Hypercom Corporation Annual Report - CiteSeer

17. Income Taxes
Loss before income taxes and discontinued operations consisted of the following for the years ended December 31, 2009, 2008
and 2007 (dollars in thousands):
2009 2008 2007
Income (loss) before income taxes and discontinued operations:
United States $ 319 $ (24,276 ) $ (15,760 )
Foreign (7,092 ) (59,422 ) 7,138
$ (6,773 ) $ (83,698 ) $ (8,622 )
The (provision) benefit for income taxes for the years ended December 31, 2009, 2008 and 2007 consisted of the following
(dollars in thousands):
Current:
State $ 41 $ (3 ) $ 4
Federal — — (8 )
Foreign (5,107 ) 465 (40 )
(5,066 ) 462 (44 )
Deferred — Foreign 5,895 (1,673 ) (434 )
Total $ 829 $ (1,211 ) $ (478 )
A reconciliation of the U.S. federal statutory income tax rate to the Company’s effective tax rate for the years ended December
31, 2009, 2008 and 2007 is as follows:
2009 2008 2007
Tax expense at the federal statutory rate 35 % 35 % 35 %
Foreign taxes (22.8 ) (5.2 ) 27.5
Impairment charges - (21.3 ) —
Change in valuation allowance 0.6 (8.0 ) (67.4 )
Transaction costs — (1.8 ) —
Other (0.6 ) (0.2 ) (1.0 )
Effective tax rate 12.2 % (1.5 %) (5.9 %)
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax
assets and liabilities at December 31, 2009 and 2008 are as follows (dollars in thousands):
2009 2008
Deferred tax assets (liabilities), current:
Inventory valuation $ 2,780 $ 2,657
Compensation accruals 1,059 1,059
Allowance for doubtful accounts 127 441
Foreign, net 2,213 (3,015 )
Valuation allowance (4,890 ) (4,650 )
Net deferred tax assets (liabilities), current $ 1,289 $ (3,508 )
Deferred tax assets (liabilities), non-current:
Tax loss carry forwards — United States $ 35,256 $ 34,957
Tax loss carry forwards — Foreign 20,363 22,404
Intangibles
(14,979 )
(16,714 )
Property, plant and equipment
(999 )
(1,097 )
Foreign 116 3,918
Other 5,345 5,827
Valuation allowance
(60,004 )
(65,294 )
Net deferred tax liabilities, non-current $ (14,902 ) $ (15,999 )
For the year ended December 31, 2009, the Company’s valuation allowance decreased by $5.0 million, primarily related to the
application of foreign tax loss carryforwards and transfer pricing adjustments. The Company does not expect to realize its deferred
tax assets through expected future taxable profits and has recorded a valuation allowance for all U.S. federal and state deferred tax
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2009
2008
2007