Stein Mart 2014 Annual Report Download - page 40

STEIN MART, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables in thousands, except per share amounts)
F-16
During 2014, 2013 and 2012, we realized tax benefits (deficiencies) of $1.8 million, $0.4 million and $(0.5) million, respectively, related to
share-based compensation plans that were recorded to additional paid-in-capital. Income tax expense differs from the amount of income
tax determined by applying the statutory U.S. corporate tax rate to pre-tax amounts due to the following items:
2014 2013 2012
Federal tax at the statutory rate 35.0% 35.0% 35.0%
State income taxes, net of federal benefit 3.8% 2.8% 2.1%
Permanent differences and othe
r
0.7% (0.8)% (6.6)%
Effective tax rate 39.5% 37.0% 30.5%
For 2014, the effective tax rate (ETR) was negatively impacted by permanent differences which relate primarily to non-recurring non-
deductible expenses. The ETR for 2013 reflects a benefit for a change in state effective tax rate. For 2012, the ETR was positively
impacted by the favorable permanent differences which related primarily to the non-taxable income recognized related to a settlement gain
from post-retirement life insurance benefits described in Note 7.
The following is a reconciliation of the change in the amount of unrecognized tax benefits from January 29, 2012 to January 31, 2015:
2014 2013 2012
Beginning balance 468$631$1,476$
Decreases due to:
Tax positions taken in prior years - - (765)
Lapse of statute of limitations (127) (163) (80)
Ending balance 341$468$631$
As of January 31, 2015, there were no unrecognized tax benefits (UTBs) that, if recognized, would affect the effective tax rate. We
recognize interest and penalties related to UTBs in income tax expense. During the fiscal years ended January 31, 2015, February 1,
2014 and February 2, 2013, the amount of interest and penalties related to UTBs was insignificant. The total amount of accrued interest
and accrued penalties related to UTBs as of January 31, 2015 and February 1, 2014 was also insignificant.
UTBs decreased in 2014, 2013 and 2012 due to tax positions taken and lapse of statute of limitations.
We are currently open to audit under the statute of limitations by the Internal Revenue Service for the tax years 2011 through 2013. The
Companys state tax returns are open to audit under similar statute of limitations for the tax years 2009 through 2013.
7. Employee Benefit Plans
We have a defined contribution retirement plan (a 401(k) plan) covering employees who are at least 21 years of age, have completed at
least one year of service and who work at least 1,000 hours annually. Under the profit sharing portion of the plan, we can make
discretionary contributions which vest at a rate of 20 percent per year after two years of service. During 2014, 2013 and 2012, we matched
50 percent of an employees voluntary pre-tax contributions up to a maximum of four percent of an employees compensation. Our
matching portion vests in accordance with the plans vesting schedule. Our contributions to the retirement plan, net of forfeitures, were
$1.8 million for 2014, $1.5 million for 2013 and $1.2 million for 2012, included in SG&A.
We have an executive deferral plan providing officers, key executives and director-level employees with the opportunity to defer receipt of
salary, bonus and other compensation. The plan allows for Company discretionary contributions. During 2014, we matched contributions
up to 10 percent of salary and bonuses deferred at a rate of 75 percent for officers and key executives and a rate of 37.5 percent for
directors. During 2013 and 2012, we matched contributions up to 10 percent of salary and bonuses deferred at a rate of 100 percent for
officers and key executives and a rate of 50 percent for directors. In addition, during 2012, we made an additional discretionary
contribution totaling $6.7 million related to the curtailment and settlement of the split dollar retirement benefit described below.
Matching contributions and related investment earnings for the executive deferral plan vest at 20 percent per year in each of years four
through eight, at which time a participant is fully vested. The additional discretionary contribution made in 2012 and related investment
earnings cliff vest at age 62. The executive deferral plan liability was $13.6 million and $12.5 million at January 31, 2015 and February 1,
2014, respectively, and is included in other liabilities in the Consolidated Balance Sheets. The expense for this plan, net of forfeitures, was
$0.1 million, $0.6 million and $6.9 million in 2014, 2013 and 2012, respectively.