Aarons 2012 Annual Report Download - page 72

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62
Significant components of the Company’s deferred income tax liabilities and assets at December 31 are as follows:
(In Thousands)
2012
2011
Deferred Tax Liabilities:
Lease Merchandise and Property, Plant and Equipment
$ 279,926
$ 329,497
Other, Net
34,014
29,607
Total Deferred Tax Liabilities
313,940
359,104
Deferred Tax Assets:
Accrued Liabilities
25,365
33,826
Advance Payments
15,834
16,432
Federal Net Operating Loss
-
10,936
Other, Net
9,677
11,760
Total Deferred Tax Assets
50,876
72,954
Less Valuation Allowance
(657)
(812)
Net Deferred Tax Liabilities
$ 263,721
$ 286,962
The Company’s effective tax rate differs from the statutory United States Federal income tax rate for the years
ended December 31 as follows:
2012
2011
2010
Statutory Rate
35.0%
35.0%
35.0%
Increases in United States Federal Taxes
Resulting From:
State Income Taxes, Net of Federal Income Tax Benefit
2.5
2.7
2.7
Other, Net
0.0
0.3
0.3
Effective Tax Rate
37.5%
38.0%
38.0%
The Company files a federal consolidated income tax return in the United States and the separate legal entities file in
various states and foreign jurisdictions. With few exceptions, the Company is no longer subject to federal, state and
local tax examinations by tax authorities for years before 2008.
The following table summarizes the activity related to the Company’s uncertain tax positions:
(In Thousands)
2012
2011
2010
Balance at January 1,
$ 1,412
$ 1,315
$ 1,342
Additions based on tax positions related to the current year
178
178
149
Additions for tax positions of prior years
83
22
18
Prior year reductions
(315)
(13)
(26)
Statute expirations
(83)
(90)
(63)
Settlements
(17)
-
(105)
Balance at December 31,
$ 1,258
$ 1,412
$ 1,315
As of December 31, 2012 and 2011, the amount of uncertain tax benefits that, if recognized, would affect the
effective tax rate is $1.0 million and $1.2 million, respectively, including interest and penalties. During the year
ended December 31, 2012, the Company recognized a net benefit of $126,000 related to interest and penalties.
During the years ended December 31, 2011 and 2010, the Company recognized interest and penalties of $41,000
and $35,000, respectively. The Company had $234,000 and $374,000 of accrued interest and penalties at December
31, 2012 and 2011, respectively. The Company recognizes potential interest and penalties related to uncertain tax
benefits as a component of income tax expense.
NOTE 8: COMMITMENTS AND CONTINGENCIES
Leases
The Company leases warehouse and retail store space for most of its operations under operating leases expiring at
various times through 2028. The Company also leases certain properties under capital leases that are more fully
described in Note 6. Most of the leases contain renewal options for additional periods ranging from one to 20 years
or provide for options to purchase the related property at predetermined purchase prices that do not represent bargain