The following is a
reconciliation of income tax expense to the federal statutory tax rate
for continuing operations for the past three fiscal years:
2003
2002
2001
Federal income tax at
the statutory rate
$ 355
$ 324
$ 227
State income taxes, net
of federal benefit
35
34
27
Tax-exempt
interest income
(10)
(3)
(9)
Other
12
1
3
Income tax
expense
$ 392
$ 356
$ 248
Effective
tax rate
38.7%
38.4%
38.3%
Income tax expense for
continuing operations was comprised of the following for the past
three fiscal years:
2003
2002
2001
Current:
Federal
$ 375
$ 301
$ 187
State
51
39
25
Foreign
3
1
—
429
341
212
Deferred:
Federal
(22)
8
32
State
(3)
1
4
Foreign
(12)
6
—
(37)
15
36
Income tax
expense
$ 392
$ 356
$ 248
Deferred taxes are the
result of differences between the bases of assets and liabilities for
financial reporting and income tax purposes. Deferred tax assets and
liabilities from continuing operations as of the dates indicated were
comprised of the following:
March 1,
2003
March 2,
2002
Accrued
expenses
$ 83
$ 55
Deferred
revenue
25
14
Compensation
and benefits
47
40
Inventory
26
—
Goodwill
23
—
Other
45
26
Total deferred tax
assets
249
135
Property and
equipment
154
149
Convertible
debt
18
5
Other
6
18
Total deferred tax
liabilities
178
172
Net deferred
tax assets (liabilities)
$ 71
$ (37)
In connection with the
cumulative effect of the changes in accounting principles, the Company
realized an income tax benefit of $50. In addition, the final Future
Shop purchase price allocation included a $19 deferred tax adjustment.
As of March 1, 2003, we had Canadian net operating loss carryforwards
of $21, which expire through 2010. No valuation allowances have been
recorded since we expect to utilize the carryforwards fully. >>
