Dillard's 2013 Annual Report Download - page 64

F-18
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
(in thousands of dollars) Fiscal 2013 Fiscal 2012 Fiscal 2011
Unrecognized tax benefits at beginning of period . . . . . . . . . . . . . . . . . . . . . $ 5,432 $ 8,481 $ 9,106
Gross increases—tax positions in prior period. . . . . . . . . . . . . . . . . . . . . . . 967——
Gross decreases—tax positions in prior period . . . . . . . . . . . . . . . . . . . . . . (733)(3,676)(955)
Gross increases—current period tax positions . . . . . . . . . . . . . . . . . . . . . . . 1,207 993 1,314
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (335)—
(525)
Lapse of statutes of limitation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —(366)(459)
Unrecognized tax benefits at end of period. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,538 $ 5,432 $ 8,481
The Company is currently under examination by the IRS for the fiscal tax year 2011. The tax years that remain subject to
examination for major tax jurisdictions are fiscal tax years 2010 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 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 2013, 2012 and 2011 were approximately $173.8
million, $179.3 million and $104.7 million, respectively.
7. Subordinated Debentures
At February 1, 2014, 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 1, 2014, 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 $17,500 ($23,000 if at least 50 years of age) or 75% of eligible pay.
Eligible employees with 1 year of service, who elect to participate in the plan or are auto-enrolled, receive a Company
matching contribution. Company matching contributions are calculated on the eligible employee's first 6% of elective deferrals
with the first 1% being matched 100% and the next 5% being matched 50%. The Company matching contributions are used to
purchase Class A Common Stock of the Company for the benefit of the employee. The terms of the plan provide a two-year
vesting schedule for the Company matching contribution portion of the plan.
The Company incurred benefit plan expense of approximately $18 million, $16 million and $16 million for fiscal 2013,
2012 and 2011, respectively.
The Company has an unfunded, nonqualified defined benefit plan ("Pension Plan") for its officers. The Pension Plan is
noncontributory and provides benefits based on years of service and compensation during employment. Pension expense is
determined using various actuarial cost methods to estimate the total benefits ultimately payable to officers and allocates this
cost to service periods. The actuarial assumptions used to calculate pension costs are reviewed annually. Net periodic benefit
costs are included in selling, general and administrative expenses.