Lowe's 2005 Annual Report Download - page 43

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฀ The฀tax฀effect฀of฀cumulative฀temporary฀differences฀that฀gave฀rise฀to฀the฀
deferred฀tax฀assets฀and฀liabilities฀at฀February฀3,฀2006,฀and฀January฀28,฀2005,฀
is฀as฀follows:
฀฀฀฀฀ February฀3,฀2006
(In฀millions)฀ ฀ ฀ Assets฀ Liabilities฀ Total
Excess฀property฀and฀store฀closing฀costs฀ ฀ $฀ 19฀ $฀ –฀ $฀฀ ฀19
Self-insurance฀ ฀ ฀ 81฀ ฀ –฀ 81
Depreciation฀ ฀ ฀ –฀ ฀ (804)฀ (804)
Rent฀ ฀ ฀ ฀ ฀ ฀ 26฀ ฀ –฀ 26
Vacation฀accrual฀ ฀ ฀ 6฀ ฀ –฀ 6
Sales฀returns฀reserve฀ ฀ ฀ 44฀ ฀ –฀ 44
Stock-based฀compensation฀expense฀ ฀ ฀ 40฀ ฀ –฀ 40
Other,฀net฀ ฀ ฀ ฀ 19฀ ฀ (39)฀ (20)
Total฀ ฀ ฀ ฀ ฀ $฀ 235฀ $฀ (843)฀ $ ฀ (608)
฀ ฀ ฀ ฀ ฀ January฀28,฀2005
(In฀millions)฀ ฀ ฀ Assets฀ Liabilities฀ Total
Excess฀property฀and฀store฀closing฀costs฀ ฀ $฀ 19฀ $฀ –฀ $฀ ฀19
Self-insurance฀ ฀ ฀ 42฀ ฀ –฀ 42
Depreciation฀ ฀ ฀ –฀ ฀ (776)฀ (776)
Rent฀ ฀ ฀ ฀ ฀ ฀ 26฀ ฀ –฀ 26
Vacation฀accrual฀ ฀ ฀ 7฀ ฀ –฀ 7
Sales฀returns฀reserve฀ ฀ ฀ 43฀ ฀ –฀ 43
Stock-based฀compensation฀expense฀ ฀ ฀ 28฀ ฀ –฀ 28
Other,฀net฀ ฀ ฀ ฀ 14฀ ฀ (44)฀ (30)
Total฀ ฀ ฀ ฀ ฀ $฀ 179฀ $฀ (820)฀ $ ฀ (641)
฀ Given฀the฀consistent฀profitability฀of฀past฀operations,฀the฀Company฀
believes฀that฀the฀deferred฀tax฀assets฀will฀be฀recovered฀and฀that฀no฀valuation฀
allowance฀is฀necessary.
฀ The฀tax฀balances฀and฀income฀tax฀expense฀recognized฀by฀the฀Company฀are฀
based฀on฀what฀management฀believes฀are฀reasonable฀interpretations฀of฀the฀tax฀
statutes฀of฀multiple฀jurisdictions.฀Income฀tax฀expense฀reflects฀the฀Company’s฀
best฀estimates฀and฀assumptions฀regarding฀the฀level฀of฀future฀taxable฀income฀
and฀interpretation฀of฀current฀tax฀statutes.
฀ The฀Company฀believes฀that฀its฀tax฀positions฀are฀consistent฀with฀applicable฀
tax฀laws฀and฀that฀they฀are฀supportable.฀However,฀management฀believes฀that฀
certain฀positions฀are฀likely฀to฀be฀challenged฀by฀taxing฀authorities.฀These฀chal-
lenges฀include฀a฀review฀of฀the฀Company’s฀tax฀filing฀positions,฀including฀the฀
timing฀and฀amount฀of฀income฀and฀deductions฀in฀various฀tax฀jurisdictions.฀In฀
evaluating฀liabilities฀associated฀with฀its฀various฀tax฀filing฀positions,฀the฀Company฀
has฀accrued฀for฀probable฀liabilities฀resulting฀from฀tax฀assessments฀by฀tax฀author-
ities.฀The฀Company฀records฀these฀tax฀contingencies฀to฀address฀the฀potential฀
exposures฀that฀can฀result฀from฀the฀diverse฀interpretations฀of฀tax฀statutes,฀rules฀
and฀regulations.฀The฀amounts฀accrued฀were฀not฀material฀to฀the฀Company’s฀
consolidated฀financial฀statements฀in฀any฀of฀the฀years฀presented.
