Annual report pursuant to section 13 and 15(d)

Income Taxes

v2.4.0.6
Income Taxes
12 Months Ended
Jan. 28, 2012
Income Taxes [Abstract]  
INCOME TAXES
5.

INCOME TAXES

Earnings before income taxes (in thousands):

 

                         
    Fiscal Year  
    2011     2010     2009  

United States

  $ 133,405     $ 49,150     $ 22,738  

Foreign

    51,005       51,380       46,306  
   

 

 

   

 

 

   

 

 

 

Total

  $ 184,410     $ 100,530     $ 69,044  
   

 

 

   

 

 

   

 

 

 

The provision for income taxes consists of the following (in thousands):

 

                         
    Fiscal Year  
    2011     2010     2009  

Current tax expense:

                       

Federal

  $ 24,087     $ 20,240     $ 18,843  

State

    4,780       3,402       1,548  

Foreign

    5,649       475       32,603  

Deferred tax expense (benefit):

                       

Federal and state

    20,864       (4,439     (10,667

Foreign

    8,564       13,174       (19,498
   

 

 

   

 

 

   

 

 

 

Total

  $ 63,944     $ 32,852     $ 22,829  
   

 

 

   

 

 

   

 

 

 

 

No provision for U.S. income taxes or Canadian withholding taxes has been made on the cumulative undistributed earnings of foreign companies (approximately $169.5 million at January 28, 2012) because we intend to reinvest permanently outside of the United States. The potential deferred tax liability associated with these earnings, net of foreign tax credits associated with the earnings, is estimated to be $30.4 million.

A reconciliation of the statutory federal income tax rate to our effective tax rate is as follows:

 

                         
    Fiscal Year  
    2011     2010     2009  

Federal statutory rate

    35.0     35.0     35.0

State income taxes, net of federal benefit

    3.1       2.5       2.0  

Exchange rate impact from distributed foreign earnings

                (3.5

Net change in tax accruals

    (0.2     (1.4     (1.2

Foreign tax rate differential

    (1.5     (0.2     (1.9

Amortizable tax goodwill

    (1.0     (1.1      

Other

    (0.7     (0.7     0.7  

Valuation allowance

          (1.4     2.0  
   

 

 

   

 

 

   

 

 

 
      34.7     32.7     33.1
   

 

 

   

 

 

   

 

 

 

At January 28, 2012, we had net deferred tax liabilities of $1.8 million with $29.4 million classified as other current assets and $31.2 million classified as other non-current liabilities. At January 29, 2011, we had net deferred tax assets of $27.5 million with $32.2 million classified as other current assets, $5.0 million classified as other non-current assets and $9.7 million classified as other non-current liabilities.

Total deferred tax assets and liabilities and the related temporary differences as of January 28, 2012 and January 29, 2011 were as follows (in thousands):

 

                 
    January 28,
2012
    January 29,
2011
 

Deferred tax assets:

               

Accrued rent and other expenses

  $ 30,913     $ 29,730  

Accrued compensation

    21,415       16,835  

Accrued inventory markdowns

    3,153       4,146  

Deferred intercompany profits

    1,528       4,640  

Tax loss and other carryforwards

    19,171       23,460  
   

 

 

   

 

 

 

Total deferred tax assets

    76,180       78,811  
   

 

 

   

 

 

 

Deferred tax liabilities:

               

Property and equipment

    (58,232     (32,624

Capitalized inventory costs

    (5,042     (4,898

Intangibles

    (14,333     (13,658

Other

    (342     (127
   

 

 

   

 

 

 

Total deferred tax liabilities

    (77,949     (51,307
   

 

 

   

 

 

 

Net deferred tax assets (liabilities)

  $ (1,769   $ 27,504  
   

 

 

   

 

 

 

In accordance with the guidance regarding accounting for uncertainty in income taxes, we classify uncertain tax positions as non-current income tax liabilities unless expected to be paid within one year and recognize interest and/or penalties related to income tax matters in income tax expense. As of January 28, 2012 and January 29, 2011, the total amount of accrued interest related to uncertain tax positions was $1.4 million. Amounts charged to operations for interest and/or penalties related to income tax matters were $0.3 million, $0.4 million and $0.4 million in fiscal 2011, 2010 and 2009, respectively.

 

The following table summarizes the activity related to our unrecognized tax benefits (in thousands):

 

                 
    January 28,
2012
    January 29,
2011
 

Gross unrecognized tax benefits, beginning balance

  $ 5,559     $ 7,073  

Increase in tax positions for prior years

    257       459  

Decrease in tax positions for prior years

    (27      

Increase in tax positions for current year

    811       741  

Decrease in tax positions for current year

           

Settlements

    (1,107     (802

Lapse from statute of limitations

    (1,147     (1,912
   

 

 

   

 

 

 

Gross unrecognized tax benefits, ending balance

  $ 4,346     $ 5,559  
   

 

 

   

 

 

 

Of the $4.3 million in unrecognized tax benefits as of January 28, 2012, $3.2 million, if recognized, would reduce our income tax expense and effective tax rate. It is reasonably possible that there could be a net reduction in the balance of unrecognized tax benefits of up to $1.0 million in the next twelve months.

The Company is subject to routine compliance examinations on tax matters by various tax jurisdictions in the ordinary course of business. Tax years 2007 through 2011 are open to such examinations. Our tax jurisdictions include the United States, Canada, the United Kingdom, The Netherlands and France as well as their states, provinces and other political subdivisions. A number of U.S. state examinations are ongoing. As of January 28, 2012, we cannot reasonably determine the timing or outcomes of these examinations.

At January 28, 2012, the company had federal, state and foreign net operating loss (“NOL”) carryforwards of approximately $29.2 million, $12.4 million and $12.8 million, respectively. The federal and state NOLs will expire between fiscal 2015 and 2031; the $12.8 million of foreign NOLs can be carried forward indefinitely. We also had $4.0 million of foreign tax credit carryforwards at January 28, 2012 which will expire in 2019. It is more likely than not that we can fully realize the carryforwards in future years.