Radio Shack 2011 Annual Report Download - page 67

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The following table contains the actuarial assumptions used
to determine the benefit obligations and the net periodic
benefit cost for each year presented:
2011 2010 2009
Benefit obligations:
Discount rate 3.3% 4.1% 4.7%
Rate of compensation
increase 3.5% 3.5% 3.5%
Net periodic benefit cost:
Discount rate 4.1% 4.7% 5.9%
Rate of compensation
increase 3.5% 3.5% 3.5%
We base our discount rate on the rates of return available
on high-quality bonds with maturities approximating the
expected period over which the pension benefits will be
paid. The rate of compensation increase is based on
historical and expected increases.
As the SERP is an unfunded plan, benefit payments are
made from the general assets of RadioShack. The
expected future benefit payments based upon the
assumptions described above and including benefits
attributable to future employee service for the following
periods are as follows:
(In millions)
2012 $ 3.6
2013 3.4
2014 3.0
2015 2.5
2016 1.6
2017 through 2021 4.4
In 2012, we expect to make contributions to the plan of $3.6
million in the form of benefit payments.
NOTE 9 – INCOME TAXES
The following is a reconciliation of the federal statutory
income tax rate to our income tax expense:
Year Ended December 31,
(In millions) 2011
2010
2009
Components of income from
continuing operations:
United States $ 117.0 $ 308.8 $ 312.5
Foreign (9.7)
2.1 2.1
Income from continuing
operations before income
taxes
107.3
310.9
314.6
Statutory tax rate x 35.0%
x 35.0%
x 35.0%
Federal income tax expense
at statutory rate 37.6 108.8 110.1
State income taxes,
net of federal benefit 2.1 8.3 8.7
Unrecognized tax benefits 2.5 1.0 (3.1)
Other, net (2.0)
2.1 2.4
Total income tax expense $ 40.2 $ 120.2 $ 118.1
Effective tax rate 37.5%
38.7%
37.5%
The components of income tax expense were as follows:
Year Ended December 31,
(In millions) 2011
2010 2009
Current:
Federal $ (0.4)
$ 92.8 $ 103.4
State 3.4 12.3 6.7
Foreign 2.0 2.4 2.6
5.0 107.5 112.7
Deferred:
Federal 31.6 11.3 5.8
State 2.8 1.2 (0.1)
Foreign 0.8 0.2 (0.3)
35.2 12.7 5.4
Income tax expense $ 40.2 $ 120.2 $ 118.1
The tax effect of cumulative temporary differences that
gave rise to the deferred tax assets and liabilities were as
follows:
December 31,
(In millions) 2011 2010
Deferred tax assets:
Insurance reserves $ 14.6 15.5
Deferred compensation 12.2 13.7
Indirect effect of unrecognized
tax benefits 11.1 10.1
Inventory valuation adjustments 10.6 11.4
Reserve for estimated
wireless service deactivations
8.9 12.0
Deferred revenue 7.9 13.6
Accrued average rent 8.7 8.5
Depreciation and amortization -- 16.6
Other 21.7 26.9
Total deferred tax assets 95.7 128.3
Deferred tax liabilities:
Depreciation and amortization 8.7 --
Deferred taxes on foreign
operations 4.1 6.6
Other 11.4 14.4
Total deferred tax liabilities 24.2 21.0
Net deferred tax assets $71.5 $107.3
Deferred tax assets and liabilities were included in the
Consolidated Balance Sheets as follows:
December 31,
(In millions) 2011 2010
Other current assets $ 54.4 $ 61.4
Other non-current assets 17.1 45.9
Net deferred tax assets $ 71.5 $ 107.3
We anticipate that we will generate sufficient pre-tax income
in the future to realize the full benefit of U.S. deferred tax
assets related to future deductible amounts. Accordingly, a
valuation allowance was not required at December 31, 2011
or 2010. We have not recorded deferred U.S. income taxes
or foreign withholding taxes on temporary differences
resulting from earnings for certain foreign subsidiaries that
are considered permanently invested outside the United
States. The cumulative amount of these earnings and the
amount of the unrecognized deferred tax liability related to