NOTE 15 - INCOME TAXES

All Company operations are domestic. Income tax expense consisted of the following (in thousands):

	Fiscal Year
	2012			2011		2010
Federal income tax expense:
Current	$	17,467		$	8,108	$	14,646
Deferred		1,170			6,101		4,744
		18,637			14,209		19,390
State income tax expense:
Current		3,626			1,673		1,741
Deferred		(62	)		433		121
		3,564			2,106		1,862

	$	22,201		$	16,315	$	21,252

Reconciliation between the federal income tax expense charged to income before income tax computed at statutory tax rates and the actual income tax expense recorded follows (in thousands):

	Fiscal Year
	2012			2011			2010
Federal income tax expense
at the statutory rate	$	21,133		$	16,546		$	20,612
State income taxes, net		2,199			1,411			1,354
Job credits and other, net		(1,131	)		(1,642	)		(714	)
	$	22,201		$	16,315		$	21,252

Deferred tax assets (liabilities) consist of the following (in thousands):

	February 2, 2013			January 28, 2012
Gross deferred tax assets:
Net operating loss carryforwards	$	717		$	1,195
Accrued expenses		3,241			2,633
Lease obligations		23,135			25,503
Deferred compensation		13,885			16,694
Deferred income		6,049			1,648
Other		1,486			820
		48,513			48,493
Gross deferred tax liabilities:
Inventory		(6,263	)		(6,255	)
Depreciation and amortization		(62,047	)		(61,698	)
		(68,310	)		(67,953	)

Valuation allowance		(498	)		(654	)
Net deferred tax liabilities	$	(20,295	)	$	(20,114	)

ASC No. 740, Income Taxes, requires recognition of future tax benefits of deferred tax assets to the extent such realization is more likely than not. Net non-current deferred tax liabilities were $19.5 million and $17.8 million and net current deferred tax liabilities were $0.8 million and $2.3 million at February 2, 2013 and January 28, 2012, respectively. Consistent with the requirements of ASC No. 740, the tax benefits recognized related to pre-reorganization deferred tax assets have been recorded as a direct addition to additional paid-in capital. The remaining valuation allowance of $0.5 million and $0.7 million at February 2, 2013 and January 28, 2012, respectively, was established for pre-reorganization state net operating losses, which may expire prior to utilization. Adjustments are made to reduce the recorded valuation allowance when positive evidence exists that is sufficient to overcome the negative evidence associated with those losses.

The Company has net operating loss carryforwards for state income tax purposes of approximately $14.9 million which, if not utilized, will expire in varying amounts between 2014 and 2021. The Company does not have any net operating loss carryforwards for federal income tax purposes.

The Company files income tax returns in the U.S. federal jurisdiction and various state and local jurisdictions. The Company is subject to U.S. federal income tax examinations by tax authorities for the fiscal year ended January 30, 2010 and forward. Although the outcome of tax audits is uncertain, the Company has concluded that there were no significant uncertain tax positions, as defined by ASC No. 740-10, Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109, requiring recognition in its financial statements. However, the Company may, from time to time, be assessed interest and/or penalties. In the event the Company receives an assessment for interest and/or penalties, it will be classified in the financial statements as income tax expense.