v2.4.0.6

Income Taxes | 12 Months Ended
--- | ---
Jul. 28, 2012
Income Taxes | 15. Income Taxes Taxes on Income Domestic and foreign pretax income from continuing operations are as follows:
|  | Fiscal Years Ended |
|  | July 28, 2012 |  |  | July 30, 2011 |  |  | July 31, 2010 |
|  | (millions) |
Domestic |  | $ | 237.9 |  |  | $ | 253.9 |  |  | $ | 194.0 |
Foreign |  |  | 41.1 |  |  |  | 30.5 |  |  |  | 15.4 |
Total income from continuing operations before provision for income taxes |  | $ | 279.0 |  |  | $ | 284.4 |  |  | $ | 209.4 |
Provisions (benefits) from continuing operations for current and deferred income taxes are as follows:
|  | Fiscal Years Ended |
|  | July 28, 2012 |  |  | July 30, 2011 |  |  | July 31, 2010 |
|  | (millions) |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal (a) |  | $ | 66.6 |  |  | $ | 69.6 |  |  | $ | 55.8 |
State and local (a) |  |  | 16.4 |  |  |  | 14.9 |  |  |  | 10.0 |
Foreign |  |  | 7.9 |  |  |  | 6.6 |  |  |  | 3.3 |
|  |  | 90.9 |  |  |  | 91.1 |  |  |  | 69.1 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | 20.6 |  |  |  | 20.8 |  |  |  | 5.5 |
State and local |  |  | (4.4 | ) |  |  | 2.5 |  |  |  | 1.5 |
Foreign |  |  | 0.1 |  |  |  | (0.5 | ) |  |  | (0.1 | )
|  |  | 16.3 |  |  |  | 22.8 |  |  |  | 6.9 |
Total provision for income taxes from continuing operations |  | $ | 107.2 |  |  | $ | 113.9 |  |  | $ | 76.0 |
| (a) | Excludes federal, state and local tax benefits of approximately $7.3 million in Fiscal 2012, $5.7 million in Fiscal 2011 and $5.8 million in Fiscal 2010 resulting from stock-based compensation arrangements. Such amounts were recorded within equity.
Tax Rate Reconciliation The differences between income taxes expected at the U.S. federal statutory income tax rate of 35% and income taxes provided for continuing operations are as set forth below:
|  | Fiscal Years Ended |
|  | July 28, 2012 |  |  | July 30, 2011 |  |  | July 31, 2010 |
Provision for income taxes from continuing operations at the U.S. federal statutory rate |  | $ | 97.7 |  |  | $ | 99.5 |  |  | $ | 73.3 |
Increase (decrease) due to: |  |  |  |  |  |  |  |  |  |  |  |
State and local income taxes, net of federal benefit |  |  | 9.0 |  |  |  | 11.3 |  |  |  | 7.4 |
Net change relating to uncertain income tax benefits |  |  | (5.5 | ) |  |  | (1.4 | ) |  |  | (4.3 | )
Other – net |  |  | 6.0 |  |  |  | 4.5 |  |  |  | (0.4 | )
Total provision for income taxes from continuing operations |  | $ | 107.2 |  |  | $ | 113.9 |  |  | $ | 76.0 |
The Company's effective tax rate is higher than the statutory rate principally as a result of state income tax costs attributable to the Company’s domestic retail and procurement businesses, as well as certain non-deductible costs for which the Company is not expected to receive a tax benefit. Deferred Taxes Significant components of the Company's net deferred tax assets (liabilities) are as follows:
|  | Fiscal Years Ended |
|  | July 28, 2012 |  |  | July 30, 2011 |
|  | (millions) |
Deferred tax assets: |  |  |  |  |  |  |  |
Inventory capitalization and inventory-related items |  | $ | 6.0 |  |  | $ | 10.6 |
Tax credit and net operating loss carryforwards |  |  | 64.9 |  |  |  | — |
Capital loss carryover and unrealized losses |  |  | 1.4 |  |  |  | 3.5 |
Accrued payroll & benefits |  |  | 60.7 |  |  |  | 32.5 |
Share-based compensation |  |  | 19.5 |  |  |  | 12.4 |
Straight-line rent |  |  | 41.4 |  |  |  | 45.9 |
Federal benefit of uncertain tax positions |  |  | 15.7 |  |  |  | 11.9 |
Other items |  |  | 51.3 |  |  |  | 15.0 |
Total deferred tax assets |  |  | 260.9 |  |  |  | 131.8 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Depreciation |  |  | 88.6 |  |  |  | 63.8 |
Intangibles |  |  | 163.3 |  |  |  | 67.7 |
Other items |  |  | 9.1 |  |  |  | 17.2 |
Total deferred tax liabilities |  |  | 261.0 |  |  |  | 148.7 |
Valuation allowance |  |  | (11.8 | ) |  |  | (3.5 | )
Net deferred tax assets (liabilities) |  | $ | (11.9 | ) |  | $ | (20.4 | )
The Company provides U.S. income taxes on the earnings of foreign subsidiaries unless the subsidiaries' earnings are considered indefinitely reinvested outside the U.S. In 2012, the Company changed its assertion regarding $9.0 million of earnings and used those earnings to fund the Canadian expansion reversing $1.7 million of U.S. deferred taxes previously provided, bringing the total of indefinitely reinvested earnings outside the U.S. to $15 million. Future capital requirements of the Company’s international business operations might cause management to change its assertion in regard to some portion of the foreign earnings on which U.S. taxes have been provided, resulting in a reversal of additional federal deferred tax liabilities. Effective with the closing of the Charming Shoppes Acquisition, Charming Shoppes’s federal consolidated group ceased to exist and the companies acquired as a result of the transaction joined the Company’s federal consolidated group. As part of the acquisition, the Company acquired the pre-existing federal and state net operating loss carryforwards, tax credits and charitable contribution carryovers of Charming Shoppes