CDW 2004 Annual Report Download - page 50

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42
2004 2003 2002
Statutory federal income tax rate $ 139,951 35.0 % $ 101,347 35.0 % $ 107,169 35.0 %
State taxes, net of federal benefit 18,268 4.6 13,921 4.8 13,411 4.4
Change in valuation allowance 290 0.0 31 0.0 - 0.0
Other (94) 0.0 (921) (0.3) 368 0.1
Effective tax rates $ 158,415 39.6 % $ 114,378 39.5 % $ 120,948 39.5 %
The tax effect of temporary differences that give rise to the net deferred income tax asset at December 31,
2004 and 2003 is presented below (in thousands):
2004 2003
Assets:
Accounts receivable $ 4,142 $ 4,824
Payroll and benefits 7,184 5,399
Employee stock plans 3,118 4,110
Merchandise inventory 860 1,467
Accrued expenses 1,531 457
Exit charge - 130
Loss carryforwards 321 31
Other 1,454 638
Gross deferred assets 18,610 17,056
Liabilities:
Property and equipment 4,019 538
Gross deferred liabilities 4,019 538
Deferred tax asset valuation allowance 321 31
Net deferred tax asset $ 14,270 $ 16,487
The portion of the net deferred tax asset relating to employee stock plans results primarily from the
compensatory stock option grants under the CDW Stock Option Plans. Compensation expense related to
these plans is deductible for income tax purposes in the year the options are exercised.
The net operating loss in Canada of $0.8 million may be carried forward to 2010 - 2011.
10. Stock-Based Compensation
CDW Stock Option Plans
We have established certain stock-based compensation plans for the benefit of our directors and coworkers.
Pursuant to these plans, as of December 31, 2004, we have reserved a total of 5,017,658 common shares for
future stock option grants. The plans generally include vesting requirements from one to 10 years and option
lives of up to 10 years. Options may be granted at exercise prices ranging from $0.01 to the market price of
the common stock at the date of grant.
Option activity for the years ended December 31, 2002, 2003 and 2004 was as follows: