Steelcase
Inc.
Notes
to Consolidated Financial Statements
Note 13
Income Taxes
The provision for income taxes on income before equity in net income of joint ventures and dealer transitions consists of:
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| Year Ended | February 27, 1998 | February 28, 1997 | February 23, 1996 | |||
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| Current income taxes: | ||||||
| Federal | $ | 115.7 | $ | 17.6 | $ | 69.4 |
| State and local | 9.5 | 4.2 | 8.5 | |||
| Foreign | 10.4 | — | 2.4 | |||
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| 135.6 | 21.8 | 80.3 | ||||
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| Deferred income taxes: | ||||||
| Federal | (0.8) | (1.4) | (11.7) | |||
| State and local | (0.3) | 0.5 | 0.2 | |||
| Foreign | (3.6) | 2.7 | (0.7) | |||
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| (4.7) | 1.8 | (12.2) | ||||
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| $ | 130.9 | $ | 23.6 | $ | 68.1 | |
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Undistributed earnings of foreign joint ventures and subsidiaries are not material.
Temporary differences between the financial statement carrying amounts and tax bases of assets and liabilities that give rise to significant portions of deferred income taxes relate to the following:
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| February 27, 1998 | February 28, 1997 | |||
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| Deferred income tax assets: | ||||
| Employee benefit | ||||
| plan obligations | $ | 74.2 | $ | 71.6 |
| Accrued compensation | 20.3 | 7.9 | ||
| Reserves and allowances | 36.5 | 33.1 | ||
| Foreign losses | 9.0 | 8.2 | ||
| Other | 13.7 | 10.9 | ||
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| Total deferred income tax assets | 153.7 | 131.7 | ||
| Deferred income tax liability | ||||
| —property and equipment | (47.3) | (30.0) | ||
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| Net deferred income tax assets | 106.4 | 101.7 | ||
| Current portion | 56.4 | 48.1 | ||
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| Non-current portion | $ | 50.0 | $ | 53.6 |
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The Company has recorded a deferred tax asset as of February 27, 1998 of $9.0 million reflecting the benefit of foreign operating loss carry-forwards that expire over the next five years. Realization is dependent on future taxable income of the related foreign operations and tax planning strategies available to the Company.
Although realization is not assured, management believes it is more likely than not that all of the deferred tax assets will be realized. Accordingly, no valuation allowance has been established for the deferred tax assets.
The effective income tax rate on income before equity in net income of joint ventures and dealer transitions varied from the statutory federal income tax rate as set forth in the following table:
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| Year Ended | February 27, 1998 | February 28, 1997 | February 23, 1996 | |
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| Statutory federal | ||||
| income tax rate | 35.0% | 35.0% | 35.0% | |
| State and local | ||||
| income taxes | 2.7 | 4.3 | 2.6 | |
| Tax exempt interest | (0.2) | (1.3) | (0.2) | |
| Goodwill and intangible | ||||
| asset amortization | ||||
| and write-offs | 0.2 | 5.0 | 0.3 | |
| Research and | ||||
| development credit | (0.6) | — | (1.6) | |
| Other | 1.4 | 3.0 | 0.2 | |
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| Effective income tax rate | 38.5% | 46.0% | 36.3% | |
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The Company made income tax payments of $116.0 million, $44.0 million and $78.1 million during 1998, 1997 and 1996, respectively.
