CarMax 2007 Annual Report Download - page 59

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Land held for development represents land owned for potential expansion. Leased property meeting capital lease
criteria is capitalized and the present value of the related lease payments is recorded as long-term debt.
Accumulated amortization on capital lease assets was $6.0 million as of February 28, 2007, and $3.6 million as of
February 28, 2006.
7. INCOME TAXES
PROVISION FOR INCOME TAXES
Years Ended February 28
(In thousands) 2007 2006 2005
Current:
Federal .................................................................................. $ 116,125 $ 92,488 $ 62,662
State ...................................................................................... 18,031 11,431 10,117
Total.......................................................................................... 134,156 103,919 72,779
Deferred:
Federal .................................................................................. (9,024) (18,764) (7,463)
State ...................................................................................... (380) (1,774) (810)
Total.......................................................................................... (9,404) (20,538) (8,273)
Provision for income taxes................................................................. $ 124,752 $ 83,381 $ 64,506
EFFECTIVE INCOME TAX RATE RECONCILIATION
Years Ended February 28
2007 2006 2005
Federal statutory income tax rate............................................... 35.0% 35.0% 35.0%
State and local income taxes, net of federal benefit................... 3.5 3.0 3.6
Nondeductible items.................................................................. 0.1 0.3 0.3
Effective income tax rate........................................................... 38.6% 38.3% 38.9%
TEMPORARY DIFFERENCES RESULTING IN DEFERRED TAX ASSETS AND LIABILITIES
As of February 28
(In thousands) 2007 2006
Deferred tax assets:
Accrued expenses............................................................................................... $20,954 $16,887
Partnership basis ................................................................................................ 6,138 6,229
Inventory............................................................................................................ 2,036 —
Stock compensation ........................................................................................... 24,282 20,365
Total gross deferred tax assets............................................................................... 53,410 43,481
Deferred tax liabilities:
Securitized receivables....................................................................................... 18,540 19,699
Prepaid expenses................................................................................................ 7,295 10,757
Inventory............................................................................................................ — 7,476
Depreciation and amortization ........................................................................... 504 4,508
Other .................................................................................................................. 29 27
Total gross deferred tax liabilities ......................................................................... 26,368 42,467
Net deferred tax asset ............................................................................................ $27,042 $ 1,014
Based on our historical and current pretax earnings, management believes the amount of gross deferred tax assets
will more likely than not be realized through future taxable income and future reversals of existing temporary
differences; therefore, no valuation allowance is necessary.