Overstock.com 2006 Annual Report Download - page 110
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21. OTHER INCOME (EXPENSE), NET
Other income (expense), net consisted of the following (in thousands):
Year ended December 31,
2004 2005 2006
Gain from early retirement of convertible senior notes $ — $ 6,158 $—
Loss on disposal of software — (1,457) —
Other (49)27 81
Other income (expense), net $ (49)$ 4,728 $81
22. INCOME TAXES
The components of the Company's deferred tax assets and liabilities as of December 31, 2005 and 2006 are as follows (in
thousands):
December 31,
2005 2006
Deferred tax assets:
Net operating loss carryforwards $ 28,006 $ 62,191
Temporary differences:
Accrued expenses 6,071 5,722
Reserves and other 4,147 4,788
38,224 72,701
Deferred tax liabilities:
Temporary differences:
Depreciation (1,639) 1,689
Valuation allowance (36,585)(74,390)
Net asset $ — $ —
As a result of the Company's history of losses, a valuation allowance has been provided for the full amount of the Company's net
deferred tax assets. In management's opinion, it is more likely than not that such benefits will be realized.
At December 31, 2005 and 2006, the Company had net operating loss carryforwards of approximately $58.0 million and $145.2
million, respectively, which may be used to offset future taxable income. An additional $21.9 million of net operating losses are
limited under Internal Revenue Code Section 382 to $799,000 a year. These carryforwards begin to expire in 2018.
The income tax benefit differs from the amount computed by applying the U.S. federal income tax rate of 35% to loss before
income taxes for the following reasons (in thousands):
Year ended December 31,
2004 2005 2006
U.S. federal income tax benefit at statutory rate $ 1,589 $ 8,702 $ 35,618
State income tax benefit, net of federal expense 148 847 3,444
Stock compensation expense (127) (25) —
Other 525 389 (1,257)
Unrecognized benefit due to valuation allowance (2,135)(9,135)(37,805)
Income tax benefit $ — $ — $ —
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