Travelzoo 2013 Annual Report Download - page 101

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Income tax expense differed from the amounts computed by applying the U.S. federal statutory tax rate applicable to the
Company’s level of pretax income as a result of the following (in thousands):
Year Ended December 31,
2013 2012 2011
Federal tax at statutory rates $ 947 $ 9,029 $ 5,363
State taxes, net of federal income tax benefit 694 489 385
Foreign losses not benefited — — —
Change of valuation allowance (1,131)(2,453)(1,235)
Unexchanged promotional shares 7,700 1,050 7,000
Non-deductible expenses and other (492)(515) 492
Total income tax expense $ 7,718 $ 7,600 $ 12,005
The tax effects of temporary differences that give rise to significant portions of the Company’s deferred tax assets and
liabilities are as follows (in thousands):
December 31,
2013 2012
Deferred tax assets:
Foreign net operating loss carryforwards $ 76 $ 1,936
State income taxes 415 565
Accruals and allowances 1,141 697
Stock based compensation 1,618 1,094
Capital loss 1,713 1,754
Deferred revenue 411 790
Deferred rent 54 302
Property, equipment and intangible assets (145) 7
Total deferred tax assets 5,283 7,145
Valuation allowance (1,713)(2,886)
Total deferred tax assets net of valuation allowance 3,570 4,259
Deferred tax liabilities:
U.S. tax on undistributed earnings (395)(355)
Property, equipment and intangible assets — —
Total deferred tax liabilities (395)(355)
Net deferred tax assets $ 3,175 $ 3,904
The total amount of the valuation allowance at December 31, 2013 decreased $1.1 million from the amount recorded as
of December 31, 2012, primarily due to the utilization of foreign net operating loss carryforwards in 2013. The Company also
has a valuation allowance of $1.7 million as of December 31, 2013 related to the capital loss carryforward for which it is more
likely than not that the tax benefit will not be realized. If not utilized, the capital loss carryforward will expire in 2014.
United States income and foreign withholding taxes have not been provided on undistributed earnings for certain non-
U.S. subsidiaries. The undistributed earnings on a book basis for the non-U.S. subsidiaries are approximately $2.8 million. The
Company intends to reinvest these earnings indefinitely in its operations outside the U.S. If the undistributed earnings are
remitted to the U.S. these amounts would be taxable in the U.S at the current federal and state tax rates net of foreign tax
credits. Also, depending on the jurisdiction any distribution may be subject to withholding taxes at rates applicable for that
jurisdiction.