Express Scripts 2011 Annual Report Download - page 78

Express Scripts 2011 Annual Report
76
The deferred tax assets and deferred tax liabilities recorded in our consolidated balance sheet are as
follows:
December 31,
(in millions)
2011
2010
Deferred tax assets:
Allowance for doubtful accounts
$ 11.6
$ 17.7
Net operating loss carryforwards and other tax
attributes
33.0
34.8
Deferred compensation
7.0
5.6
Equity compensation
42.9
38.5
Accrued expenses
51.6
73.6
Other
3.9
3.4
Gross deferred tax assets
150.0
173.6
Less valuation allowance
(25.1)
(23.2)
Net deferred tax assets
124.9
150.4
Deferred tax liabilities:
Depreciation and property differences
(100.8)
(71.1)
Goodwill and customer contract amortization
(516.6)
(438.0)
Prepaids
(0.8)
(1.4)
Other
(7.4)
(2.8)
Gross deferred tax liabilities
(625.6)
(513.3)
Net deferred tax liabilities
$ (500.7)
$ (362.9)
As of December 31, 2011, we have $25.8 million of state net operating loss carryforwards which expire
between 2012 and 2031. A valuation allowance of $19.2 million exists for a portion of these deferred tax assets. The
net current deferred tax asset is $45.8 million and $86.0 million, and the net long-term deferred tax liability,
included in other liabilities, is $546.5 million and $448.9 million as of December 31, 2011 and 2010, respectively.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
(in millions)
2011
2010
2009
Balance at January 1
$ 56.4
$ 56.1
$ 40.4
Additions for tax positions related to prior years
7.1
7.4
11.1
Reductions for tax positions related to prior years
(29.3)
(5.0)
(2.2)
Additions for tax positions related to the current year
4.9
-
12.9
Reductions for tax positions related to the current year
-
(1.8)
-
Reductions attributable to settlements with taxing authorities
(5.1)
-
(0.2)
Reductions as a result of a lapse of the applicable statute of limitations
(1.7)
(0.3)
(5.9)
Balance at December 31
$ 32.3
$ 56.4
$ 56.1
Included in our unrecognized tax benefits are $19.2 million of uncertain tax positions that would impact our
effective tax rate if recognized.
We have recorded $3.7 million, $2.4 million, and $0.7 million of interest and penalties in our consolidated
statement of operations as of December 31, 2011, 2010, and 2009, respectively, resulting in $11.8 million and $8.1
million of accrued interest and penalties in our consolidated balance sheet as of December 31, 2011 and 2010,
respectively. Interest was computed on the difference between the tax position recognized in accordance with
accounting guidance and the amount previously taken or expected to be taken in our tax returns.
The Internal Revenue Service (―IRS‖) concluded its examination of our consolidated 2005 – 2007 U.S.
federal income tax returns in the second quarter of 2011. Our U.S. federal income tax returns for tax years 2008 and
beyond remain subject to examination, and the IRS commenced an examination of our consolidated 2008 – 2009
U.S. federal income tax returns in the third quarter of 2011 that is anticipated to be concluded in 2013. Our state
income tax returns for 2007 and beyond, as well as certain returns prior to 2007, also remain subject to examination
by various state authorities with the latest statute expiring on December 31, 2015.