World Fuel Services 2007 Annual Report Download - page 74

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64435 TX 66WORLD FUEL SERVICES
ANNUAL REPORT
28-Feb-2008 00:13 EST
CLN PSTAM
RR Donnelley ProFile SER kirkw0cm 7*
PMT 2C
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9.9.26
WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The income tax provision (benefit) related to income before taxes consists of the following components (in
thousands):
2007 2006 2005
Current:
U.S. federal statutory tax rate ................... $ 6,850 $ 1,706 $ 2,937
State ...................................... 2,266 1,449 1,311
Foreign .................................... 15,139 10,011 10,522
24,255 13,166 14,770
Deferred:
U.S. federal statutory tax rate ................... (2,721) 3,450 890
State ...................................... (505) 180 (94)
Foreign .................................... 206 557 (91)
(3,020) 4,187 705
Total .................................. $21,235 $17,353 $15,475
A reconciliation of the U.S. federal statutory tax rate to our effective income tax rate is as follows:
2007 2006 2005
U.S. federal statutory tax rate ...................................... 35.0% 35.0% 35.0%
Foreign earnings, net of foreign taxes ............................... (12.9) (15.6) (14.4)
Foreign dividend repatriation ...................................... — — 5.1
State income taxes, net of U.S. federal income tax benefit 1.3 1.2 1.0
Income tax credits .............................................. — — 0.9
Other permanent differences ...................................... 1.1 0.7 0.1
Effective income tax rate ..................................... 24.5% 21.3% 27.7%
The American Jobs Creation Act of 2004 (the “Act”) created a temporary incentive for U.S. corporations to
repatriate accumulated income earned abroad by providing an 85% dividends-received deduction for certain
dividends from controlled foreign corporations. In 2005, our Chief Executive Officer (“CEO”) approved a
domestic reinvestment plan, under which we repatriated $40.0 million in earnings outside the U.S. pursuant to
the Act. This plan was ratified by our Board of Directors in March 2006. We recorded additional tax expense in
2005 of approximately $2.8 million, or $0.12 per basic share and $0.11 per diluted share, related to this decision
to repatriate foreign earnings. This repatriation increased our effective tax rate for 2005 by approximately 5.1%.
The majority of this increase, 3.7%, represents the effective tax rate increase for our repatriation of prior years’
permanently reinvested earnings.
For 2007, our effective tax rate was 24.5%, for an income tax provision of $21.2 million, as compared to an
effective tax rate of 21.3% and $17.4 million for 2006. The higher effective tax rate for 2007 resulted primarily
from additional income tax expense recorded in connection with the new accounting guidance of FIN 48 in 2007
as well as fluctuations in the actual results achieved by our subsidiaries in tax jurisdictions with different tax
rates.
For 2006, our effective tax rate was 21.3%, for an income tax provision of $17.4 million, as compared to an
effective tax rate of 27.7% and income tax provision of $15.5 million for 2005. Included in the calculation of the
effective tax rate for 2005 was $2.8 million additional income tax provision associated with our decision to
repatriate $40.0 million in foreign earnings pursuant to the special taxing provisions noted above. This
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