Pottery Barn 2010 Annual Report Download - page 66

Note D: Income Taxes
The components of earnings before income taxes, by tax jurisdiction, are as follows:
Fiscal Year Ended
Dollars in thousands Jan. 30, 2011 Jan. 31, 2010 Feb. 1, 2009
United States $ 308,033 $ 111,689 $ 33,376
Foreign 15,027 8,600 8,577
Total earnings before income taxes $ 323,060 $ 120,289 $ 41,953
The provision for income taxes consists of the following:
Fiscal Year Ended
Dollars in thousands Jan. 30, 2011 Jan. 31, 2010 Feb. 1, 2009
Current
Federal $ 79,719 $ 55,563 $ 5,143
State 15,576 8,122 (1,096)
Foreign 3,972 2,757 2,775
Total current 99,267 66,442 6,822
Deferred
Federal 20,429 (21,636) 4,817
State 3,047 (2,280) (83)
Foreign 90 321 373
Total deferred 23,566 (23,595) 5,107
Total provision $ 122,833 $ 42,847 $ 11,929
Except where required by U.S. tax law, we have historically elected not to provide for U.S. income taxes with
respect to the undistributed earnings of our foreign subsidiaries as we intended to utilize those earnings in our
foreign operations for an indefinite period of time. In the fourth quarter of fiscal 2008, based on the current
economic environment, we assessed our anticipated future cash needs and overall financial position of our
Canadian subsidiary and concluded that the remaining undistributed earnings were in excess of our future cash
requirements for the ongoing operations of our Canadian subsidiary. Accordingly, our Canadian subsidiary
repatriated $13,900,000 to our U.S. operations in the fourth quarter of fiscal 2008. These repatriated earnings
were offset by foreign tax credits that reduced the financial tax liability associated with this foreign dividend to
zero. As of January 30, 2011, the accumulated undistributed earnings of all foreign subsidiaries were
approximately $13,833,000 and are sufficient to support our anticipated future cash needs for our foreign
operations. We currently intend to utilize the remainder of those undistributed earnings for an indefinite period of
time and will only repatriate such earnings when it is tax effective to do so. It is currently not practical to
estimate the tax liability that might be payable if these foreign earnings were to be repatriated.
A reconciliation of income taxes at the federal statutory corporate rate to the effective rate is as follows:
Fiscal Year Ended
Jan. 30, 2011 Jan. 31, 2010 Feb. 1, 2009
Federal income taxes at the statutory rate 35.0% 35.0% 35.0%
State income tax rate 3.8% 2.4% (8.2%)1
Other (0.8%) (1.8%) 1.6%
Total 38.0% 35.6% 28.4%
1The decrease in the fiscal 2008 state income tax rate was primarily driven by certain favorable income tax resolutions
during fiscal 2008, representing (14.7%).
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