Income Taxes

12 Months Ended

Dec. 31, 2011

Income Taxes [Abstract]

Income Taxes

Note I — Income Taxes

A reconciliation of the federal statutory rate of 35% to actual follows:

	Year Ended December 31,
	2011		2010		2009
Tax at statutory rate …………………………………………	35.0	%	35.0	%	35.0	%
State income taxes, net of federal benefit……………. ………	1.9	%	2.9	%	3.1	%
Effect of foreign operations, net of foreign tax credits ……	0.3	%	0.5	%	—	%
Other, net …………………………………………………..	(1.4)	%	(0.9)	%	(0.2)	%
Total ………………………………………………………..	35.8	%	37.5	%	37.9	%

The components of income tax expense are as follows:
				Year Ended December 31,
				2011		2010		2009
			(In thousands)
Current expense
	Federal …………………………………………………		$	4,154	$	749	$	55,101
	State ……………………………………………………			6,547		8,656		10,278
	Foreign …………………………………………………			3,762		4,220		1,288
		Total current ………………………………………		14,463		13,625		66,667
Deferred expense
	Federal …………………………………………………			76,936		85,866		33,028
	State ……………………………………………………			1,145		3,624		2,820
	Foreign …………………………………………………			(631)		0		0
		Total deferred ………………………………………		77,450		89,490		35,848
		Total …………………………………………………	$	91,913	$	103,115	$	102,515

Deferred tax assets (liabilities) consist of the following:
			December 31,
			2011		2010
			(In thousands)
Deferred tax assets
	Federal net operating loss carryforwards …………………………		$	63,057	$	24,612
	State net operating loss carryforwards ……………………………			16,506		12,318
	Foreign net operating loss carryforwards …………………………			2,989		595
	Accrued liabilities …………………………………………………			48,928		53,777
	Property assets ……………………………………………………			0		1,141
	Other assets including credits ……………………………………..			65		1,261
	Foreign tax credit carryforwards …………………………………			4,434		2,207
				135,979		95,911
Valuation allowance …………………………………………………				(930)		(5,951)
Deferred tax liabilities
	Rental merchandise ……………………………………………….			(327,222)		(244,662)
	Property assets ……………………………………………………			(25,508)		0
	Intangible assets …………………………………………………..			(80,030)		(64,250)
				(432,760)		(308,912)
		Net deferred taxes ……………………………………………….	$	(297,711)	$	(218,952)

At December 31, 2011, we had approximately $180.2 million of federal net operating loss (“NOL”) carryforwards available to offset future taxable income expiring between 2020 and 2023 and approximately $345.8 million of state NOL carryforwards expiring between 2012 and 2030. Approximately one third of the total remaining carryforward represents acquired NOLs. Utilization of these NOLs is subject to applicable annual limitations for U.S. state and U.S. federal tax purposes, including Section 382 of the Internal Revenue Code of 1986, as amended. In addition, at December 31, 2011, we had approximately $10.0 million of foreign NOLs and approximately $4.4 million in foreign tax credit (“FTC”) carryforwards expiring between 2020 and 2021. We establish a valuation allowance to the extent we consider it more likely than not that the deferred tax assets attributable to our acquired NOLs or FTCs will not be recovered.

We are subject to federal, state, local and foreign income taxes. Along with our U.S. subsidiaries, we file a U.S. federal consolidated income tax return. With few exceptions, we are no longer subject to U.S. federal, state, foreign and local income tax examinations by tax authorities for years before 2007. The Appeals process with the Internal Revenue Service (IRS) Office of Appeals for the years 2001 through 2007 has been completed. We reached agreement on all issues except one issue with respect to the 2003 tax year, an issue which occurs in 2004 through 2007 taxable years as well. We believe the position and supporting case law applied by the IRS to this matter are incorrectly applied to our situation and that our fact pattern is distinguishable from the IRS' position. We intend to vigorously defend our position on the issue. This matter was heard by the United States Tax Court at trial during November 2011, and a decision is expected during the latter part of 2012. Currently, we are also under examination in various states. We do not anticipate that adjustments, if any, regarding the 2003 through 2007 disputed issue or state examinations will result in a material change to our consolidated statement of earnings, financial condition, statement of cash flows or earnings per share.

A reconciliation of the beginning and ending amount of unrecognized tax benefits follows:

	(In thousands)
Balance at January 1, 2010 …………………………………………………..	$	3,030
Additions based on tax positions related to current year ……………………		958
Additions for tax positions of prior years ……………………………………		2,928
Reductions for tax positions of prior years ………………………………….		(241)
Balance at January 1, 2011 …………………………………………………..		6,675
Additions based on tax positions related to current year ……………………		800
Additions for tax positions of prior years ……………………………………		2,650
Reductions for tax positions of prior years ………………………………….		(152)
Settlements …………………………………………………………………..		(317)
Balance at December 31, 2011 ………………………………………………	$	9,656

Included in the balance of unrecognized tax benefits at December 31, 2011 is $6.9 million, net of federal benefit, which, if ultimately recognized, will affect our annual effective tax rate.

As of December 31, 2011, we have accrued approximately $1.3 million for the payment of interest and recorded interest expense of approximately $490,000 for the year then ended, which are excluded from the reconciliation of unrecognized tax benefits presented above.