Sonic 2011 Annual Report Download - page 47

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Prior to the adoption of Topic 810, noncontrolling interests were reported as a component of operating income. Due
to the adoption, noncontrolling interests are now presented pre-tax as net income-noncontrolling interests and no longer
as a component of operating income. This presentation gives an appearance of a lower effective tax rate than the
company’s actual effective tax rate. The following table reconciles the difference in the effective tax rate as a result of
adoption of this topic:
2011 2010 2009
Effective income tax rate reconciliation (post-adoption of Topic 810):
Effective tax rate per consolidated income statement 31.2% 25.8 % 32.3%
Book income attributable to noncontrolling interests 1.1 3.9 6.1
Effective tax rate for the fiscal year 32.3% 29.7 % 38.4%
Deferred tax assets and liabilities consist of the following at August 31:
2011 2010
Current deferred tax assets (liabilities):
Allowance for doubtful accounts and notes receivable $ 1,032 $ 1,228
Capital lease liabilities and other 1,551 37
Accrued litigation costs 112 408
Prepaid expenses (1,190) (585)
Deferred income from franchisees 848 972
Deferred income from affiliated technology fund 353 (143)
Deferred income 10 –
Net investment in direct financing leases (112) –
Accrued liabilities 166 –
Current deferred tax assets, net $ 2,770 $ 1,917
Noncurrent deferred tax assets (liabilities):
Net investment in direct financing leases, including differences
related to capitalization and amortization $ 648 $ (2,729)
Investment in partnerships, including differences in capitalization,
depreciation and direct financing leases (2,554) (2,631)
State net operating losses 6,389 5,550
Property, equipment and capital leases (24,834) (20,737)
Deferred income from affiliated franchise fees 1,160 1,271
Accrued liabilities 33 445
Intangibles and other assets (13,321) (2,589)
Deferred income from franchisees 1,481 1,801
Stock compensation 12,556 11,989
Loss on cash flow hedge – 522
Debt extinguishment (4,146) (2,323)
Capital loss carryover 40 –
Allowance for doubtful accounts and notes receivable 256 –
Deferred income 1,453 –
(20,839) (9,431)
Valuation allowance (6,389) (5,550)
Noncurrent deferred tax liabilities, net $ (27,228) $ (14,981)
Deferred tax assets and (liabilities):
Deferred tax assets (net of valuation allowance) $ 21,699 $ 18,673
Deferred tax liabilities (46,157) (31,737)
Net deferred tax liabilities $ (24,458) $ (13,064)
State net operating loss carryforwards expire generally beginning in 2011. Management does not believe the company
will be able to realize the state net operating loss carryforwards and therefore has provided a valuation allowance of $6.4
million and $5.5 million as of August 31, 2011 and August 31, 2010, respectively.
Notes to Consolidated Financial Statements
August 31, 2011, 2010 and 2009 (In thousands, except per share data)