Pier 1 2012 Annual Report Download - page 60

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The net deferred gain associated with the original program agreement with Chase is recognized in
nonoperating income. The Company recognized $10,880,000, $3,535,000 and $2,052,000 related to this deferred
gain in fiscal 2012, 2011 and 2010, respectively. The $28,326,000 in consideration received from Chase also
deferred and was 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 $22,706,000 and $2,905,000 of this amount in fiscal 2012 and 2011, respectively.
During the third quarter of fiscal 2012, the Company entered into a private-label credit card plan
agreement (“Agreement”) with a subsidiary of Alliance Data Systems Corporation (“ADS”). The transfer of
ownership to ADS of the private-label credit accounts issued under the Company’s existing private-label credit
card program agreement was completed in the first quarter of fiscal 2013. The Agreement has an initial term of
seven years that will automatically extend to a term of ten years if certain performance targets are achieved. The
Company will be entitled to future payments over the term of the Agreement based on revolving credit card sales
and certain other credit and account related matters.
NOTE 9 – INCOME TAXES
The provision (benefit) for income taxes for each of the last three fiscal years consists of (in thousands):
2012 2011 2010
Federal:
Current $ 32,734 $ (446) $ (56,263)
Deferred (34,107) - -
State:
Current 1,659 1,898 1,200
Deferred (7,808) - -
Foreign:
Current 2,691 1,967 267
Deferred - - -
Total provision (benefit) for income taxes $ (4,831) $ 3,419 $ (54,796)
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
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. Late in the fourth quarter of fiscal 2012, the IRS initiated an examination of 2010.
At the end of fiscal 2011, the Company had utilized all federal net operating loss carryforwards.
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