Petsmart 2012 Annual Report Download - page 59

F-13
The components of the net deferred income tax assets (liabilities) included in the Consolidated Balance Sheets are as follows
(in thousands):
February 3, 2013 January 29, 2012
Deferred income tax assets:
Capital lease obligations......................................................................................................... $ 185,137 $ 189,650
Employee benefit expense...................................................................................................... 102,063 100,536
Deferred rents......................................................................................................................... 33,086 36,225
Net operating loss carryforwards ........................................................................................... 15,534 16,586
Other....................................................................................................................................... 38,047 39,067
Total deferred income tax assets.......................................................................................... 373,867 382,064
Valuation allowance............................................................................................................. (8,250)(7,700)
Deferred income tax assets, net of valuation allowance ...................................................... 365,617 374,364
Deferred income tax liabilities:
Property and equipment ......................................................................................................... (167,428)(198,192)
Inventory ................................................................................................................................ (10,771)(12,074)
Other....................................................................................................................................... (21,567)(19,232)
Total deferred income tax liabilities..................................................................................... (199,766)(229,498)
Net deferred income tax assets............................................................................................. $ 165,851 $ 144,866
As of February 3, 2013, we had, for income tax reporting purposes, federal net operating loss carryforwards of $44.4 million
which expire in varying amounts between 2019 and 2020. The federal net operating loss carryforwards are subject to certain
limitations on their utilization pursuant to the Internal Revenue Code. We also had a Canadian capital loss carryforward of $11.6
million and state tax credit carryforwards of $2.8 million which can be carried forward indefinitely.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
Year Ended
February 3, 2013 January 29, 2012 January 30, 2011
(53 weeks) (52 weeks) (52 weeks)
Unrecognized tax benefits, beginning balance........................................... $ 20,940 $ 16,735 $ 7,652
Gross increases - tax positions related to the current year ......................... 1,757 1,938 1,655
Gross increases - tax positions in prior periods.......................................... 1,362 3,730 7,933
Gross decreases - tax positions in prior periods......................................... (4,854)(146)(24)
Gross settlements........................................................................................ (2,819)(922)(405)
Lapse of statute of limitations .................................................................... (719)(393)(221)
Gross increases (decreases) - foreign currency translation ........................ 12 (2) 145
Unrecognized tax benefits, ending balance................................................ $ 15,679 $ 20,940 $ 16,735
Included in the balance of unrecognized tax benefits at February 3, 2013, January 29, 2012, and January 30, 2011, are $7.9
million, $11.1 million and $9.7 million, respectively, of tax benefits that, if recognized, would affect the effective tax rate.
We continue to recognize penalties and interest accrued related to unrecognized tax benefits as income tax expense. During
2012, 2011 and 2010, the impact of accrued interest and penalties related to unrecognized tax benefits on the Consolidated Statements
of Income and Comprehensive Income was immaterial. In total, as of February 3, 2013, we had recognized a liability for penalties
of $0.9 million and interest of $2.0 million. As of January 29, 2012, we had recognized a liability for penalties of $1.3 million and
interest of $2.6 million.
Our unrecognized tax benefits largely include state exposures from filing positions taken on state tax returns and
characterization of income and timing of deductions on federal and state tax returns. We believe that it is reasonably possible that
approximately $0.2 million of our currently remaining unrecognized tax positions, each of which are individually insignificant,
may be recognized by the end of 2013 as a result of settlements or a lapse of the statute of limitations.
PetSmart, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)