 |
Notes to Consolidated Financial Statements
|
|
The provision for income taxes from continuing operations
consisted of:
| |
2005 |
2004 |
2003 |
|
Current:
Federal |
$ |
120,172 |
|
$ |
91,669 |
|
$ |
103,825 |
|
| State and local, including Puerto Rico |
|
4,269 |
|
|
3,362 |
|
|
3,880 |
|
| Foreign |
|
124,901 |
|
|
106,678 |
|
|
53,402 |
|
|
| |
|
249,342 |
|
|
201,709 |
|
|
161,107 |
|
|
Deferred:
Domestic |
|
75,948 |
|
|
(4,308 |
) |
|
6,209 |
|
| Foreign |
|
(12,719 |
) |
|
(27,037 |
) |
|
(288 |
) |
|
| |
|
63,229 |
|
|
(31,345 |
) |
|
5,921 |
|
|
| |
$ |
312,571 |
|
$ |
170,364 |
|
$ |
167,028 |
|
|
The components of Income From Continuing Operations
Before Income Taxes consisted of:
| |
2005 |
2004 |
2003 |
|
| Domestic, including Puerto Rico |
$ |
433,670 |
|
$ |
291,973 |
|
$ |
355,032 |
|
| Foreign |
|
571,184 |
|
|
460,895 |
|
|
366,926 |
|
|
| |
$ |
1,004,854 |
|
$ |
752,868 |
|
$ |
721,958 |
|
|
In accordance with SFAS No. 109, “Accounting for Income
Taxes,” deferred tax assets and liabilities are netted on the balance
sheet by separate tax jurisdictions. At September 30, 2005 and
2004, net current deferred tax assets of $75,382 and $100,605,
respectively, were included in Prepaid expenses, deferred taxes
and other. There were no net non-current deferred tax assets in
2005 and 2004. Net current deferred tax liabilities of $1,949
and $1,346, respectively, were included in Current Liabilities–
Income taxes. Net non-current deferred tax liabilities of
$98,007 and $61,819, respectively, were included in Deferred Income Taxes and Other. Deferred taxes are not provided on
substantially all undistributed earnings of foreign subsidiaries
that are indefinitely reinvested. At September 30, 2005, the
cumulative amount of such undistributed earnings indefinitely
reinvested outside the United States was $655,617. Determining
the tax liability that would arise if these earnings were remitted
is not practicable. Deferred taxes are provided for earnings outside
the United States when those earnings are not considered
indefinitely reinvested.
In October 2004, the American Jobs Creations Act of 2004
(the “AJCA”) was signed into law. The AJCA creates a temporary
incentive for U.S. multinationals to repatriate accumulated
income earned outside the United States. As a result of the passage
of the AJCA, the Company revisited its policy of indefinite
reinvestment of foreign earnings and determined that it will
repatriate approximately $1.3 billion in 2006. The Company
recorded a one-time charge of $77,200 in the fourth quarter of
2005 attributable to the planned repatriation of these earnings.
Deferred income taxes at September 30 consisted of:
| |
2005 |
2004 |
|
| |
Assets |
Liabilities |
Assets |
Liabilities |
|
| Compensation and benefits |
$ |
154,085 |
|
$ |
— |
|
$ |
170,148 |
|
$ |
— |
|
| Property and equipment |
|
— |
|
|
147,188 |
|
|
— |
|
|
141,382 |
|
Repatriation of foreign
earnings under the AJCA |
|
— |
|
|
77,200 |
|
|
— |
|
|
— |
|
| Loss and credit carryforwards |
|
78,806 |
|
|
— |
|
|
33,552 |
|
|
— |
|
| Other |
|
178,244 |
|
|
139,205 |
|
|
127,200 |
|
|
124,723 |
|
|
| |
|
411,135 |
|
|
363,593 |
|
|
330,900 |
|
|
266,105 |
|
| Valuation allowance |
|
(72,116 |
) |
|
— |
|
|
(27,355 |
) |
|
— |
|
|
| |
$ |
339,019 |
|
$ |
363,593 |
|
$ |
303,545 |
|
$ |
266,105 |
|
|
Valuation allowances have been established for capital loss carryforwards, state deferred tax assets, net of federal tax, related to net operating losses and credits and other deferred tax assets for which the Company has determined it is more likely than not that these benefits will not be realized. At September 30, 2005, the Company had deferred state tax assets for net state operating losses and credit carryforwards of $30,667 for which a valuation allowance has been established due to the uncertainty of generating sufficient taxable income in the state jurisdictions to utilize the deferred tax assets before they principally expire between 2006 and 2012. The Company also has federal and state capital loss carryforward deferred tax assets of $37,626 for which a full valuation allowance has been established due to the uncertainty of recognizing the benefit from these losses before they principally expire in 2010.
A reconciliation of the federal statutory tax rate to the Company’s effective tax rate was as follows:
| |
2005 |
2004 |
2003 |
|
| Federal statutory tax rate |
35.0 |
% |
35.0 |
% |
35.0 |
% |
State and local income taxes,
net of federal tax benefit |
0.6 |
|
0.3 |
|
0.4 |
|
Effect of foreign and Puerto Rico
earnings and foreign tax credits |
(10.3 |
) |
(9.9 |
) |
(8.4 |
) |
Effect of Research, Empowerment
Zone, Extraterritorial Income
tax benefits |
(2.0 |
) |
(2.5 |
) |
(3.0 |
) |
Repatriation of foreign earnings
under the AJCA |
7.7 |
|
— |
|
— |
|
| Other, net |
0.1 |
|
(0.3 |
) |
(0.9 |
) |
|
| |
31.1 |
% |
22.6 |
% |
23.1 |
% |
|
The approximate dollar and diluted earnings per share amounts of tax reductions related to tax holidays in various countries in which the Company does business were: 2005–$75,150 and $0.29; 2004–$55,461 and $0.21; and 2003–$42,050 and $0.16. The tax holidays expire at various dates through 2023.
The Company made income tax payments, net of refunds, of $183,867 in 2005, $146,574 in 2004 and $110,739 in 2003.
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