American Home Shield 2007 Annual Report Download - page 67
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from reincorporation will be fully amortized. The divestitures of ARS and AMS resulted in a reduction of approximately $4 million
in the average annual cash tax benefits; however, the cash tax benefits were accelerated into 2006 and 2007 such that the aggregate
tax benefits are unchanged. Accounting standards require that the Company recognize deferred taxes relating to the differences
between the financial reporting and tax basis of the assets. As the annual tax benefit from the amortization expense is realized, the
deferred tax liability increases, reflecting the declining tax basis compared to the non-amortized book basis. Significant components
of the Company's deferred tax balances are as follows:
(In thousands) 2006 2005
Deferred tax assets (liabilities):
Current:
Prepaid expenses $ (14,300) $ (14,000)
Receivables allowances 14,900 12,750
Accrued insurance expenses 10,900 11,500
Net operating loss and tax credit
carryforwards 1,600 2,800
Other accrued expenses 24,300 22,000
Total current asset 37,400 35,050
Long-Term:
Intangible assets (1) (225,300) (146,200)
Accrued insurance expenses 6,100 6,000
Net operating loss and tax
credit carryforwards 44,100 22,500
Less valuation allowance (1,800) —
Other long-term obligations 8,900 4,400
Total long-term liability (168,000) (113,300)
Net deferred tax asset (liability) $ (130,600) $ (78,250)
(1) The deferred tax liability relates primarily to the difference in the tax versus book basis of intangible assets. The majority of
this liability will not actually be paid until a business unit of the Company is sold.
At December 31, 2006, the Company had tax effected federal and state net operating loss carryforwards net of valuation allowances
of approximately $41 million, expiring at various dates up to 2025. The Company also had federal and state tax credit
carryforwards net of valuation allowances
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