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HSN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
62
Current income tax provision: 2008 2007 2006
$ (10,727) $ (68,969) $ (85,370)
(553) (7,388) (9,122)
(11,280) (76,357) (94,492)
674,789 10,683 13,423
67,264 1,120 1,859
742,053 11,803 15,282
$ 730,773
$ (64,554)
$ (79,210)
Income tax benefit (provision)
Federal
Deferred income tax benefit (provision)
Deferred income tax benefit (provision):
State
Years Ended December 31,
Federal
Current income tax provision
State
Current income taxes payable has been reduced by $3.8 million, $2.4 million and $2.3 million for the years
ended December 31, 2008, 2007 and 2006, respectively, for tax deductions attributable to stock- based
compensation. The related income tax benefits of this stock-based compensation were recorded as amounts charged
or credited to additional paid in capital, invested capital or a reduction in goodwill.
The tax effects of cumulative temporary differences that give rise to significant portions of the deferred tax
assets and deferred tax liabilities at December 31, 2008 and 2007 are presented below (in thousands). The valuation
allowance is related to items for which it is more likely than not that the tax benefit will not be realized.
2008 2007
Deferred tax assets:
Provision for accrued expenses
$ 29,815
$ 35,631
Inventories 11,885 14,916
Foreign investment 6,917 6,665
Stock-based compensation 6,312 5,451
Net operating losses 6,901 6,818
Other 197 2,819
Total deferred tax assets 62,027 72,300
Less valuation allowance (17,229) (12,862)
Net deferred tax assets 44,798 59,438
Deferred tax liabilities:
Intangible and other assets (87,904) (840,938)
Prepaid expenses (9,561) (10,805)
Property and equipment (8,832) (3,058)
Total deferred tax liabilities (106,297) (854,801)
Net deferred tax liability
$ (61,499)
$ (795,363)
December 31,
At December 31, 2008, HSNi had $23.7 million of net operating loss carryforwards related to its
discontinued international operations which expire in 2011 through 2012. As of December 31, 2008 and 2007,
HSNi had a valuation allowance of approximately $17.2 million and $12.9 million, respectively, primarily related to
the net operating losses, the unrealized capital losses and deferred assets associated with uncertain tax positions for
which it is more likely than not that the tax benefit will not be realized. During 2008, the valuation allowance was
increased by $4.3 million due to it being more likely than not that certain deferred tax benefits of tax positions taken
while HSNi was included in the IAC consolidated tax returns will not be realized.
A reconciliation of the income tax provision to the amounts computed by applying the statutory federal
income tax rate to earnings from continuing operations before income taxes is shown as follows (in thousands):