Big Lots 2011 Annual Report Download - page 183

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BIG LOTS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 9 — Income Taxes (Continued)
because the IRS has not issued a statutory notice of disallowance with respect to those claims; however, because
our claims are unlikely to prevail in a different jurisdiction, we have decided not to pursue them. Therefore,
we are reducing our unrecognized tax benefits by the entire amount of the claims. Because these benefits were
unrecognized, the decrease will have no effect on income tax expense.
We recognized an expense (benefit) associated with interest and penalties on unrecognized tax benefits of
approximately $(0.5) million, $(1.9) million, and $(0.5) million during 2011, 2010, and 2009, respectively, as a
component of income tax expense. The amount of accrued interest and penalties recorded in the accompanying
consolidated balance sheets at the end of 2011 and 2010 was $5.8 million and $6.4 million, respectively.
We are subject to U.S. federal income tax, income tax of multiple state and local jurisdictions, and Canadian
and provincial taxes. The statute of limitations for assessments on our federal income tax returns for periods
prior to 2008 has lapsed. In addition, the state income tax returns filed by us are subject to examination
generally for periods beginning with 2007, although state income tax carryforward attributes generated prior
to 2007 may still be adjusted upon examination. We have various state returns in the process of examination
or administrative appeal. Generally, the time limit for reassessing returns for Canadian and provincial income
taxes for periods prior to the year ending October 3, 2004 have lapsed.
We have estimated the reasonably possible expected net change in unrecognized tax benefits through February
2, 2013, based on expected cash and noncash settlements or payments of uncertain tax positions and lapses of
the applicable statutes of limitations for unrecognized tax benefits. The estimated net decrease in unrecognized
tax benefits for the next 12 months is approximately $4.0 million. Actual results may differ materially from
this estimate.
Note 10 — Commitments, Contingencies and Legal Proceedings
In September 2006, a class action complaint was filed against us in the Superior Court of California, Los
Angeles County, alleging that we violated certain California wage and hour laws by misclassifying California
store managers as exempt employees (“Seals matter”). The plaintiffs sought to recover, on their own behalf
and on behalf of all other individuals who are similarly situated, damages for alleged unpaid overtime, unpaid
minimum wages, wages not paid upon termination, improper wage statements, missed rest breaks, missed meal
periods, reimbursement of expenses, loss of unused vacation time, and attorneys’ fees and costs. In October
2009, the court denied, with prejudice, plaintiffs’ class certification motion. In January 2010, the plaintiffs filed
a notice of appeal. In April 2011, the California Court of Appeals affirmed the trial court’s decision denying
class certification. In December 2011, we entered into confidential settlement agreements with each of the
plaintiffs, and the court dismissed the plaintiffs’ claims in January 2012. The Seals matter was resolved without
a material effect on our financial condition, results of operations, or liquidity.
In February 2008, three alleged class action complaints were filed against us by a California resident (“Caron
matter”). The first was filed in the Superior Court of California, Orange County. That action was similar in
nature to the Seals matter, which enabled us to successfully coordinate that matter with the Seals matter in
the Superior Court of California, Los Angeles County. The second and third matters, filed in the U.S. District
Court, Central District of California, and the Superior Court of California, Riverside County, respectively,
alleged that we violated certain California wage and hour laws for missed meal and rest periods and other wage
and hour claims. The plaintiffs sought to recover, on their own behalf and on behalf of a California statewide
class consisting of all other individuals who are similarly situated, damages resulting from improper wage
statements, missed rest breaks, missed meal periods, non-payment of wages at termination, reimbursement of
expenses, loss of unused vacation time, and attorneys’ fees and costs. We believed these two matters overlapped
and we successfully consolidated them before the U.S. District Court, Central District of California. We believe
the remaining allegations also overlap some portion of the claims released through the class action settlement
in the Espinosa matter, which was settled in 2008. In August 2009, the court denied, without prejudice, the