Lowe's 2013 Annual Report Download - page 61

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ESPP
The purchase price of the shares under the ESPP equals 85% of the closing price on the date of purchase. The Company’s
share-based payment expense per share is equal to 15% of the closing price on the date of purchase. The ESPP is considered a
liability award and is measured at fair value at each reporting date, and the share-based payment expense is recognized over the
six-month offering period. During 2013, the Company issued 2.0 million shares of common stock and recognized $13 million
of share-based payment expense pursuant to the plan.
NOTE 11: Employee Retirement Plans
The Company maintains a defined contribution retirement plan for its eligible employees (the 401(k) Plan). Employees are
eligible to participate in the 401(k) Plan six months after their original date of service. Eligible employees hired or rehired
prior to November 1, 2012 were automatically enrolled in the 401(k) Plan at a contribution rate of 1% of their pre-tax annual
compensation unless they elected otherwise. Eligible employees hired or rehired November 1, 2012 or later must make an
active election to participate in the 401(k) Plan. The Company makes contributions to the 401(k) Plan each payroll period,
based upon a matching formula applied to employee deferrals (the Company Match). Participants are eligible to receive the
Company Match pursuant to the terms of the 401(k) Plan. The Company Match varies based on how much the employee elects
to defer up to a maximum of 4.25% of eligible compensation. The Company Match is invested identically to employee
contributions and is immediately vested.
The Company maintains a Benefit Restoration Plan to supplement benefits provided under the 401(k) Plan to participants
whose benefits are restricted as a result of certain provisions of the Internal Revenue Code of 1986. This plan provides for
employee salary deferrals and employer contributions in the form of a Company Match.
The Company maintains a non-qualified deferred compensation program called the Lowe’s Cash Deferral Plan. This plan is
designed to permit certain employees to defer receipt of portions of their compensation, thereby delaying taxation on the
deferral amount and on subsequent earnings until the balance is distributed. This plan does not provide for Company
contributions.
The Company recognized expense associated with employee retirement plans of $160 million, $151 million and $150 million
in 2013, 2012 and 2011, respectively.
NOTE 12: Income Taxes
The following is a reconciliation of the federal statutory tax rate to the effective tax rate:
2013
2012
2011
Statutory federal income tax rate
35.0
%
35.0
%
35.0
%
State income taxes, net of federal tax benefit
2.9
3.1
2.8
Other, net
(0.1
)
(0.5
)
(1.1
)
Effective tax rate
37.8
%
37.6
%
36.7
%
The components of the income tax provision are as follows:
(In millions)
2013
2012
2011
Current:
Federal
$
1,342
$
1,162
$
891
State
203
155
124
Total current
1,545
1,317
1,015
Deferred:
Federal
(133
)
(133
)
50
State
(25
)
(6
)
2
Total deferred
(158
)
(139
)
52
Total income tax provision
$
1,387
$
1,178
$
1,067