Dillard's 2005 Annual Report Download - page 56

A reconciliation between the Company’s income tax provision and income taxes using the federal statutory
income tax rate is presented below:
(in thousands of dollars)
Fiscal
2005
Fiscal
2004
Fiscal
2003
Income tax at the statutory federal rate ................................ $47,525 $64,593 $5,598
State income taxes, net of federal benefit .............................. 1,870 1,834 122
Nondeductible goodwill write off .................................... 344 433 869
Changes in tax rate ............................................... 5,469 — —
Benefit of capital loss carrybacks .................................... (45,415) — —
Other .......................................................... 4,507 25 61
$ 14,300 $66,885 $6,650
The $45.4 million tax benefit relates to the sale of a subsidiary of the Company. Deferred income taxes
reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes. The Company’s estimated federal
and state income tax rate was 10.5% in fiscal 2005, and 36.0% in fiscal 2004 and 2003. Significant components
of the Company’s deferred tax assets and liabilities as of January 28, 2006 and January 29, 2005 are as follows:
(in thousands of dollars) January 28, 2006 January 29, 2005
Property and equipment bases and depreciation
Differences .................................................. $445,821 $ 504,253
State income taxes ................................................ 87,054 64,903
Joint venture basis differences ....................................... 24,496 23,997
Differences between book and tax bases of inventory ..................... 43,899 46,001
Other ........................................................... 36,384 12,604
Total deferred tax liabilities ..................................... 637,654 651,758
Accruals not currently deductible ..................................... (67,102) (63,410)
Capital loss carryforwards .......................................... (258,677)
Net operating loss carryforwards ..................................... (105,747) (82,058)
State income taxes ................................................ (17,587) (12,625)
Total deferred tax assets ........................................ (449,113) (158,093)
Capital loss valuation allowance ..................................... 258,677
Net operating loss valuation allowance ................................ 66,035 53,148
Net deferred tax assets ......................................... (124,401) (104,945)
Net deferred tax liabilities ...................................... $513,253 $ 546,813
At January 28, 2006, the Company had a deferred tax asset of approximately $259 million related to a
capital loss carryforward arising in the current year that could be utilized to reduce the tax liabilities of future
years. This carryforward will expire in 2011. The deferred asset attributable to the capital loss carryforward has
been reduced by a valuation allowance of $259 million due to the uncertainty of future capital gains necessary to
utilize the capital loss carryforward.
At January 28, 2006, the Company had a deferred tax asset related to state net operating loss carryforwards
of approximately $106 million that could be utilized to reduce the tax liabilities of future years. These
carryforwards will expire between 2006 and 2026. A portion of the deferred asset attributable to state net
operating loss carryforwards was reduced by a valuation allowance of $66 million for the losses of various
members of the affiliated group in states that require separate company filings.
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