Taxes

6 Months Ended

Jul. 31, 2011

Taxes

Taxes

Note 10: Taxes

The Company's effective tax rate differs from the statutory federal income tax rate of 35% due primarily to certain undistributed foreign earnings for which no U.S. taxes are provided because such earnings are intended to be indefinitely reinvested outside of the U.S.

The gross unrecognized tax benefits (before federal impact of state items) were $17.0 million at July 31, 2011 and January 30, 2011. Included in the balances of unrecognized tax benefits at July 31, 2011 and January 30, 2011, are $14.7 million of net tax benefits (after federal impact of state items) that, if recognized, would impact the effective tax rate. The liability for uncertain tax positions is reflected on the consolidated condensed balance sheets as follows:

(in thousands)	July 31, 2011		January 30, 2011
Accrued liabilities	$	4,191	$	4,191
Other long-term liabilities		10,548		10,548
Total accrued taxes	$	14,739	$	14,739

The Company's policy is to include net interest and penalties related to unrecognized tax benefits within the provision for taxes. The Company had approximately $293,000 of net interest and penalties accrued at July 31, 2011 and January 30, 2011.

As of July 31, 2011, it was reasonably possible that the total amounts of unrecognized tax benefits would decrease by up to $4.5 million within twelve months as a result of statutes of limitations for the taxing authority to challenge the position expiring. If recognized, this decrease will impact the effective tax rate.

In the first quarter of fiscal year 2012, the Internal Revenue Service initiated an examination of the Company's 2009 Federal tax return (fiscal year 2010) which is currently ongoing. Tax years prior to 2007 (fiscal year 2008) are generally not subject to examination by the Internal Revenue Service except for items with tax attributes that could impact open tax years. For state returns, the Company is generally not subject to income tax examinations for years prior to 2006 (fiscal year 2007).

The Company's significant foreign tax presence is in Switzerland. The Company's material Swiss tax filings have been examined through fiscal year 2009. The Company is also subject to routine examinations by various foreign tax jurisdictions in which it operates.

As a global organization, the Company may be subject to a variety of transfer pricing or permanent establishment challenges by taxing authorities in various jurisdictions. In the second quarter of fiscal year 2011, Korean tax authorities completed an audit of the Company's branch activities in Korea for tax years 2006 through 2010. The impact of this audit did not have a significant impact of the Company's tax provision.