Pier 1 2008 Annual Report Download - page 67

The Company has net operating loss carryforwards of approximately $203,000,000. These loss carryfor-
wards can be utilized to offset future income but will begin to expire in fiscal year 2027 if not utilized before
then.
Deferred tax assets and liabilities from continuing operations at March 1, 2008 and March 3, 2007 were
comprised of the following (in thousands):
2008 2007
Deferred tax assets:
Deferred compensation ...................................... $ 16,933 $ 29,836
Net operating loss .......................................... 75,924 13,835
Accrued average rent ....................................... 13,912 15,280
Fixed assets, net ........................................... 17,584 11,236
Self insurance reserves ...................................... 9,658 8,665
Deferred gain on sale of credit card operations..................... 7,373 8,212
Cumulative foreign currency translation .......................... 1,949 854
Deferred revenue and revenue reserves .......................... 5,111 3,455
Purchased call option ....................................... 2,159 2,785
Other ................................................... 6,630 5,831
Total deferred tax assets ..................................... 157,233 99,989
Deferred tax liabilities:
Inventory . . .............................................. (29,898) (12,165)
Other ................................................... (1,630) (1,553)
Total deferred tax liabilities ................................... (31,528) (13,718)
Valuation allowance .......................................... (125,705) (86,271)
Net deferred tax assets ........................................ $ — $ —
During fiscal 2007, the Company recorded a valuation allowance against all deferred tax assets. In
addition, net deferred tax assets arising from current year losses during fiscal 2008 and 2007 in excess of the
amount expected to be carried back to offset taxable income in a prior year were fully reserved through a
valuation allowance during the respective years. As these deferred tax assets were established and fully
reserved during fiscal 2008 and 2007, there was no net impact to the provision of income taxes.
The difference between income taxes at the statutory federal income tax rate of 35% in fiscal 2008, 2007
and, 2006, and income tax reported in continuing operations in the consolidated statements of operations is as
follows (in thousands):
2008 2007 2006
Tax (benefit) expense at statutory federal income tax rate ...... $(32,696) $(79,843) $(14,669)
State income taxes, net of federal benefit .................. (1,240) (4,091) 880
Increase in valuation allowance ......................... 36,498 83,047 —
Net foreign income taxed at lower rates, net of foreign tax
credits .......................................... (209) 718 (687)
Other, net ......................................... 241 (716) 35
Provision (benefit) for income taxes from continuing
operations ....................................... $ 2,594 $ (885) $(14,441)
65
Pier 1 Imports, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)