Bed, Bath and Beyond 2004 Annual Report Download - page 23

BED BATH & BEYOND ANNUAL REPORT 2004
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Those investment securities with contractual maturity dates or interest reset dates within one year are classified as
short term investment securities. All other investment securities are classified as long term investment securities. The
contractual maturity dates of held-to-maturity investment securities extend to January 2018 and the available-for-sale
investment securities do not have stated contractual maturities due to the nature of the investment vehicle. Actual
maturities could differ from contractual maturities because borrowers have the right to call certain obligations.
As of February 26, 2005, the Company had gross unrecognized holding losses of $3.9 million relating to held-to-matu-
rity investment securities with fair values totaling $567.9 million. None of these investment securities have been in a
continuous unrecognized loss position for more than 12 months. Unrecognized holding losses typically will not result
in a recognized expense if the underlying securities are held to maturity as intended. As of February 28, 2004, there
were no material gross unrecognized holding losses. Gross unrecognized holding gains relating to held-to-maturity
investment securities were not material as of February 26, 2005 and February 28, 2004. As of February 26, 2005 and
February 28, 2004, the Company had no cumulative unrecognized holding gains or losses relating to its available-for-
sale investment securities.
6. PROVISION FOR INCOME TAXES
The components of the provision for income taxes are as follows:
FISCAL YEAR
(in thousands) 2004 2003 2002
Current:
Federal $281,200 $230,124)$184,055)
State and local 20,967 23,012)18,405)
302,167 253,136)202,460)
Deferred:
Federal 2,715 (2,783) (12,083)
State and local 1,341 (278) (1,208)
4,056 (3,061) (13,291)
$306,223 $250,075)$189,169)
On October 22, 2004, the American Job Creation Act of 2004 (the “Act”) was signed into law. The Act contains
numerous amendments and additions to the U.S. corporate income tax rules. None of these changes, either individu-
ally or in the aggregate, is expected to have a significant impact on the Company’s income tax liability.
At February 26, 2005 and February 28, 2004, included in other current assets and in deferred rent and other liabilities
is a net current deferred income tax asset of $70.1 million and $74.3 million, respectively, and a net noncurrent
deferred income tax liability of $16.3 million and $16.4 million, respectively. These amounts represent the net tax
effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purpos-
es and the amounts used for income tax purposes. The significant components of the Company’s deferred tax assets
and liabilities consist of the following:
February 26, February 28,
(in thousands) 2005 2004
Deferred Tax Assets:
Inventories $26,207)$25,003)
Deferred rent and other rent credits 20,348)12,627)
Insurance 24,518)25,103)
Other 36,705)45,569)
Deferred Tax Liabilities:
Depreciation (46,126) (43,260)
Other (7,817) (7,151)
$53,835)$57,891)
The Company has not established a valuation allowance for the net deferred tax asset as it is considered more likely
than not that it is realizable through a combination of future taxable income, the deductibility of future net
deferred tax liabilities and tax planning strategies.
For fiscal 2004, 2003 and 2002, the effective tax rate is comprised of the Federal statutory income tax rate of 35.00%
in each fiscal year, the State income tax rate, net of Federal benefit, of 2.60% for fiscal 2004, 3.50% for fiscal 2003
and 2002, and other income tax effects of 0.15% for fiscal 2004.