Bemis Company 2007 Annual Report - IR Solutions

(dollars in thousands) 2007 2006 2005
Deferred tax expense:
U.S. federal 4,711 (6,266) (2,122)
Foreign (744) (796) 2,855
State 1,836 (868) 1,627
Total deferred tax expense 5,803 (7,930) 2,360
Total income tax expense $104,300 $109,500 $113,900
The tax effects of temporary differences that give rise to the deferred tax assets and deferred tax liabilities are presented below.
(dollars in thousands) 2007 2006 2005
Deferred Tax Assets:
Accounts receivable, principally due to
allowances for returns and doubtful accounts $5,759 $6,317 $3,651
Inventories, principally due to additional
costs inventoried for tax purposes 14,898 15,699 3,569
Employee compensation and benefits
accrued for financial reporting purposes 45,006 54,402 18,077
Foreign net operating losses 12,308 12,596 10,179
Other 4,377 8,003 880
Total deferred tax assets 82,348 97,017 36,356
Less valuation allowance (7,059) (6,701) (3,167)
Total deferred tax assets, after valuation allowance $75,289 $90,316 $33,189
Deferred Tax Liabilities:
Plant and equipment, principally due to
differences in depreciation, capitalized
interest, and capitalized overhead $128,471 $127,817 $127,803
Goodwill and intangible assets, principally
due to differences in amortization 55,228 50,980 42,787
Other 6,419 8,532 6,392
Total deferred tax liabilities 190,118 187,329 176,982
Deferred tax liabilities, net $114,829 $ 97,013 $143,793
The net deferred tax liabilities are reflected in the balance sheet as follows:
(dollars in thousands) 2007 2006 2005
Deferred tax assets (included in prepaid expense) $ 41,042 $ 37,155 $ 24,654
Deferred tax liabilities 155,871 134,168 168,447
Net deferred tax liabilities $114,829 $ 97,013 $143,793
The Company's effective tax rate differs from the federal statutory rate due to the following items:
(dollars in thousands) 2007 2006 2005
% of % of % of
Income Income Income
Amount Before Tax Amount Before Tax Amount Before Tax
Computed "expected" tax
expense on income before
taxes at federal statutory rate $100,049 35.0% $100,029 35.0% $96,750 35.0%
Increase (decrease) in taxes
resulting from:
State and local income
taxes net of federal
income tax benefit 7,285 2.5 8,732 3.1 9,016 3.3
Foreign tax rate differential (1,464) (0.5) 3,930 1.4 637 0.2
Minority interest 1,313 0.5 1,239 0.4 2,078 0.8
Jobs Act repatriation 6,000 2.2
Manufacturing tax benefits (4,200) (1.5) (3,146) (1.1) (840) (0.4)
Other 1,317 0.5 (1,284) (0.5) 259 0.1
Actual income tax expense $104,300 36.5% $109,500 38.3% $113,900 41.2%
As of December 31, 2007, the Company had foreign net operating loss carryovers of approximately $35.5 million that are
available to offset future taxable income. Approximately $13.8 million of the carryover expires over the period 2014-2016. The balance
of the loss carryovers have no expiration. FAS No. 109, Accounting for Income Taxes, requires that a valuation allowance be established
when it is more likely than not that all or a portion of deferred tax assets will not be realized. The Company’s management determined
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