Redbox 2003 Annual Report Download - page 53

COINSTAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
Deferred income tax assets and liabilities reflect the net tax effects of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and the carrying amounts used for
income tax purposes. Future tax benefits for net operating loss and tax credit carryforwards are also recognized to
the extent that realization of such benefits is more likely than not. Significant components of our deferred tax
assets and liabilities at December 31, 2003 and 2002 are as follows:
December 31,
2003 2002
(in thousands)
Depreciation and amortization ................................................. $(4,029) $ (5,093)
Net unrealized gains on investments ............................................. (692) —
Total deferred tax liabilities ................................................... (4,721) (5,093)
Tax loss and credit carry forwards .............................................. 42,989 55,501
Other ..................................................................... 1,138 806
Total deferred tax assets ...................................................... 44,127 56,307
Net deferred tax asset ........................................................ 39,406 51,214
Valuation allowance ......................................................... (580) (1,399)
$38,826 $49,815
At December 31, 2003, we had approximately $111.5 million of net operating loss and credit carryforwards
that expire from the years 2006 to 2021. Changes in ownership, as defined by Section 382 of the Internal
Revenue Code, may limit the amount of net operating loss carryforwards used in any one year. The company also
has minimum and state tax credit carryforwards of approximately $1.0 million which are available to reduce
future federal and state regular income taxes, if any, over an indefinite period.
The valuation allowance on the U.S. deferred tax assets was eliminated in 2002 because current operations
indicate that realization of the related deferred tax asset is now more likely than not to occur. We maintained a
valuation allowance for net operating loss carryovers related to foreign operations. The net change in the
valuation allowance during the years ended December 31, 2003, 2002 and 2001 was $(0.8) million, $(52.2)
million and $9.4 million, respectively.
For tax purposes, the income tax benefit from stock compensation expense in excess of the amounts
recognized for financial reporting purposes at December 31, 2003 and 2002 credited to common stock was
approximately $0.3 million and $7.3 million, respectively. Of the 2002 benefit, approximately $3.9 million
related to stock option activity in 2002 and the remaining $3.4 million related to stock option activity which
occurred during the year ended December 31, 2001.
NOTE 12: INCOME (LOSS) PER SHARE
Basic net income (loss) per share is computed by dividing the net income (loss) available to common
stockholders for the period by the weighted average number of common shares outstanding during the period.
Diluted net income (loss) per share is computed by dividing the net income (loss) for the period by the weighted
average number of common and potential common shares outstanding (if dilutive) during the period. Potential
common shares, composed of incremental common shares issuable upon the exercise of stock options and
warrants, are included in the calculation of diluted net income (loss) per share to the extent such shares are
dilutive.
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