7.	INCOME TAXES

The components of earnings before income taxes from continuing operations consisted of domestic (loss) earnings before income taxes from continuing operations of $(11.1) million, $23.8 million and $(6.8) million in 2011, 2010 and 2009, respectively, and foreign earnings before income taxes from continuing operations of $20.2 million, $29.4 million and $18.5 million in 2011, 2010 and 2009, respectively. In addition to the income tax expense associated with continuing operations, we also recorded income tax expense associated with net earnings from discontinued operations of $8.0 million in 2011. The Company did not record net earnings from discontinued operations in 2010 and 2009.

The components of income tax provision on earnings from continuing operations were as follows:


($ thousands)	2011			2010			2009
Federal
Current	$	(2,528	)	$	(3,001	)	$	(16,602	)
Deferred		319			13,209			14,567
		(2,209	)		10,208			(2,035	)
State
Current		(588	)		885			1,102
Deferred		137			2,285			847
		(451	)		3,170			1,949
Foreign		2,986			2,782			1,345
Total income tax provision	$	326		$	16,160		$	1,259

The Company received federal, state and foreign tax refunds, net of payments, of $5.7 million and $4.6 million in 2011 and 2010, respectively, and made federal, state and foreign tax payments, net of refunds, of $13.0 million in 2009.

The differences between the tax provision reflected in the consolidated financial statements and the amounts calculated at the federal statutory income tax rate of 35% were as follows:


($ thousands)	2011			2010			2009
Income taxes at statutory rate	$	3,168		$	18,627		$	4,095
State income taxes, net of federal tax benefit		(293	)		2,061			1,267
Tax impact of nondeductible stock option expense		76			285			305
Foreign earnings taxed at lower rates		(4,090	)		(6,504	)		(4,442	)
Other		1,465			1,691			34
Total income tax provision	$	326		$	16,160		$	1,259

The other category of income tax provision principally represents the impact of expenses that are not deductible for federal income tax purposes.

Significant components of the Company's deferred income tax assets and liabilities were as follows:


($ thousands)	January 28, 2012			January 29, 2011
Deferred Tax Assets
Employee benefits, compensation and insurance	$	18,096		$	13,735
Accrued expenses		10,207			8,088
Postretirement and postemployment benefit plans		2,088			1,915
Deferred rent		2,411			5,072
Accounts receivable reserves		5,584			5,375
Net operating loss ("NOL") carryforward/carryback		30,113			26,643
Inventory capitalization and inventory reserves		4,033			2,752
Intangible assets		–			993
Other		7,394			2,172
Total deferred tax assets, before valuation allowance		79,926			66,745
Valuation allowance		(6,946	)		(6,751	)
Total deferred tax assets, net of valuation allowance		72,980			59,994
Deferred Tax Liabilities
Retirement plans		(22,550	)		(18,961	)
LIFO inventory valuation		(36,139	)		(31,927	)
Capitalized software		(13,469	)		(13,403	)
Other		(1,288	)		(1,656	)
Depreciation		(1,874	)		(1,078	)
Intangible assets		(14,364	)		–
Total deferred tax liabilities		(89,684	)		(67,025	)
Net deferred tax liability	$	(16,704	)	$	(7,031	)

At the end of 2011, the Company had a net operating loss carryforward with a tax value of $1.8 million related to Shoes.com, which expires in 2019, and various state net operating loss carryforwards with tax values totaling $10.7 million. A valuation allowance of $6.4 million has been established related to these operating loss carryforwards. The Company also has a valuation allowance of $0.5 million related to share-based compensation. The remaining net operating loss will be carried forward to future tax years.

As of January 28, 2012, no deferred taxes have been provided on the accumulated unremitted earnings of the Company's foreign subsidiaries that are not subject to United States income tax. The Company periodically evaluates its foreign investment opportunities and plans, as well as its foreign working capital needs, to determine the level of investment required and, accordingly, determine the level of foreign earnings that is considered indefinitely reinvested. Based upon that evaluation, earnings of the Company's foreign subsidiaries that are not otherwise subject to United States taxation, except for the Company's Canadian subsidiary, are considered to be indefinitely reinvested, and accordingly, deferred taxes have not been provided. If changes occur in future investment opportunities and plans, those changes will be reflected when known and may result in providing residual United States deferred taxes on unremitted foreign earnings. If the Company's unremitted foreign earnings were not considered indefinitely reinvested as of January 28, 2012, additional deferred taxes of approximately $26.3 million would have been provided.

Uncertain Tax Positions

ASC 740, Income Taxes, establishes a single model to address accounting for uncertain tax positions. The standard clarifies the accounting for income taxes by prescribing a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. The standard also provides guidance on derecognition, measurement classification, interest and penalties, accounting in interim periods, disclosure and transition.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:


($ thousands)
Balance at January 31, 2009	$	1,393
Additions for tax positions of prior years		242
Reductions for tax positions of prior years due to a lapse in the statute of limitations		(262	)
Balance at January 30, 2010	$	1,373
Additions for tax positions of prior years		624
Settlements		(887	)
Reductions for tax positions of prior years due to a lapse in the statute of limitations		(358	)
Balance at January 29, 2011	$	752
Settlements		(206	)
Reductions for tax positions of prior years due to a lapse in the statute of limitations		(337	)
Balance at January 28, 2012	$	209

If the unrecognized tax benefits were to be recognized in full, the net amount that would be reflected in the income tax provision, thereby impacting the effective tax rate, would be $0.2 million at January 28, 2012, $0.7 million at January 29, 2011 and $1.3 million at January 30, 2010.

Estimated interest related to the underpayment of income taxes were classified as a component of the income tax provision in the consolidated statements of earnings and were insignificant in 2011, 2010 and 2009. Accrued interest was $0.1 million at January 28, 2012 and $0.3 million at January 29, 2011.

For federal purposes, the Company's tax years 2008 to 2010 (fiscal years ending January 31, 2009, January 30, 2010 and January 29, 2011) remain open to examination. The Company also files tax returns in various foreign jurisdictions and numerous states for which various tax years are subject to examination. The Company does not expect any significant changes to its liability for unrecognized tax benefits during the next 12 months.