Famous Footwear 2011 Annual Report Download - page 63

2011 BROWN SHOE COMPANY, INC. FORM 10-K 61
At the end of 2011, the Company had a net operating loss carryforward with a tax value of $1.8 million related to Shoes.com,
which expires in 2019, and various state net operating loss carryforwards with tax values totaling $10.7 million. A valuation
allowance of $6.4 million has been established related to these operating loss carryforwards. The Company also has a
valuation allowance of $0.5 million related to share-based compensation. The remaining net operating loss will be carried
forward to future tax years.
As of January 28, 2012, no deferred taxes have been provided on the accumulated unremitted earnings of the Company’s
foreign subsidiaries that are not subject to United States income tax. The Company periodically evaluates its foreign
investment opportunities and plans, as well as its foreign working capital needs, to determine the level of investment
required and, accordingly, determine the level of foreign earnings that is considered indefi nitely reinvested. Based upon that
evaluation, earnings of the Company’s foreign subsidiaries that are not otherwise subject to United States taxation, except
for the Company’s Canadian subsidiary, are considered to be indefi nitely reinvested, and accordingly, deferred taxes have
not been provided. If changes occur in future investment opportunities and plans, those changes will be refl ected when
known and may result in providing residual United States deferred taxes on unremitted foreign earnings. If the Company’s
unremitted foreign earnings were not considered indefi nitely reinvested as of January 28, 2012, additional deferred taxes of
approximately $26.3 million would have been provided.
Uncertain Tax Positions
ASC 740, Income Taxes, establishes a single model to address accounting for uncertain tax positions. The standard clarifi es
the accounting for income taxes by prescribing a minimum recognition threshold a tax position is required to meet
before being recognized in the fi nancial statements. The standard also provides guidance on derecognition, measurement
classifi cation, interest and penalties, accounting in interim periods, disclosure and transition.
A reconciliation of the beginning and ending amount of unrecognized tax benefi ts is as follows:
($ thousands)
Balance at January 31, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,393
Additions for tax positions of prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 242
Reductions for tax positions of prior years due to a lapse in the statute of limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (262)
Balance at January 30, 2010. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,373
Additions for tax positions of prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 624
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (887)
Reductions for tax positions of prior years due to a lapse in the statute of limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (358)
Balance at January 29, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 752
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (206)
Reductions for tax positions of prior years due to a lapse in the statute of limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (337)
Balance at January 28, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 209
If the unrecognized tax benefi ts were to be recognized in full, the net amount that would be refl ected in the income tax
provision, thereby impacting the e ective tax rate, would be $0.2 million at January 28, 2012, $0.7 million at January 29, 2011
and $1.3 million at January 30, 2010.
Estimated interest related to the underpayment of income taxes were classifi ed as a component of the income tax provision
in the consolidated statements of earnings and were insignifi cant in 2011, 2010 and 2009. Accrued interest was $0.1 million
at January 28, 2012 and $0.3 million at January 29, 2011.
For federal purposes, the Company’s tax years 2008 to 2010 (fi scal years ending January 31, 2009, January 30, 2010 and
January 29, 2011) remain open to examination. The Company also fi les tax returns in various foreign jurisdictions and
numerous states for which various tax years are subject to examination. The Company does not expect any signifi cant
changes to its liability for unrecognized tax benefi ts during the next 12 months.
8. BUSINESS SEGMENT INFORMATION
The Company’s reportable segments include Famous Footwear, Wholesale Operations, Specialty Retail and Other.
Famous Footwear, which represents the Company’s largest division, operated 1,089 stores at the end of 2011, primarily
selling branded footwear for the entire family.
The Wholesale Operations segment sources and markets licensed, branded and private-label footwear primarily to
national chains, mass merchandisers and department stores as well as Company-owned Famous Footwear and Specialty
Retail segments.
The Specialty Retail segment included 105 stores in the United States, 106 stores in Canada and 23 stores in China
at the end of 2011, selling primarily Naturalizer brand footwear in regional malls and outlet centers as well as other
e-commerce businesses.
The Other segment includes corporate assets and administrative expenses and other costs and recoveries that are not
allocated to the operating units.