Surety bonds

[Table of Contents](#i16ebb68f4bd84ff99a771b20ec27c3fc_7)The following is a reconciliation of our total gross unrecognized tax benefits:

|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| (in millions) |  | January 29, 2022 |  | January 30, 2021 |
| Beginning Balance |  | $ | 22.6  |  |  | $ | 28.9  |  |
| Additions for tax positions of prior years |  | 4.6  |  |  | 3.4  |  |
| Additions, based on tax positions related to current year |  | 2.7  |  |  | 1.2  |  |
|  |  |  |  |  |
| Lapses in statutes of limitation |  | (9.0) |  |  | (10.9) |  |
| Ending balance |  | $ | 20.9  |  |  | $ | 22.6  |  |

We believe it is reasonably possible that $8.5 million to $9.5 million of the reserve for uncertain tax positions may be reduced during the next 12 months principally as a result of the effective settlement of outstanding issues. It is also possible that state tax reserves will be reduced for audit settlements and statute expirations within the next 12 months. At this point it is not possible to estimate a range associated with the resolution of these audits. We do not expect any change to have a material impact to our consolidated financial statements.As of January 29, 2022, we have recorded a liability for potential interest and penalties of $2.1 million.Note 4 – Commitments and ContingenciesPurchase ObligationsAt January 29, 2022, we have commitments totaling $229.6 million related to ocean shipping contracts and commitments of $266.0 million related to agreements for software licenses and support, telecommunication services and store technology assets and maintenance for our stores.Letters of CreditWe have $425.0 million in Letter of Credit Reimbursement and Security Agreements with various financial institutions, under which $257.9 million was committed to these letters of credit issued for routine purchases of imported merchandise at January 29, 2022.At January 29, 2022, we also have $46.0 million in standby letters of credit that serve as collateral for our large-deductible insurance programs and expire in fiscal 2022.Surety BondsWe have issued various surety bonds that primarily serve as collateral for utility payments at our stores and self-insured insurance programs. These bonds total $118.6 million and are committed through various dates through fiscal 2025.ContingenciesWe are defendants in legal proceedings including the class, collective, representative and large cases described below as well as individual claims in arbitration. We will vigorously defend ourselves in these matters. We do not believe that any of these matters will, individually or in the aggregate, have a material effect on our business or financial condition. We cannot give assurance, however, that one or more of these matters will not have a material effect on our results of operations for the quarter or year in which they are resolved.We assess our legal proceedings monthly and reserves are established if a loss is probable and the amount of such loss can be reasonably estimated. For matters that have settled, we reserve the estimated settlement amount even if the settlement has not been approved by the court. Many, if not substantially all, of our legal proceedings are subject to significant uncertainties and, therefore, determining the likelihood of a loss and the measurement of any loss can be complex and subject to judgment. With respect to legal proceedings where we have determined that a loss is reasonably possible but not probable, we are unable to estimate the amount or range of the reasonably possible loss due to the inherent difficulty of predicting the outcome of and uncertainties regarding legal proceedings. Our assessments are based on estimates and assumptions that have been deemed reasonable by management, but that may prove to be incomplete or inaccurate, and unanticipated events and circumstances may occur that might cause us to change those estimates and assumptions. Management’s assessment of legal proceedings could change because of future determinations or the discovery of facts which are not presently known. Accordingly, the ultimate costs of resolving these proceedings may be substantially higher or lower than currently estimated.  
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