INCOME TAXES

12 Months Ended

Jan. 28, 2012

INCOME TAXES

INCOME TAXES

16. INCOME TAXES

        Components of the income tax (benefit) provision were as follows:

	2011			2010			2009
Current:
Federal	$	(25	)	$	11		$	(9,767	)
State		506			(263	)		(2,447	)
Total current		481			(252	)		(12,214	)
Deferred:
Federal		(1,853	)		1,300			4,019
State		(647	)		305			164
Total deferred	$	(2,500	)	$	1,605		$	4,183
Income tax (benefit) provision	$	(2,019	)	$	1,353		$	(8,031	)

        Components of gross deferred tax assets and liabilities were as follows:

	January 28, 2012			January 29, 2011
Deferred tax assets:
Net operating losses	$	56,483		$	42,767
Alternative minimum tax credits		4,689			4,720
Defined benefit pension obligations		36,080			20,991
Accrued expenses		7,232			8,932
Inventories		3,702			5,550
Equity compensation		7,116			6,988
Rent amortization		31,776			26,369
Capital leases		22,863			24,025
Other		18,781			20,637
Gross deferred tax assets		188,722			160,979
Less: Valuation allowance		(147,148	)		(126,333	)
Total gross deferred tax assets		41,574			34,646
Deferred tax liabilities:
Property, fixtures and equipment		(39,606	)		(32,934	)
Other		(5,814	)		(4,834	)
Total gross deferred tax liabilities		(45,420	)		(37,768	)
Net deferred tax liabilities	$	(3,846	)	$	(3,122	)

        ASC 740 requires that companies assess whether valuation allowances should be established against their deferred tax assets based on consideration of all available evidence using a "more likely than not" standard. In assessing the realizability of its deferred tax assets, the Company considered whether it was more likely than not that its deferred tax assets will be realized based upon all available evidence, including the scheduled reversal of deferred tax liabilities, historical operating results, projected future operating results, tax carry-back availability, and limitations pursuant to Section 382 of the Internal Revenue Code ("Section 382"), among others. Pursuant to ASC 740, significant weight is to be given to evidence that can be objectively verified. As a result, a company's current or previous losses are given more weight than any projected future taxable income. In addition, a recent three-year historical cumulative loss is considered a significant element of negative evidence that is difficult to overcome.

        The Company has evaluated its deferred tax assets each reporting period, including assessment of its cumulative income or loss over the prior three-year period, to determine if valuation allowances were required. With respect to reviews during 2009, 2010 and 2011, the Company's three-year historical cumulative loss and the continuation of uncertain near-term economic conditions impeded the Company's ability to rely on its projections of future taxable income in assessing valuation allowance requirements. As such, the Company concluded that it was necessary to maintain a full valuation allowance on its net deferred tax assets.

        The Company reported deferred tax asset valuation allowances of $147,148 and $126,333 at January 28, 2012 and January 29, 2011, respectively. If actual results differ from the Company's underlying estimates, or these estimates are adjusted in future periods, the Company may need to adjust its valuation allowance—which could materially impact its financial position and results of operations.

        As a result of the full deferred tax asset valuation allowance maintained throughout 2009, 2010 and 2011, the changes recognized within other comprehensive income (loss) for 2011, 2010 and 2009 were recorded on a gross basis, with the exception of the tax benefit of $3,224 resulting from the reclassification of the residual tax effect associated with certain interest rate swap contracts which expired on July 14, 2011.

        If sufficient positive evidence arises in the future indicating that all or a portion of the deferred tax assets meet the more likely than not standard for realization under ASC 740, the valuation allowance would be reduced accordingly in the period that such a conclusion is reached. If reduced, a maximum of $1,601 of the valuation allowance reduction would result in an increase to paid in capital rather than an income tax benefit.

        At January 28, 2012, the Company had federal and state net operating loss carry-forwards of $110,734 and $312,827, respectively, which are available to offset future federal and state taxable income, subject to certain limitations imposed by Section 382. These net operating losses will expire at various dates from 2012 through 2032.

        The Company had carry-forwards for general business tax credits of $2,364 and $889 as of January 28, 2012 and January 29, 2011, respectively. These credits will expire in 2032.

        The Company had carry-forwards for alternative minimum tax credits of $4,689 and $4,720 as of January 28, 2012 and January 29, 2011, respectively. The Company acquired $2,064 of these credits in connection with an acquisition; their use is subject to the limitations imposed by Section 382. These credits can be carried-forward indefinitely.

        A reconciliation of the tax (benefit) expense to the tax at the statutory federal income rate is as follows:

	2011			2010			2009
Tax (benefit) expense at statutory rate	$	(4,951	)	$	7,996		$	(4,230	)
State income taxes, net of federal benefit		(668	)		(145	)		(3,111	)
Valuation allowance changes, net		7,436			(5,790	)		(821	)
Residual tax reclassed from OCI		(3,224	)		—			—
Tax credits		(1,184	)		(516	)		(130	)
Nondeductible expenses		315			341			606
Changes in state deferred tax rate		248			(532	)		(345	)
Other, net		9			(1	)		—
Tax (benefit) expense at effective rate	$	(2,019	)	$	1,353		$	(8,031	)

        The Company elected to use the extended carry-back for its 2008 net operating loss, as permitted by The Worker, Homeownership, and Business Assistance Act of 2009 ("2009 Act"). The 2009 Act permitted the Company to carry back federal net operating losses for up to five years, instead of the general two-year carry-back. This election resulted in a reduction to the Company's valuation allowance of $6,920 during the fourth quarter of 2009. The Company filed this carry-back claim during 2010, and received a corresponding federal income tax refund of $6,946 during the second quarter of 2010.

        In accordance with ASC 740, the Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. A reconciliation of the beginning and ending gross unrecognized tax benefits is as follows:

	2011			2010			2009
Balance at beginning of year	$	10,749		$	11,984		$	7,274
Increases related to prior year tax positions		30			—			7,504
Decreases related to prior year tax positions		(526	)		—			—
Increases related to current year tax positions		—			—			118
Settlements with taxing authorities		(272	)		—			—
Lapse of statute		(20	)		(1,235	)		(2,912	)
Balance at end of year	$	9,961		$	10,749		$	11,984

        The total amount of gross unrecognized tax benefits that, if recognized, would impact the effective tax rate was $877 and $1,634 as of January 28, 2012 and January 29, 2011, respectively.

        During the twelve months subsequent to January 28, 2012, it is reasonably possible that the gross unrecognized tax benefits will decrease by up to $214, all of which could impact the income tax provision. This potential decrease is due to expiration of certain statutes of limitation.

        It is the Company's policy to record interest and penalties on unrecognized tax benefits as an income tax provision. For 2011, the Company recorded $387 as an income tax provision to reflect additional interest on unrecognized tax benefits, offset by a $171 reduction of accrued interest pursuant to recognition of certain prior year tax positions and lapses of statues during 2011. For 2010, the Company recorded $459 as an income tax provision to reflect additional interest and penalties on unrecognized tax benefits, offset by a $323 reduction of accrued interest pursuant to lapses of statutes during 2010. For 2009, the Company recorded $444 as an income tax provision to reflect additional interest on unrecognized tax benefits, offset by a $913 reduction of accrued interest pursuant to lapses of statutes during 2009. At January 28, 2012 and January 29, 2011, the Company had accruals of $1,323 and $1,287, respectively, for interest and penalties on unrecognized tax benefits.

        The Company's federal tax returns for the years ended January 31, 2009 through the present are open to examination, as are the Company's various state tax returns for the years ended February 2, 2008 through the present.