Pier 1 2011 Annual Report Download - page 63

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
agreement, the Company continued to support the card through marketing programs and receive additional
payments over the life of the agreement for transaction level incentives, marketing support and other program
terms.
On December 30, 2010, the Company entered into a new program agreement with Chase, effective
January 1, 2011, with a term of eighteen months. In conjunction with this agreement, the Company and Chase
terminated the original program agreement between the Company and Chase in consideration of payment to the
Company from Chase of $28,326,000 plus all remaining sums due to the Company by Chase. The Company did
not incur any penalties in connection with the termination of the agreement. The Company will be entitled to
future payments over the term of the new program agreement based on revolving credit card sales, and certain
other credit and account related matters. In addition, the Company received total payments of $4,489,000,
$8,738,000 and $7,500,000 related to these program agreements during fiscal 2011, 2010 and 2009, respectively.
The net deferred gain associated with the original program agreement will continue to be recognized in
nonoperating income over the term of the new program agreement. The Company recognized $3,535,000,
$2,052,000 and $2,164,000 related to this deferred gain in fiscal 2011, 2010 and 2009, respectively. The
$28,326,000 in consideration received from Chase was also deferred and is being recognized over the new term
of the agreement as a component of revenue consistent with the treatment of amounts received under the original
program agreement. The Company recognized approximately $2,905,000 of this amount in fiscal 2011.
NOTE 9 – INCOME TAXES
The provision (benefit) for income taxes for each of the last three fiscal years consists of (in thousands):
2011 2010 2009
Federal:
Current $ (446) $ (56,263) $ 296
Deferred - - -
State:
Current 1,898 1,200 236
Deferred - - -
Foreign:
Current 1,967 267 92
Deferred - - -
Provision (benefit) for income taxes 3,419 (54,796) 624
Total provision (benefit) for income taxes $ 3,419 $ (54,796) $ 624
The Company files a U.S. federal income tax return and income tax returns in various states and foreign
jurisdictions. The Company recorded and received a federal income tax benefit and refund of $55,856,000 during
fiscal 2010, primarily as a result of the Worker, Homeownership and Business Assistance Act of 2009. This law
allowed businesses with net operating losses incurred in either 2008 or 2009 to elect to carry back such losses up
to five years. The Company elected to carry back net operating losses from fiscal 2008 to fiscal years 2003 and
2004. This benefit resulted from the reversal of $55,856,000 of the Company’s valuation allowance on its
deferred tax asset for its net operating loss carryforwards that were carried back under the new law.
The Internal Revenue Service (“IRS”) completed its examination of fiscal years 2003 through 2007
during the first quarter of fiscal 2010. However, as a result of the federal income tax benefit and refund discussed
57