Pier 1 2011 Annual Report Download - page 64
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
above, fiscal years 2003 and 2004 were reopened for examination by the IRS. During fiscal 2011, the IRS
completed its examination of fiscal years 2003, 2004 and 2008. As a result of the completion of these audits, the
Company received a refund of $387,000, plus interest, during the first quarter of fiscal 2012. There were no
adjustments from this examination which resulted in significant permanent differences that had not already been
reserved.
As of February 26, 2011, the Company had utilized all federal net operating loss carryforwards.
Deferred tax assets and liabilities at February 26, 2011 and February 27, 2010 were comprised of the
following (in thousands):
2011 2010
Deferred tax assets:
Deferred compensation $ 20,386 $ 18,943
Net operating loss carryforward 9,443 44,218
Accrued average rent 11,546 12,336
Properties, net 26,899 33,582
Self insurance reserves 9,385 9,619
Deferred gain on sale of credit card operations 14,596 5,841
Cumulative foreign currency translation 3,343 2,034
Deferred revenue and revenue reserves 6,882 6,973
Other 1,628 5,210
Total deferred tax assets 104,108 138,756
Deferred tax liabilities:
Inventory (20,456) (18,403)
Deferred gain on debt repurchase (19,636) (19,636)
Other (287) (361)
Total deferred tax liabilities (40,379) (38,400)
Valuation allowance (63,729) (100,356)
Net deferred tax assets $ - $ -
During fiscal 2007, the Company recorded a valuation allowance against all deferred tax assets. In
addition, net deferred tax assets arising from losses during fiscal 2009 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. As these
deferred tax assets were established and fully reserved during fiscal 2009, there was no net impact to the
provision of income taxes. Taxes arising from the earnings in fiscal 2011 and 2010 were offset by utilization of
the Company’s federal net operating loss carryforwards, which combined with the $55,856,000 refund in 2010 as
discussed above, resulted in a decrease of the valuation allowance of $81,600,000 in fiscal 2010 and $38,687,000
in fiscal 2011.
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