CVS 2000 Annual Report Download - page 35

Income Taxes
The income tax provision consisted of the following
for the respective years:
Following is a reconciliation of the statutory income tax rate to
the Company’s effective tax rate for the respective years:
Following is a summary of the significant components of the
Company’s deferred tax assets and liabilities as of the respective
balance sheet dates:
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Fiscal Year
In millions 2000 1999 1998
Current: Federal $ 397.2 $ 289.6 $197.3
State 73.9 68.4 41.4
471.1 358.0 238.7
Deferred: Federal 21.9 72.6 44.1
State 4.4 10.7 23.7
26.3 83.3 67.8
Total $ 497.4 $ 441.3 $306.5
Fiscal Year
2000 1999 1998
Statutory income tax rate 35.0% 35.0% 35.0%
State income taxes, net of
federal tax benefit 4.1 4.8 5.8
Goodwill and other 0.9 1.2 1.2
Effective tax rate before
merger-related costs 40.0 41.0 42.0
Merger-related costs(1) ——2.4
Effective tax rate 40.0% 41.0% 44.4%
(1) Includes state tax effect.
December 30, January 1,
In millions 2000 2000
Deferred tax assets:
Employee benefits $ 65.1 $ 56.7
Other 137.4 135.1
Total deferred tax assets 202.5 191.8
Deferred tax liabilities:
Accelerated depreciation (98.6) (68.9)
Inventory (7.0) (10.7)
Total deferred tax liabilities (105.6) (79.6)
Net deferred tax assets $ 96.9 $112.2
Income taxes paid were $342.5 million, $354.5 million and $102.6
million for 2000, 1999 and 1998, respectively.
Based on historical pre-tax earnings, the Company believes it is
more likely than not that the deferred tax assets will be realized.
Commitments & Contingencies
In connection with certain business dispositions
completed between 1991 and 1997, the Company
continues to guarantee lease obligations for
approximately 1,300 former stores.The Company is indemnified
for these obligations by the respective purchasers. Assuming
that each respective purchaser became insolvent, an event
which the Company believes to be highly unlikely, management
estimates that it could settle these obligations for approximately
$876 million as of December 30, 2000.
In the opinion of management, the ultimate disposition of
these guarantees will not have a material adverse effect on
the Company’s consolidated financial condition, results of
operations or future cash flows.
As of December 30, 2000, the Company had outstanding
commitments to purchase $335 million of merchandise inventory
for use in the normal course of business.The Company currently
expects to satisfy these purchase commitments by 2003.
The Company is also a defendant in various lawsuits arising in
the ordinary course of business. In the opinion of management
and the Company’s outside counsel, the ultimate disposition
of these lawsuits, exclusive of potential insurance recoveries,
will not have a material adverse effect on the Company’s
consolidated financial condition, results of operations or future
cash flows.
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2000 Annual Report