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<strong>Harman</strong> International Industries, Incorporated and Subsidiaries<br />
(Dollars in thousands, except per-share data and unless otherwise indicated)<br />
Income tax (benefit) expense for the years ended June 30, 2009, 2008 and 2007 consisted of the following:<br />
2009<br />
Year Ended June 30,<br />
2008 2007<br />
Current:<br />
Federal .................................................... $ 2,430 $ 2,194 $ 3,991<br />
State ...................................................... 300 400 400<br />
Foreign .................................................... 2,445 22,551 <strong>10</strong>7,818<br />
Current income tax expense ....................................... 5,175 25,145 112,209<br />
Deferred:<br />
Federal .................................................... (58,369) (11,124) (43,913)<br />
State ...................................................... — — —<br />
Foreign .................................................... (44,829) (2,223) (8,566)<br />
Deferred income tax benefit ....................................... (<strong>10</strong>3,198) (13,347) (52,479)<br />
Excess tax benefits from share-based payment arrangements ............. 126 5,321 <strong>10</strong>,456<br />
Total income tax (benefit) expense, net .............................. $ (97,897) $ 17,119 $ 70,186<br />
Deferred taxes are recorded based upon differences between the financial statement basis and tax basis of<br />
assets and liabilities and available tax loss and credit carryforwards.<br />
At June 30, 2009 and 2008, deferred taxes consisted of the following:<br />
June 30,<br />
Assets/(Liabilities) 2009 2008<br />
Federal tax credits .............................................. $215,378 $ 203,535<br />
Inventory costing differences ..................................... 12,809 12,285<br />
Capitalized research and development .............................. 51,082 63,<strong>10</strong>4<br />
U.S. tax loss carryforward ....................................... 61,527 —<br />
Foreign tax loss and credit carryforwards ........................... 44,182 18,089<br />
Non-qualified stock options—GAAP deductions ..................... 12,134 16,212<br />
Other assets and other allowances ................................. 63,488 52,274<br />
Deferred tax asset, gross ......................................... 460,600 365,499<br />
Less valuation allowance ........................................ (131,601) (120,220)<br />
Deferred tax asset, net of valuation allowance ........................ 328,999 245,279<br />
Gross deferred tax liability from fixed asset depreciation ............... (3,465) (9,301)<br />
Foreign statutory accounting ..................................... (765) (14,206)<br />
Deferred tax liability, gross ...................................... (4,230) (23,507)<br />
Net deferred tax asset ........................................... $324,769 $ 221,772<br />
Although realization is not assured, we believe that the realization of the recognized net deferred tax asset of<br />
$324.8 million is more likely than not based on expectations as to future taxable income in the jurisdictions in<br />
which we operate and available tax planning strategies, as defined in SFAS No. <strong>10</strong>9 “Accounting for Income<br />
Taxes,” that could be implemented if necessary to prevent a carryforward from expiring. We have Federal<br />
research credit, alternative minimum tax credit and foreign income tax credit carryforwards valued at $32.2<br />
million, $1.9 million and $181.3 million at June 30, 2009. The research credit carryforward will begin to expire<br />
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