Bed, Bath and Beyond 2011 Annual Report Download - page 28

BED BATH & BEYOND 2011 ANNUAL REPORT
26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
The following table summarizes the activity related to the gross unrecognized tax benefits from uncertain tax positions:
February 25, February 26,
(in thousands) 2012 2011
Balance at beginning of year $ 141,869 $ 113,086
Increase related to current year positions 23,286 24,051
Increase related to prior year positions 12,533 16,677
Decrease related to prior year positions (33,191) (8,273)
Settlements (17,822) (1,576)
Lapse of statute of limitations (1,712) (2,096)
Balance at end of year $ 124,963 $ 141,869
At February 25, 2012, the Company has recorded approximately $1.4 million and $123.6 million of gross unrecognized tax
benefits in current and non-current taxes payable, respectively, on the consolidated balance sheet of which approximately
$123.3 million would impact the Company’s effective tax rate. At February 26, 2011, the Company has recorded approximately
$42.2 million and $99.7 million of gross unrecognized tax benefits in current and non-current taxes payable, respectively, on
the consolidated balance sheet of which approximately $137.6 million would impact the Company’s effective tax rate. As of
February 25, 2012 and February 26, 2011, the liability for gross unrecognized tax benefits included approximately $27.1 million
and $30.2 million, respectively, of accrued interest. The Company recorded an increase of interest of approximately $2.3 million
and $9.2 million for the years ended February 25, 2012 and February 26, 2011, respectively, for gross unrecognized tax benefits
in the consolidated statement 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, could be approximately $1.0 to $2.0 million in the next
twelve months. However, actual results could differ from those currently anticipated.
As of February 25, 2012, the Company operated in 50 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 also open to
examination for state and local jurisdictions with varying statutes of limitations, generally ranging from three to five years.
For fiscal 2011, 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%, provision for uncertain tax positions of 0.23% and other income tax benefits of 1.13%. For
fiscal 2010, 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 2.77%, provision for uncertain tax positions of 1.86% and other income tax benefits of 0.83%. 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%.
7. 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 25, 2012
and February 26, 2011.
B. In fiscal 2009, the Company leased office and retail space from entities controlled by management of CTS. In fiscal 2009,
the Company leased retail space from entities controlled by management of buybuy BABY. The Company paid such entities
occupancy costs of approximately $6.9 million in fiscal 2009.