Pier 1 2013 Annual Report Download - page 58

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
During fiscal 2007, the Company sold its proprietary credit card operations to Chase Bank USA, N.A.
(“Chase”). The sale was comprised of the Company’s proprietary credit card receivables, certain charged-off
accounts, and the common stock of Pier 1 National Bank. The Company received cash proceeds for the majority
of the sales price and was entitled to receive additional proceeds of $10,750,000, plus any accrued interest, over
the life of a long-term program agreement. The Company received no payments related to this agreement in
fiscal 2013 or 2012 and received $6,250,000 in fiscal 2011. The net deferred gain associated with the original
program agreement with Chase was recognized in nonoperating income. The Company recognized $1,126,000,
$10,880,000 and $3,535,000 related to this deferred gain in fiscal 2013, 2012 and 2011, respectively. In addition,
the Company and Chase entered into a private-label credit card program agreement with an original term of ten
years. Under this 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 an original term of 18 months (the term was subsequently reduced to 15 months when
conversion to a new provider was completed). 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 was
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. The Company received total payments of $160,000, $1,574,000
and $4,489,000 related to these program agreements during fiscal 2013, 2012 and 2011, respectively and
recognized them as a component of net sales. The $28,326,000 in consideration received from Chase was also
deferred and was previously recognized over the new term of the agreement as a component of revenue
consistent with the treatment of transaction-based amounts previously received under the original program
agreement. The Company recognized approximately $2,715,000, $22,706,000 and $2,905,000 of this amount in
fiscal 2013, 2012 and 2011, respectively.
NOTE 8 – INCOME TAXES
The provision (benefit) for income taxes for each of the last three fiscal years consists of (in thousands):
2013 2012 2011
Federal:
Current $ 45,797 $ 32,734 $ (446)
Deferred 15,635 (34,107) -
State:
Current 4,738 1,659 1,898
Deferred 4,293 (7,808) -
Foreign:
Current 1,093 2,691 1,967
Deferred - - -
Total provision (benefit) for income taxes $ 71,556 $ (4,831) $ 3,419
The Internal Revenue Service (“IRS”) has completed its examination of all fiscal years through fiscal
2009. There were no adjustments from this examination which resulted in significant permanent differences. 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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