Staples 2003 Annual Report Download - page 83

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STAPLES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE I Income Taxes
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and
liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components and
the approximate tax effect of Staples’ deferred tax assets and liabilities as of February 1, 2003 and February 2, 2002, are
as follows (in thousands):
February 1, February 2,
2003 2002
Deferred Tax Assets:
Deferred rent ........................................... $ 29,466 $ 27,564
Deferred revenue ........................................ — 19,778
Foreign tax credit carryforwards .............................. 33,808 22,792
Net operating loss carryforwards .............................. 28,517 19,621
Insurance .............................................. 24,153 21,023
Employee benefits ........................................ 22,410 3,173
Merger related charges .................................... 15,636 11,938
Store closure charge ...................................... 20,596 30,079
Capital loss/asset write-downs ................................ 20,982 23,757
Other—net ............................................. 40,182 38,058
Total Deferred Tax Assets .................................. 235,750 217,783
Deferred Tax Liabilities:
Depreciation ............................................ (33,408) (3,283)
Inventory (644) (14,529)
Intangibles ............................................. (72,944) —
Other—net ............................................. (13,979) (24,799)
Total Deferred Tax Liabilities ................................ (120,975) (42,611)
Total Valuation Allowance .................................... (68,813) (64,350)
Net Deferred Tax Assets ..................................... $ 45,962 $110,822
The gross deferred tax asset from tax loss carryforwards of $28.5 million represents approximately $174.1 million of
net operating loss carryforwards, which have an indefinite carryforward period. Of the total foreign tax credit carryfor-
wards of $33.8 million, $22.3 million will expire in 2006 and $11.5 million will expire in 2007 if not utilized. The deferred
tax asset from capital loss/asset write-down includes approximately $5.6 million and $14.0 million of capital loss
carryforward that expires in 2006 and 2007, respectively. The deferred tax assets for these carryforwards have been
partially reserved against due to the uncertainty of their realization.
For financial reporting purposes, income before taxes includes the following components (in thousands):
Fiscal Year Ended
February 1, February 2, February 3,
2003 2002 2001
Pretax income:
United States ................................... $586,085 $366,918 $196,195
Foreign ....................................... 75,978 63,927 47,990
$662,063 $430,845 $244,185
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