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Income Taxes | 12 Months Ended
--- | ---
Jan. 28, 2012
Income Taxes |
Income Taxes |
(9) Income Taxes Income tax expense (benefit) is summarized as follows (in thousands):
|  | Year Ended Jan. 28, 2012 |  | Year Ended Jan. 29, 2011 |  | Year Ended Jan. 30, 2010 |
--- | --- | --- | --- | --- | --- | --- | ---
Federal: |  |  |  |  |  |  |  |  |  |
Current |  | $ | 84,994 |  | $ | 59,720 |  | $ | 60,106 |
Deferred |  |  | (3,136 | ) |  | 11,484 |  |  | (18 | )
State: |  |  |  |  |  |  |  |  |  |
Current |  |  | 11,607 |  |  | 7,953 |  |  | 10,820 |
Deferred |  |  | (193 | ) |  | 3,548 |  |  | (500 | )
Foreign: |  |  |  |  |  |  |  |  |  |
Current |  |  | 32,975 |  |  | 47,353 |  |  | 49,351 |
Deferred |  |  | 2,444 |  |  | (3,184 | ) |  | (4,160 | )
Total |  | $ | 128,691 |  | $ | 126,874 |  | $ | 115,599 |
Except where required by U.S. tax law, no provision was made for U.S. income taxes on the undistributed earnings of the foreign subsidiaries as the Company intends to utilize those earnings in the foreign operations for an indefinite period of time or repatriate such earnings only when tax-effective to do so. That portion of accumulated undistributed earnings of foreign subsidiaries as of January 28, 2012 and January 29, 2011 was approximately $631 million and $514 million, respectively. Actual income tax expense differs from expected income tax expense obtained by applying the statutory Federal income tax rate to earnings before income taxes as follows (in thousands):
|  | Year Ended Jan. 28, 2012 |  | Year Ended Jan. 29, 2011 |  | Year Ended Jan. 30, 2010 |
--- | --- | --- | --- | --- | --- | --- | ---
Computed "expected" tax expense |  | $ | 139,769 |  | $ | 147,482 |  | $ | 126,675 |
State taxes, net of federal benefit |  |  | 7,419 |  |  | 7,475 |  |  | 6,708 |
Incremental foreign taxes in excess of/(less than) federal statutory tax rate |  |  | (19,457 | ) |  | (27,822 | ) |  | (16,434 | )
Other |  |  | 960 |  |  | (261 | ) |  | (1,350 | )
Total |  | $ | 128,691 |  | $ | 126,874 |  | $ | 115,599 |
Total income tax expense (benefit) was allocated as follows (in thousands):
|  | Year Ended Jan. 28, 2012 |  | Year Ended Jan. 29, 2011 |  | Year Ended Jan. 30, 2010 |
--- | --- | --- | --- | --- | --- | --- | ---
Operations |  | $ | 128,691 |  | $ | 126,874 |  | $ | 115,599 |
Stockholders' equity |  |  | (208 | ) |  | (8,234 | ) |  | (8,899 | )
Total income taxes |  | $ | 128,483 |  | $ | 118,640 |  | $ | 106,700 |
The tax effects of the components of other comprehensive income were allocated as follows (in thousands):
|  | Year Ended Jan. 28, 2012 |  | Year Ended Jan. 29, 2011 |  | Year Ended Jan. 30, 2010 |
--- | --- | --- | --- | --- | --- | --- | ---
Unrealized net gain (loss) on hedges |  | $ | 1,170 |  | $ | (399 | ) | $ | (2,690 | )
Unrealized (loss) gain on investments or reclassification of loss to income |  |  | (24 | ) |  | 72 |  |  | 58 |
SERP |  |  | (2,057 | ) |  | (251 | ) |  | (1,435 | )
Total income tax (income) expense |  | $ | (911 | ) | $ | (578 | ) | $ | (4,067 | )
Total earnings before income tax expense and noncontrolling interests were comprised of the following (in thousands):
|  | Year Ended Jan. 28, 2012 |  | Year Ended Jan. 29, 2011 |  | Year Ended Jan. 30, 2010 |
--- | --- | --- | --- | --- | --- | --- | ---
Domestic operations |  | $ | 245,554 |  | $ | 215,689 |  | $ | 201,081 |
Foreign operations |  |  | 153,787 |  |  | 205,688 |  |  | 160,848 |
Earnings before income tax expense and noncontrolling interests |  | $ | 399,341 |  | $ | 421,377 |  | $ | 361,929 |
The tax effects of temporary differences that give rise to significant portions of current and non-current deferred tax assets and deferred tax liabilities at January 28, 2012 and January 29, 2011 are presented below (in thousands):
|  | Jan. 28, 2012 |  | Jan. 29, 2011 |
--- | --- | --- | --- | --- | ---
Deferred tax assets: |  |  |  |  |  |  |
SERP |  | $ | 23,255 |  | $ | 18,514 |
Rent expense |  |  | 13,829 |  |  | 13,394 |
Deferred compensation |  |  | 11,748 |  |  | 11,498 |
Deferred income |  |  | 9,386 |  |  | 10,944 |
Bad debt reserve |  |  | 8,332 |  |  | 7,744 |
Fixed assets bases difference |  |  | 7,903 |  |  | 6,694 |
Uniform capitalization |  |  | 2,042 |  |  | 1,910 |
Accrued bonus |  |  | 1,783 |  |  | 3,802 |
Net operating losses |  |  | 1,675 |  |  | 5,098 |
Inventory valuation |  |  | 690 |  |  | 1,546 |
Other |  |  | 7,712 |  |  | 6,423 |
Total deferred assets |  |  | 88,355 |  |  | 87,567 |
Deferred tax liabilities: |  |  |  |  |  |  |
Goodwill amortization |  |  | (3,666 | ) |  | (3,265 | )
Other |  |  | (9,090 | ) |  | (5,703 | )
Valuation allowance |  |  | (1,984 | ) |  | (5,023 | )
Net deferred tax assets |  | $ | 73,615 |  | $ | 73,576 |
