Staples 2005 Annual Report Download - page 104

STAPLES, INC. AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)
C-19
NOTE H Income Taxes (Continued)
The provision for income taxes consists of the following (in thousands):
Fiscal Year Ended
January 28, 2006 January 29, 2005 January 31, 2004
Current tax expense:
Federal.................................... $ 484,326 $ 315,989 $ 231,122
State ...................................... 19,027 19,899 20,023
Foreign.................................... 75,990 69,701 50,481
Deferred tax (benefit) expense:
Federal.................................... (56,989) 13,213 (5,384)
State ...................................... (8,501) 1,441 (1,236)
Foreign.................................... (34,061) (13,059) (7,105)
Totalincometaxexpense ...................... $ 479,792 $ 407,184 $ 287,901
A reconciliation of the federal statutory tax rate to Staples’ effective tax rate on historical net income is as follows:
Fiscal Year Ended
January 28, 2006 January 29, 2005 January 31, 2004
Federal statutory rate.......................... 35.0% 35.0% 35.0%
State effective rate, net of federal benefit ........ 1.7 2.3 3.7
Effect of foreign taxes ......................... (0.6) (0.4) (0.3)
Taxcredits................................... (0.5) (0.6) (0.4)
Other........................................ 0.9 0.2 (1.0)
Effective tax rate.............................. 36.5% 36.5% 37.0%
The effective tax rate in any year is impacted by the geographic mix of earnings.
The tax impact of the unrealized gain or loss on instruments designated as hedges of net investments in foreign
subsidiaries is reported in the cumulative translation adjustment line in stockholders’ equity.
The Company operates in multiple jurisdictions and could be subject to audit in these jurisdictions. These audits can
involve complex issues that may require an extended period of time to resolve and may cover multiple years. In the
Company’s opinion, an adequate provision for income taxes has been made for all years subject to audit.
Income tax payments were $472 million, $322 million and $282 million during fiscal years ended January 28, 2006,
January 29, 2005 and January 31, 2004, respectively.
Undistributed earnings of the Company’s foreign subsidiaries amounted to approximately $408 million as of
January 28, 2006. The Company has not provided any additional federal or state income taxes or foreign withholding
taxes on the undistributed earnings as such earnings have been indefinitely reinvested in the business. The determination
of the amount of the unrecognized deferred tax liability related to the undistributed earnings is not practicable because
of the complexities associated with its hypothetical calculation.
NOTE I Employee Benefit Plans
Employee Stock Purchase Plans
The Amended and Restated 1998 Employee Stock Purchase Plan authorizes a total of up to 15.8 million shares of
common stock to be sold to participating employees and the Amended and Restated International Employee Stock
Purchase Plan authorizes a total of up to 1.3 million shares of common stock to be sold to participating employees of
non-U.S. subsidiaries of the Company. Under both plans, participating employees may purchase shares of common stock
at 85% of its fair market value at the beginning or end of an offering period, whichever is lower, through payroll
deductions in an amount not to exceed 10% of an employee’s annual base compensation.