Stein Mart 2015 Annual Report Download - page 40

STEIN MART, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables in thousands, except per share amounts)
F-16
During 2015, 2014 and 2013, we realized tax benefits of $3.6 million, $1.8 million and $0.4 million, respectively, related to share-based
compensation plans that were recorded to additional paid-in-capital. Income tax expense differs from the amount of income tax
determined by applying the statutory U.S. corporate tax rate to pre-tax amounts due to the following items:
2015 2014 2013
Federal tax at the statutory rate 35.0% 35.0% 35.0%
State income taxes, net of federal benefit 3.7% 3.8% 2.8%
Permanent differences and other (0.6)% 0.7% (0.8)%
Effective tax rate 38.1% 39.5% 37.0%
The effective tax rate (“ETR”) represents the applicable combined federal and state statutory rates reduced by the federal benefit of state
taxes deductible on federal returns, adjusted for the impact of permanent differences.
The following is a reconciliation of the change in the amount of unrecognized tax benefits:
2015 2014 2013
Beginning balance 341$ 468$ 631$
Decreases due to:
Settlements (99) - -
Lapse of statutes of limitations - (127) (163)
Ending balance 242$ 341$ 468$
As of January 30, 2016, there were no unrecognized tax benefits (“UTBs”) that, if recognized, would affect the ETR. We recognize interest
and penalties related to UTBs in income tax expense. During 2015, 2014, and 2013, the amount of interest and penalties related to UTBs
was insignificant. The total amount of accrued interest and accrued penalties related to UTBs as of January 30, 2016, January 31, 2015
and February 1, 2014 was also insignificant. UTB’s decreased in 2015, 2014 and 2013 due to settlements and lapse of statues of
limitations.
We are currently open to audit under the statute of limitations by the Internal Revenue Service for the tax years 2013 and 2014. The
Company’s state tax returns are open to audit under statutes of limitations for the tax years 2010 through 2014.
7. Employee Benefit Plans
We have a defined contribution retirement plan (a 401(k) 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% per year after two years of service. During 2015, 2014 and 2013, we matched 50%
of an employee’s voluntary pre-tax contributions up to a maximum of 4% of an employee’s compensation. Our matching portion vests in
accordance with the plan’s vesting schedule. Our contributions to the retirement plan, net of forfeitures, were $1.8 million for both 2015
and 2014 and $1.5 million for 2013, and are included in SG&A.
We have an executive deferral plan providing officers, key executives and director-level employees with the opportunity to defer receipt of
salary, bonus and other compensation. The plan allows for us to make discretionary contributions. During 2015 and 2014, we matched
contributions up to 10% of salary and bonuses deferred at a rate of 75% for officers and key executives and a rate of 37.5% for directors.
During 2013, we matched contributions up to 10% of salary and bonuses deferred at a rate of 100% for officers and key executives and a
rate of 50% for directors.
Matching contributions and related investment earnings for the executive deferral plan vest at 20% per year in each of years four through
eight, at which time a participant is fully vested. The executive deferral plan liability was $13.4 million and $13.6 million at January 30,
2016 and January 31, 2015, respectively, and is included in other liabilities in the Consolidated Balance Sheets. In 2015, forfeitures
exceeded expense for this plan, resulting in $0.1 million of income. The expense for this plan, net of forfeitures, was $0.1 million and $0.6
million in 2014 and 2013, respectively.