Abercrombie & Fitch 2010 Annual Report Download - page 86

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Table of Contents
ABERCROMBIE & FITCH CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
2010 2009 2008
(In thousands)
Unrecognized tax benefits, beginning of the year $ 29,437 $ 43,684 $ 38,894
Gross addition for tax positions of the current year 562 222 5,539
Gross addition for tax positions of prior years 1,734 2,167 8,754
Reductions of tax positions of prior years for:
Changes in judgment/excess reserve (412) (10,744) (4,206)
Settlements during the period (14,166) (5,444) (1,608)
Lapses of applicable statutes of limitations (2,328) (448) (3,689)
Unrecognized tax benefits, end of year $ 14,827 $ 29,437 $ 43,684
The amount of the above unrecognized tax benefits at January 29, 2011, January 30, 2010 and January 31, 2009 which would
impact the Company's effective tax rate, if recognized, was $14.8 million, $29.4 million and $43.7 million, respectively.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits as a component of income tax
expense. Tax expense for Fiscal 2010 included a $3.4 million reversal of net accrued interest, compared to $1.2 million of net accrued
interest as of the end of Fiscal 2009. Interest and penalties of $6.2 million had been accrued as of the end of Fiscal 2010, compared to
$9.9 million accrued as of the end of Fiscal 2009.
The Internal Revenue Service ("IRS") is currently conducting an examination of the Company's U.S. federal income tax return
for Fiscal 2010 as part of the IRS's Compliance Assurance Process program. IRS examinations for Fiscal 2009 and prior years have
been completed and settled. State and foreign returns are generally subject to examination for a period of 3-5 years after the filing of
the respective return. The Company has various state and foreign income tax returns in the process of examination or administrative
appeals.
The Company does not expect material adjustments to the total amount of unrecognized tax benefits within the next 12 months,
but the outcome of tax matters is uncertain and unforeseen results can occur.
As of January 29, 2011, U.S. taxes had not been provided on approximately $44.5 million of unremitted earnings of subsidiaries
operating outside of the U.S. These earnings, which are considered to be invested indefinitely, would become subject to income tax if
they were remitted as dividends or were lent to A&F or a U.S. affiliate, or if A&F were to sell its stock in the subsidiaries.
Determination of the amount of unrecognized deferred U.S. income tax liability on these unremitted earnings is not practicable
because of the complexities associated with this hypothetical calculation.
14. LONG-TERM DEBT
On April 15, 2008, the Company entered into a syndicated unsecured credit agreement (as previously amended by Amendment
No. 1 to Credit Agreement made as of December 29, 2008, the "Credit Agreement") under which up to $450 million was available. On
June 16, 2009, the Company amended the Credit
83