Napa Auto Parts 2006 Annual Report Download - page 39

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The current portion of the deferred tax liability is included in
income taxes payable and the non-current deferred tax asset is
included in other assets in the consolidated balance sheets. The
2006 deferred tax asset includes $187,371,000 related to adjust-
ments required by SFAS No. 158, which is discussed further in
Note 7.
The components of income tax expense are as follows:
(in thousands) 2006 2005 2004
Current:
Federal $ 243,089 $ 183,387 $ 180,709
State 41,361 32,977 31,599
Foreign 16,542 11,331 8,389
Deferred (5,481) 43,935 19,670
$ 295,511 $ 271,630 $ 240,367
The reasons for the difference between total tax expense and the
amount computed by applying the statutory Federal income tax
rate to income before income taxes are as follows:
(in thousands) 2006 2005 2004
Statutory rate applied
to income $ 269,821 $ 248,172 $ 222,572
Plus state income taxes,
net of Federal
tax benefit 26,395 25,571 22,370
Other (705) (2,113) (4,575)
$ 295,511 $ 271,630 $ 240,367
7. Employee Benet Plans
The Company’s dened benet pension plans cover substantially
all of its employees in the U.S. and Canada. The plan covering
U.S. employees is noncontributory and benets are based on the
employees’ compensation during the highest ve of their last ten
years of credited service. The Canadian plan is contributory and
benets are based on career average compensation. The Compa-
ny’s funding policy is to fund amounts deductible for income tax
purposes.
The Company also sponsors unfunded supplemental retire-
ment plans covering employees in the U.S. and Canada and other
postretirement benet plans in the U.S. The Company uses a
measurement date of December 31 for its pension and other post-
retirement benet plans.
On September 29, 2006, the FASB issued SFAS No. 158, Employers’
Accounting for Dened Benet Pension and Other Postretirement
Plans,
which amends SFAS No. 87 and SFAS No. 106 to require
recognition of the overfunded or underfunded status of pension
and other postretirement benet plans on the balance sheet.
Under SFAS No. 158, gains and losses, prior service costs and
credits, and any remaining transition amounts under SFAS No. 87
and SFAS No. 106 that have not yet been recognized through net
periodic benet cost are to be recognized in accumulated other
comprehensive income, net of tax effects, until they are amortized
as a component of net periodic cost. SFAS No. 158 is effective for
publicly-held companies for scal years ending after December 15,
2006. The incremental effect of adopting SFAS No. 158 was to
reduce other long-term assets by $411,714,000. In addition, other
current liabilities were increased by $5,036,000; other long-term
liabilities were increased by $55,406,000, a deferred tax asset was
recorded for $187,371,000 and shareholders’ equity was reduced
by an amount recorded to accumulated other comprehensive (loss)
income of $284,785,000, net of taxes.
Pension Benefits Other Postretirement Benefits
(in thousands) 2006 2005 2006 2005
Changes in benefit obligation
Benefit obligation at beginning of year $ 1,236,379 $ 1,035,858 $ 24,267 $ 22,705
Service cost 50,224 41,910 475 453
Interest cost 72,246 64,102 1,327 1,310
Plan participants’ contributions 2,709 2,446 1,173 3,867
Plan amendments 1,708 902 – –
Actuarial loss 9,213 123,140 2,842 2,821
Exchange rate (gain) loss (349) 3,031 – –
Gross benefits paid (37,602) (35,010) (5,263) (6,889)
Less: federal subsidy N/A N/A 848 N/A
Benefit obligation at end of year $ 1,334,528 $ 1,236,379 $ 25,669 $ 24,267
The benet obligation for the Company’s U.S. pension plans included in the above were $1,225,020,000 and $1,130,210,000 at
December 31, 2006 and 2005, respectively. The total accumulated benet obligation for the Company’s dened benet pension
plans was approximately $1,068,895,000 and $996,100,000 at December 31, 2006 and 2005, respectively.