Staples 2007 Annual Report Download - page 124

STAPLES, INC. AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)
NOTE G Income Taxes (Continued)
The gross deferred tax asset from tax loss carryforwards of $88.1 million represents approximately $301.0 million of
net operating loss carryforwards, which have an indefinite carryforward period. The valuation allowance increased by
$19.5 million during the year, due primarily to the uncertainty of benefiting deferred tax assets associated with net
operating losses and capital allowances.
For financial reporting purposes, income before income taxes includes the following components (in thousands):
Fiscal Year Ended
February 2, February 3, January 28,
2008 2007 2006
Pretax income:
United States ................................ $1,100,064 $1,173,804 $1,058,299
Foreign ..................................... 454,418 297,524 177,000
$1,554,482 $1,471,328 $1,235,299
The provision for income taxes consists of the following (in thousands):
Fiscal Year Ended
February 2, February 3, January 28,
2008 2007 2006
Current tax expense:
Federal ....................................... $431,006 $ 516,520 $484,326
State ......................................... 44,567 22,638 19,027
Foreign ....................................... 100,635 86,870 75,990
Deferred tax (benefit) expense:
Federal ....................................... (31,504) (101,984) (85,897)
State ......................................... (1,178) (11,996) (8,501)
Foreign ....................................... 16,088 (14,076) (34,061)
Total income tax expense ............................ $559,614 $ 497,972 $450,884
A reconciliation of the federal statutory tax rate to Staples’ effective tax rate on historical net income is as follows:
Fiscal Year Ended
February 2, February 3, January 28,
2008 2007 2006
Federal statutory rate ............................... 35.0% 35.0% 35.0%
State effective rate, net of federal benefit ................ 2.9 1.9 1.7
Effect of foreign taxes .............................. (2.7) (1.2) (0.6)
Tax credits ...................................... (0.2) (0.6) (0.5)
Resolution of tax matters ............................ 0.0 (2.2) 0.0
Other .......................................... 1.0 0.9 0.9
Effective tax rate .................................. 36.0% 33.8% 36.5%
The effective tax rate in any year is impacted by the geographic mix of earnings.
The tax impact of the unrealized gain or loss on instruments designated as hedges of net investments in foreign
subsidiaries is reported in the cumulative translation adjustment line in stockholders’ equity.
The Company operates in multiple jurisdictions and could be subject to audit in these jurisdictions. These audits can
involve complex issues that may require an extended period of time to resolve and may cover multiple years. In the
Company’s opinion, an adequate provision for income taxes has been made for all years subject to audit.
Income tax payments were $479.5 million, $595.7 million and $472.0 million during fiscal years 2007, 2006 and 2005,
respectively.
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