Whole Foods 2015 Annual Report Download - page 30

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Minimum rental commitments and sublease rental income required by all noncancelable leases are approximately as follows
(in millions):
Capital Operating Sublease
Fiscal year 2016 $ 6 $ 430 $ 8
Fiscal year 2017 7 493 8
Fiscal year 2018 5 525 6
Fiscal year 2019 5 530 5
Fiscal year 2020 5 536 4
Future fiscal years 74 6,388 6
102 $ 8,902 $ 37
Less amounts representing interest 37
Net present value of capital lease obligations $ 65
The present values of future minimum obligations for capital leases shown above are calculated based on interest rates determined
at the inception of the lease, or upon acquisition of the original lease.
(10) Income Taxes
Components of income tax expense for the fiscal years indicated were as follows (in millions):
2015 2014 2013
Current federal income tax $ 310 $ 359 $ 321
Current state income tax 76 82 73
Current foreign income tax (1) 2 3
Total current tax 385 443 397
Deferred federal income tax (40) (66) (44)
Deferred state income tax (2) (10) (10)
Deferred foreign income tax (1) — —
Total deferred tax (43) (76) (54)
Total income tax expense $ 342 $ 367 $ 343
Actual income tax expense for the fiscal years indicated differed from the amount computed by applying statutory corporate
income tax rates to income before income taxes as follows (in millions):
2015 2014 2013
Federal income tax based on statutory rates $ 307 $ 331 $ 313
Increase (reduction) in income taxes resulting from:
Tax-exempt interest (1) (1) (1)
Excess charitable contributions (9) (8) (7)
Federal income tax credits (3) (3) (2)
Other, net 2 2 —
Total federal income taxes 296 321 303
State income taxes, net of federal income tax benefit 48 47 41
Tax impact of foreign operations (2) (1) (1)
Total income tax expense $ 342 $ 367 $ 343
Current income taxes receivable were not material at September 27, 2015 or September 28, 2014.
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The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities
were as follows (in millions):
September 27,
2015
September 28,
2014
Deferred tax assets:
Compensation-related costs $ 207 $ 159
Insurance-related costs 59 53
Inventories 2—
Lease and other termination accruals 11 13
Rent differential 170 156
Tax basis of fixed assets in excess of financial basis 11 9
Net domestic and international operating loss carryforwards 23 20
Other 15 8
Gross deferred tax assets 498 418
Valuation allowance (35) (30)
Deferred tax assets 463 388
Deferred tax liabilities:
Financial basis of fixed assets in excess of tax basis (117) (79)
Inventories —(5)
Capitalized costs expensed for tax purposes (3) (4)
Deferred tax liabilities (120) (88)
Net deferred tax asset $ 343 $ 300
Deferred taxes have been classified on the Consolidated Balance Sheets as follows (in millions):
September 27,
2015
September 28,
2014
Current assets $ 199 $ 168
Noncurrent assets 144 132
Net deferred tax asset $ 343 $ 300
At September 27, 2015, the Company had international operating loss carryforwards totaling approximately $115 million, all
of which have an indefinite life. The Company provided a valuation allowance totaling approximately $35 million for deferred
tax assets associated with international operating loss carryforwards, federal credit carryforwards, and deferred tax assets
associated with unrecognized tax benefits, for which management has determined it is more likely than not that the deferred tax
asset will not be realized. Management believes that it is more likely than not that we will fully realize the remaining domestic
deferred tax assets in the form of future tax deductions based on the nature of these deductible temporary differences and a
history of profitable operations.
The Company intends to utilize earnings in foreign operations for an indefinite period of time, or to repatriate such earnings
only when tax-efficient to do so. If these amounts were distributed to the United States, in the form of dividends or otherwise,
the Company would be subject to additional U.S. income taxes. Determination of the amount of unrecognized deferred income
tax liabilities on these earnings is not practicable because such liability, if any, is dependent on circumstances existing if and
when remittance occurs. The Company’s total gross unrecognized tax benefits are classified in the “Other long-term liabilities”
line item on the Consolidated Balance Sheets and were not material during the last three fiscal years.
The Company and its domestic subsidiaries file income tax returns with federal, state and local tax authorities within the United
States. The Company’s foreign affiliates file income tax returns in Canada and the United Kingdom. The IRS of the United
States completed its examination of the Company’s federal tax returns for fiscal year 2013 during the first quarter of fiscal year
2015. With limited exceptions, the Company is no longer subject to federal income tax examinations for fiscal years before 2013
and is no longer subject to state and local income tax examinations for fiscal years before 2008. Additionally, the Company
entered into a Compliance Agreement Program (“CAP”) with the IRS under which the Company’s federal income tax return is
reviewed and accepted by the Internal Revenue Service in conjunction with the filing of its tax return.