Redbox 2008 Annual Report Download - page 75

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.
In determining our fiscal 2008, 2007 and 2006 tax provisions under SFAS 109, management determined the
deferred tax assets and liabilities for each separate tax jurisdiction and 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. The consolidated tax valuation allowance
was $6.9 million as of December 31, 2008. A valuation allowance has been recorded against foreign net operating
losses as the negative evidence outweighs the positive evidence that those deferred tax assets will more likely than
not be realized. The net change in the valuation allowance during the years ended December 31, 2008, 2007 and
2006 was $4.4 million, $1.6 million and $0.9 million, respectively.
Significant components of our deferred tax assets and liabilities as of December 31, 2008 and 2007 are as
follows:
2008 2007
December 31,
(In thousands)
Deferred tax assets:
Tax loss carryforwards ....................................... $34,838 $ 12,030
Credit carryforwards ......................................... 6,574 4,423
Accrued liabilities and allowances ............................... 7,806 2,638
Stock compensation ......................................... 3,771 2,835
Inventory ................................................. — 832
Foreign tax credit ........................................... 1,478 1,134
Property and equipment ...................................... — 12,311
Other .................................................... 3,716 249
Gross deferred tax assets .................................... 58,183 36,452
Less valuation allowance...................................... (6,897) (2,508)
Total deferred tax assets .................................... 51,286 33,944
Deferred tax liabilities:
Property and equipment ...................................... (27,524) —
Inventory ................................................. (916) —
Intangible assets ............................................ (11,767) (11,065)
Minority interest ............................................ (11,932) —
Unremitted earnings ......................................... — (3,027)
Total deferred tax liabilities .................................. (52,139) (14,092)
Net deferred tax (liabilities) assets ................................ $ (853) $ 19,852
As of December 31, 2008, deferred tax assets included approximately $34.8 million of net operating losses and
United States federal tax credits of $8.1 million. The tax credits consist of $1.5 million of foreign tax credits that
expire from the years 2016 to 2019, $2.1 million of research and development tax credits that expire from the years
2012 to 2029 and $4.5 million of alternative minimum tax credits which do not expire.
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.
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