Staples 2004 Annual Report Download - page 111

STAPLES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
NOTE H Income Taxes
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and
liabilities for financial reporting purposes and the amounts used for income tax purposes. The approximate tax effect of
the significant components of Staples’ deferred tax assets and liabilities are as follows (in thousands):
January 29, January 31,
2005 2004
Deferred tax assets:
Deferred rent ........................................... $ 34,649 $ 32,816
Capitalized vendor money .................................. 24,164 30,933
Foreign tax credit carryforwards .............................. 7,505 35,511
Net operating loss carryforwards ............................. 15,310 10,576
Insurance .............................................. 5,560 6,215
Employee benefits ........................................ 21,229 20,737
Merger related charges .................................... 18,595 7,501
Store closure charge ...................................... 12,197 13,468
Capital losses and asset write-downs ........................... 19,874 20,982
Inventory .............................................. 15,340 120
Unrealized loss on hedge instruments .......................... 17,825 20,788
Other—net ............................................. 39,048 36,452
Total deferred tax assets ................................... 231,296 236,099
Total valuation allowance .................................... (55,454) (45,987)
Net deferred tax assets ...................................... $175,842 $ 190,112
Deferred tax liabilities:
Depreciation ............................................ $(11,570) $ (22,663)
Intangibles ............................................. (77,985) (70,279)
Other—net ............................................. (3,104) (8,486)
Total deferred tax liabilities ................................. (92,659) (101,428)
Net deferred tax assets ...................................... $ 83,183 $ 88,684
The gross deferred tax asset from tax loss carryforwards of $15.3 million represents approximately $177.8 million of
net operating loss carryforwards, $7.3 million of which will expire in 2007 and $2.1 million of which will expire in 2009 if
not utilized. The remainder has an indefinite carryforward period. Total foreign tax credit carryforwards of $7.5 million
will expire in 2012 if not utilized. The deferred tax asset from capital losses and asset write-downs includes approximately
$5.6 million, $14.0 million, and $8.6 million of capital loss carryforwards that expire in 2005, 2006, and 2008, respectively.
The deferred tax assets for these carryforwards have been partially reserved against due to the uncertainty of their
realization. The valuation allowance increased by $9.5 million during the year due primarily to the uncertainty of
benefitting deferred tax assets associated with various merger reserves.
For financial reporting purposes, income before income taxes includes the following components (in thousands):
Fiscal Year Ended
January 29, January 31, February 1,
2005 2004 2003
Pretax income:
United States .................................. $ 931,228 $ 648,179 $586,085
Foreign ...................................... 184,344 129,933 75,978
$1,115,572 $ 778,112 $662,063
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