Napa Auto Parts 2008 Annual Report Download - page 38

notes to consolidated nancial statements (continued)
december 31, 2008
6. income taxes
Deferred income taxes reflect the net tax effect of temporary dif-
ferences between the carrying amounts of assets and liabilities for
financial reporting purposes and amounts used for income tax pur-
poses. Undistributed earnings of the Company’s foreign subsidiaries
are considered to be indefinitely reinvested. As such, no U.S. federal
and state income taxes have been provided thereon, and it is not
practicable to determine the amount of the related unrecognized de-
ferred income tax liability. Significant components of the Company’s
deferred tax assets and liabilities are as follows:
(in thousands) December 31, 2008 2007
Deferred tax assets related to:
Expenses not yet deducted
for tax purposes $ 114,092 $ 110,494
Pension liability not yet deducted
for tax purposes 326,808 168,835
Capital loss 24,787 –
Valuation allowance (24,787) –
440,900 279,329
Deferred tax liabilities related to:
Employee and retiree benefits 125,655 147,285
Inventory 79,304 98,196
Property, plant and equipment 17,614 19,849
Other 13,250 6,918
235,823 272,248
Net deferred tax asset 205,077 7,081
Current portion of deferred tax liability (13,426) (28,697)
Non-current deferred tax asset $ 218,503 $ 35,778
e current portion of the deferred tax liability is included
in income taxes payable in the consolidated balance sheets.
e Company has a capital loss carryforward of approximately
$62,000,000 that will expire in 2013.
e components of income tax expense are as follows:
(in thousands) 2008 2007 2006
Current:
Federal $ 261,250 $ 262,922 $ 243,089
State 45,167 42,101 41,361
Foreign 26,657 13,449 16,542
Deferred (40,023) (8,066) (5,481)
$ 293,051 $ 310,406 $ 295,511
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) 2008 2007 2006
Statutory rate applied
to income $ 268,964 $ 285,861 $ 269,821
Plus state income taxes,
net of Federal tax benefit 25,831 26,672 26,395
Capital loss (30,038) – –
Capital loss -
valuation allowance 24,787 – –
Other 3,507 (2,127) (705)
$ 293,051 $ 310,406 $ 295,511
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 2005 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 position 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) 2008 2007
Balance at beginning of year $ 32,100 $ 29,215
Additions based on tax positions
related to the current year 7,376 7,929
Additions for tax positions
of prior years 3,790 455
Reductions for tax positions
for prior years (190) (1,557)
Reduction for lapse in statute
of limitations (5,449) (2,897)
Settlements (1,198) (1,045)
Balance at end of year $ 36,429 $ 32,100
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