Pier 1 2007 Annual Report Download - page 72
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NOTE 12 — INCOME TAXES
The provision (benefit) for income taxes for each of the last three fiscal years consists of (in thousands):
2007 2006 2005
Federal:
Current .......................................... $(25,442) $ (2,402) $24,615
Deferred ......................................... 22,980 (13,972) 2,414
State:
Current .......................................... (365) 1,880 3,958
Deferred ......................................... 1,596 (510) (383)
Foreign:
Current .......................................... 346 577 5,776
Deferred ......................................... — (14) 4
Provision (benefit) for income taxes from continuing operations . . (885) (14,441) 36,384
Provision (benefit) for income taxes from discontinued
operations ........................................ (231) (5,250) —
Total provision (benefit) for income taxes .................. $ (1,116) $(19,691) $36,384
During the second quarter of fiscal 2007, the Company established a valuation allowance of $24,714,000,
or $0.28 per share, related to deferred tax assets. In evaluating the likelihood that sufficient earnings would be
available in the near future to realize the deferred tax assets, the Company considered cumulative losses over
three years including the current year. The Company concluded that a valuation allowance was necessary
based upon this evaluation and the guidance provided in SFAS No. 109 “Accounting for Income Taxes”.
In addition, net deferred tax assets arising from current year losses in excess of the amount expected to
be carried back to offset taxable income in a prior year were fully reserved through a valuation allowance
recorded for the remainder of fiscal 2007. As these deferred tax assets were established and fully reserved
during fiscal 2007, there was no net impact to the provision of income taxes.
70
Pier 1 Imports, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)