Nutrisystem 2014 Annual Report Download - page 58

A reconciliation of the statutory federal income tax rate to the Company’s effective tax rate is as follows:
Year Ended December 31,
2014 2013 2012
Statutory federal income tax rate .................................... 35.0% 35.0% 35.0%
State income taxes, net of federal benefit .............................. 0.5 (0.6) 3.8
Executive compensation limitation ................................... 0.9 1.6 0.0
Executive stock-based compensation ................................. 0.0 0.0 13.5
Food donations .................................................. (0.4) (2.8) 8.9
Fixed assets ..................................................... (1.4) 0.0 (7.5)
Changes in reserves ............................................... 0.1 (6.7) 4.5
Tax credits ...................................................... (0.5) (1.7) (1.4)
Other .......................................................... (0.6) 0.4 (0.1)
Valuation allowance .............................................. 0.0 7.1 0.0
33.6% 32.3% 56.7%
The change in the effective tax rate from 2013 to 2014 was due to changes in executive compensation, decreased
levels of food donations and the reduction in tax reserves during 2013 due to the lapse of the statute of limitations
which offset a charge to record a valuation allowance in 2013 for charitable contributions carryforwards. The
change in the effective tax rate from 2012 to 2013 was due to the changes in executive compensation, decreased
levels of food donations and the reduction in tax reserves due to the lapse of the statute of limitations which
offset a charge to record a valuation allowance for charitable contributions carryforwards that might not be
realized due to the short carryforward period for this temporary difference.
The significant items comprising the Company’s deferred income tax assets and liabilities are as follows:
December 31,
2014 2013
Deferred tax asset:
Reserves and accrual ................................... $ 920 $ 813
Goodwill/Intangible assets ............................... 235 316
Net operating loss carryforward ........................... 1,639 1,722
Stock-based compensation ............................... 1,880 2,002
Charitable contribution carryforward ....................... 3,180 3,795
Other ................................................ 909 889
8,763 9,537
Valuation allowance ........................................ (800) (800)
Deferred tax asset .......................................... 7,963 8,737
Deferred tax liability:
Property and equipment ................................. (1,451) (1,882)
Net deferred tax asset ....................................... $6,512 $ 6,855
At December 31, 2014 and 2013, the Company had net operating loss carryforwards of approximately $29,474
and $29,684, respectively, for state tax purposes. For state tax purposes, there is a limitation on the amount of net
operating loss carryforwards that can be utilized in a given year to offset state taxable income. Net operating
losses will begin to expire in 2025.
In 2013, the Company recorded a valuation allowance of $800 against its deferred tax asset generated for
charitable contributions. The Company recorded the valuation allowance to reduce the deferred tax asset to an
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