Redbox 2007 Annual Report Download - page 63

Significant components of our deferred tax assets and liabilities as of December 31, 2007 and 2006 are as
follows:
2007 2006
December 31,
(In thousands)
Deferred tax assets:
Tax loss carryforwards ....................................... $12,030 $26,194
Credit carryforwards ......................................... 4,423 4,076
Accrued liabilities and allowances ............................... 2,638 4,429
Stock compensation ......................................... 2,835 1,654
Inventory ................................................. 832 645
Foreign tax credit ........................................... 1,134 521
Property and equipment ...................................... 12,311 —
Other .................................................... 249 956
Gross deferred tax assets .................................... 36,452 38,475
Less valuation allowance...................................... (2,508) (881)
Total deferred tax assets .................................... 33,944 37,594
Deferred tax liabilities:
Property and equipment ...................................... — (13,212)
Intangible assets ............................................ (11,065) (14,061)
Unremitted earnings ......................................... (3,027) —
Total deferred tax liabilities .................................. (14,092) (27,273)
Net deferred tax asset .......................................... $19,852 $ 10,321
As of December 31, 2007, deferred tax assets included approximately $46.4 million of net operating losses and
United States federal tax credits of $6.0 million. The tax credits consist of $1.1 million of foreign tax credits that
expire from the years 2015 to 2018, $1.6 million of research and development tax credits that expire from the years
2011 to 2028 and $2.8 million of alternative minimum tax credits which do not expire.
During 2007 adjustments were made to the carrying value of state net operating losses carried forward and
other state deferred tax assets to give effect for certain adjustments to previously calculated amounts as well as
changing apportionment factors, changing tax rates and changes to state income tax laws. On a combined basis state
deferred tax assets were reduced by $1.0 million for these adjustments. Foreign tax assets were further reduced by
$0.2 million to give effect for changes in tax rates and to true-up net operating losses carried forward to actual tax
returns filed.
In May 2006, we acquired CMT and recorded a deferred tax liability of $2.7 million representing acquired
intangibles that had no tax basis. This deferred tax liability is available to realize deferred tax assets related to net
operating loss carryforwards generated by CMT and its subsidiaries, resulting in a lower valuation allowance to
offset that deferred tax asset.
In 2006, the indefinite reversal criteria of Accounting Principle Board Opinion No. 23, Accounting for Income
Taxes — Special Areas (“APB 23”) in which the earnings of our foreign operations are permanently reinvested
outside of the United States was met. As such, United States deferred taxes will not be provided on these earnings.
United States deferred taxes previously recorded on foreign earnings were reversed, which resulted in a $1.5 million
tax benefit in 2006. It is not practible to determine the United States deferred taxes associated with foreign earnings
that are indefinitely reinvested.
During 2006, studies were conducted of accumulated state net operating loss carryforwards and of qualified
research and development expenditures used in computing the research and development tax credit. As a result of
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