Petsmart 2014 Annual Report Download - page 90

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Table of Contents
PetSmart, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
Year Ended
February 2, 2014 February 3, 2013 January 29, 2012
(52 weeks) (53 weeks) (52 weeks)
Unrecognized tax benefits, beginning balance $ 15,679 $ 20,940 $ 16,735
Gross increases - tax positions related to the current year 2,067 1,757 1,938
Gross increases - tax positions in prior periods 4,321 1,362 3,730
Gross decreases - tax positions in prior periods (393) (4,854) (146)
Gross settlements (3,610) (2,819) (922)
Lapse of statute of limitations — (719) (393)
Gross (decreases) increases - foreign currency translation (237) 12 (2)
Unrecognized tax benefits, ending balance $ 17,827 $ 15,679 $ 20,940
Included in the balance of unrecognized tax benefits at February 2, 2014, February 3, 2013, and January 29, 2012, were
$8.9 million, $7.9 million, and $11.1 million, respectively, of tax benefits that, if recognized, would affect the effective tax
rate.
We continue to recognize penalties and interest accrued related to unrecognized tax benefits as income tax expense.
During 2013, 2012, and 2011, the impact of accrued interest and penalties related to unrecognized tax benefits on the
Consolidated Statements of Income and Comprehensive Income was immaterial. In total, as of February 2, 2014, we had
recognized a liability for penalties of $1.3 million and interest of $2.5 million. As of February 3, 2013, we had recognized a
liability for penalties of $0.9 million and interest of $2.0 million.
Our unrecognized tax benefits largely include state exposures from filing positions taken on state tax returns and
characterization of income and timing of deductions on federal and state tax returns. We believe that it is reasonably possible
that approximately $0.8 million of our currently remaining unrecognized tax positions, each of which are individually
insignificant, may be recognized by the end of 2014 as a result of settlements or a lapse of the statute of limitations.
We have substantially settled all federal income tax matters through 2008, state and local jurisdictions through 2005, and
foreign jurisdictions through 2003. We could be subject to audits in these jurisdictions for the subsequent years.
Note 4 — Investments
Short-term Investments
Our short-term investments consisted of municipal bonds with various maturities, representing funds available for current
operations. These short-term investments are classified as available-for-sale and are carried at fair value using quoted prices in
active markets for identical assets or liabilities (Level 1). Accrued interest was immaterial at February 3, 2013. The amortized
cost basis at February 3, 2013 was $9.1 million. Unrealized gains and losses are included in other comprehensive income in
the Consolidated Statements of Income and Comprehensive Income. We did not have short-term investments at February 2,
2014.
Investments in Negotiable Certificates of Deposit
At February 2, 2014, and February 3, 2013, we had investments in negotiable certificates of deposit, or “NCDs,” with
various maturities. These investments are classified as held-to-maturity and are carried at their amortized cost basis.
The amortized cost basis of our investments in NCDs was classified in the Consolidated Balance Sheets as follows (in
thousands):
February 2, 2014 February 3, 2013
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