Harman Kardon 2010 Annual Report Download - page 104

Harman International Industries, Incorporated and Subsidiaries
(Dollars in thousands, except per-share data and unless otherwise indicated)
Income tax expense (benefit) from continuing operations for the years ended June 30, 2010, 2009 and 2008
consisted of the following:
Year Ended June 30,
2010 2009 2008
Current:
Federal ..................................................... $(3,875) $ 2,430 $ 2,194
State ....................................................... (370) 300 400
Foreign ..................................................... 9,379 2,769 23,169
Current income tax expense ......................................... 5,134 5,499 25,763
Deferred:
Federal ..................................................... 9,695 (63,287) (14,453)
Foreign ..................................................... (6,219) (49,355) (2,967)
Deferred income tax expense (benefit) ................................ 3,476 (112,642) (17,420)
Excess tax benefits from share-based payment arrangements ............... — 126 5,321
Total income tax expense (benefit), net ................................ $8,610 $(107,017) $ 13,664
Deferred taxes are recorded based upon differences between the financial statement basis and tax basis of
assets and liabilities and available tax loss and credit carryforwards.
At June 30, 2010 and 2009, deferred taxes consisted of the following:
June 30,
Assets/(Liabilities) 2010 2009
Federal tax credits .............................................. $239,860 $ 215,378
Inventory costing differences ..................................... 10,360 12,809
Capitalized research and development .............................. 84,759 51,082
U.S. tax loss carryforward ....................................... 7,454 61,527
Foreign tax loss and credit carryforwards ........................... 29,962 31,191
Non-qualified stock options—GAAP deductions ..................... 15,511 12,134
Other assets and other allowances ................................. 71,188 63,488
Deferred tax asset, gross ......................................... 459,094 447,609
Less valuation allowance ........................................ (135,148) (118,610)
Deferred tax asset, net of valuation allowance ........................ 323,946 328,999
Gross deferred tax liability from fixed asset depreciation ............... — (3,465)
Unrepatriated foreign earnings .................................... (41,338) —
Foreign statutory accounting ..................................... (4,733) —
Interest expense on deferred note .................................. (13,073) (18,257)
Deferred tax liability, gross ...................................... (59,144) (21,722)
Net deferred tax asset ........................................... $264,802 $ 307,277
Although realization is not assured, we believe that the realization of the recognized net deferred tax asset of
$264.8 million is more likely than not based on expectations as to future taxable income in the jurisdictions in
which we operate and available tax planning strategies that could be implemented if necessary to prevent a
carryforward from expiring. We have Federal research credit, alternative minimum tax credit and foreign income
tax credit carryforwards valued at $31.4 million, $1.7 million and $72.3 million, respectively, at June 30, 2010.
The research credit carryforward will begin to expire in 2021. The alternative minimum tax credit does not
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