Redbox 2005 Annual Report Download - page 60

COINSTAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
YEARS ENDED DECEMBER 31, 2005, 2004, AND 2003
We paid net income tax payments to other federal, state and foreign agencies of $1.1 million, $0.9 million
and $1.0 million in 2005, 2004 and 2003, respectively.
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, 2005 and 2004 are as follows:
December 31,
2005 2004
(in thousands)
Deferred tax assets:
Tax loss carryforwards .................................................. $43,656 $ 50,726
Credit carryforwards .................................................... 1,874 1,471
Accrued liabilities and allowances ......................................... 2,855 3,487
Inventory capitalization ................................................. — 538
Other ................................................................ 191 249
Total deferred tax assets ............................................. 48,576 56,471
Deferred tax liabilities:
Property and equipment ................................................. (13,259) (10,542)
Intangible assets ....................................................... (10,447) (9,338)
Inventory capitalization ................................................. (1,108) —
State taxes ............................................................ (1,047) (1,575)
Other ................................................................ — (303)
Total deferred tax liabilities .......................................... (25,861) (21,758)
Net deferred tax asset ....................................................... $22,715 $ 34,713
At December 31, 2005, we had approximately $107.3 million of net operating losses and $0.5 million of
credit carryforwards that expire from the years 2006 to 2025. We also have minimum tax credit carryforwards of
approximately $1.4 million which are available to reduce future federal regular income taxes, if any, over an
indefinite period. During 2005 and 2004 we acquired $35.2 million in operating loss carryforwards in two
business combinations which are subject to limitation under the provisions of Section 382 of the Internal
Revenue Code.
In determining our fiscal 2005, 2004 and 2003 tax provisions under SFAS No. 109, Accounting for Income
Taxes, management determined the deferred tax assets and liabilities for each separate tax entity. Management
then considered a number of factors including the positive and negative evidence regarding the realization of our
deferred tax assets to determine whether a valuation allowance should be recognized with respect to our deferred
tax assets. In 2004, management determined to eliminate the valuation allowance on our foreign operations
because current operations indicate that realization of the related deferred tax assets was more likely than not.
The net change in the valuation allowance during the years ended December 31, 2005, 2004 and 2003 was $0.0
million, $(0.6) million and $(0.8) million, respectively.
The income tax benefit from stock compensation expense in excess of the amounts recognized for financial
reporting purposes at December 31, 2005, 2004 and 2003 credited to additional paid-in capital was
approximately $1.0 million, $1.6 million and $0.3 million, respectively.
56