Nautilus 2013 Annual Report Download - page 30

Interest Expense
Negative Interest Expense of $0.1 million in 2012 arose from the early repayment in March 2012 of our Increasing
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Rate Senior Discount Notes.
Early repayment of the notes resulted in a lower average effective interest rate over the term of the notes than would have applied if the notes
had been held to maturity. In prior periods, we used the average effective interest rate as if the notes were held to maturity in determining the
amount of interest expense incurred.
Other Income (Expense)
Other Income (Expense) primarily relates to the effect of exchange rate fluctuations between the U.S. and Canada. However, 2013 also included
the following one-time items:
Income Tax Provision (Benefit)
n/m - Not meaningful.
Income Tax Benefit for 2013 included a partial release of U.S. domestic valuation allowance. Income Tax Benefit for 2012 was primarily related
to the expiration of statutes of limitation applicable to our liabilities for uncertain tax positions in certain jurisdictions. Income tax expense in
2011 was attributable to the taxable income generated in Canada and the result of changes in our uncertain tax positions. Generally, we did not
recognize U.S. income tax expense associated with our income from continuing operations for 2013, 2012 or 2011 due to the valuation
allowance against the net deferred tax asset.
In the second quarter of 2013, we evaluated the potential realization of our Deferred Income Tax Assets, considering both positive and negative
evidence, including cumulative income or loss for the past three
years and forecasted taxable income. As a result of this evaluation we concluded
that, as of June 30, 2013, a majority of the existing valuation allowance on our domestic Deferred Income Tax Assets was no longer required. As
of December 31, 2013, we maintain the same position as the previous quarter that the partial release of valuation allowance is still appropriate.
Accordingly, an income tax benefit of $38.9 million was recorded during 2013 related to the reduction of our existing valuation allowance.
Further there was a total of $4.4 million of Deferred Income Tax Asset reversal related to the expiration of capital loss and certain state net
operating loss carryforwards during the fourth quarter of 2013. Accordingly a corresponding amount of valuation allowance was reversed in the
same quarter.
The amount of valuation allowance offsetting the Company's deferred tax assets was $12.9 million as of December 31, 2013. Of the total
remaining valuation allowance, $4.1 million
relates to certain domestic loss and other credit carryforwards that we may not be able to utilize
primarily due to their shorter remaining carryforward periods. Should it be determined in the future that it is more likely than not that our
domestic Deferred Income Tax Assets will be realized, an additional valuation allowance would be released during the period in which such an
assessment is made. In addition, $8.8 million of the remaining valuation allowance relates to foreign net operating loss carryfowards. There have
been no material changes to our foreign operations since December 31, 2012 and, accordingly, we maintain our existing valuation allowance on
foreign Deferred Income Tax Assets in such jurisdictions at December 31, 2013.
See Note 11 of Notes to Consolidated Financial Statements included in Part II, Item 8 of this report for additional information.
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A $0.1 million gain related to an insurance settlement; and
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A $0.3 million gain related to a refund of state sales tax previously paid by us.
Dollars in thousands
Year Ended December 31, Change
2013 2012 $ %
Income Tax Benefit $(32,085) $(226) $(31,859) n/m
Dollars in thousands
Year Ended December 31, Change
2012 2011 $ %
Income Tax Provision (Benefit) $(226) $686 $(912) n/m