Pep Boys 2005 Annual Report Download - page 67

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62
THE PEP BOYS—MANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 28, 2006, January 29, 2005 and January 31, 2004
(dollar amounts in thousands, except share data)
Items that gave rise to significant portions of the deferred tax accounts are as follows:
January 28,
2006
January 29,
2005
Deferred tax assets:
Employee compensation $ 6,693 $ 5,915
Store closing reserves 1,087 995
Legal 500 704
Benefit Accruals 538 —
Net operating loss carryforwards 27,640 8,260
Tax credit carryforwards 12,775 9,089
Accrued leases 13,522 13,067
Other 3,049 2,484
Gross deferred tax assets 65,804 40,514
Valuation allowance (3,545) (1,558)
$ 62,259 $ 38,956
Deferred tax liabilities:
Depreciation $ 55,222 $ 57,677
Inventories 17,655 17,802
Real estate tax 2,405 2,434
Insurance 3,180 3,840
Benefit accruals —1,189
Interest rate swap 2,151 1,388
$ 80,613 $ 84,330
Net deferred tax liability $ 18,354 $ 45,374
As of January 28, 2006 and January 29, 2005, the company had available tax net operating losses that can be carried forward to future years. The $113,741
net operating loss carryforward in 2006 consists of $73,069 of federal losses and $40,672 of state losses. The federal net operating loss begins to expire in
2023 while the state net operating losses will expire in various years beginning in 2008.
The tax credit carryforward in 2006 consists of $4,412 of Alternative Minimum Tax credits, $2,612 of work opportunity credits, $ 5,506 of state tax credits
and $246 of Charitable Contribution carryforward.
The tax credit carryforward in 2005 consists of $4,400 of Alternative Minimum Tax credits, $1,700 of work opportunity credits, and $2,989 of state tax
credits.
Due to the uncertainty of the Company’s ability to realize certain state tax attributes, valuation allowances of $3,545 and $1,558 were recorded at January
28, 2006 and January 29, 2005, respectively.
NOTE 15—CONTINGENCIES
The Company is not currently engaged in any litigation arising outside the ordinary course of its business that it believes
to be material. The Company is party to various actions and claims, including purported class actions, arising in the normal
course of business. The Company believes that amounts accrued for awards or assessments in connection with such matters
are adequate and that the ultimate resolution of these matters will not have a material adverse effect on the Company’s
financial position or results of operations.