Bed, Bath and Beyond 2009 Annual Report Download - page 29

BED BATH & BEYOND 2009 ANNUAL REPORT
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amount of gross unrecognized tax benefits was $163.3 million, of which $119.9 million would impact the Company’s effective tax
rate. The Company recognizes accrued interest and penalties related to gross unrecognized tax benefits in the
provision for income taxes. As of March 4, 2007, the liability for gross unrecognized tax benefits included approximately
$27.5 million of accrued interest.
The following table summarizes the activity related to the gross unrecognized tax benefits from uncertain tax positions:
February 27, February 28,
(in thousands) 2010 2009
Balance at beginning of year $ 96,697 $ 83,139
Increase related to current year positions 17,993 13,790
Increase related to prior year positions 31,904 8,962
Decrease related to prior year positions (31,949) (5,249)
Settlements (26) (2,843)
Lapse of statute of limitations (1,533) (1,102)
Balance at end of year $ 113,086 $ 96,697
At February 27, 2010, the Company has recorded approximately $9.7 million and $103.4 million of gross unrecognized tax benefits
in current and non-current taxes payable, respectively, on the consolidated balance sheet of which approximately $107.8 mil-
lion would impact the Company’s effective tax rate. At February 28, 2009, the Company has recorded approximately $8.5 million
and $88.2 million of gross unrecognized tax benefits in current and non-current taxes payable, respectively, on the consolidated
balance sheet of which approximately $89.3 million would impact the Company’s effective tax rate. As of February 27, 2010 and
February 28, 2009, the liability for gross unrecognized tax benefits included approximately $21.6 million and $18.2 million, respec-
tively, of accrued interest. The Company recorded an increase of interest of approximately $6.1 million and $4.6 million for the
years ended February 27, 2010 and February 28, 2009, respectively, for gross unrecognized tax benefits in the consolidated state-
ment of earnings.
The Company anticipates that any adjustments to gross unrecognized tax benefits which will impact income tax expense, due
to the settlement of audits and the expiration of statutes of limitations, will not exceed $1.6 million in the next twelve months.
However, actual results could differ from those currently anticipated.
As of February 27, 2010, the Company operated in 49 states, the District of Columbia, Puerto Rico and Canada and files income
tax returns in the United States and various state, local and international jurisdictions. The Company is currently under examina-
tion by the Internal Revenue Service for tax years 2001 through 2008. The Company is also open to examination for state and
local jurisdictions with varying statutes of limitations, generally ranging from three to five years.
For fiscal 2009, the effective tax rate is comprised of the Federal statutory income tax rate of 35.00%, the State income tax rate,
net of Federal benefit, of 3.29%, provision for uncertain tax positions of 1.96% and other income tax benefits of 1.15%. For fis-
cal 2008, the effective tax rate is comprised of the Federal statutory income tax rate of 35.00%, the State income tax rate, net
of Federal benefit, of 2.90% and other income tax benefits of 0.12%. For fiscal 2007, the effective tax rate is comprised of the
Federal statutory income tax rate of 35.00%, the State income tax rate, net of Federal benefit, of 2.57% and other income tax
benefits of 2.62%. Included in other income tax benefits for fiscal 2007 are the settlement of certain discrete tax items from
ongoing examinations, the recognition of favorable discrete state tax items and from changing the blended state tax rate of
deferred income taxes.
8. TRANSACTIONS AND BALANCES WITH RELATED PARTIES
A. In fiscal 2002, the Company had an interest in certain life insurance policies on the lives of its Co-Chairmen and their spouses.
The Company’s interest in these policies was equivalent to the net premiums paid by the Company. The agreements relating to
the Company’s interest in the life insurance policies on the lives of its Co-Chairmen and their spouses were terminated in fiscal
2003. Upon termination in fiscal 2003, the Co-Chairmen paid to the Company $5.4 million, representing the total amount of
premiums paid by the Company under the agreements and the Company was released from its contractual obligation to make
substantial future premium payments. In order to confer a benefit to its Co-Chairmen in substitution for the aforementioned
terminated agreements, the Company has agreed to pay to the Co-Chairmen, at a future date, an aggregate amount of $4.2
million, which is included in accrued expenses and other current liabilities as of February 27, 2010 and February 28, 2009.