Office Depot 2003 Annual Report Download - page 50

The tax-effected components of deferred income tax assets
and liabilities consisted of the following:
December 27, December 28,
(Dollars in thousands) 2003 2002
Self-insurance accruals . . . . . . $24,348 $ 26,049
Inventory . . . . . . . . . . . . . . . . . 22,976 34,125
Vacation pay and other
accrued compensation. . . . . 26,672 31,558
Reserve for bad debts . . . . . . . 7,926 4,585
Reserve for facility closings . . . 28,226 52,637
Acquisition and integration
costs. . . . . . . . . . . . . . . . . . . 11,821 4,934
Unrealized loss on
investments . . . . . . . . . . . . . 1,660 20,279
Foreign and state net operating
loss carryforwards . . . . . . . 156,903 86,281
State credit carryforwards,
net of Federal . . . . . . . . . . . 7,015 —
Other items, net. . . . . . . . . . . . 50,515 39,545
Gross deferred tax assets . . 338,062 299,993
Valuation allowance . . . . . . . . (156,903) (86,281)
Deferred tax assets . . . . . . . 181,159 213,712
Basis difference in fixed assets 42,940 86,433
Intangibles. . . . . . . . . . . . . . . . 44,949 3,356
Other items, net. . . . . . . . . . . . 20,560 1,730
Deferred tax liabilities . . . . 108,449 91,519
Net deferred tax assets . . . . . . $72,710 $122,193
As of December 27, 2003, we had approximately $805
million of state and $372 million of foreign net operating loss
carryforwards, of which approximately $126 million, $45 mil-
lion tax effected, relate to the Guilbert acquisition. Of these
carryforwards, approximately $15 million will expire in 2004,
$126 million will carry over indefinitely, and the balance will
expire between 2005 and 2023. The valuation allowance has
been developed to reduce our deferred tax asset to an amount
that is more likely than not to be realized, and is based upon
the uncertainty of the realization of certain foreign and state
deferred tax assets relating to net operating loss carryfor-
wards. In addition to the net operating loss carryforward noted
above, the deferred asset above includes approximately $17
million, consisting mainly of acquisition and integration
related items, and the deferred tax liability above includes
approximately $43 million, consisting mainly of basis differ-
ences in intangible assets related to the acquisition of Guilbert.
The following is a reconciliation of income taxes at the
Federal statutory rate to the provision for income taxes:
(Dollars in thousands) 2003 2002 2001
Federal tax computed at
the statutory rate . . . $155,764 $167,721 $109,945
State taxes, net of
Federal benefit . . . . . 4,136 8,526 13,333
Non-deductible
goodwill. . . . . . . . . . —— 1,834
State credits . . . . . . . . . (10,400) ——
Foreign income taxed
at rates other than
Federal . . . . . . . . . . . (9,470) (12,656) (14,534)
Other items, net . . . . . . 2,986 4,131 1,718
Provision for income
taxes. . . . . . . . . . . . . $143,016 $167,722 $112,296
NOTE I—Commitments and Contingencies
Operating Leases: Office Depot leases facilities and
equipment under agreements that expire in various years
through 2029. Substantially all such leases contain provisions
for multiple renewal options. In addition to minimum rentals,
there are certain executory costs such as real estate taxes,
insurance and common area maintenance on most of our facility
leases. Certain leases contain provisions for additional rent to
be paid if sales exceed a specified amount, though such pay-
ments have been immaterial during the years presented.
The table below shows future minimum lease payments due
under non-cancelable leases as of December 27, 2003. These
minimum lease payments include facility leases that were
accrued as store closure costs.
(Dollars in thousands)
2004. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 382,944
2005. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 327,808
2006. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 277,635
2007. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 241,722
2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 207,374
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 850,377
2,287,860
Less sublease income . . . . . . . . . . . . . . . . . . . . . 71,417
$2,216,443
The Company is in the process of opening new stores and
CSCs in the ordinary course of business, and leases signed
subsequent to December 27, 2003 are not included in the
above described commitment amounts. Rent expense, includ-
ing equipment rental, was approximately $424.7 million,
$402.6 million and $396.4 million in 2003, 2002, and 2001,
respectively. Rent expense was reduced by sublease income of
approximately $3.1 million in 2003, $2.9 million in 2002 and
$3.0 million in 2001.
OFFICE DEPOT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Office Depot 2003 / Form 10-K 48