Under Armour 2007 Annual Report Download - page 73
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A reconciliation from the U.S. statutory federal income tax rate to the effective income tax rate is as
follows:
Year Ended December 31,
2007 2006 2005
U.S. federal statutory income tax rate ............................... 35.0% 35.0% 35.0%
State taxes, net of federal tax impact ................................ 5.0 (1.9) 3.7
Other ........................................................ 1.0 0.9 1.5
Effective income tax rate ......................................... 41.0% 34.0% 40.2%
In 2006, the Company recorded $5.6 million of state tax credits, which reduced the Company’s effective tax
rate in 2006 as compared to 2007.
Deferred tax assets and liabilities consisted of the following:
December 31,
(In thousands) 2007 2006
Deferred tax asset
State tax credits, net of federal tax impact .............................. $ 2,950 $ 4,419
Tax basis inventory adjustment ....................................... 2,336 2,000
Inventory obsolescence reserves ...................................... 1,769 1,585
Allowance for doubtful accounts and other reserves ...................... 4,879 3,449
Subsidiary net operating loss ........................................ 2,798 993
Stock-based compensation .......................................... 1,366 527
Intangible asset ................................................... 1,047 305
Other ........................................................... 3,166 372
Total deferred tax assets ........................................ 20,311 13,650
Deferred tax liability
Unrealized (gains) losses ............................................ (818) 43
Other comprehensive income ........................................ (201) 64
Prepaid expenses .................................................. (701) (432)
Total deferred tax liabilities ..................................... (1,720) (325)
Total deferred tax assets, net ..................................... $18,591 $13,325
As of December 31, 2007, the Company has available state tax credits of $4.5 million that can be carried
forward for 13 to 14 year periods. As of December 31, 2007, a Company subsidiary has available a net operating
loss that can be carried forward for 8 to 9 years.
The Company adopted the provisions of FIN 48 on January 1, 2007. As a result of the implementation, the
Company recorded an additional $1.6 million liability for uncertain tax positions, including related interest and
penalties, of which $1.2 million was accounted for as a reduction to the January 1, 2007 balance of retained
earnings and the remainder was recorded within deferred tax assets. After recognizing the adoption of FIN 48,
the total liability for uncertain tax positions, including related interest and penalties, was approximately $2.0
million.
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