Pier 1 2010 Annual Report Download - page 74

Download and view the complete annual report

Please find page 74 of the 2010 Pier 1 annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 148

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The difference between income taxes at the statutory federal income tax rate of 35% in fiscal 2010, 2009
and, 2008, and income tax reported in the consolidated statements of operations is as follows (in thousands):
2010 2009 2008
Tax provision (benefit) at statutory federal income
tax rate $ 11,218 $ (45,020) $ (32,696)
State income taxes, net of federal provision (benefit) 2,475 (12,350) (1,240)
Increase (decrease) in valuation allowance (81,599) 56,637 36,498
Foreign income taxes, net of foreign tax credits 267 92 (209)
Permanent difference on consolidation of foreign
subsidiary for tax filings (1) 6,381 - -
Non-deductible make-whole interest payment (2) 5,375 - -
Other, net 1,087 1,265 241
Provision (benefit) for income taxes $ (54,796) $ 624 $ 2,594
(1) The Company chose to change the tax filing status of a foreign subsidiary, and will begin including this subsidiary in its
consolidated tax return in fiscal 2010. For federal tax purposes, this effectively resulted in the repatriation of the foreign
subsidiary’s accumulated earnings which had not been previously taxed in the United States. This created a permanent
difference between reported net income and taxable income.
(2) During fiscal 2010, the Company paid make-whole interest in connection with the voluntary conversion of its 9% Notes. This
interest is not deductible for federal tax purposes and resulted in a permanent difference between reported net income and
taxable income.
The accounting guidance on uncertainty in income taxes prescribes the minimum recognition threshold a
tax position is required to meet before being recognized in the financial statements. It also provides guidance on
derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and
transition. The Company adopted the provisions of this guidance effective as of the beginning of fiscal 2008. As
a result of the cumulative effect of the adoption, the Company recorded a $5,073,000 decrease in retained
earnings in fiscal 2008. Upon adoption on March 4, 2007, total reserves for uncertain tax positions were
$13,908,000.
On a quarterly and annual basis, the Company accrues for the effects of open uncertain tax positions. A
summary of amounts recorded for unrecognized tax benefits at the beginning and end of fiscal 2010 and 2009 are
presented below, in thousands:
Unrecognized Tax Benefits - March 1, 2008 $13,939
Gross increases - tax positions in prior period 3
Gross decreases - tax positions in prior period (1,179)
Settlements (1,418)
Expiration of statute of limitations (168)
Unrecognized Tax Benefits - February 28, 2009 $11,177
Gross increases - tax positions in prior period 661
Gross decreases - tax positions in prior period -
Settlements (806)
Expiration of statute of limitations -
Unrecognized Tax Benefits - February 27, 2010 $11,032
68