OfficeMax 2014 Annual Report Download - page 93
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Table of Contents
primarily attributable to the 2013 sale of the Company’s investment in Office Depot de Mexico, which is discussed in Note 2. In 2013, the Company paid
$117 million of Mexican income tax upon the sale and recognized additional U.S. income tax expense of $23 million due to dividend income and Subpart F
income as a result of the sale, for total income tax expense of $140 million. The sale of the Company’s interest in Grupo OfficeMax during 2014 did not
generate a similar gain or income tax expense. The 2013 effective tax rate also includes charges related to goodwill impairment (refer to Note 5) and certain
Merger expenses that are not deductible for tax purposes.
The 2012 effective tax rate includes benefits related to the $16 million favorable settlement of the U.S. Internal Revenue Service (“IRS”) examination of the
2009 and 2010 tax years, as well as the recovery of purchase price that is treated as a purchase price adjustment for tax purposes. As discussed in Note 14, this
recovery would have been a reduction of related goodwill for financial reporting purposes, but the related goodwill was impaired in 2008.
The Company operates in several foreign jurisdictions with income tax rates that differ from the U.S. Federal statutory rate, which resulted in a benefit for all
years presented in the effective tax rate reconciliation. Significant foreign tax jurisdictions for which the Company realized such benefit include the
Netherlands, the UK, and France. Additionally, Mexico is included for 2013 due to the sale of Office Depot de Mexico.
Due to valuation allowances against the Company’s deferred tax assets, no income tax benefit was recognized in the 2014 Consolidated Statement of
Operations related to stock-based compensation. In addition, no income tax benefit was initially recognized in the 2012 and 2013 Consolidated Statement of
Operations related to stock-based compensation. However, due to the sale of Office Depot de Mexico in 2013, the Company realized an income tax benefit of
$5 million for the utilization of net operating loss carryforwards that had resulted from excess stock-based compensation deductions for which no benefit was
previously recorded. The Company also realized an income tax benefit of $3 million for excess stock-based compensation deductions resulting from the
exercise and vesting of equity awards during 2013. These income tax benefits were recorded as increases to additional paid-in capital in 2013.
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