Home Shopping Network 2011 Annual Report Download - page 59

HSN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Current income taxes payable has been reduced by $14.1 million, $7.2 million and $1.5 million for the years
ended December 31, 2011, 2010 and 2009, 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, 2011 and 2010 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.
December 31,
2011 2010
Deferred tax assets:
Provision for accrued expenses ............................................. $ 39,346 $ 40,654
Inventories ............................................................. 11,964 13,482
Foreign investment ....................................................... 6,467 6,467
Stock-based compensation ................................................. 13,618 9,588
Net operating losses ...................................................... 3,857 6,802
Other .................................................................. 2,294 2,603
Total deferred tax assets ................................................... 77,546 79,596
Less valuation allowance .................................................. (14,274) (17,242)
Net deferred tax assets .................................................... 63,272 62,354
Deferred tax liabilities:
Intangible and other assets ................................................. (92,746) (92,421)
Prepaid expenses ......................................................... (12,022) (11,037)
Property and equipment ................................................... (12,333) (10,298)
Total deferred tax liabilities ................................................ (117,101) (113,756)
Net deferred tax liability ................................................... $ (53,829) $ (51,402)
At December 31, 2011, HSNi had $13.6 million of net operating loss carryforwards which begin expiring in
2012. As of December 31, 2011 and 2010, HSNi had a valuation allowance of approximately $14.3 million and
$17.2 million, respectively. Valuation allowances are recorded for certain deferred tax assets related to foreign
net operating losses, unrealized capital losses and deferred tax assets associated with pre-Spin-off uncertain tax
positions for which it is more likely than not that the benefit will be unrealized.
A reconciliation of the income tax provision to the amounts computed by applying the statutory federal
income tax rate to earnings before income taxes is shown as follows (in thousands):
Year Ended December 31,
2011 2010 2009
Income tax provision at the federal statutory rate of 35% .................. $(70,162) $(57,261) $(42,250)
State income taxes, net of effect of federal tax benefit .................... (6,052) (6,238) (4,382)
Other, net ....................................................... (1,122) (1,542) (1,504)
Income tax provision .............................................. $(77,336) $(65,041) $(48,136)
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