DSW 2013 Annual Report Download - page 77

Table of Contents


February 1, 2014
February 2, 2013
(in thousands)
Deferred tax assets:
Federal net operating loss $ —
$25,006
Federal tax credits —
16,881
State net operating loss and tax credits 332
—
Inventory 5,826
6,529
Construction and tenant allowances 7,441
9,981
Stock-based compensation 7,457
6,109
Benefit from uncertain tax positions 58
116
Guarantees 1,347
2,523
Accrued expenses 8,717
7,389
Accrued rent 14,790
14,293
Other 13,068
12,921
Total deferred tax assets, gross of valuation allowance 59,036
101,748
Less: valuation allowance (860)
(785)
Total deferred tax assets, net of valuation allowance 58,176
100,963
Deferred tax liabilities:
Property and equipment (24,214)
(21,567)
Prepaid expenses (957)
(924)
Other (3,288)
(1,632)
Total deferred tax liabilities (28,459)
(24,123)
Total – net deferred tax asset $29,717
$ 76,840
The federal net operating loss and state net operating loss and tax credits were fully utilized in 2013. DSW establishes valuation allowances for deferred tax
assets when the amount of expected future taxable income is not likely to support the use of the deduction or credit. The valuation allowance as of February 1,
2014 was related to a capital loss carryforward and state income tax credits. The valuation allowance as of February 2, 2013 was related to a capital loss
carryforward.
As a result of the Merger in fiscal 2011, DSW released the valuation allowance on RVI’s deferred tax assets of $88.6 million due to DSW’s expected future
taxable income and eliminated $17.4 million of state net operating losses and tax credits and the related valuation allowance. DSW was also able to reverse the
deferred tax liability of $87.4 million related to RVI's basis in DSW. RVI's tax basis of its investment in DSW was below its book basis in the shares and RVI
had recorded a deferred tax liability for the gain on eventual sales of the DSW stock. When the merger closed, the parent/subsidiary relationship that caused
the basis difference ended, and no tax cost was incurred to eliminate the historical basis difference. The elimination of the historical basis difference was an
indirect effect of the merger, and accordingly, the reversal of the deferred tax liability was required to be reflected in the statement of operations. Similarly, RVI
had recorded a deferred tax asset of $18.6 million for the changes in fair value of its PIES and, as a result of the merger where DSW would now settle a
security indexed to its own stock, any gain or loss on the settlement of the PIES would not be taxable. As the elimination of the taxability of any gain or loss
was also an indirect effect of the Merger, the reversal of the deferred tax asset was charged to the statement of operations.
F- 34
Source: DSW Inc., 10-K, March 27, 2014 Powered by Morningstar® Document Research℠
The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,
except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.