Radio Shack 2012 Annual Report Download - page 64

62
The components of income tax expense (benefit) were as
follows:
Year Ended December 31,
(In millions) 2012 2011 2010
Current:
Federal $ (44.4) $ (0.4) $ 92.8
State (1.8)
3.4 12.3
Foreign 2.6 2.0 2.4
(43.6) 5.0 107.5
Deferred:
Federal 56.0 31.6 11.3
State 13.7 2.8 1.2
Foreign (0.8)
0.8 0.2
68.9 35.2 12.7
Income tax expense $ 25.3 $ 40.2 $ 120.2
We have recognized an income tax benefit with respect to
our current U.S. operating losses and losses generated in
certain state jurisdictions because we are able to carry back
those losses and offset prior year taxable income.
The significant components of deferred income tax assets
and liabilities were as follows:
December 31,
(In millions) 2012 2011
Deferred tax assets:
Inventory valuation adjustments $ 15.9 $ 10.6
Insurance reserves 14.4 14.6
Reserve for estimated
wireless service deactivations
14.1 8.9
Deferred revenue 13.4 7.9
Foreign branch net operating
losses
12.1 7.1
Indirect effect of unrecognized
tax benefits 11.6 11.1
Deferred compensation 10.1 12.2
Stock-based compensation 8.0 8.6
Accrued average rent 7.6 8.7
State net operating loss, net of
federal benefit 5.8 1.2
Other 15.0 11.9
Gross deferred tax assets 128.0 102.8
Valuation allowance (80.9) (7.1)
Total deferred tax assets 47.1 95.7
Deferred tax liabilities:
Depreciation and amortization 29.7 8.7
Deferred taxes on foreign
operations 4.0 4.1
Other 10.7 11.4
Total deferred tax liabilities 44.4 24.2
Net deferred tax assets $ 2.7 $ 71.5
Deferred tax assets and liabilities were included in the
Consolidated Balance Sheets as follows:
December 31,
(In millions) 2012 2011
Other current assets $ 23.9 $ 54.4
Other non-current assets -- 17.1
Other non-current liabilities (21.2) --
Net deferred tax assets $ 2.7 $ 71.5
We had deferred tax assets associated with state net
operating loss carryforwards of $9.0 million, net of $3.2
million federal benefit, and $1.9 million, net of 0.7 million
federal benefit, as of December 31, 2012 and 2011,
respectively. The related state net operating losses expire
at various dates between 2016 and 2032. At December 31,
2012 and 2011, deferred tax assets associated with the net
operating losses of our foreign branches were $12.1 million
and $7.1 million, respectively. The net operating losses of
our foreign branches will expire on various dates between
2016 and 2032. Deferred tax assets associated with U.S.
general business credits, which expire on various dates
between 2031 and 2032, were $2.4 million and $1.1 million
as of December 31, 2012 and 2011, respectively.
A reconciliation of the consolidated valuation allowance for
deferred tax assets from January 1, 2010, to December 31,
2012, is as follows:
(In millions) 2012 2011 2010
Balance at beginning of year $ 7.1 $ 3.9 $ 1.9
Additions, charged to
expense 73.8 3.2 2.0
Deductions -- -- --
Balance at end of year $ 80.9
$ 7.1 $ 3.9
In 2012 we established a valuation allowance of $68.8
million with respect to our U.S. federal deferred tax assets
and certain state deferred tax assets. We considered all
available positive and negative evidence in evaluating
whether these deferred tax assets were more likely than not
to be realized. The significant negative evidence of our
cumulative loss before income taxes for 2011 and 2012 and
the unfavorable shift in our business could not be overcome
by considering other sources of taxable income, which
included the reversal of taxable temporary differences or
tax-planning strategies. These deferred tax assets are still
available to us to offset future taxable income, and we will
adjust this valuation allowance if we change our
assessment of the amount of deferred income tax asset
that is more likely than not to be realized.
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.
At December 31, 2012, the cumulative amount of these
earnings was $5.6 million and the amount of the