Stein Mart 2010 Annual Report Download - page 37

STEIN MART, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables in thousands, except per share amounts)
F-13
The following is a reconciliation of the change in the amount of unrecognized tax benefits from February 3, 2008 to January 29, 2011:
2010 2009 2008
Be
g
innin
g
balance $ 5,151 $ 715 $ 1,256
Increases due to:
Tax positions taken in prior
y
ears 297 4,292 1,310
Settlements with taxin
g
authorities 12 1,498 -
Decreases due to:
Tax positions taken in prior
y
ears
(
2,553
)
(
1,123
)
(
1,519
)
Settlements with taxin
g
authorities - -
(
106
)
Lapse of statute limitations
(
86
)
(
231
)
(
226
)
Endin
g
balance $ 2,821 $5,151 $ 715
As of January 29, 2011, the amount of unrecognized tax benefits (“UTBs”) that, if recognized, would affect the effective tax rate was $0.7
million. We recognize interest and penalties related to UTBs in income tax expense. During the fiscal years ended January 29, 2011,
January 30, 2010 and January 31, 2009, we recognized approximately $(0.7) million, $0.5 million and $0.1 million in interest and penalties
expense (income). The total amount of accrued interest and accrued penalties as of January 29, 2011 and January 30, 2010 was $0.3
million and $1.0 million, respectively.
UTBs decreased $2.5 million in 2010 related primarily to favorable settlements of state tax examinations and the resolution of protective
federal credit claims filed for prior tax years. UTBs increased $4.3 million in 2009 related primarily to certain tax positions for income tax
returns filed in 2009 and changes in judgment and estimates related to certain state income tax uncertainties due to changes in
circumstances. In addition, the IRS completed its examination of our 2005 and 2006 federal income tax returns during 2009 and we settled
with the IRS. This settlement and the settlement of other state examinations resulted in net income tax refunds which increased the UTBs
by approximately $1.5 million.
We are subject to periodic review by federal, state and local taxing authorities in the ordinary course of business. With few exceptions, we
are no longer subject to federal and state income tax examinations for fiscal years ended before 2007 and 2006, respectively. The
examination of our 2007 and 2008 federal income tax returns was completed subsequent to January 29, 2011. As a result, gross UTBs will
decrease by $2.0 million in the first quarter of 2011 with no effect on the Consolidated Statement of Operations.
7. Employee Benefit Plans
We have a defined contribution retirement plan (a 401K plan) covering employees who are at least 21 years of age, have completed at
least one year of service and who work at least 1,000 hours annually. Under the profit sharing portion of the plan, we can make
discretionary contributions which vest at a rate of 20 percent per year after two years of service. During 2008 and 2010, we matched 50
percent of an employee’s voluntary pre-tax contributions up to a maximum of four percent of an employee’s compensation. Our matching
portion vests in accordance with the plan’s vesting schedule. The Company match was suspended for 2009. Total Company contributions
to the retirement plan, net of forfeitures, were $1.2 million in 2010 and $1.5 million in 2008.
We have an executive deferral plan providing officers, key executives and director-level employees with the opportunity to participate in an
unfunded, deferred compensation program. Under the program, participants may defer up to 100% of their base compensation and
bonuses earned. During 2008, we matched the officers’ and key executives’ contributions 100%, and the director-level employees’
contributions 50%, up to the first 10% of compensation deferred. Match was suspended for 2009 and 2010 and has been reinstated for
2011. A participant’s Company matching contributions and related investment earnings vest at 20% per year in each of years four through
eight, at which time a participant is fully vested. The liability to the employees for amounts deferred was $2.7 million at January 29, 2011
and $3.2 million at January 30, 2010, and is included in other liabilities in the Consolidated Balance Sheets. The expense for this plan, net
of forfeitures, was $0.2 million in 2010, $0.1 million in 2009 and $1.0 million in 2008.
We have an executive split-dollar life insurance plan wherein officers, key executives and director-level employees are provided with pre-
retirement life insurance protection based upon three to five times base salary. Upon retirement, the executive is provided with life
insurance protection based upon one and one-half to two and one-half times final base salary. The postretirement benefit liability
pertaining to these life insurance benefits was $6.3 million and $5.3 million at January 29, 2011 and January 30, 2010, respectively, and is
classified in other liabilities. Accumulated other comprehensive income on the Consolidated Balance Sheets at January 29, 2011 and
January 31, 2010 includes $0.6 million and $0.8 million related to this plan. The expense recorded in net income (loss) for this plan was
$1.1 million in both 2010 and 2009 and $1.0 million in 2008.