Income Taxes

9 Months Ended

Oct. 29, 2011

Income Taxes [Abstract]

Income Taxes

10. Income Taxes

The Company and its subsidiaries are subject to United States federal income tax as well as income tax of multiple state jurisdictions. The Company is no longer subject to U.S. federal income tax examinations by tax authorities for fiscal years prior to fiscal 2009. The Company is currently under IRS examination for fiscal 2009 and 2010. With respect to state and local jurisdictions, with limited exceptions, the Company and its subsidiaries are no longer subject to income tax audits for fiscal years prior to fiscal 2009.

As of October 29, 2011, the gross amount of unrecognized tax benefits was $0.7 million, all of which would affect the effective tax rate if recognized. The amount of unrecognized tax benefits, including interest and penalties, that would no longer need to be accrued due to the passage of various statutes of limitations in the next 12 months is $0.4 million. The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense. The Company had approximately $0.6 million in interest and penalties related to unrecognized tax benefits accrued as of October 29, 2011 and January 29, 2011. The Company’s total liability for unrecognized tax benefits, including interest and penalties, as of October 29, 2011 and January 29, 2011, was $1.2 million and $1.7 million, respectively.

The Company’s effective tax rate, including the impact of its equity method investment, for the thirty-nine weeks ended October 29, 2011 was 37.6%, versus an effective tax rate of 23.6% for the thirty-nine weeks ended October 30, 2010. The increase in our effective tax rate over last year was driven by an increase in interim period year-to-date loss combined with an increase in realizable tax credits in the current year.

The methodology for calculation of income tax rates in interim periods is described in ASC 740-270. In general, ASC 740-270 requires an entity to compute the interim income tax rate based on an estimate of the annual effective tax rate. In computing the annual effective tax rate, an entity must rely on management forecasts and other estimates. The rate is revised, if necessary, as of the end of each successive interim period during the fiscal year to the entity’s best current estimate of its annual effective tax rate. In interim periods where the entity is experiencing losses, an entity must make assumptions concerning its future taxable income and determine whether the realization of future tax benefits is more likely than not. The Company has concluded that realization of future tax benefits related to deferred tax assets is more likely than not.

As of the current reporting period, the Company computed the annual effective tax rate based on guidance within ASC 740-270-55 which describes the proper calculation of an interim tax rate for a seasonal business with a year to date loss.