Finding and Valuing NOLs

[Cunninghamew]

I was wondering how you go about finding how many NOLs a company has? In the past, I have seen it explicitly stated by mgmt. in filings. To be specific, I am trying to find the amount of NOLs that Special Diversified Opportunities (SDOI) carries.

 

As far as valuation, I assume you just take the amount and discount it overtime...

 

Thanks in advance for any help you can provide.

[mbrock77]

They should break it out in the 10K

[gfp]

It's on page 13 of the most recent 10K for Special Diversified - approximately 11 million

 

http://www.sec.gov/Archives/edgar/data/911649/000118811213001093/t76199_10k.htm

[WhoIsWarren]

They should break it out in the 10K

 

Yes it's in the 10k.

 

As a general rule, you should always look in the notes to the accounts because what's recorded in the balance sheet is the net operating loss (or net deferred tax asset, net DTA) -- that is, net of allowances.  The notes will show the gross figure, the allowances and the net.  The allowance means that, in the view of management / auditor, not all losses will be used.  There are many reasons why this may be the case -- losses not transferable across jurisdictions or businesses, or simply the company won't make sufficient profits in the future to use up the losses.  However, in some cases significant value can be "hidden" if management / auditors takes an overly conservative view.

 

So in the case of SDOI, there was a net deferred tax asset of $37k as at year end 2012.  Note 11 breaks this out.  The gross DTA was $9,962k, the allowance was $9,925k.  Your call as to whether there is hidden value here, but relative to a current market cap of $24 million, the gross DTA is large.

 

I think that in some cases the DTAs are transferable to an acquirer in an acquisition, who may be in a better position to utilise the gross DTA.  However, this area of tax is very complicated.

 

Hope this helps.

 

It's on page 13 of the most recent 10K for Special Diversified - approximately 11 million

 

http://www.sec.gov/Archives/edgar/data/911649/000118811213001093/t76199_10k.htm

 

Not sure you're right here -- where are you getting $11m?

 

[gfp]

 

It's on page 13 of the most recent 10K for Special Diversified - approximately 11 million

 

http://www.sec.gov/Archives/edgar/data/911649/000118811213001093/t76199_10k.htm

 

Not sure you're right here -- where are you getting $11m?

 

My apologies - I don't know anything about this company, I was just directing the poster to a link and page number for Net Operating Loss Carry forwards for the US.

[Ham Hockers]

 

It's on page 13 of the most recent 10K for Special Diversified - approximately 11 million

 

http://www.sec.gov/Archives/edgar/data/911649/000118811213001093/t76199_10k.htm

 

Not sure you're right here -- where are you getting $11m?

 

It's also in the notes, and earlier in the 10K. They're netted out to zero for financial reporting purposes.

 

I also wouldn't consider everything that gets lumped into deferred tax assets on the balance sheet as NOLs. There's tons of stuff in there that has nothing to do with NOLs.

[LC]

 

As a general rule, you should always look in the notes to the accounts because what's recorded in the balance sheet is the net operating loss (or net deferred tax asset, net DTA) -- that is, net of allowances.  The notes will show the gross figure, the allowances and the net.  The allowance means that, in the view of management / auditor, not all losses will be used.  There are many reasons why this may be the case -- losses not transferable across jurisdictions or businesses, or simply the company won't make sufficient profits in the future to use up the losses.  However, in some cases significant value can be "hidden" if management / auditors takes an overly conservative view.

 

This was the case with FHCO last year. They received a large order and Poof, something like 8m of valuation allowances on their DTA were released and included in earnings.

[WhoIsWarren]

I also wouldn't consider everything that gets lumped into deferred tax assets on the balance sheet as NOLs. There's tons of stuff in there that has nothing to do with NOLs.

 

Oh yes, good point.

[Cunninghamew]

They should break it out in the 10K

 

Yes it's in the 10k.

 

As a general rule, you should always look in the notes to the accounts because what's recorded in the balance sheet is the net operating loss (or net deferred tax asset, net DTA) -- that is, net of allowances.  The notes will show the gross figure, the allowances and the net.  The allowance means that, in the view of management / auditor, not all losses will be used.  There are many reasons why this may be the case -- losses not transferable across jurisdictions or businesses, or simply the company won't make sufficient profits in the future to use up the losses.  However, in some cases significant value can be "hidden" if management / auditors takes an overly conservative view.

 

So in the case of SDOI, there was a net deferred tax asset of $37k as at year end 2012.  Note 11 breaks this out.  The gross DTA was $9,962k, the allowance was $9,925k.  Your call as to whether there is hidden value here, but relative to a current market cap of $24 million, the gross DTA is large.

 

I think that in some cases the DTAs are transferable to an acquirer in an acquisition, who may be in a better position to utilise the gross DTA.  However, this area of tax is very complicated.

 

Hope this helps.

 

It's on page 13 of the most recent 10K for Special Diversified - approximately 11 million

 

http://www.sec.gov/Archives/edgar/data/911649/000118811213001093/t76199_10k.htm

 

Not sure you're right here -- where are you getting $11m?

 

First, thanks everyone...  I was looking in the 10qs for this info, but I guess it is only in the ks (or at least for this company).

 

So note 11 has two tables: (1) Breakout of the DTA and (2) breakout of NOLs by year of expiration

 

As you pointed out, the DTA shows $37k net and $9,962k gross. This company is currently a shell of cash that has no operations, so the allowance of almost 100% makes sense. The board is using the shell to find an acquisition target (or so I think). In the meantime, until such target is acquired the company will have no operations (or income) to offset anything.

 

The DTA table also has a breakout that shows its components. In it is shows $4,930 of NOL carry forwards. However, the second table of NOL expiration by year shows NOLs of $10,978k.

 

Question 1. How do they arrive at the number in the DTA table of $4,930k (or why isn't it $10,978k)?

 

Question 2. Assuming they were able to use these NOLs for anything they wanted (i.e. forget about jurisdictions, etc) would I look at the DTA table to find out how much they can offset or the NOL table?  My inclination would be that they have $10,978k they could use to offset taxes.

 

I guess the answer to the first question will inform the answer to my second. 

 

Also, thanks everyone