Lumber Liquidators 2014 Annual Report Download - page 69

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Lumber Liquidators Holdings, Inc.
Notes to Consolidated Financial Statements
(amounts in thousands, except share data and per share amounts)
Note 7. Income Taxes − (continued)
The tax effects of temporary differences that result in significant portions of the deferred tax accounts are
as follows:
December 31,
2014 2013
Deferred Tax Liabilities:
Prepaid Expenses ................................. $ (77) $ (72)
Depreciation and Amortization ........................ (16,900) (13,763)
Other ......................................... — (1,325)
Total Gross Deferred Tax Liabilities ....................... (16,977) (15,160)
Deferred Tax Assets:
Stock-Based Compensation Expense .................... 3,785 3,104
Reserves ....................................... 4,296 2,697
Employee Benefits ................................ 15 2,663
Inventory Capitalization ............................ 7,188 4,887
Foreign Operations ............................... 2,223 1,765
Other ......................................... 37 —
Total Gross Deferred Tax Assets ........................ 17,544 15,116
Less Valuation Allowance ........................... (2,223) (1,765)
Total Net Deferred Tax Assets ........................... 15,321 13,351
Net Deferred Tax Liability .............................. $ (1,656) $ (1,809)
In both 2014 and 2013, the Canadian operations were in a cumulative loss position. As such, the
Company has recorded a full valuation allowance on the net deferred tax assets in Canada. For the year ended
December 31, 2014, the valuation allowance increased by $458 primarily as a result of an increase in the
Canadian net operating loss. In future periods, the allowance could be reduced if sufficient evidence exists
indicating that it is more likely than not that a portion or all of these deferred tax assets will be realized.
As of December 31, 2014 and 2013, the Company had Canadian net operating loss carryforwards of
$8,577 and $7,069, respectively, which begin to expire in 2030. These net operating losses may be carried
forward up to 20 years to offset future taxable income.
The Company made income tax payments of $33,281, $30,154 and $29,035 in 2014, 2013 and 2012,
respectively.
The reconciliation of unrecognized tax benefits was as follows:
Year Ended December 31,
2014 2013 2012
Balance at beginning of year .................... $ 915 $574 $294
Increases based on tax positions related to the current year 430 341 280
Increases for tax positions of prior years ............ 161 — —
Lapse of statute ............................. (274) — —
Balance at end of year ........................ $1,232 $915 $574
As of December 31, 2014, the Company had $1.2 million of gross unrecognized tax benefits,
$0.8 million of which, if recognized, would affect the effective tax rate. It is reasonably possible that the
amount of the unrecognized tax benefit with respect to certain of the uncertain tax positions will increase or
decrease during the next 12 months; however, the Company does not expect the change to have a significant
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