Popeye's 2013 Annual Report Download - page 85

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Popeyes Louisiana Kitchen, Inc.
Notes to Consolidated Financial Statements
For Fiscal Years 2013, 2012, and 2011 — (Continued)
69
Applicable foreign withholding taxes are generally deducted from royalties and certain other revenues collected
from international franchisees. Foreign taxes withheld are generally eligible for credit against the Company’s
U.S. income tax liabilities.
Reconciliations of the Federal statutory income tax rate to the Company’s effective tax rate are presented below:
2013 2012 2011
Federal income tax rate 35.0 %35.0 %35.0 %
State taxes, net of federal benefit 1.9 %1.5 %0.1 %
Valuation allowance 0.9 %0.8 %1.9 %
Provision to return adjustments (0.3)% (0.1)% 0.2 %
Adjustments to estimated tax reserves 0.1 %(1.2)% 0.3 %
Other items, net (0.2)% 0.3 %(2.9)%
Effective income tax rate 37.4 %36.3 %34.6 %
Provision to return adjustments include the effects of the reconciliation of income tax amounts recorded in our
Consolidated Statements of Operations to amounts reflected on our tax returns. In 2011, “Other items, net” included a
tax benefit of approximately $0.8 million,or 2.2%,for work opportunity tax credits related to prior years.
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred
tax liabilities are presented below:
(in millions) 2013 2012
Deferred tax assets:
Deferred franchise fee revenue $ 0.8 $1.0
State net operating loss carry forwards 6.3 5.9
Deferred rentals 4.0 3.9
Deferred compensation 3.8 3.8
Allowance for doubtful accounts 0.1 0.4
Insurance accruals — 0.1
Other accruals 0.4 0.4
Reorganization costs 2.3 2.2
Total gross deferred tax assets 17.7 17.7
Deferred tax liabilities:
Franchise value and trademarks (19.3)(18.4)
Property, plant and equipment (5.7)(2.4)
Total gross deferred liabilities (25.0)(20.8)
Valuation allowance (6.3)(5.9)
Net deferred tax liability $ (13.6) $ (9.0)
The Company assesses quarterly the likelihood that the deferred tax assets will be recovered. To make this assessment,
historical levels of income, expectations and risks associated with estimates of future taxable income are considered.
If recovery is not likely,the Company increases its valuation allowance for the deferred tax assets that it estimates will
not be recovered.