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[NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS continued ]
38
2003 Annual ReportBarnes & Noble, Inc.
11. INCOME TAXES
The Company files a consolidated federal return with
all 80 percent or more owned subsidiaries. Federal and
state income tax provisions (benefits) for fiscal 2003,
2002 and 2001 are as follows:
Fiscal Year 2003 2002 2001
Current:
Federal $ 66,788 59,598 62,141
State 12,845 13,503 13,891
79,633 73,101 76,032
Deferred:
Federal 33,202 6,311 ( 25,790 )
State 7,719 811 ( 4,864 )
40,921 7,122 ( 30,654 )
Total $ 120,554 80,223 45,378
A reconciliation between the effective income tax rate
and the federal statutory income tax rate during fiscal
2003, 2002 and 2001, is as follows:
Fiscal Year 2003 2002 2001
Federal statutory
income tax rate 35.00% 35.00% 35.00%
State income taxes, net of
federal income tax benefit 4.52 4.67 5.37
Amortization of
non-deductible goodwill
and trade names and
write-down of goodwill --.--.0 1.82
GameStop undistributed
earnings 1.09 1.17 --
Other, net 0.14 ( 0.59) ( 0.69)
Effective income tax rate 40.75% 40.25% 41.50%
The tax effects of temporary differences that give rise to
significant components of the Company’s deferred tax
assets and liabilities as of January 31, 2004 and
February 1, 2003 are as follows:
January 31, February 1,
2004 2003
Deferred tax liabilities:
Operating expenses $ ( 9,680 ) ( 23,175 )
Depreciation ( 60,717) ( 32,437)
Gain on equity increase in
GameStop ( 62,507 ) ( 65,306 )
Investment in Barnes & Noble.com (77,135 ) ( 41,253 )
Goodwill amortization ( 15,100 ) ( 11,241 )
GameStop undistributed earnings ( 5,545 ) ( 2,332 )
Total deferred tax liabilities ( 230,684 ) (175,744 )
Deferred tax assets:
Lease transactions 27,576 26,260
Investments in equity securities 15,095 15,182
Estimated accruals 20,221 24,491
Inventory 25,935 19,116
Pension 5,626 2,296
Insurance liability 7,821 6,824
Loss carryover 5,339 1,155
Other 465 215
Total deferred tax assets 108,078 95,539
Net deferred tax liabilities $ (122,606 ) ( 80,205 )
Deferred income taxes are classified on the Company’s
balance sheet as follows:
January 31, February 1,
2004 2003
Short-term deferred tax assets (a) $47,460 39,618
Long-term deferred tax liabilities ( 170,066 ) (119,823 )
$ ( 122,606 ) ( 80,205 )
(a) Reflected as a component of prepaid expenses and other
current assets on the accompanying balance sheet.
At December 31, 2003, bn.com, which files separate tax
returns, had net operating loss carryforwards of
approximately $137,028 related to U.S. federal and