Radio Shack 2013 Annual Report Download - page 59

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The components of income tax expense (benefit) were as
follows:
Year Ended December 31,
(In millions) 2013 2012
2011
Current:
Federal $ (15.4) $
(37.8)
$ 20.9
State (2.4)
(2.1)
5.5
Foreign 0.9 2.6
2.0
(16.9)
(37.3)
28.4
Deferred:
Federal 1.3 57.2 16.7
State -- 13.5
1.6
Foreign 2.6
(0.8)
0.8
3.9 69.9
19.1
Total income tax
(benefit)expense $ (13.0) $ 32.6 $ 47.5
The income tax benefit recognized in 2013 primarily relates
to the effective settlement of certain federal and state
income tax matters resulting in the recognition of previously
unrecognized tax benefits and the reversal of interest
accrued thereon. In 2012 we recognized an income tax
benefit with respect to our U.S. operating losses and losses
generated in certain state jurisdictions because we were
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) 2013 2012
Deferred tax assets:
Federal net operating loss
$
132.0 $ --
Inventory valuation adjustments 19.7
15.9
Insurance reserves 15.7
14.4
Reserve for estimated
wireless service deactivations 2.8 14.1
Deferred revenue 4.5
13.4
Foreign branch net
operating losses 18.3
12.1
Indirect effect of unrecognized
tax benefits 7.9
11.6
Deferred compensation 9.1
10.1
Stock-based compensation 4.7
8.0
Accrued average rent 7.0
7.6
State net operating loss, net
of federal benefit 21.0
5.8
Other 16.6
15.0
Gross deferred tax assets 259.3
128.0
Valuation allowance (228.8) (80.9)
Total deferred tax assets 30.5
47.1
Deferred tax liabilities:
Depreciation and amortization 13.5
29.7
Deferred taxes on foreign operations 3.9
4.0
Other 14.3
10.7
Total deferred tax liabilities 31.7
44.4
Net deferred tax (liabilities) assets
$
(1.2) $ 2.7
Deferred tax assets and liabilities were included in the
Consolidated Balance Sheets as follows:
December 31,
(In millions) 2013 2012
Other current assets $ -- $ 23.9
Other non-current assets 0.1 --
Other current liabilities (1.3)
--
Other non-current liabilities --
(21.2)
Net deferred tax assets $ (1.2)
$ 2.7
We had deferred tax assets associated with our federal net
operating losses, which will expire in 2033, of $132 million
as of December 31, 2013. Net operating losses generated
in 2011 and 2012 were carried back to offset prior year
taxable income. Deferred tax assets associated with U.S.
general business credits, which expire on various dates
between 2031 and 2033, were $2.8 million and $2.4 million
as of December 31, 2013 and 2012, respectively.
In addition, we had deferred tax assets associated with
state net operating loss carryforwards of $32.3 million, net
of $11.3 million federal benefit, and $9.0 million, net of $3.2
million federal benefit, as of December 31, 2013 and 2012,
respectively. The related state net operating losses expire
at various dates between 2016 and 2033. At December 31,
2013 and 2012, deferred tax assets associated with the net
operating losses of our foreign branches were $18.3 million
and $12.1 million, respectively. The net operating losses of
our foreign branches will expire on various dates between
2016 and 2033.
Our federal and certain state net operating losses and
federal general business credit carryforwards may be
subject to limitations under Section 382 of the Internal
Revenue Code if significant ownership changes occur.
A reconciliation of the consolidated valuation allowance for
deferred tax assets from January 1, 2011, to December 31,
2013, is as follows:
(In millions) 2013 2012 2011
Balance at beginning of year $ 80.9
$
7.1
$
3.9
Additions, charged to
expense 145.3 67.7
3.2
Additions, charged to
discontinued operations 2.9 6.1
Deductions (0.3) --
--
Balance at end of year $ 228.8
$
80.9
$
7.1
We are required to assess the available positive and
negative evidence to estimate if sufficient income will be
generated to utilize deferred tax assets. A significant piece
of negative evidence that we consider is cumulative losses
(generally defined as losses before income taxes) incurred
over the most recent three-year period. Such evidence
limits our ability to consider other subjective evidence such
as our projections for future growth. At December 31, 2013,
domestic cumulative losses were incurred over the
applicable three-year period.
In 2012 we established a valuation allowance of $68.8
million with respect to our U.S. federal deferred tax assets
and state deferred tax assets of which $6.1 million was
charged to discontinued operations. We considered all
available positive and negative evidence in evaluating
whether these deferred tax assets were more likely than not