Chili's 2008 Annual Report Download - page 61

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BRINKER INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. INCOME TAXES (Continued)
The income tax effects of temporary differences that give rise to significant portions of deferred
income tax assets and liabilities as of June 25, 2008 and June 27, 2007 are as follows (in thousands):
2008 2007
Deferred income tax assets:
Leasing transactions ........................... $ 43,740 $ 43,884
Stock-based compensation ....................... 19,601 14,636
Restructure charges and impairments ............... 54,681 4,284
Insurance reserves ............................. 4,590 3,967
Employee benefit plans ......................... 2,019 2,235
Other, net .................................. 21,385 17,616
Total deferred income tax assets ................. 146,016 86,622
Deferred income tax liabilities:
Prepaid expenses .............................. 19,810 20,408
Goodwill and other amortization .................. 15,768 14,324
Depreciation and capitalized interest on property and
equipment ................................. 5,969 18,530
Captive insurance ............................. 2,998 6,397
Other, net .................................. 6,716 6,085
Total deferred income tax liabilities ............... 51,261 65,744
Net deferred income tax asset .................. $ 94,755 $ 20,878
As a result of the adoption of FIN 48 we recognized an $847,000 decrease in the liability for
unrecognized tax benefits, net of the federal deferred tax benefit, with a corresponding increase to retained
earnings. A reconciliation of the 2008 beginning and ending amount of unrecognized tax benefits is a
follows:
(in thousands)
Balance at June 28, 2007 .................................. $ 23,193
Additions based on tax positions related to fiscal 2008 ........... 5,587
Additions based on tax positions related to prior years ........... 57
Settlements with tax authorities ........................... (1,081)
Expiration of statute of limitations ......................... (617)
Balance at June 25, 2008 .................................. $ 27,139
The total amount of unrecognized tax benefits as of June 25, 2008 was $27.1 million ($19.9 million of
which would favorably affect the effective tax rate if resolved in our favor due to the effect of deferred tax
benefits). During the next twelve months, we anticipate that it is reasonably possible that the amount of
unrecognized tax benefits could be reduced by approximately $3.3 million ($2.3 million of which would
affect the effective tax rate due to the effect of deferred tax benefits) either because our tax position will be
sustained upon audit or as a result of the expiration of the statute of limitations for specific jurisdictions.
We recognize accrued interest and penalties related to unrecognized tax benefits in income tax
expense. During 2008 we recognized approximately $1.3 million in interest. As of June 25, 2008, we had
$5.3 million ($3.8 million net of a $1.5 million Federal deferred tax benefit) of interest and penalties
F-27