Classmates.com 2007 Annual Report Download - page 120

UNITED ONLINE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. INCOME TAXES (Continued)
regarding realization; (4) the re-measurement of deferred tax assets in New York; (5) employee stock purchase plan compensation, the benefit of
which is not currently recognized under SFAS No. 123R but which is recognized upon a disqualified disposition; and (6) the benefit of federal
tax exempt interest income.
For the year ended December 31, 2005, the Company recorded a tax provision of $40.2 million on pre-tax income of $87.4 million,
resulting in an effective tax rate of 46.1%. The effective tax rate differs from the statutory federal income tax rate primarily due to (1) state
income taxes, net of federal benefit; (2) compensation, including stock-based compensation, that is limited under Section 162(m) of the Code;
(3) foreign losses, the benefit of which is not currently recognizable due to uncertainty regarding realization; and (4) the re-measurement of
deferred tax assets, including a change in New York State tax law.
Components of net deferred tax assets at December 31, 2007 and 2006 are as follows (in thousands):
The Company has a valuation allowance of approximately $8.6 million at December 31, 2007 to reduce deferred tax assets to the amount
that is more likely than not to be realized in future periods. Based on the Company's assessment of all available evidence, it concluded that,
primarily with the exception of certain compensation that is expected to be limited under Section 162(m) of the Code and foreign losses due to
uncertainty regarding utilization, it is more likely than not that the remaining deferred tax assets will be realized. The valuation allowance is
primarily attributable to certain
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December 31,
2007 2006
Deferred tax assets:
Net operating loss carryforwards
$
62,743
$
66,303
Depreciation and amortization
2,429
7,899
Stock
-
based compensation
10,411
8,841
Other
8,042
8,719
Total gross deferred tax assets
83,625
91,762
Less: valuation allowance
(8,623
)
(6,850
)
Total deferred tax assets after valuation allowance
75,002
84,912
Deferred tax liabilities:
Amortization of acquired intangible assets
(10,393
)
(13,552
)
Total deferred tax liabilities
(10,393
)
(13,552
)
Net deferred tax assets
$
64,609
$
71,360
December 31,
2007 2006
Current portion of net deferred tax assets
$
7,050
$
11,705
Long
-
term portion of net deferred tax assets
57,559
59,655
Net deferred tax assets
$
64,609
$
71,360