AutoNation 2003 Annual Report Download - page 73

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Table of Contents
AUTONATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
A reconciliation of the provision for income taxes calculated using the statutory federal income tax rate to the Company’s provision for
income taxes from continuing operations for the years ended December 31 is as follows:
2003 %2002 %2001 %
Provision for income taxes at statutory rate of
35% $206.9 35.0 $216.3 35.0 $140.3 35.0
Non-deductible expenses 1.6 .3 1.3 .2 12.2 3.0
State income taxes, net of federal benefit 18.0 3.0 18.4 3.0 5.4 1.4
226.5 38.3 236.0 38.2 157.9 39.4
Change in valuation allowance, net 8.3 1.5 2.3 .4 (.3) (.1)
Benefit from IRS settlement (127.5) (21.6) — — — —
Adjustments and settlements, net (21.7) (3.7) — — — —
Other, net (.7) (.1) (1.9) (.3) (1.8) (.4)
Provision for income taxes $84.9 14.4 $236.4 38.3 $155.8 38.9
Deferred income tax asset and liability components at December 31 are as follows:
2003 2002
Deferred income tax assets:
Inventory and receivable reserves $(25.0) $(30.3)
Warranty, chargeback and self-insurance liabilities (42.0) (37.6)
Other accrued liabilities (46.8) (43.4)
Loan and lease items (20.6) (64.3)
Other, net (35.1) (47.4)
Net operating losses — Federal & State (22.2) (24.9)
(191.7) (247.9)
Valuation allowances 17.0 10.8
Deferred income tax liabilities:
Long-lived assets (Intangibles and Property) 116.1 75.9
Inventory 11.2 8.7
Other, net 6.4 49.3
Items deducted for tax, not for book (primarily accelerated future
expense) — 551.0
133.7 684.9
Net deferred income tax (assets) liabilities $(41.0) $447.8
At December 31, 2003 and 2002, net current deferred income tax assets of $93.4 million and $56.2 million, respectively, are classified
as Other Current Assets in the accompanying Consolidated Balance Sheet.
At December 31, 2003, the Company had available domestic federal and state net operating loss carry forwards of approximately
$35.6 million ($22.2 million after-tax) which begin to expire in 2004. In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company provides
valuation allowances to offset portions of deferred tax assets due to uncertainty surrounding the future realization of such deferred tax assets.
The Company adjusts the valuation allowance in the period management determines it is more likely than not that deferred tax assets will or
will not be realized. Certain decreases to valuation allowances are offset against intangible assets associated with business acquisitions
accounted for under the purchase method of accounting.
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