Chili's 2015 Annual Report Download - page 65

The income tax effects of temporary differences that give rise to significant portions of deferred income tax
assets and liabilities as of June 24, 2015 and June 25, 2014 are as follows (in thousands):
2015 2014
Deferred income tax assets:
Leasing transactions ................................... $ 38,858 $ 40,085
Stock-based compensation .............................. 13,105 13,698
Restructure charges and impairments ...................... 2,303 16,726
Insurance reserves .................................... 18,567 18,550
Employee benefit plans ................................ 470 404
Gift cards ........................................... 18,499 15,497
Other, net ........................................... 9,804 8,975
Total deferred income tax assets ..................... 101,606 113,935
Deferred income tax liabilities: ..........................
Prepaid expenses ..................................... 16,803 16,462
Goodwill and other amortization ......................... 27,713 26,551
Depreciation and capitalized interest on property and
equipment ......................................... 19,990 20,982
Other, net ........................................... 3,963 3,680
Total deferred income tax liabilities ................... 68,469 67,675
Net deferred income tax asset ....................... $ 33,137 $ 46,260
A reconciliation of unrecognized tax benefits for the fiscal years ended June 24, 2015 and June 25, 2014 are
as follows (in thousands):
2015 2014
Balance at beginning of year .................................. $7,375 $6,388
Additions based on tax positions related to the current year ..... 760 1,582
Additions based on tax positions related to prior years ......... 18 347
Settlements with tax authorities ........................... (371) (339)
Expiration of statute of limitations ......................... (1,694) (603)
Balance at end of year ....................................... $6,088 $7,375
The total amount of unrecognized tax benefits that would favorably affect the effective tax rate if resolved
in our favor due to the effect of deferred tax benefits was $4.1 million and $4.9 million as of June 24, 2015 and
June 25, 2014, respectively. During the next twelve months, we anticipate that it is reasonably possible that the
amount of unrecognized tax benefits could be reduced by approximately $0.8 million ($0.6 million of which
would affect the effective tax rate due to the effect of deferred tax benefits) either because our tax position will
be sustained upon audit or as a result of the expiration of the statute of limitations for specific jurisdictions.
We recognize accrued interest and penalties related to unrecognized tax benefits in income tax
expense. During fiscal 2015, we recognized an expense of approximately $0.2 million in interest. During fiscal
2014 and 2013, we recognized a benefit of approximately $0.3 million and an expense of $0.5 million,
respectively, in interest due to the reduction of accrued interest from statute expirations and settlements, net of
accrued interest for remaining positions. As of June 24, 2015, we had $2.2 million ($1.5 million net of a $0.7
million Federal deferred tax benefit) of interest and penalties accrued, compared to $2.5 million ($1.7 million net
of a $0.8 million Federal deferred tax benefit) at June 25, 2014.
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