Neiman Marcus 2006 Annual Report Download - page 130

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NOTE 12. INCOME TAXES
The significant components of income tax expense are as follows:
(Successor) (Predecessor)
(in thousands)
Fiscal year
ended
July 28,
2007
Forty-three
weeks ended
July 29,
2006
Nine weeks
ended
October 1,
2005
Fiscal year
ended
July 30,
2005
Current:
Federal $ 127,725 $ 71,689 $ 31,002 $ 143,898
State 15,063 8,408 2,522 13,093
Foreign 29 118 20 307
142,817 80,215 33,544 157,298
Deferred:
Federal (53,763 ) (58,291 ) (6,501 ) (14,039
State (6,759 )(7,329 ) (817 )(1,886
(60,522 )(65,620 ) (7,318 )(15,925
Income tax expense $ 82,295 $ 14,595 $ 26,226 $ 141,373
A reconciliation of income tax expense to the amount calculated based on the federal and state statutory rates is as follows:
(Successor) (Predecessor)
(in thousands)
Fiscal year
ended
July 28,
2007
Forty-three
weeks ended
July 29,
2006
Nine weeks
ended
October 1,
2005
Fiscal year
ended
July 30,
2005
Income tax expense at statutory rate $ 75,954 $ 14,366 $ 24,910 $ 134,812
State income taxes, net of federal income tax benefit 6,989 1,411 2,177 13,809
Tax expense (benefit) related to tax settlements and other changes in tax
liabilities 1,925 (113 ) (222 ) (7,585
Impact of non-taxable income (2,422 ) (1,378 ) (1,058 ) (2,121
Impact of non-deductible expenses 326 256 607 2,633
Other (477 )53 (188 )(175
Total $ 82,295 $ 14,595 $ 26,226 $ 141,373
Our effective income tax rate was 37.9% for fiscal year 2007. Our effective income tax rate was 35.6% for the forty-three
weeks ended July 29, 2006 and 36.8% for the nine weeks ended October 1, 2005, resulting in a combined fiscal year 2006 rate of
36.4%. Our effective tax rate for fiscal year 2007 was negatively impacted by increases in tax liabilities for settlements with taxing
authorities. Our combined effective tax rate for fiscal year 2006 was favorably impacted by a higher level of tax-exempt interest income
earned. Our effective income tax rate was 36.7% for the fiscal year ended July 30, 2005 and was favorably impacted by tax-exempt
interest income, offset by non-deductible transaction costs. In the fourth fiscal quarter of fiscal year 2005, we recognized tax benefits
aggregating $7.6 million related to a favorable settlement associated with previous state tax filings and reductions in previously recorded
deferred tax liabilities. Excluding these benefits, our effective tax rate was 38.6% for fiscal year 2005.
We closed the Internal Revenue Service (IRS) examinations of federal tax returns for fiscal years 2004 and 2003 during the first
quarter of fiscal year 2007 and paid the related tax liability during the second quarter of fiscal year 2007. The IRS is now examining our
federal tax returns for fiscal years 2005 and 2006. We believe our recorded tax liabilities as of July 28, 2007 are sufficient to cover any
potential assessments to be made by the IRS upon the completion of their examinations. We will continue to monitor the progress of the
IRS examinations and review our recorded tax liabilities for potential audit assessments. Adjustments to increase or decrease the
recorded tax liabilities may be required in the future as additional facts become known.
F-34