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Table of Contents
HSN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Included in the 2008 income tax benefit is the reversal of $753.3 million of deferred tax liabilities related to the goodwill and intangible
asset impairments recognized in 2008. These deferred tax liabilities for both HSN and Cornerstone were recorded upon the acquisition of certain
business operations and interests in prior years in accordance with the prescribed accounting rules.
Current income taxes payable has been reduced by $7.2 million, $1.5 million and $3.8 million for the years ended December 31, 2010,
2009 and 2008, 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 the income tax provision and additional paid-in capital.
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, 2010 and 2009 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.
At December 31, 2010, HSNi had $24.2 million of net operating loss carryforwards which begin expiring in 2011. As of December 31,
2010 and 2009, HSNi had a valuation allowance of approximately $17.2 million and $17.3 million, respectively, related to the net operating
losses, as well as unrealized capital losses and deferred tax assets associated with uncertain tax positions for which it is more likely than not that
the tax benefit 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):
61
December 31,
2010
2009
Deferred tax assets:
Provision for accrued expenses
$
40,654
$
39,305
Inventories
13,482
11,055
Foreign investment
6,467
6,921
Stock
-
based compensation
9,588
7,882
Net operating losses
6,802
6,812
Other
2,603
2,580
Total deferred tax assets
79,596
74,555
Less valuation allowance
(17,242
)
(17,288
)
Net deferred tax assets
62,354
57,267
Deferred tax liabilities:
Intangible and other assets
(92,421
)
(89,317
)
Prepaid expenses
(11,037
)
(13,138
)
Property and equipment
(10,298
)
(9,265
)
Total deferred tax liabilities
(113,756
)
(111,720
)
Net deferred tax liability
$
(51,402
)
$
(54,453
)
Year Ended December 31,
2010
2009
2008
Income tax (provision) benefit at the federal statutory rate of 35%
$
(57,261
)
$
(42,250
)
$
1,091,388
State income taxes, net of effect of federal tax benefit
(6,238
)
(4,382
)
41,846
Nondeductible portion of goodwill and intangible asset impairment charges
—
—
(
404,034
)
Other, net
(1,542
)
(1,504
)
1,573
Income tax (provision) benefit
$
(65,041
)
$
(48,136
)
$
730,773