Annual report pursuant to Section 13 and 15(d)

Income Taxes

v2.4.0.8
Income Taxes
 12 Months Ended
Feb. 02, 2013
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes
The Company records deferred taxes for differences between the financial reporting and income tax bases of assets and liabilities, computed in accordance with tax laws in effect at that time. The deferred taxes related to such differences as of February 1, 2014 and February 2, 2013 were as follows (in thousands):

 
 
February 1, 2014
 
February 2, 2013
Accruals and reserves not currently deductible for tax purposes
 
$
5,066

 
$
5,365

Inventory capitalization
 
966

 
719

Differences in depreciation lives and methods
 
2,811

 
2,885

Differences in basis of intangible assets
 
(1,180
)
 
(392
)
Differences in investments and other items
 
(141
)
 
442

Net operating loss carryforwards
 
113,229

 
111,276

Valuation allowance
 
(121,909
)
 
(120,295
)
Net deferred tax liability
 
$
(1,158
)
 
$
—


The provision from income taxes consisted of the following (in thousands):
 
 
For the Years Ended
 
 
February 1, 2014
 
February 2, 2013
 
January 29, 2011
Current
 
$
(15
)
 
$
(20
)
 
$
(84
)
Deferred
 
(1,158
)
 
—

 
—

 
 
$
(1,173
)
 
$
(20
)
 
$
(84
)


A reconciliation of the statutory tax rates to the Company’s effective tax rate is as follows:
 
 
For the Years Ended
 
 
February 1, 2014
 
February 2, 2013
 
January 29, 2011
Taxes at federal statutory rates
 
35.0
 %
 
35.0
 %
 
35.0
 %
State income taxes, net of federal tax benefit
 
(5.3
)
 
1.8

 
0.4

Non-cash stock option vesting expense
 
(43.3
)
 
(3.8
)
 
(0.9
)
Non-deductible interest
 
—

 
—

 
(1.2
)
Non-deductible loss on debt extinguishment
 
—

 
—

 
(18.7
)
Other
 
(0.6
)
 
0.1

 
0.1

FCC license deferred tax liability
 
(81.5
)
 
—

 
—

Valuation allowance and NOL carryforward benefits
 
8.4

 
(33.2
)
 
(14.9
)
Effective tax rate
 
(87.3
)%
 
(0.1
)%
 
(0.2
)%

Based on the Company’s recent history of losses, the Company has recorded a full valuation allowance for its net deferred tax assets as of February 1, 2014 and February 2, 2013 in accordance with GAAP, which places primary importance on the Company’s most recent operating results when assessing the need for a valuation allowance. The ultimate realization of these deferred tax assets depends on the ability of the Company to generate sufficient taxable income in the future, as well as the timing of such income. The Company intends to maintain a full valuation allowance for its net deferred tax assets until sufficient positive evidence exists to support reversal of the allowance. As of February 1, 2014, the Company has federal net operating loss carryforwards (NOL's) of approximately $304 million and state NOL's of approximately $140 million which are available to offset future taxable income. The Company's federal NOLs expire in varying amounts each year from 2023 through 2034 in accordance with applicable federal tax regulations and the timing of when the NOLs were incurred. During the first quarter of fiscal 2011, the Company had a change in ownership (as defined in Section 382 of the Internal Revenue Code) as a result of the issuance of common stock coupled with the redemption of all the Series B preferred stock held by GE Equity. Sections 382 and 383 limit the annual utilization of certain tax attributes, including NOL carryforwards incurred prior to a change in ownership. The limitations imposed by Sections 382 and 383 are not expected to impair the Company's ability to fully realize its NOL's; however, the annual usage of NOL's incurred prior to the change in ownership will be limited.
For the year ended February 1, 2014, the income tax provision included a non-cash tax charge of approximately $1,158,000 relating to changes in the Company's long-term deferred tax liability related to the tax amortization of the Company's indefinite-lived intangible FCC license asset that is not available to offset existing deferred tax assets in determining changes to the Company's income tax valuation allowance.
As of February 1, 2014 and February 2, 2013, there were no unrecognized tax benefits for uncertain tax positions. Accordingly, a tabular reconciliation from beginning to ending periods is not provided. Further, to date, there have been no interest or penalties charged or accrued in relation to unrecognized tax benefits. The Company will classify any future interest and penalties as a component of income tax expense if incurred. The Company does not anticipate that the amount of unrecognized tax benefits will change significantly in the next twelve months.
The Company is subject to U.S. federal income taxation and the taxing authorities of various states. The Company’s tax years for 2010, 2011, and 2012 are currently subject to examination by taxing authorities. With limited exceptions, the Company is no longer subject to U.S. federal, state, or local examinations by tax authorities for years before 2010.