6.	INCOME TAXES

The components of earnings before income taxes from continuing operations consisted of domestic earnings (loss) before income taxes from continuing operations of $10.5 million, $(11.1) million and 23.8 million in 2012, 2011 and 2010, respectively, and foreign earnings before income taxes from continuing operations of $28.0 million, $20.2 million and $29.4 million in 2012, 2011 and 2010, 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 2012 or 2010.

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



($ thousands)	2012		2011		2010
Federal
Current	$	(1,275)	$	(2,528)	$	(3,001)
Deferred		5,578		319		13,209
		4,303		(2,209)		10,208
State
Current		591		(588)		885
Deferred		1,858		137		2,285
		2,449		(451)		3,170
Foreign		4,591		2,986		2,782
Total income tax provision	$	11,343	$	326	$	16,160

The Company made federal, state and foreign tax payments, net of refunds, of $5.7 million in 2012. 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.

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)	2012		2011		2010
Income taxes at statutory rate	$	13,491	$	3,168	$	18,627
State income taxes, net of federal tax benefit		1,592		(293)		2,061
Tax impact of nondeductible stock option expense		16		76		285
Foreign earnings taxed at lower rates		(5,206)		(4,090)		(6,504)
Other		1,450		1,465		1,691
Total income tax provision	$	11,343	$	326	$	16,160

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)	February 2, 2013		January 28, 2012
Deferred Tax Assets
Employee benefits, compensation and insurance	$	12,913	$	18,096
Accrued expenses		17,788		10,207
Postretirement and postemployment benefit plans		1,753		2,088
Deferred rent		381		2,411
Accounts receivable reserves		8,136		5,584
Net operating loss (“NOL”) carryforward/carryback		29,355		30,113
Inventory capitalization and inventory reserves		3,692		4,033
Other		12,956		7,394
Total deferred tax assets, before valuation allowance		86,974		79,926
Valuation allowance		(8,476)		(6,946)
Total deferred tax assets, net of valuation allowance		78,498		72,980
Deferred Tax Liabilities
Retirement plans		(16,496)		(22,550)
LIFO inventory valuation		(42,914)		(36,139)
Capitalized software		(18,433)		(13,469)
Other		(1,949)		(1,288)
Depreciation		(892)		(1,874)
Intangible assets		(10,963)		(14,364)
Total deferred tax liabilities		(91,647)		(89,684)
Net deferred tax liability	$	(13,149)	$	(16,704)

At the end of 2012, 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 $11.6 million. A valuation allowance of $6.7 million has been established related to these operating loss carryforwards. The Company also has valuation allowances of $0.5 million related to share-based compensation and $1.3 million related to foreign tax credits. The remaining net operating loss will be carried forward to future tax years.

As of February 2, 2013, 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 February 2, 2013, additional deferred taxes of approximately $29.5 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 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
Additions for tax positions of prior years		1,015
Reductions for tax positions of prior years due to a lapse in the statue of limitations		(75)
Balance at February 2, 2013	$	1,149

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 $0.8 million at February 2, 2013, $0.2 million at January 28, 2012 and $0.7 million at January 29, 2011.

Estimated interest related to the underpayment of income taxes was classified as a component of the income tax provision in the consolidated statements of earnings and was insignificant in 2012, 2011 and 2010. Accrued interest was $0.1 million February 2, 2013 and $0.1 million at January 28, 2012.

For federal purposes, the Company’s tax years 2009 to 2011 (fiscal years ending January 30, 2010, January 29, 2011 and January 28, 2012) 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.