Urban Outfitters 2011 Annual Report Download - page 75

URBAN OUTFITTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(in thousands, except share and per share data)
full valuation allowance for certain foreign and state net operating loss carryforwards where it was
uncertain the carryforwards would be utilized. The Company had no valuation allowance for certain
other foreign and state net operating loss carryforwards where management believes it is more likely
than not the tax benefit of these carryforwards will be realized. As of January 31, 2011 and 2010, the
non-current portion of net deferred tax assets aggregated $37,789 and $31,379, respectively.
The cumulative amount of the Company’s share of undistributed earnings of non-U.S.
subsidiaries for which no deferred taxes have been provided was $68,415 as of January 31, 2011.
These earnings are deemed to be permanently re-invested to finance growth programs.
A reconciliation of the beginning and ending balances of the total amounts of gross unrecognized
tax benefits is as follows:
January 31,
2011 2010 2009
Balance at the beginning of the period .................. $7,532 $ 7,509 $7,805
Increases in tax positions for prior years ................ 43 948 24
Decreases in tax positions for prior years ............... (592) (116) (380)
Increases in tax positions for current year ............... 1,000 1,894 838
Settlements ....................................... (40) (924) (554)
Lapse in statute of limitations ........................ (185) (1,779) (224)
Balance at the end of the period ....................... $7,758 $ 7,532 $7,509
The total amount of net unrecognized tax benefits that, if recognized, would impact the
Company’s effective tax rate were $6,677 and $6,039 at January 31, 2011 and 2010 respectively.
The Company accrues interest and penalties related to unrecognized tax benefits in income tax
expense in the Consolidated Statements of Income, which is consistent with the recognition of these
items in prior reporting periods. During the years ended January 31, 2011, 2010 and 2009, the
Company recognized a benefit of $437, $427 and $985 in interest and penalties. The Company had
$3,620 and $3,182 for the payment of interest and penalties accrued at January 31, 2011 and 2010,
respectively.
The Company files income tax returns in the U.S. federal jurisdiction and various state and
foreign jurisdictions. In January 2010, the Company received an examination report from the IRS
setting forth proposed adjustments to the Company’s U.S. income tax returns for the periods ended
January 31, 2005 through 2008. The Company has submitted an appeal with respect to certain of the
proposed adjustments. The timing for resolving such appeal to the IRS is uncertain. The Company is
not subject to U.S. federal tax examinations for years before fiscal 2005. State and foreign jurisdictions
that remain subject to examination range from fiscal 2002 to 2010 with few exceptions. It is possible
that any state or foreign examination may be resolved within twelve months. Due to the potential for
resolution of Federal appeals and state examinations, and the expiration of various statutes of
limitation, it is possible that the Company’s gross unrecognized tax benefits balance may change
within the next twelve months by a range of zero to $3,411.
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