Nautilus 2011 Annual Report Download - page 45

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Table of Contents
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 2011 and 2010 Nautilus concluded that cumulative taxable
losses in recent years indicated a 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 $60.3 million and $59.6 million as of December 31, 2011 and 2010 , respectively.
Nautilus has net operating loss, capital loss and income tax credit carryforwards in various jurisdictions, all of which are fully offset by valuation
allowances and are available to offset future taxable income, if any. The timing and manner in which the Company is permitted to utilize its net
operating loss carryforwards may be limited by Internal Revenue Code Section 382, Limitation on Net Operating Loss Carry-forwards and
Certain Built-in-Losses Following Ownership Change .
As of December 31, 2011 , the Company had the following income tax carryforwards (in millions):
Under accounting guidance, an uncertain tax position represents the Company's expected treatment of a tax position taken in a filed tax return, or
planned to be taken in a future tax return, that has not been reflected in measuring income tax expense for financial reporting purposes.
Following is a reconciliation of gross unrecognized tax benefits from uncertain tax positions (excluding the impact of penalties and interest) in
the years ended December 31, 2011 and 2010 (in thousands):
39
2011 2010
U.S. statutory income tax rate
35.0
%
35.0
%
State tax, net of U.S. federal tax benefit
5.2
2.2
Nondeductible incentive stock option expense
—
0.2
Non-U.S. income taxes
2.1
13.1
Effect of double taxation dividend received
—
(
13.6
)
Nondeductible operating expenses
(1.8
)
(0.1
)
Research and development credit
(2.6
)
—
Change in deferred tax measurement rate
(0.3
)
0.3
Change in uncertain tax positions
13.0
(1.0
)
Valuation allowance
(29.0
)
(40.4
)
Other
(0.1
)
(2.1
)
Effective income tax rate
21.5
%
(6.4
)%
Amount
Expires in
Net operating loss carryforwards:
Federal
$
79.0
2029 - 2031
State
106.3
2012 - 2031
Germany
11.4
Indefinite
Switzerland
18.6
2012 - 2018
China
3.7
2012 - 2014
Italy
2.5
2013 - 2016
Federal capital loss carryforward
11.3
2013
Income tax credit carryforwards:
Federal
2.6
2018 - 2031
State
0.4
2018 - 2022