Napa Auto Parts 2007 Annual Report Download - page 39

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e components of income tax expense are as follows:
(in thousands) 2007 2006 2005
Current:
Federal $ 262,922 $ 243,089 $ 183,387
State 42,101 41,361 32,977
Foreign 13,449 16,542 11,331
Deferred (8,066) (5,481) 43,935
$ 310,406 $ 295,511 $ 271,630
e reasons for the difference between total tax expense and the
amount computed by applying the statutory Federal income tax
rate to income before income taxes are as follows:
(in thousands) 2007 2006 2005
Statutory rate applied
to income $ 285,861 $ 269,821 $ 248,172
Plus state income taxes,
net of Federal tax benefit 26,672 26,395 25,571
Other (2,127) (705) (2,113)
$ 310,406 $ 295,511 $ 271,630
e Company or one of its subsidiaries files income tax returns in
the US federal jurisdiction, various states, and foreign jurisdictions.
With few exceptions, the Company is no longer subject to federal,
state and local tax examinations by tax authorities for years before
2004 or subject to non-United States income tax examinations
for years ended prior to 2002. e Company does not anticipate
total unrecognized tax benefits will significantly change during the
year due to the settlement of audits and the expiration of statutes
of limitations. e Company adopted the provisions of FASB
Interpretation No. 48, Accounting for Uncertainty in Income Taxes,
an interpretation of FASB Statement No. 109, (“FIN No. 48”), on
January 1, 2007. e cumulative effect of adopting FIN No. 48
did not have a material impact on the Company’s financial posi-
tion or the results of operations. A reconciliation of the beginning
and ending amount of unrecognized tax benefits is as follows:
Unrecognized Tax Benefits
(in thousands)
Balance at January 1, 2007 $ 29,215
Additions based on tax positions
related to the current year 7,929
Additions for tax positions of prior years 455
Reductions for tax positions for prior years (1,557)
Reduction for lapse in statute of limitations (2,897)
Settlements (1,045)
Balance at December 31, 2007 $ 32,100
e amount of gross tax effected unrecognized tax benefits as of
December 31, 2007 was approximately $32,100,000 of which
approximately $13,682,000, if recognized, would affect the effective
tax rate. During the year ending December 31, 2007, the Com-
pany recognized interest and penalties of approximately $600,000.
e Company had approximately $1,500,000 and $900,000 of
accrued interest and penalties at December 31, 2007 and January
1, 2007, respectively. e Company recognizes potential interest
and penalties related to unrecognized tax benefits as a component
of income tax expense.
7. Employee Benefit Plans
e Company’s defined benefit pension plans cover substantially
all of its employees in the U.S. and Canada. e plan covering
U.S. employees is noncontributory and benefits are based on the
employees’ compensation during the highest five of their last ten
years of credited service. e Canadian plan is contributory and
benefits are based on career average compensation. e Com-
pany’s funding policy is to contribute an amount equal to the
minimum required contribution under ERISA. e Company
may increase its contribution above the minimum if appropriate
to its tax and cash position and the plans’ funded position.
e Company also sponsors unfunded supplemental retirement
plans covering employees in the U.S. and Canada and other
postretirement benefit plans in the U.S. e Company uses a
measurement date of December 31 for its pension and other
postretirement benefit plans.
On September 29, 2006, the FASB issued SFAS No. 158,
Employers’ Accounting for Defined Benefit Pension and Other
Retirement Plans, which amends SFAS No. 87 and SFAS No.
106 to require recognition of the overfunded or underfunded
status of pension and other postretirement benefit plans on the
balance sheet. Under SFAS No. 158, gains and losses, prior
service costs and credits, and any remaining transition amounts
under SFAS No. 87 and SFAS No. 106 that have not yet been
recognized through net periodic benefit cost are to be recognized
in accumulated other comprehensive income, net of tax effects,
until they are amortized as a component of net periodic cost.
SFAS No. 158 is effective for publicly held companies for fiscal
years ending after December 31, 2006.