Staples 2007 Annual Report Download - page 123

STAPLES, INC. AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)
NOTE F Commitments and Contingencies (Continued)
estimate of what the Company would owe under the contract upon providing notice of termination. Such purchase
obligations will arise as follows (in thousands):
Fiscal Year: Total
2008 ............................................................. $308,512
2009 through 2010 ................................................... 239,418
2011 through 2012 ................................................... 96,047
Thereafter ......................................................... 58,444
$702,421
Import letters of credit are issued by Staples during the ordinary course of business through major financial
institutions as required by certain vendor contracts. As of February 2, 2008, Staples had open letters of credit totaling
$46.8 million.
Various class action lawsuits have been brought against the Company for alleged violations of what is known as
California’s ‘‘wage and hour’’ law. The plaintiffs have alleged that the Company improperly classified store managers as
exempt under the California wage and hour law, making such managers ineligible for overtime wages. In December 2006,
the Company settled one class action lawsuit relating to the misclassification of store general managers for $3.9 million.
In November 2007, the Company settled the remaining class action lawsuit relating to the misclassification of assistant
store managers, recording a charge of $38.0 million, including interest and class counsel’s attorney’s fees. These charges
are included in general and administrative expenses.
In addition, the Company is involved from time to time in litigation arising from the operation of its business that is
considered routine and incidental to its business; however, the Company does not expect the results of any of these
actions to have a material adverse effect on its business, results of operations, or financial condition.
NOTE G 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. The approximate tax effect of
the significant components of Staples’ deferred tax assets and liabilities are as follows (in thousands):
February 2, February 3,
2008 2007
Deferred tax assets:
Deferred rent ........................................... $ 45,790 $ 42,336
Foreign tax credit carryforwards .............................. 71,016 62,473
Net operating loss carryforwards .............................. 88,091 88,497
Insurance .............................................. 8,284 12,362
Employee benefits ........................................ 106,030 87,844
Merger related and store closure charges ....................... 14,643 17,249
Inventory ............................................... 38,220 32,289
Unrealized loss on hedge instruments .......................... 4,237 22,083
Deferred revenue ......................................... 25,332 22,724
Depreciation ............................................ 42,067 53,273
Other—net ............................................. 57,529 45,780
Total deferred tax assets .................................... 501,239 486,910
Total valuation allowance ..................................... (97,290) (77,821)
Net deferred tax assets ...................................... $403,949 $409,089
Deferred tax liabilities:
Intangibles ............................................. $(90,071) $ (90,455)
Other—net ............................................. (807) (2,661)
Total deferred tax liabilities ................................. (90,878) (93,116)
Net deferred tax assets ...................................... $313,071 $315,973
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