Dillard's 2012 Annual Report Download - page 72

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Notes to Consolidated Financial Statements (Continued)
6. Income Taxes (Continued)
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
Fiscal Fiscal Fiscal
(in thousands of dollars) 2012 2011 2010
Unrecognized tax benefits at beginning of period ...... $8,481 $9,106 $18,233
Gross increases—tax positions in prior period ...... — — —
Gross decreases—tax positions in prior period ...... (3,676) (955) (6,461)
Gross increases—current period tax positions ....... 993 1,314 861
Settlements ............................... — (525) (3,527)
Lapse of statutes of limitation .................. (366) (459) —
Unrecognized tax benefits at end of period .......... $5,432 $8,481 $ 9,106
The Company is currently under examination by various state and local taxing jurisdictions for
various fiscal years. The tax years that remain subject to examination for major tax jurisdictions are
fiscal tax years 2009 and forward. At this time, the Company does not expect the results from any
income tax audit to have a material impact on the Company’s consolidated financial statements.
The Company has taken positions in certain taxing jurisdictions for which it is reasonably possible
that the total amounts of unrecognized tax benefits may decrease within the next twelve months. The
possible decrease could result from the finalization of the Company’s various state income tax audits
and lapse of statutes of limitation. The Company does not expect a material change in unrecognized
tax benefits in the next twelve months.
Income taxes paid, net of income tax refunds received, during fiscal 2012, 2011 and 2010 were
approximately $179.3 million, $104.7 million and $57.7 million, respectively.
7. Subordinated Debentures
At February 2, 2013, the Company had $200 million outstanding of its 7.5% subordinated
debentures due August 1, 2038. All of these subordinated debentures were held by Dillard’s Capital
Trust I (‘‘Trust’’), a 100% owned unconsolidated finance subsidiary of the Company. The subordinated
debentures are the sole asset of the Trust. The Company has the right to defer the payment of interest
on the subordinated debentures at any time for a period not to exceed 20 consecutive quarters.
At February 2, 2013, the Trust has outstanding $200 million liquidation amount of 7.5% Capital
Securities, due August 1, 2038 (the ‘‘Capital Securities’’). Holders of the Capital Securities are entitled
to receive cumulative cash distributions, payable quarterly, at the annual rate of 7.5% of the liquidation
amount of $25 per Capital Security. The Capital Securities are subject to mandatory redemption upon
repayment of the Company’s subordinated debentures. The Company’s obligations under the
subordinated debentures and related agreements, taken together, provide a full and unconditional
guarantee of payments due on the Capital Securities.
The Trust is a variable interest entity and is not consolidated into the Company’s financial
statements, since the Company is not the primary beneficiary of the Trust.
8. Benefit Plans
The Company has a retirement plan with a 401(k)-salary deferral feature for eligible employees.
Under the terms of the plan, eligible employees could contribute up to the lesser of $17,000 ($22,500 if
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