Sonic 2013 Annual Report Download - page 47

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45
Deferred tax assets and liabilities consist of the following at August 31:
2013 2012
Deferred tax assets:
Allowance for doubtful accounts and notes receivable $ 898 $ 1,145
Leasing transactions 3,599 3,346
Deferred income 4,124 6,004
Accrued liabilities 1,995 1,200
Stock compensation 8,024 11,899
Other 676 745
State net operating losses 8,703 7,361
Total deferred tax assets 28,019 31,700
Valuation allowance (8,703) (7,361)
Total deferred tax assets after valuation allowance $ 19,316 $ 24,339
Deferred tax liabilities:
Prepaid expenses $ (1,369) $ (1,265)
Investment in partnerships, including differences in capitalization,
depreciation and direct financing leases (2,061) (2,408)
Property, equipment and capital leases (25,433) (24,466)
Intangibles and other assets (18,337) (16,965)
Debt extinguishment (4,191) (4,191)
Total deferred tax liabilities (51,391) (49,295)
Net deferred tax liabilities $ (32,075) $ (24,956)
Net deferred tax assets and liabilities are classified as follows:
Current $ 2,840 $ 4,821
Noncurrent (34,915) (29,777)
Total $ (32,075) $ (24,956)
State net operating loss carryforwards expire beginning in December 2013 through May 2034. 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 $8.7 million and $7.4 million as of August 31, 2013 and 2012, respectively.
As of August 31, 2013 and 2012, the Company had approximately $2.6 million and $5.5 million of unrecognized
tax benefits, including approximately $0.3 million and $0.7 million of accrued interest and penalty, respectively. The
liability for unrecognized tax benefits decreased $2.9 million in fiscal year 2013. The majority of the change was
due to the favorable resolution of a federal tax audit, a statute of limitations expiration of a state tax position and
a tax method change, offset by a new uncertain position related to a federal credit. Of this change, only $0.7
million impacted the Company’s tax rate.
The Company recognizes estimated interest and penalties as a component of its income tax expense, net of
federal benefit, as a component of “Provision for income taxes” in the Consolidated Statements of Income and
Comprehensive Income. During the years ended August 31, 2013, 2012 and 2011, the Company recognized net
benefits of $0.4 million, $0.1 million and $0.5 million, respectively.
Notes to Consolidated Financial Statements
August 31, 2013, 2012 and 2011 (In thousands, except per share data)