With the purchase of National Beef (closed on in Dec 2011), would NB's full year's net income go into LUK Q4? NB made $250M last year, and LUK has that huge deferred tax asset. NB could mop up much of the DTA in the next 4-5 years...especially with beef prices rising.
it's sooo black and white... see the 2010 Annual Report: At the behest of the accounting pharaohs, we have once again capitalized the NOL on our balance sheet (having written it off in 2008), and recognized income tax “income” of over $1 billion. We remind our readers that capitalizing this asset is Byzantine, makes no sense, does not take into account present value and represents tax savings on money the Company has not yet earned. Our CFO, Joe Orlando, will be happy to explain why this makes no sense, but don’t yell at him!
What is so hard to understand? Lots of companies reduce their taxes paid (see GE) with various tax reduction strategies.
The confusing issue referenced in the annual letter is recognizing an accounting gain today for a cash gain in the future. The future cash "gain" is really a tax that goes to retained earnings instead of the tax man.
It IS black and white, but vanity does not allow us to admit when we're wrong. It's all good, just human nature.
PS You can see how they shielded their Americredit gain using their tax losses.
Forbes thinks a loss of $0.24 is coming. A quick review on my end would show more of a $0.50 gain per share, and I still don't know fully how NBeef will positively effect the shares. Next week will be interesting.
also regarding luk's ability to use NOL's against their cap gains there's this on pg 38 of their 2011 3rd qtr 10Q:
<<Since the Company had carried a full valuation allowance against its net federal deferred tax asset during interim periods in 2010, no regular federal income tax expense or benefit for interim periods was recorded. However, the Company had been recording provisions or benefits for deferred federal minimum taxes payable, due to material unrealized security gains reflected in accumulated other comprehensive income and in income related to associated companies. As more fully described in the 2010 10-K, if these gains were realized, the Company would have been able to use its NOLs to fully offset the federal income taxes that would have been due, but would have had to pay federal minimum taxes. Although the payment of federal minimum taxes generates a minimum tax credit carryover, it would have been fully reserved for in the net deferred tax asset valuation allowance. In the third quarter of 2010, the Company was able to make an election that permitted it to use a portion of its NOLs to fully offset federal minimum taxable income, and as a result $11,594,000 of deferred federal minimum tax liabilities, which had been recorded in prior periods, were reversed.>>