Taxes On Earnings

12 Months Ended

Feb. 02, 2013

Income Tax Expense (Benefit) [Abstract]

Taxes On Earnings

Taxes on Earnings

The provision for income taxes consisted of the following:

($000)	2012			2011			2010
Current
Federal	$	485,882		$	343,550		$	329,723
State	31,227			30,702			30,478
	517,109			374,252			360,201
Deferred
Federal	(37,178		)	25,383			(11,139		)
State	(1,850		)	(3,661		)	(6,838		)
	(39,028		)	21,722			(17,977		)
Total	$	478,081		$	395,974		$	342,224

In fiscal 2012, 2011, and 2010, the Company realized tax benefits of $30.0 million, $19.0 million and $15.4 million, respectively, related to employee equity programs that were credited to additional paid-in capital.

The provision for taxes for financial reporting purposes is different from the tax provision computed by applying the statutory federal income tax rate. Differences are as follows:

	2012		2011		2010
Federal income taxes at the statutory rate	35	%	35	%	35	%
State income taxes (net of federal benefit) and other, net	3	%	3	%	3	%
Total	38	%	38	%	38	%

The components of deferred income taxes at February 2, 2013 and January 28, 2012 are as follows:

($000)	2012			2011
Deferred Tax Assets
Accrued liabilities	$	72,266		$	43,215
Deferred compensation	28,040			34,736
Stock-based compensation	28,781			16,969
Deferred rent	16,984			13,115
California franchise taxes	13,376			11,286
Employee benefits	18,315			10,074
Other	3,686			3,260
	181,448			132,655
Deferred Tax Liabilities
Depreciation	(210,343		)	(199,119		)
Merchandise inventory	(18,802		)	(20,129		)
Supplies	(9,766		)	(9,024		)
Prepaid expenses	(6,431		)	(7,305		)
	(245,342		)	(235,577		)
Net Deferred Tax Liabilities	$	(63,894	)	$	(102,922	)
Classified as:
Current net deferred tax asset	$	20,407		$	5,598
Long-term net deferred tax liability	(84,301		)	(108,520		)
Net Deferred Tax Liabilities	$	(63,894	)	$	(102,922	)

The changes in amounts of unrecognized tax benefits (gross of federal tax benefits and excluding interest) at fiscal 2012, 2011, and 2010 are as follows:

($000)	2012			2011			2010
Unrecognized tax benefits - beginning of year	$	56,524		$	43,990		$	33,349
Gross increases:
Tax positions in current period	11,009			9,245			8,957
Tax positions in prior period	4,167			12,193			4,343
Gross decreases:
Tax positions in prior periods	(1,476		)	(4,491		)	—
Lapse of statute limitations	(1,312		)	(682		)	(1,348		)
Settlements	(3,245		)	(3,731		)	(1,311		)
Unrecognized tax benefits - end of year	$	65,667		$	56,524		$	43,990

At the end of fiscal 2012 and 2011, the reserves for unrecognized tax benefits were $82.5 million and $72.4 million inclusive of $16.8 million and $15.9 million of related interest, respectively. The Company accounts for interest and penalties related to unrecognized tax benefits as a part of its provision for taxes on earnings. If recognized, $42.1 million would impact the Company’s effective tax rate. The difference between the total amount of unrecognized tax benefits and the amounts that would impact the effective tax rate relates to amounts attributable to deferred income tax assets and liabilities. These amounts are net of federal and state income taxes.

During the next twelve months, it is reasonably possible that the statute of limitations may lapse pertaining to positions taken by the Company in prior year tax returns. If this occurs, the total amount of unrecognized tax benefits may decrease, reducing the provision for taxes on earnings by up to $1.5 million.

The Company is generally open to audit by the Internal Revenue Service under the statute of limitations for fiscal years 2009 through 2012. The Company’s state income tax returns are generally open to audit under the various statutes of limitations for fiscal years 2008 through 2012. Certain state tax returns are currently under audit by state tax authorities. The Company does not expect the results of these audits to have a material impact on the consolidated financial statements.