EMC 2005 Annual Report Download - page 77

Table of Contents
EMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
foreign corporations. In October 2005, our Chief Executive Officer and Board of Directors approved a domestic reinvestment plan to repatriate approximately
$3.0 billion in foreign earnings; such repatriation resulted in a current tax provision of $180.2 million. Additionally, we recognized a $163.9 million benefit in
2005 resulting from the favorable resolution of certain income tax audits and expiration of statutes of limitations, the majority of which is attributable to
foreign operations.
In 2004, we were able to utilize $252.7 million of net operating loss carryforwards and tax credits to reduce the current portion of our tax provision.
The effective income tax rate is based upon the income for the year, the composition of the income in different countries, and adjustments, if any, for
the potential tax consequences, benefits or resolutions of tax audits. A reconciliation of our income tax provision to the statutory federal tax rate is as follows:
2005 2004 2003
Statutory federal tax rate 35.0% 35.0% 35.0%
State taxes (benefit), net of federal taxes 1.7 0.9 (4.2)
Resolution of income tax audits and expiration of statutes of limitation (2.3) 0.8 (2.6)
International related tax items (13.7) (14.9) (14.4)
Reduction of deferred tax assets due to liquidation of subsidiaries – 0.1 3.5
U.S. tax credits (2.1) (0.8) (1.2)
Changes in valuation allowance 0.4 1.2 (5.1)
Resolution of acquisition and merger contingencies (1.5) – (5.9)
Permanent items, including IPR&D charges 2.8 3.6 6.3
Tax cost of repatriation under the AJCA 10.9 – –
Other 0.2 0.6 1.7
31.4% 26.5% 13.1%
The components of the current and noncurrent deferred tax assets are as follows (table in thousands):
December 31, 2005 December 31, 2004
Deferred
Tax
Asset
Deferred
Tax
Liability
Deferred
Tax
Asset
Deferred
Tax
Liability
Current:
Accounts & notes receivable $ 56,060 $ — $ 61,721 $ —
Inventory 47,999 — 40,816 —
Accrued expenses 129,409 — 107,442 —
Deferred revenue 92,850 — 75,226 —
Other — — 4,605 —
Total current 326,318 — 289,810 —
Noncurrent:
Property, plant and equipment, net — (37,951) — (61,447)
Intangible and other assets, net — (212,995) — (188,100)
Equity 39,241 — 27,953 —
Deferred revenue 45,733 — 23,419 —
Other noncurrent liabilities — (54,765) — (45,835)
Credit carryforwards 18,507 — 65,673 —
Net operating loss carryforwards 90,300 — 105,235 —
Other comprehensive loss 555 — — (6,522)
Total noncurrent 194,336 (305,711) 222,280 (301,904)
Gross deferred tax assets and liabilities 520,654 (305,711) 512,090 (301,904)
Valuation allowance (63,817) — (61,976) —
Total deferred tax assets and liabilities $ 456,837 $ (305,711) $ 450,114 $ (301,904)
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