Nautilus 2009 Annual Report Download - page 54

Table of Contents
The Company’s net deferred tax liabilities as presented in its consolidated balance sheets are as follows:
A reconciliation of the U.S. statutory federal income tax rate with the Company’s effective income tax benefit rate from continuing operations is
as follows:
The comparative increase in our effective income tax benefit rate primarily is due to the partial release of valuation allowance, resulting from the
enactment of a new law in the fourth quarter of 2009. The effective tax benefit rate for discontinued operations of 0.3% in 2009 differs from the
statutory rate due to the recognition of a valuation allowance against deferred tax assets. Nautilus must periodically evaluate the potential
realization of its deferred income tax assets and, if necessary, record a valuation allowance to reduce the net carrying value of such assets to the
amount expected to be realized. In 2008, Nautilus concluded that cumulative taxable losses in recent years indicated a full valuation allowance
against its deferred income tax assets was required. If and when a review of objective evidence indicates that some or all of the Company’s
valuation allowance is no longer appropriate, release of the valuation allowance would be recognized as an income tax benefit to continuing
operations in the period in which such assessment is made. The amount of valuation allowance offsetting the Company’s deferred income tax
assets was $53.7 million and $40.5 million as of December 31, 2009 and 2008, respectively.
In November 2009, the President signed into U.S. federal law a provision to allow taxpayers to carry back an applicable net operating loss for up
to five years. Nautilus elected to carry back a portion of its 2008 net operating loss and a portion of the Company’s valuation allowance was
released. A corresponding income tax benefit of $12.5 million was included in results of continuing operations in the fourth quarter of 2009 and
Nautilus received a $12.1 million refund of U.S. federal income taxes in the first quarter of 2010.
Nautilus has net operating loss and tax credit carryforwards in U.S. federal, state and non
-U.S. jurisdictions. At December 31, 2009, U.S. federal
net operating loss carryforwards were $45.1 million, which were fully offset by a valuation allowance and are available to offset future taxable
income, if any, through 2030. The Company’s net operating loss carryforwards in state jurisdictions are fully offset by a valuation allowance,
and will expire between 2013 and 2030, if not utilized. In addition, Nautilus has $11.3 million of U.S. federal capital loss carryforwards, which
were fully offset by a valuation allowance and expire in 2013, if not utilized.
50
December 31,
(In thousands)
2009
2008
Current deferred tax assets
$
54
$
266
Current deferred tax liability
(1,220
)
(919
)
Non
-
current deferred tax assets, included in
“
Other assets
”
446
429
Non
-
current deferred tax liabilities
(754
)
(1,037
)
Net deferred tax liability
$
(1,474
)
$
(1,261
)
(In percents)
2009
2008
U.S. statutory income tax rate
35.0
%
35.0
%
State tax, net of U.S. federal tax benefit
3.4
2.5
Nondeductible incentive stock option expense
(0.1
)
(0.5
)
Non
-
U.S. Taxes
(0.6
)
2.4
Nondeductible operating expenses
(0.1
)
(0.1
)
Research and development credit
0.3
0.1
Change in deferred tax measurement rate
(0.2
)
0.1
Change in tax contingency reserve
(0.6
)
0.8
Valuation allowance
(42.5
)
(28.8
)
Release of valuation allowance
42.4
—
Other
(0.1
)
(1.4
)
Effective tax benefit rate
36.9
%
10.1
%