Staples 2006 Annual Report Download - page 119
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STAPLES, INC. AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)
C-15
NOTE G 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):
February 3, January 28,
2007 2006
Deferred tax assets:
Deferred rent.................................................. $ 42,336 $ 39,062
Capitalized vendor money....................................... — 26,855
Foreign tax credit carryforwards.................................. 62,473 —
Net operating loss carryforwards ................................. 88,497 47,447
Insurance...................................................... 12,362 7,274
Employee benefits.............................................. 87,844 80,365
Merger related charges.......................................... 9,954 11,008
Store closure charge............................................ 7,295 10,325
Inventory...................................................... 32,289 40,715
Unrealized loss on hedge instruments............................. 22,083 26,156
Deferred revenue............................................... 22,724 18,291
Depreciation................................................... 53,273 28,152
Other—net.................................................... 45,780 50,940
Total deferred tax assets......................................... 486,910 386,590
Total valuation allowance.......................................... (77,821 ) (44,314)
Net deferred tax assets............................................ $ 409,089 $ 342,276
Deferred tax liabilities:
Intangibles .................................................... $ (90,455 ) $ (90,205)
Other—net.................................................... (2,661 ) (1,499)
Total deferred tax liabilities...................................... (93,116 ) (91,704)
Net deferred tax assets............................................ $ 315,973 $ 250,572
The gross deferred tax asset from tax loss carryforwards of $88.5 million represents approximately $280.9 million of
net operating loss carryforwards, which have an indefinite carryforward period. The valuation allowance increased by
$33.5 million during the year, due primarily to increased tax rates applied to the net operating loss carryforwards.
For financial reporting purposes, income before income taxes includes the following components (in thousands):
Fiscal Year Ended
February 3,
2007
January 28,
2006
January 29,
2005
Pretax income:
United States....................................... $ 1,173,804 $ 1,058,299 $ 862,231
Foreign ............................................ 297,524 177,000 184,344
$ 1,471,328 $ 1,235,299 $ 1,046,575