Income Taxes

12 Months Ended

Feb. 01, 2015

Income Taxes

Note D: Income Taxes

The components of earnings before income taxes, by tax jurisdiction, are as follows:

	Fiscal Year Ended
In thousands	Feb. 1, 2015 (52 Weeks)			Feb. 2, 2014 (52 Weeks)			Feb. 3, 2013 (53 Weeks)
United States	$	482,739		$	448,764		$	401,542
Foreign		19,464			3,918			8,414
Total earnings before income taxes	$	502,203		$	452,682		$	409,956
The provision for income taxes consists of the following:
	Fiscal Year Ended
In thousands	Feb. 1, 2015 (52 Weeks)			Feb. 2, 2014 (52 Weeks)			Feb. 3, 2013 (53 Weeks)
Current
Federal	$	157,227		$	173,686		$	136,742
State		31,959			25,748			22,072
Foreign		4,411			2,690			3,441
Total current		193,597			202,124			162,255
Deferred
Federal		2,719			(26,324	)		(7,827	)
State		(2,547	)		(1,277	)		(1,202	)
Foreign		(420	)		(743	)		(0	)
Total deferred		(248	)		(28,344	)		(9,029	)
Total provision	$	193,349		$	173,780		$	153,226

We have historically elected not to provide for U.S. income taxes with respect to the undistributed earnings of our foreign subsidiaries as we intended to utilize those earnings in our foreign operations for an indefinite period of time. As of February 1, 2015 the accumulated undistributed earnings of all foreign subsidiaries were approximately $43,300,000 and are sufficient to support our anticipated future cash needs for our foreign operations. We currently intend to utilize those undistributed earnings for an indefinite period of time and will only repatriate such earnings when it is tax effective to do so. It is currently not practical to estimate the tax liability that might be payable if these foreign earnings were to be repatriated.

A reconciliation of income taxes at the federal statutory corporate rate to the effective rate is as follows:

	Fiscal Year Ended
	Feb. 1, 2015 (52 Weeks)			Feb. 2, 2014 (52 Weeks)			Feb. 3, 2013 (53 Weeks)
Federal income taxes at the statutory rate		35.0%			35.0%			35.0%
State income tax rate		4.0%			3.7%			3.3%
Other		(0.5%	)		(0.3%	)		(0.9%	)
Effective tax rate		38.5%			38.4%			37.4%

Significant components of our deferred tax accounts are as follows:

In thousands	Feb. 1, 2015			Feb. 2, 2014
Current:
Compensation	$	15,968		$	14,378
Merchandise inventories		30,328			27,337
Accrued liabilities		28,866			26,461
Customer deposits		60,989			58,479
Prepaid catalog expenses		(12,753	)		(12,576	)
Other		7,220			7,407
Total current		130,618			121,486
Non-current:
Depreciation		(9,888	)		(4,216	)
Deferred rent		18,925			17,500
Deferred lease incentives		(37,098	)		(33,065	)
Stock-based compensation		19,857			28,948
Executive deferral plan		5,437			5,699
Uncertainties		7,061			4,378
Valuation allowance		(1,568	)		(1,048	)
Other		1,539			(4,372	)
Total non-current		4,265			13,824
Total deferred tax assets, net	$	134,883		$	135,310

The following table summarizes the activity related to our gross unrecognized tax benefits:

In thousands	Fiscal 2014 (52 Weeks)			Fiscal 2013 (52 Weeks)			Fiscal 2012 (53 Weeks)
Balance at beginning of year	$	10,765		$	8,990		$	10,023
Increases related to current year tax positions		3,093			3,351			2,188
Increases related to prior years’ tax positions		2,007			328			936
Decreases related to prior years’ tax positions		(138	)		(42	)		(171	)
Settlements		(1,144	)		(170	)		(1,069	)
Lapses in statute of limitations		(224	)		(1,692	)		(2,917	)
Balance at end of year	$	14,359		$	10,765		$	8,990

As of February 1, 2015, we had $14,359,000 of gross unrecognized tax benefits, of which $9,602,000 would, if recognized, affect the effective tax rate.

We accrue interest and penalties related to unrecognized tax benefits in the provision for income taxes. As of February 1, 2015 and February 2, 2014, our accruals for the payment of interest and penalties totaled $2,412,000 and $2,231,000, respectively, primarily related to interest.

Due to the potential resolution of state issues, it is reasonably possible that the balance of our gross unrecognized tax benefits could decrease within the next twelve months by a range of $0 to $1,900,000.

We file income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. The Internal Revenue Service (IRS) had concluded examination of our U.S. federal income tax returns for years prior to fiscal 2011 without any significant adjustments. Substantially all material state, local and foreign income tax examinations have been concluded through fiscal 2004.