Included above at January 28, 2012 and January 29, 2011, are $21.0 million and $18.1 million for current deferred tax assets, respectively, and $52.6 million and $55.5 million for non-current deferred tax assets, respectively. Based on the historical earnings of the Company and projections of future taxable income, management believes it is more likely than not that the results of operations will generate sufficient taxable earnings to realize net deferred tax assets. At January 28, 2012, the Company's U.S. and certain Asian and European retail operations had net operating loss carryforwards of $12.1 million and capital loss carryforwards of $0.2 million. These are comprised of $1.4 million of operating loss carryforwards that have an unlimited carryforward life, $7.1 million of foreign operating loss carryforwards that expire between 2015 and 2022, $0.2 million of U.S. capital loss carryforwards that expire in fiscal 2015 and $3.6 million of state operating loss carryforwards that expire between 2011 and 2020. Based on the historical earnings of these operations, management believes that it is more likely than not that these operations will not generate sufficient income or capital gains to utilize all of the net operating loss and the capital loss. Therefore, the Company has recorded a valuation allowance of $2.0 million, which is a decrease of $3.0 million from the prior year. At January 28, 2012, the Company had approximately $16.0 million of total gross unrecognized tax benefits excluding interest and penalties. Of this total, $13.7 million (net of the federal benefit on state issues) represents the amount of unrecognized tax benefits that, if recognized, would favorably affect the effective income tax rate in any future periods. The following changes occurred in the amount of gross unrecognized tax benefits excluding interest and penalties during fiscal 2012, fiscal 2011 and fiscal 2010 (in thousands):
|  | Year Ended Jan. 28, 2012 |  | Year Ended Jan. 29, 2011 |  | Year Ended Jan. 30, 2010 |
--- | --- | --- | --- | --- | --- | --- | ---
Beginning Balance |  | $ | 10,828 |  | $ | 9,615 |  | $ | 3,427 |
Additions: |  |  |  |  |  |  |  |  |  |
Tax positions related to the prior year |  |  | 4,782 |  |  | 1,002 |  |  | 5,608 |
Tax positions related to the current year |  |  | 78 |  |  | 352 |  |  | 1,107 |
Reductions: |  |  |  |  |  |  |  |  |  |
Tax positions related to the prior year |  |  | 357 |  |  | — |  |  | — |
Settlements |  |  | — |  |  | (141 | ) |  | (294 | )
Expiration of statutes of limitation |  |  | — |  |  | — |  |  | (233 | )
Ending Balance |  | $ | 16,045 |  | $ | 10,828 |  | $ | 9,615 |
The Company and its subsidiaries are subject to U.S. federal and foreign income tax as well as income tax of multiple state and foreign local jurisdictions. From time to time, the Company is subject to routine compliance reviews on various tax matters around the world in the ordinary course of business. Although the Company has substantially concluded all U.S. federal, foreign, state and foreign local income tax matters for years through fiscal 2005, as of January 28, 2012, several income tax audits were underway in multiple jurisdictions for various periods after fiscal 2005. In February 2012, the Company received a verbal status update from the Italian tax authority regarding its pending audit of one of the Company's Italian subsidiaries for the 2008 and 2009 fiscal years. While the tax authority has not made a formal tax assessment, based on the verbal status update, the Company believes that it is likely to receive an initial formal claim from the tax authority for these two periods for roughly $11 million, though it is possible that the formal claim will not be consistent with the verbal status update. Further, it is possible that the Company will receive similar or even larger assessments in the future for periods subsequent to fiscal 2009. The Company disagrees with the positions that the Italian tax authority has indicated it may take and intends to vigorously contest any such assessments. As required under applicable accounting rules, the Company accrues an amount for its estimate of additional income tax liability which the Company, more likely than not, could incur as a result of the ultimate resolution of the audits ("uncertain tax positions"). The Company reviews and updates the accrual for uncertain tax positions as more definitive information becomes available from taxing authorities, upon completion of tax audits, upon expiration of statutes of limitation, or upon occurrence of other events. The Company does not believe that the resolution of open matters will have a material effect on the Company's financial position or liquidity. As of January 28, 2012 and January 29, 2011, the Company had $16.7 million and $17.0 million, respectively, of aggregate accruals for uncertain tax positions, including penalties and interest and net of federal tax benefits. The change in the accrual balance from January 29, 2011 to January 28, 2012 resulted primarily from the resolution of uncertain tax positions related to prior years and foreign currency translation. The Company's continuing practice is to recognize interest and/or penalties related to income tax matters in income tax expense. Net income tax (benefit) expense included interest and penalties related to uncertain tax positions of $(5.8) million, $1.4 million and $4.1 million for fiscal 2012, fiscal 2011 and fiscal 2010, respectively. As of January 28, 2012 and January 29, 2011, the Company accrued interest and penalties related to uncertain tax positions of $1.4 million and $7.2 million, respectively.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 136, 172 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 43, 44, 45, 46, 47, 48, 49 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690 + Details
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