Supercuts 2011 Annual Report Download - page 132

Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
13. INCOME TAXES (Continued)
At June 30, 2011, the Company had state and foreign operating loss carryforwards of approximately $18.6 million and $8.4 million,
respectively. These losses relate to various states, the U.K., Netherlands, and Luxembourg. The Company has recorded a valuation allowance of
$7.5 million relating to losses in the Netherlands and Luxembourg. The Company expects to fully utilize all of the loss carryforwards for which a
valuation allowance has not been established.
At June 30, 2010, the Company had set up a valuation allowance of $1.0 million relating to the Netherlands tax losses. The valuation
allowance increase of $6.5 million is due to additional tax losses in the Netherlands and Luxemborg.
As of June 30, 2011, undistributed earnings of international subsidiaries of approximately $42.3 million were considered to have been
reinvested indefinitely and, accordingly, the Company has not provided for U.S. income taxes on such earnings.
The Company files tax returns and pays tax primarily in the U.S, Canada, the U.K., Luxembourg and the Netherlands as well as states,
cities, and provinces within these jurisdictions. In the U.S, fiscal years 2007 and after remain open for federal tax audit. The Company's U.S.
federal income tax returns for the years 2007 through 2009 are currently under audit. For state tax audits, the statute of limitations generally
spans three to four years, resulting in a number of states remaining open for tax audits dating back to fiscal year 2007. However, the company is
under audit in a number of states in which the statute of limitations has been extended for fiscal years 2000 and forward. Internationally
(including Canada), the statute of limitations for tax audits varies by jurisdiction, but generally ranges from three to five years. A rollforward of
the unrecognized tax benefits is as follows:
If the Company were to prevail on all unrecognized tax benefits recorded, approximately $6.0 million of the $13.5 million reserve would
benefit the effective tax rate. Interest and penalties associated with unrecognized tax benefits are recorded within income tax expense. During the
years ended June 30, 2011, 2010 and 2009 we recorded income tax (benefit) expense of approximately $(0.6), $(1.1), and $2.1 million,
respectively, for the accrual of interest and penalties. As of June 30, 2011, the Company had accrued interest and penalties related to
unrecognized tax benefits of $2.7 million. This amount is not included in the gross unrecognized tax benefits noted above.
It is reasonably possible that the amount of the unrecognized tax benefit with respect to certain of our unrecognized tax positions will
increase or decrease during the next twelve months. However, we do not expect the change to have a significant effect on our results of
operations or our financial position.
127
2011 2010 2009
Balance at beginning of period
$
16,856
$
14,787
$
20,400
Additions based on tax positions related to the current year
796
5,549
2,765
(Reductions) additions based on tax positions of prior years
(759
)
(185
)
121
Reductions on tax positions related to the expiration of the statue
of limitations
(2,718
)
(2,993
)
(8,167
)
Settlements
(682
)
(302
)
(332
)
Balance at end of period
$
13,493
$
16,856
$
14,787