Note฀14฀ COMMITMENTS฀AND฀CONTINGENCIES
The฀Company฀is฀a฀defendant฀in฀legal฀proceedings฀considered฀to฀be฀in฀the฀
normal฀course฀of฀business,฀none฀of฀which,฀singularly฀or฀collectively,฀are฀
believed฀to฀have฀a฀risk฀of฀having฀a฀material฀impact฀on฀the฀Company’s฀financial฀
statements.฀In฀evaluating฀liabilities฀associated฀with฀its฀various฀legal฀proceed-
ings,฀the฀Company฀has฀accrued฀for฀probable฀liabilities฀associated฀with฀these฀
matters.฀The฀amounts฀accrued฀were฀not฀material฀to฀the฀Company’s฀consolidated฀
financial฀statements฀in฀any฀of฀the฀years฀presented.
฀ As฀of฀February฀3,฀2006,฀the฀Company฀had฀non-cancelable฀commitments฀
related฀to฀purchases฀of฀merchandise฀inventory,฀property฀and฀construction฀of฀
buildings,฀as฀well฀as฀commitments฀related฀to฀certain฀marketing฀and฀information฀
technology฀programs฀of฀$1.6฀billion.฀Payments฀under฀these฀commitments฀are฀
scheduled฀to฀be฀made฀as฀follows:฀2006,฀$650฀million;฀2007,฀$271฀million;฀2008,฀
$215฀million;฀2009,฀$207฀million;฀2010,฀$207฀million;฀thereafter,฀$4฀million.
Note฀15฀ OTHER฀INFORMATION
Net฀interest฀expense฀is฀comprised฀of฀the฀following:
(In฀millions)฀ ฀ ฀ 2005฀ 2004฀ 2003
Long-term฀debt฀ ฀ $฀171฀ $฀159฀ $฀162
Mortgage฀interest฀ ฀ 3฀ 3฀ 4
Capitalized฀leases฀ ฀ 39฀ 38฀ 39
Short-term฀debt฀ ฀ 1฀ –฀ –
Amortization฀of฀original฀issue฀discount฀฀
฀ and฀loan฀costs฀ ฀ 17฀ 20฀ 19
Interest฀income฀ ฀ (45)฀ (16)฀ (18)
Interest฀capitalized฀ ฀ (28)฀ (28)฀ (26)
Net฀interest฀expense฀ ฀ $ ฀ 158฀ $ ฀ 176฀ $ ฀ 180
Supplemental฀Disclosures฀of฀Cash฀Flow฀Information:
(In฀millions)฀ ฀ ฀ 2005฀ 2004฀ 2003
Cash฀paid฀for฀interest,฀฀
฀ net฀of฀amount฀capitalized฀ ฀ $฀฀ ฀173฀ $฀฀ ฀174฀ $฀179
Cash฀paid฀for฀income฀taxes฀ ฀ $฀1,593฀ $฀1,192฀ $฀926
Noncash฀investing฀and฀financing฀activities:
Noncash฀fixed฀asset฀acquisitions,฀฀
฀ ฀including฀assets฀acquired฀under฀฀
capital฀lease฀ ฀ $฀฀ ฀175฀ $฀฀ ฀133฀ $฀102
Conversions฀of฀long-term฀debt฀to฀equity฀ ฀ $฀฀ ฀565฀ $฀฀ ฀ ฀ ฀6฀ –