Office Depot 2010 Annual Report Download - page 53

negative evidence in that evaluation. The charge to establish the valuation allowance followed the third quarter
2009 condition of reaching or nearly reaching a 36 month cumulative loss position in certain taxing jurisdictions.
While the company believes positive evidence exists with regard to the realizability of these deferred tax assets,
it is not considered sufficient to outweigh the objectively verifiable negative evidence, including the cumulative
36 month pre-tax loss history. Deferred tax assets without valuation allowances remain in certain foreign tax
jurisdictions where supported by the evidence.
(Dollars in millions)
Beginning
Balance Additions Deductions
Ending
Balance
Valuation allowances at:
December 25, 2010 ............................ $657.0 $ — $(8.1) $648.9
December 26, 2009 ............................ 242.5 414.5 — 657.0
Of the $648.9 million valuation allowance as of December 25, 2010, $3.4 million is attributable to net operating
loss carryforward assets generated from equity compensation deductions that if realized in future period would
benefit additional paid-in capital.
The following is a reconciliation of income taxes at the Federal statutory rate to the provision (benefit) for
income taxes:
(Dollars in thousands) 2010 2009 2008
Federal tax computed at the statutory rate ........................... $(19,836) $(108,903) $(552,877)
State taxes, net of Federal benefit ................................. 1,434 1,951 (3,838)
Foreign income taxed at rates other than Federal ..................... (15,926) (21,882) (29,684)
Non-deductible goodwill and other impairments ...................... —— 356,138
Increase (reduction) in valuation allowance ......................... 29,777 387,735 47,874
Non-deductible foreign interest ................................... 5,094 13,198 40,166
Change in uncertain tax positions ................................. (32,283) 5,526 3,661
Disposition of foreign affiliates ................................... (8,562) ——
Gain on intercompany sale ....................................... 20,216 ——
Other items, net ............................................... 9,616 9,947 39,915
Income tax expense (benefit) ..................................... $(10,470) $ 287,572 $ (98,645)
The significant tax jurisdictions related to the line item foreign income taxed at rates other than Federal include
the UK, the Netherlands and France.
The following table summarizes the activity related to our uncertain tax positions:
(Dollars in thousands) 2010 2009 2008
Beginning Balance .......................................... $141,125 $119,626 $110,407
Additions based on tax positions related to the current year .......... 3,436 5,505 10,767
Additions for tax positions of prior years ........................ 24,936 19,149 17,720
Reductions for tax positions of prior years ....................... (32,572) (2,820) (19,035)
Statute expirations .......................................... (17) (335) (233)
Settlements ................................................ (26,368) ——
Ending Balance ............................................ $110,540 $141,125 $119,626
Included in the balance of $110.5 million at December 25, 2010, are $78.3 million of net uncertain tax positions
that, if recognized, would affect the effective tax rate. The difference of $32.2 million primarily results from
positions which if sustained would be fully offset by a valuation allowance.
52