Costco 2004 Annual Report Download - page 47

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Note 6—Retirement Plans (Continued)
California union employees participate in a defined benefit plan sponsored by their union. The Company
makes contributions based upon its union agreement. For all the California union employees, the Company spon-
sored 401(k) plan currently allows pre-tax deferral against which the Company matches 50% of the first five
hundred dollars of employee contributions. In addition, the Company will provide each eligible participant a con-
tribution based on hours worked and years of service. The Company has a defined contribution plan for Canadian
and United Kingdom employees and contributes a percentage of each employee’s salary.
Amounts expensed under these plans were $169,664, $149,392 and $127,189 for fiscal 2004, 2003 and
2002, respectively. The Company has defined contribution 401(k) and retirement plans only, and thus has no li-
ability for post-retirement benefit obligations under the SFAS No. 106 “Employer’s Accounting for Post-
retirement Benefits Other than Pensions.”
Note 7—Income Taxes
The provisions for income taxes for fiscal 2004, 2003 and 2002 are as follows:
2004 2003 2002
Federal:
Current ............................................. $257,092 $295,323 $331,455
Deferred ............................................ 116,390 35,150 5,263
Total federal ....................................... 373,482 330,473 336,718
State:
Current ............................................. 53,608 58,739 48,256
Deferred ............................................ 20,479 (470) 4,269
Total state ......................................... 74,087 58,269 52,525
Foreign:
Current ............................................. 171,006 9,634 46,197
Deferred ............................................ (100,344) 38,857 2,761
Total foreign ....................................... 70,662 48,491 48,958
Total provision for income taxes ........................... $518,231 $437,233 $438,201
For fiscal 2004 the annual effective tax rate remained constant throughout the year at 37%. In the fourth
quarter of fiscal 2003 and 2002 the Company adjusted the annual effective tax rate used in calculating the tax
provision from 38.5% to 37.75%, and from 40.0% to 38.5%, respectively, resulting in the reduction in the in-
come tax provision in the fourth quarter of $5,873 and $11,315, respectively.
Reconciliation between the statutory tax rate and the effective rate for fiscal 2004, 2003 and 2002 is as fol-
lows:
2004 2003 2002
Federal taxes at statutory rate ............. $490,218 35.00% $405,382 35.00% $398,364 35.00%
State taxes, net ......................... 48,157 3.44 37,875 3.27 34,145 3.00
Foreign taxes, net ...................... (5,729) (0.41) (396) (0.03) 2,732 0.24
Other ................................ (14,415) (1.03) (5,628) (0.49) 2,960 0.26
Provision at effective tax rate ............. $518,231 37.00% $437,233 37.75% $438,201 38.50%
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