Dollar General 2008 Annual Report Download - page 89
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87
A reconciliation between actual income taxes and amounts computed by applying the
federal statutory rate to income before income taxes is summarized as follows:
Successor
Predecessor
(Dollars in thousands)
2008
March 6, 2007
through
February 1, 2008
February 3, 2007
through
July 6, 2007
2006
U.S. federal statutory
rate on earnings
before income taxes
$
68,041
35.0
%
$
(2,308)
35.0
%
$
1,399
35.0
%
$
77,127
35.0
%
State income taxes, net
of federal income tax
benefit 5,361
2.8
904
(13.7)
(1,135)
(28.4)
5,855
2.7
Jobs credits, net of
federal income taxes (9,149)
(4.7)
(3,022)
45.8
(2,227)
(55.7)
(5,008)
(2.3)
Increase (decrease)
in valuation
allowances
3,038
1.6
-
-
551
13.8
3,211
1.5
Income tax related
interest expense, net
of federal income tax
benefit
(2,015)
(1.0)
2,738
(41.5)
(172)
(4.3)
-
-
Nondeductible Merger-
related lawsuit
settlement 18,130
9.3
-
-
-
-
-
-
Nondeductible
transaction costs -
-
-
-
13,501
337.9
-
-
Other, net
2,815
1.4
(87)
1.3
76
1.9
1,235
0.5
$
86,221
44.4
%
$
(1,775)
26.9
%
$
11,993
300.2
%
$
82,420
37.4
%
The 2008 effective income tax rate is an expense of 44.4%. This expense is greater than
the expected U.S. statutory tax rate of 35% principally due to the non-deductibility of the
settlement and related expenses associated with the Merger-related shareholder lawsuit.
The income tax rate for the Successor period ended February 1, 2008 is a benefit of
26.9%. This benefit is less than the expected U.S. statutory rate of 35% due to the incurrence of
state income taxes in several of the group’ s subsidiaries that file their state income tax returns on
a separate entity basis and the election to include, effective February 3, 2007, income tax related
interest and penalties in the amount reported as income tax expense.
The income tax rate for the Predecessor period ended July 6, 2007 is an expense of
300.2%. This expense is higher than the expected U.S. statutory rate of 35% due principally to
the non-deductibility of certain acquisition related expenses.
The 2006 income tax rate was higher than the U.S. statutory rate of 35% principally due
to state income taxes.
Deferred taxes reflect the effects of temporary differences between carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used for income tax
purposes. Significant components of the Company’ s deferred tax assets and liabilities are as
follows: