examinations by tax authorities for years prior to
fiscal 2013.