F-31
The reconciliationbetween theCompany’s effective tax rate on income from continuingoperations and the statutoryU.S. tax
rate is as follows (in thousands):
YearEndedDecember 31,
2013
2012
2011
Pre tax loss .................................... $ (66,558)
$ (74,587)
$ (84,790)
Statutory rate .................................
(23,295)
35.0%
(26,105)
35.0%
(29,677)
35.0%
State income taxnet of federal
benefit .......................................
(3,823)
5.7%
(4,284)
5.7%
(4,870)
5.7%
Net change invaluation
allowance ..................................
28,850
(43.3)% 25,269
(33.9)%
41,136
(48.5)%
Gainon Investment inRegulus
Therapeutics Inc. .......................
—
—
(6,353)
8.5%
—
—
Tax credits ....................................
(15,839)
23.8%
806
(1.1)%
(4,202)
5.0%
Noncontrolling interest .................
—
—
—
—
1,448
(1.7)%
Deferred tax true-up ......................
8,023
(12.1)% 839
(1.1)%
(4,236)
5.0%
Other .............................................
170
(0.2)% 719
(0.9)%
412
(0.5)%
Effective rate ................................. $
(5,914)
8.9% $ (9,109)
12.2% $
11
(0.0)%
Significant components of our deferred tax assets and liabilities as ofDecember 31, 2013 and 2012 are as follows (in
thousands):
YearEndedDecember 31,
2013
2012
DeferredTaxAssets:
Net operating loss carryovers .................................................................................... $
260,462 $
244,539
R&D credits ..............................................................................................................
65,600
46,928
CapitalizedR&D .......................................................................................................
2,736
22,223
Deferred revenue .......................................................................................................
28,555
7,285
Accrued restructuring ................................................................................................
3,304
3,605
Other .........................................................................................................................
7,107
18,931
Total deferred tax assets ............................................................................................ $
367,764 $
343,511
DeferredTaxLiabilities:
Convertible debt ........................................................................................................ $
(20,895) $
(23,322)
Intangible and capital assets ......................................................................................
(4,614)
(6,784)
Net deferred tax asset ................................................................................................ $
342,255 $
313,405
Valuation allowance ..................................................................................................
(342,255)
(313,405)
Net deferreds ............................................................................................................. $
— $
—
The deferred tax assets and liabilities shown above donot include certaindeferred tax assets at December 31, 2013 and2012
that arose directly from (or the use ofwhichwas postponedby) taxdeductions related to equity compensation in excess of
compensation recognized for financial reporting. Those deferred tax assets include non-qualified stockoptions and incentive stock
optionswe issued.Wewill increase stockholders’ equityby approximately$27.8million if andwhenwe ultimately realize such
deferred tax assets.We use tax returnordering for purposes of determiningwhen excess tax benefits have been realized.
At December 31, 2013, we had federal andCalifornia tax net operating loss carryforwards of approximately $685.8million
and$894.9million, respectively. Our Federal andCalifornia tax loss carryforwardswill expire at various dates starting in2014, unless
we use thembefore then. AtDecember 31, 2013, we alsohad federal andCalifornia research anddevelopment tax credit
carryforwards of approximately$62.6million and$22.2million, respectively. Our Federal research anddevelopment tax credit
carryforwards began expiring in2004 andwill continue to expire unlesswe use themprior to expiration. Our California research and
development tax credit carryforwards are available indefinitely. In2009, we had a substantial amount of taxable income andweused
a portionof our FederalNOL carryforwards to reduce our federal income taxes. We didnot use anyof our CaliforniaNOL
carryforwards tooffset our state taxes in2009becauseCalifornia suspended the use ofNOL carryforwards for 2009. As a result, our
FederalNOL carryforwards are lower thanourCaliforniaNOL carryforwards.
