Circuit City 2010 Annual Report Download - page 52

As of December 31, 2010, the Company has recorded valuation allowances of approximately $29.3 million including valuations against
net operating loss carryforwards incurred in foreign and state jurisdictions of $20.4 million and $2.1 million, respectively, deductible
temporary differences incurred in foreign jurisdictions of $6.4 million, the majority of which relates to the WStore acquisition, and $0.4
million for other state deductible temporary differences.
Valuation allowances increased in 2009 by $20.9 million as a result of the WStore acquisition and the valuation allowances recorded
against acquired deferred tax assets and net operating losses. Carry forward losses of $1 million were utilized in 2009 for which valuation
allowances had been previously provided.
The Company is routinely audited by federal, state and foreign tax authorities with respect to its income taxes. The Company regularly
reviews and evaluates the likelihood of audit assessments. The Company’
s federal income tax returns have been audited through 2006.
The Company has not signed any consents to extend the statute of limitations for any subsequent years. The Company’
s significant state
tax returns have been audited through 2005. The Company considers its significant tax jurisdictions in foreign locations to be the United
Kingdom, Canada, France, Italy and Germany. The Company remains subject to examination in the United Kingdom for years after 2008,
in Canada for years after 2005, in France for years after 2008, in Italy for years after 2006, in Netherlands for years after 2005 and in
Germany for years after 2008.
In accordance with the guidance for accounting for uncertainty in income taxes the Company recognizes the tax benefits from an
uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities
based on the technical merits of the position. The tax benefit of an uncertain tax position that meets the more-likely-than-
not recognition
threshold is measured as the largest amount that is greater than 50% likely to be realized upon settlement with the tax authority. To the
extent we prevail in matters for which accruals have been established or are required to pay amounts in excess of accruals, our effective
tax rate in a given financial statement period could be affected. There were no accrued interest or penalty charges related to unrecognized
tax benefits recorded in income tax expense in 2010 or 2009. As of December 31, 2010 the Company had no uncertain tax positions.
The following table details activity of the Company’s uncertain tax positions during 2009:
Leases -
The Company is obligated under operating lease agreements for the rental of certain office and warehouse facilities and
equipment which expire at various dates through October 2026. The Company currently leases its headquarters office/warehouse facility
in New York from an entity owned by the Company’
s three principal shareholders and senior executive officers. The Company believes
that these payments were no higher than would be paid to an unrelated lessor for comparable space. The Company also acquires certain
computer, communications equipment, and machinery and equipment pursuant to capital lease obligations.
At December 31, 2010, the future minimum annual lease payments for capital leases and related and third-
party operating leases were as
follows (in thousands):
December 31,
2009
Balance beginning of year
$
916
Decreases related to settlements with taxing authorities
(916
)
Balance end of year
$
—
10.
COMMITMENTS, CONTINGENCIES AND OTHER MATTERS
Capital
Leases
Operating
Leases
Total
2011
$
3,343
$
26,311
$
29,654
2012
2,901
25,925
28,826
2013
2,716
23,793
26,509
2014
2,342
20,614
22,956
2015
2,286
19,846
22,132
2016
-
2020
6,257
75,541
81,798
2021
-
2025
17,914
17,914
Thereafter
10,709
10,709
Total minimum lease payments
19,845
220,653
240,498
Less: sublease rental income
283
283
Lease obligation net of subleases
19,845
$
220,370
$
240,215
Less amount representing interest
2,754
Present value of minimum capital lease payments (including current
portion of $2,655)
$
17,091
47