Income Taxes

12 Months Ended

Feb. 02, 2013

Income Taxes [Abstract]

Income Taxes

NOTE 5: INCOME TAXES

The components of income tax expense (benefit) from continuing operations are as follows:

			2012		2011		2010
Current income taxes:
	Federal		$	6,912	$	540	$	(29,664)
	State			3,550		(2,707)		(1,600)
		Current income tax expense (benefit)		10,462		(2,167)		(31,264)
Deferred income taxes:
	Federal			23,514		39,368		16,284
	State			2,537		(10,107)		1,070
		Deferred income tax expense		26,051		29,261		17,354
Income tax expense (benefit) from continuing operations			$	36,513	$	27,094	$	(13,910)

The income tax expense (benefit) from continuing operations varies from the amounts computed by applying the statutory federal income tax rate to income before taxes. The reasons for these differences are as follows:

		2012		2011		2010
Expected federal income taxes at statutory rate of 35%		$	34,788	$	35,660	$	11,720
State and local income taxes, net of federal benefit			8,860		7,316		4,656
State NOL valuation allowance adjustment			(3,713)		(11,782)		(2,228)
Valuation allowance release on federal tax credits			(3,269)		—		—
Non-deductible compensation			1,152		—		—
Effect of tax reserve adjustments			(1,917)		(4,108)		(28,287)
Effect of settling tax examinations			—		(400)		(73)
Other, net			612		408		302
	Income tax expense (benefit) from continuing operations	$	36,513	$	27,094	$	(13,910)

The components of the net deferred tax assets recognized on the Consolidated Balance Sheets are as follows:

			February 2,		January 28,
			2013		2012
Deferred tax assets:
	Accrued expenses		$	49,285	$	45,837
	Inventory			2,052		4,049
	Capital leases			20,171		20,799
	Rent adjustments			17,244		16,618
	Pension			8,347		11,820
	Other long-term liabilities			20,513		21,690
	Property and equipment			11,249		12,813
	Tax credit carryforwards			27,667		23,944
	NOL carryforwards			59,668		87,570
	Other assets			―		4
		Subtotal		216,196		245,144
Valuation allowance				(15,329)		(19,217)
Net deferred tax assets			$	200,867	$	225,927

Of the $27,667 tax credit carryforwards as of February 2, 2013, $2,170 will expire between 2018 and 2031. The remaining $25,497 are alternative minimum tax credits which may be carried forward indefinitely against our regular taxliability.

The federal and state net operating loss (“NOL”) carryforwards will expire between 2013and 2030. The majority of the NOL carryforward is a result of the net operating losses incurred during the fiscal years ended January 30, 2010 and January 31, 2009 due principally to difficult market and macroeconomic conditions. We have concluded, based on the weight of all available positive and negative evidence, that all but $15,329of these tax benefits relating to certain state losses are more likely than not to be realized in the future. Therefore, the valuation allowance as of February 2, 2013 was$15,329.

We evaluate the realizability of our deferred tax assets on a quarterly basis. In 2012,2011,and 2010,this evaluation resulted in a net reduction to the reserve against state deferred tax assets of $3,713,$11,782,and $2,228respectively, impacting our results of operations. We will continue to assess the need for additional valuation allowances in the future. If future results are less than projected or tax planning strategies are no longer viable, then additional valuation allowances may be required to reduce our deferred tax assets which could have a material impact on our results of operations in the period in which it is recorded.

We made income tax payments, net of income tax refunds received of $8,555, $4,776and $2,191during2012,2011,and 2010,respectively.

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows:

		2012		2011		2010
Unrecognized tax benefits at beginning of year		$	14,224	$	14,254	$	40,358
	Gross increases related to tax positions taken in prior periods		1,131		9,072		3,230
	Gross decreases related to tax positions taken in prior periods		―		(4,131)		(165)
	Lapse of statute of limitations		(1,759)		(4,052)		(28,860)
	Settlements with taxing authorities		―		(919)		(309)
Unrecognized tax benefits at end of year		$	13,596	$	14,224	$	14,254

We analyzed our positions related to the reserve for tax exposures and determined that the amount was adequate. We will continue to analyze our positions related to the reserve for tax exposures on an ongoing basis. At February 2, 2013, $2,198 represented the amount of unrecognized tax benefits that, if recognized, would impact the effective income tax rate in future periods. We continually evaluateour tax filing positions and to the extent we prevail on audits or statutes of limitation expire, the unrecognized tax benefits could be realized. We do not anticipate any material changes in unrecognized tax benefits within twelve months of February 2, 2013.

We recognize interest and penalties related to unrecognized tax benefits in income tax expense. During the years ended February 2, 2013, January 28, 2012, and January 29, 2011,we recognized a benefit of $543, $927, and $1,391, respectively from interest and penalties, net of related tax effects. We have accrued $1,857 and $2,400 for interest and penalties as of February 2, 2013 and January 28, 2012, respectively.

We file a consolidated U.S. federal income tax return as well as state tax returns in multiple state jurisdictions. We have completed examinations by the Internal Revenue Service or the statute of limitations has expired for taxable years through January 31, 2009. With respect to the state and local jurisdictions, we have completed examinations in many jurisdictions through the same period and beyond and currently have examinations in progress for several jurisdictions.