North Face 2004 Annual Report Download - page 50

95vf corporation 2004 Annual Report
note q – income taxes
The provision for Income Taxes was computed based on the following amounts of Income from Continuing
Operations before Income Taxes and Cumulative Effect of a Change in Accounting Policy:
The reasons for the difference between income taxes computed by applying the statutory federal income tax
rate for continuing operations and income tax expense in the financial statements are as follows:
Deferred income tax assets and liabilities consist of the following:
As of the end of 2004, VF has not provided deferred
U.S. income taxes on $318.0 million of undistributed
earnings of international subsidiaries where such
earnings are considered to be permanently invested.
Such undistributed earnings would become taxable
in the United States if it becomes advantageous for
business, tax or foreign exchange reasons to remit
foreign cash balances to the United States. VF has
undertaken initiatives resulting in a reduced effective
tax rate on earnings of one of VF’s foreign subsidiaries.
The income tax benefit from this tax status was
$16.5 million ($0.15 per diluted share) in 2004,
$10.8 million ($0.10 per share) in 2003 and $13.3
million ($0.12 per share) in 2002. The tax status
providing this benefit is scheduled to expire at the
end of 2009.
VF has $190.2 million of foreign operating loss carry-
forwards expiring $6.9 million in 2005, $17.5 million
in 2006, $9.5 million in 2007, $1.0 million in 2008
and $4.2 million in 2009, with the remainder having
an unlimited carryforward life. A valuation allowance
has been provided where it is more likely than not,
based on an evaluation of currently available informa-
tion, that the deferred tax assets relating to those loss
carryforwards will not be realized. Interest income in
2003 included $5.7 million related to settlement of
federal income tax issues.
The American Jobs Creation Act of 2004 (“the Act”)
was signed into law in late 2004. The Act contains
a temporary incentive for repatriation of foreign
earnings during 2005 at a 5.25% effective income
The provision for Income Taxes for continuing operations consists of:
In thousands 2004 2003 2002
Current:
Federal $ 170,649 $ 132,160 $ 95,738
Foreign 38,703 29,912 28,935
State 11,895 7,540 1,778
221,247 169,612 126,451
Deferred, primarily federal 16,172 30,961 70,849
$ 237,419 $ 200,573 $ 197,300
In thousands 2004 2003 2002
Domestic $ 545,516 $ 459,507 $ 439,744
Foreign 166,604 138,999 121,984
$ 712,120 $ 598,506 $ 561,728
In thousands 2004 2003 2002
Tax at federal statutory rate $ 249,242 $ 209,477 $ 196,605
State income taxes, net of federal tax benefit 5,525 7,459 9,918
Foreign operating losses with no current benefit 7,276 2,476 7,531
Foreign rate differences (18,311) (9,674) (16,989)
Change in valuation allowance (6,297) (3,068) (6,115)
Other, net (16) (6,097) 6,350
$ 237,419 $ 200,573 $ 197,300
In thousands 2004 2003
Deferred income tax assets:
Employee benefits $50,126 $ 41,993
Inventories 19,036 22,280
Other accrued expenses 162,584 159,663
Minimum pension liability 73,985 99,425
Operating loss carryforwards 110,446 91,720
Foreign currency translation –26,214
416,177 441,295
Valuation allowance (67,475) (67,810)
Deferred income tax assets 348,702 373,485
Deferred income tax liabilities:
Depreciation 34,346 39,636
Intangible assets 158,841 87,538
Other 64,262 36,047
Deferred income tax liabilities 257,449 163,221
Net deferred income tax assets $91,253 $ 210,264
Amounts included in Consolidated Balance Sheets:
Current assets $99,338 $ 92,828
Current liabilities (4,468) –
Noncurrent assets 12,476 117,436
Noncurrent liabilities(16,093) –
$91,253 $ 210,264