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Office Depot 2004 Annual Report |59
Under capital lease agreements, we are required to make
certain monthly, quarterly or annual lease payments through
2027. The aggregate minimum capital lease payments for the
next five years and beyond are as follows:
December 25,
(Dollars in thousands) 2004
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 18,795
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,047
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,332
2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,774
2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,097
Thereafter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66,411
Total minimum lease payments . . . . . . . . . . . . . 128,456
Less amount representing interest at
5.00% to 10.27% . . . . . . . . . . . . . . . . . . . . . . 37,942
Present value of net minimum
lease payments . . . . . . . . . . . . . . . . . . . . . . . 90,514
Less current portion . . . . . . . . . . . . . . . . . . . . . . 13,673
Long-term portion ....................... $ 76,841
NOTE H—Income Taxes
The income tax provision related to earnings from contin-
uing operations consisted of the following:
(Dollars in thousands) 2004 2003 2002
Current:
Federal . . . . . . . . . . . . $ 90,606 $ 71,032 $114,497
State.............. 5,754 (4,370) 13,967
Foreign . . . . . . . . . . . . 18,480 43,116 28,994
Deferred:
Federal . . . . . . . . . . . . 5,013 39,822 8,699
State . . . . . . . . . . . . . . 1,327 (3,554) 468
Foreign............ 4,549 (4,522) (71)
Total provision for
income taxes ....... $125,729 $141,524 $166,554
The components of earnings from continuing operations
before income taxes and cumulative effect of accounting
change consisted of the following:
(Dollars in thousands) 2004 2003 2002
North America ........ $232,561 $225,150 $350,069
International . . . . . . . . . . 228,672 215,618 125,900
Total . . . . . . . . . . . . . . . . $461,233 $440,768 $475,969
The tax-effected components of deferred income tax
assets and liabilities consisted of the following:
December 25, December 27,
(Dollars in thousands) 2004 2003
Self-insurance accruals . . . . . . . $ 25,870 $ 24,348
Inventory . . . . . . . . . . . . . . . . . . 30,370 22,976
Vacation pay and other
accrued compensation . . . . . 35,084 26,672
Reserve for bad debts . . . . . . . . 7,497 7,926
Reserve for facility closings . . . . 22,151 28,226
Acquisition and integration
costs . . . . . . . . . . . . . . . . . . . . 5,752 11,821
Deferred rent credit . . . . . . . . . . 47,626 51,137
Foreign and state net operating
loss carryforwards . . . . . . . . . 253,140 156,903
State credit carryforwards,
net of federal . . . . . . . . . . . . . 7,581 7,015
Other items, net . . . . . . . . . . . . . 54,368 48,618
Gross deferred tax assets . . . 489,439 385,642
Valuation allowance . . . . . . . . . . (239,704) (157,962)
Deferred tax assets . . . . . . . . 249,735 227,680
Basis difference in
fixed assets . . . . . . . . . . . . . . 86,399 62,127
Intangibles . . . . . . . . . . . . . . . . . 45,827 44,949
Planned repatriation of
foreign earnings . . . . . . . . . . . 11,540 —
Other items, net............. 6,258 20,560
Deferred tax liabilities....... 150,024 127,636
Net deferred tax assets . . . . . . . $ 99,711 $ 100,044
As of December 25, 2004, we had approximately $636.9
million of foreign and $802.7 million of state net operating loss
carryforwards. Of the foreign carryforwards, $490.8 million can
be carried forward indefinitely, $16.9 million will expire in 2005,
and the balance will expire between 2006 and 2019. Of the state
carryforwards, $7.9 million will expire in 2005, and the balance
will expire between 2006 and 2024. The valuation allowance
has been developed to reduce our deferred 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 assets related to net operating loss carryforwards.
OFFICE DEPOT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)