Circuit City 2009 Annual Report Download - page 31

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Table of Contents
effective tax rate in 2007 resulted primarily from the reversal of a valuation allowance of approximately $5.9 million against deferred tax assets
in the United Kingdom partially offset by the recording of a valuation allowance of approximately $1.7 million against the deferred tax assets of
Germany. The United Kingdom valuation allowance, originally recorded at $10.2 million, had been established in 2005 as the result of a
cumulative loss position in the United Kingdom
During 2009, 2008, and 2007, we did not recognize certain foreign tax credits, certain state deferred tax assets in the United States and certain
benefits on losses in foreign tax jurisdictions due to our inability to carry such credits and losses back to prior years and our determination that it
was more likely than not that we would not generate sufficient future taxable income in those tax jurisdictions to realize these assets.
Accordingly, valuation allowances were recorded against the deferred tax assets associated with those items. If we are able to realize all or part
of these deferred tax assets in future periods, it will reduce our provision for income taxes by a release of the corresponding valuation allowance.
Seasonality
As the Company’s consumer channel sales have grown significantly in the past few years, the fourth quarter has represented a greater portion of
annual sales than historically. Net sales have historically been modestly weaker during the second and third quarters as a result of lower
business activity during those months. The following table sets forth the net sales, gross profit and income from operations for each of the
quarters since January 1, 2007 (amounts in millions) .
28
Quarter Ended
March 31
June 30
September 30
December 31
2009
Net sales
$
752
$
722
$
754
$
938
Percentage of year
’
s net sales
23.8
%
22.8
%
23.8
%
29.6
%
Gross profit
$
108
$
107
$
113
$
132
Operating income
$
15
$
9
$
19
$
30
2008
Net sales
$
725
$
756
$
739
$
813
Percentage of year
’
s net sales
23.9
%
24.9
%
24.4
%
26.8
%
Gross profit
$
114
$
115
$
115
$
115
Operating income
$
26
$
21
$
20
$
16
2007
Net sales
$
676
$
647
$
687
$
769
Percentage of year
’
s net sales
24.3
%
23.3
%
24.7
%
27.7
%
Gross profit
$
97
$
99
$
111
$
120
Operating income
$
22
$
20
$
24
$
28