Safeway 2007 Annual Report Download - page 78

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SAFEWAY INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The federal and state tax refunds of $262.3 million were recorded in 2006 as an increase to additional paid-in capital
since the tax deductions associated with the debt financing exceeded the previously recognized book expense. The
interest earned reduced income tax expense by $62.6 million, net of tax, in 2006.
As a result of acquiring the remaining minority interests in Safeway.com in 2006, the Company eliminated the valuation
allowance on Safeway.com’s net operating loss (“NOL”) carryforwards. The utilization of these NOL carryforwards
resulted in a tax benefit of $84.8 million, which reduced income tax expense by $13.6 million and goodwill by $71.2
million in 2006.
Significant components of the Company’s net deferred tax liability at year end were as follows (in millions):
2007 2006
Deferred tax assets:
Workers’ compensation and other claims $ 190.1 $ 201.3
Employee benefits 121.9 117.0
Charitable contribution carryforwards 74.7 58.5
Reserves not currently deductible 61.8 52.0
Accrued claims and other liabilities 24.8 39.2
Pension 32.7 (8.0)
Operating loss carryforwards 3.7 31.2
Other assets 33.9 31.9
543.6 523.1
Valuation allowance (12.2) (2.7)
$ 531.4 $ 520.4
2007 2006
Deferred tax liabilities:
Property $ (560.1) $ (381.7)
Inventory (264.6) (218.8)
Investments in foreign operations (49.4) (46.2)
(874.1) (646.7)
Net deferred tax liability (342.7) (126.3)
Less current liability (88.0) (8.9)
Long-term portion $ (254.7) $ (117.4)
At December 29, 2007, the Company had federal and state charitable contribution carryforwards of $203.9 million which
expire from 2008 through 2012. A valuation allowance has been recorded against $33.2 million of these carryforwards.
The valuation allowance is recorded when it becomes more likely than not that a portion of the deferred tax asset will not
be realized.
The Company had net operating loss carryforwards for federal income tax purposes of approximately $10.3 million which
expire at various dates from 2022 to 2026. The Company also had state tax credit carryforwards of $14.0 million which
have no expiration date.
At December 29, 2007, certain undistributed earnings of the Company’s foreign operations totaling $1,456.3 million
were considered to be permanently reinvested. No deferred tax liability has been recognized for the remittance of such
earnings to the U.S., since it is the Company’s intention to utilize those earnings in the foreign operations for an
indefinite period of time, or to repatriate such earnings only when tax-efficient to do so. Determination of the amount of
unrecognized deferred U.S. income tax liability is not practicable; however, unrecognized foreign tax credits may be
available to reduce some portion of the U.S. income tax liability.
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