Famous Footwear 2012 Annual Report Download - page 66

64 2012 BROWN SHOE COMPANY, INC. FORM 10-K
At the end of 2012, the Company had a net operating loss carryforward with a tax value of $1.8 million related to Shoes.
com, which expires in 2019, and various state net operating loss carryforwards with tax values totaling $11.6 million.
A valuation allowance of $6.7 million has been established related to these operating loss carryforwards. The Company
also has valuation allowances of $0.5 million related to share-based compensation and $1.3 million related to foreign tax
credits. The remaining net operating loss will be carried forward to future tax years.
As of February 2, 2013, no deferred taxes have been provided on the accumulated unremitted earnings of the Company’s
foreign subsidiaries that are not subject to United States income tax. The Company periodically evaluates its foreign
investment opportunities and plans, as well as its foreign working capital needs, to determine the level of investment
required and, accordingly, determine the level of foreign earnings that is considered indefinitely reinvested. Based upon
that evaluation, earnings of the Company’s foreign subsidiaries that are not otherwise subject to United States taxation,
except for the Company’s Canadian subsidiary, are considered to be indefinitely reinvested, and accordingly, deferred taxes
have not been provided. If changes occur in future investment opportunities and plans, those changes will be reflected
when known and may result in providing residual United States deferred taxes on unremitted foreign earnings. If the
Company’s unremitted foreign earnings were not considered indefinitely reinvested as of February 2, 2013, additional
deferred taxes of approximately $29.5 million would have been provided.
Uncertain Tax Positions
ASC 740, Income Taxes, establishes a single model to address accounting for uncertain tax positions. The standard clarifies
the accounting for income taxes by prescribing a minimum recognition threshold a tax position is required to meet
before being recognized in the financial statements. The standard also provides guidance on derecognition, measurement
classification, interest and penalties, accounting in interim periods, disclosure and transition.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
($ thousands)
Balance at January 30, 2010. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,373
Additions for tax positions of prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 624
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (887)
Reductions for tax positions of prior years due to a lapse in the statute of limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (358)
Balance at January 29, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 752
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (206)
Reductions for tax positions of prior years due to a lapse in the statute of limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (337)
Balance at January 28, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 209
Additions for tax positions of prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,015
Reductions for tax positions of prior years due to a lapse in the statue of limitations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (75)
Balance at February 2, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,149
If the unrecognized tax benefits were to be recognized in full, the net amount that would be reflected in the income
tax provision, thereby impacting the eective tax rate, would be $0.8 million at February 2, 2013, $0.2 million at
January 28, 2012 and $0.7 million at January 29, 2011.
Estimated interest related to the underpayment of income taxes was classified as a component of the income tax provision
in the consolidated statements of earnings and was insignificant in 2012, 2011 and 2010. Accrued interest was $0.1 million
February 2, 2013 and $0.1 million at January 28, 2012.
For federal purposes, the Company’s tax years 2009 to 2011 (fiscal years ending January 30, 2010, January 29, 2011 and
January 28, 2012) remain open to examination. The Company also files tax returns in various foreign jurisdictions and
numerous states for which various tax years are subject to examination. The Company does not expect any significant
changes to its liability for unrecognized tax benefits during the next 12 months.
7. BUSINESS SEGMENT INFORMATION
The Company’s reportable segments include Famous Footwear, Wholesale Operations, Specialty Retail and Other.
Famous Footwear, which represents the Company’s largest division, operated 1,055 stores at the end of 2012, primarily
selling branded footwear for the entire family.
The Wholesale Operations segment sources and markets licensed, branded and private-label footwear primarily to national
chains, department stores, independent retailers, mass merchandisers, online retailers and catalogs as well as Company-
owned Famous Footwear and Specialty Retail segments.
The Specialty Retail segment included 106 stores in the United States, 90 stores in Canada and 26 stores in China at the end of
2012, selling primarily Naturalizer brand footwear in regional malls and outlet centers as well as other e-commerce businesses.
The Other segment includes corporate assets and administrative expenses and other costs and recoveries that are not
allocated to the operating units.