Lumber Liquidators 2008 Annual Report Download - page 68

The reconciliation of significant differences between income tax expense (benefit) applying the federal
statutory rate of 35% and the actual income tax expense (benefit) at the effective rate are as follows:
Year Ended December 31,
2008 2007 2006
Income Tax Expense at Federal Statutory Rate ....... $13,227 35.0% $6,474 35.0% $7,370 35.0%
Increases (Decreases):
State Income Taxes, Net of Federal Income Tax
Benefit ................................. 1,939 5.1% 838 4.5% 855 4.1%
Reduction of Deferred Tax Benefit Associated
with the Variable Plan ..................... 678 1.7% — 0.0% — 0.0%
Excess Tax Benefit on Stock Option Exercises . . . (40) 0.0% — 0.0% — 0.0%
Other .................................... (161) (0.4)% (141) (0.7)% (65) (0.3)%
Total ........................................ $15,643 41.4% $7,171 38.8% $8,161 38.8%
Pursuant to the Variable Plan, the Variable Right fully vested in conjunction with the IPO and was exercised
on February 1, 2008. At that time, the Company had no excess tax deductions from previous stock-based awards,
and therefore recognized additional tax expense related to the non-deductible portion of the Variable Plan’s
cumulative compensation costs. This additional income tax expense was the result of a decrease in the fair value
of the Vested Shares from the vest date to the exercise date. Subsequent stock option exercises during 2008
resulted in an excess tax benefit that reduced income tax expense.
The tax effects of temporary differences that result in significant portions of the deferred tax accounts are as
follows:
December 31,
2008 2007
Deferred Tax Liabilities:
Prepaid Expenses ................................................ $ 337 $ 393
Depreciation and Amortization ..................................... 885 333
Total Deferred Tax Liabilities .......................................... 1,222 726
Deferred Tax Assets:
Stock-Based Compensation Expense ................................ 2,552 2,565
Reserves ...................................................... 1,712 919
Employee Benefits .............................................. 865 605
Other ......................................................... 393 384
Total Deferred Tax Assets ............................................. 5,522 4,473
Net Deferred Tax Asset ............................................... $4,300 $3,747
The Company made income tax payments of $15,112, $7,383 and $6,989 in 2008, 2007 and 2006,
respectively.
The Company files income tax returns with the U.S. federal government and various state jurisdictions. In
the normal course of business, we are subject to examination by federal and state taxing authorities.
NOTE 8. PROFIT SHARING PLAN
The Company maintains a profit-sharing plan, qualified under Section 401(k) of the Internal Revenue Code,
for all eligible employees. Employees are eligible to participate following the completion of one year of service
and attainment of age 21. The Company matches 50% of employee contributions up to 6% of eligible
compensation. The Company’s matching contributions, included in SG&A, totaled $344, $231 and $160 in 2008,
2007 and 2006, respectively.
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