valued at $69.3 million. The Company expects to utilize the acquired net operating loss carryforwards, tax credits and unexpired charitable contributions carryovers in future periods, subject to annual section 382 and other statutory limitations. At the end of Fiscal 2012, the Company had an $11.8 million valuation allowance against the aggregate carrying value of its deferred tax assets, which included $10.1 million against the aforementioned tax attributes acquired as part of the Charming Shoppes Acquisition. Such valuation allowances provide for the uncertainty that a portion of the recognized deferred tax assets may not be realizable. In Fiscal 2012, the Company reversed a net $1.8 million of valuation allowances into income, primarily relating to capital loss carryovers that became realizable during the period. During Fiscal 2011, the Company recorded a decrease in its valuation allowance of $0.7 million, primarily due to a decrease in a deferred tax asset relating to unrealized losses on investments. Net Operating Loss Carry Forwards As of July 28, 2012, the Company has U.S. Federal net operating loss carryforwards of $140.2 million and state net operating loss carryforwards of $74.4 million that are available to offset future U.S. Federal and state taxable income. The majority of the U.S. Federal net operating losses have a twenty-year carryforward period, and expire between Fiscal 2028 and Fiscal 2031. The state net operating losses have carryforward periods of five to twenty years, with varying expiration dates and amounts as follows: $6.7 million in one to five years, $25.0 million in six to ten years, $21.4 million in eleven to fifteen years, and $21.3 in sixteen to twenty years. Uncertain Income Tax Benefits Reconciliation of Liabilities A reconciliation of the beginning and ending amounts of unrecognized tax benefits, excluding interest and penalties, for each fiscal year is presented below:
|  | Fiscal Years Ended |
|  | July 28, 2012 |  |  | July 30, 2011 |  |  | July 31, 2010 |
|  | (millions) |
Unrecognized tax benefit beginning balance |  | $ | 17.4 |  |  | $ | 19.3 |  |  | $ | 18.1 |
Additions related to acquisitions |  |  | 35.7 |  |  |  | — |  |  |  | 7.6 |
Additions related to current period tax positions |  |  | 0.7 |  |  |  | 1.3 |  |  |  | 4.6 |
Additions related to tax positions in prior years |  |  | 0.7 |  |  |  | 1.5 |  |  |  | 1.1 |
Reductions related to prior period tax positions |  |  | (7.0 | ) |  |  | (3.7 | ) |  |  | (8.0 | )
Reductions related to settlements with taxing authorities |  |  | (2.1 | ) |  |  | (0.5 | ) |  |  | (3.6 | )
Reductions related to expiration of statute of limitations |  |  | (4.9 | ) |  |  | (0.5 | ) |  |  | (0.5 | )
Unrecognized tax benefit ending balance |  | $ | 40.5 |  |  | $ | 17.4 |  |  | $ | 19.3 |
The Company classifies interest and penalties related to unrecognized tax benefits as part of its provision for income taxes. A reconciliation of the beginning and ending amounts of accrued interest and penalties related to unrecognized tax benefits for each fiscal year is presented below:
|  | Fiscal Years Ended |
|  | July 28, 2012 |  |  | July 30, 2011 |  |  | July 31, 2010 |
|  | (millions) |
Accrued interest and penalties beginning balance |  | $ | 5.1 |  |  | $ | 4.6 |  |  | $ | 5.2 |
Additions related to acquisitions |  |  | 18.7 |  |  |  | — |  |  |  | — |
Additions (reductions) charged to expense |  |  | (2.6 | ) |  |  | 0.5 |  |  |  | (0.6 | )
Accrued interest and penalties ending balance |  | $ | 21.2 |  |  | $ | 5.1 |  |  | $ | 4.6 |
The Company’s liability for unrecognized tax benefits (including accrued interest and penalties), which is included in other non-current liabilities in the accompanying consolidated balance sheets, was $61.7 million as of July 28, 2012 and $21.9 million as of July 30, 2011. Future Changes in Unrecognized Tax Benefits The amount of unrecognized tax benefits relating to the Company's tax positions is subject to change based on future events including, but not limited to, the settlements of ongoing audits and/or the expiration of applicable statues of limitations. Although the outcomes and timing of such events are highly uncertain, the Company anticipates that the balance of the liability for unrecognized tax benefits will decrease by approximately $9.2 million during the next twelve months. However, changes in the occurrence, expected outcomes and timing of those events could cause the Company’s current estimate to change materially in the future. The Company’s portion of gross unrecognized tax benefits that would affect its effective tax rate, including interest and penalties, is $42.7 million (increase of $38.5 million in this amount from the Charming Shoppe acquisition). The Company files tax returns in the U.S. federal and various state, local and foreign jurisdictions. With few exceptions for those tax returns, the Company is no longer subject to examinations by the relevant tax authorities for years prior to Fiscal 2005.

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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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