Dillard's 2010 Annual Report Download - page 33

Fiscal 2008
Asset impairment and store closing charges for fiscal 2008 consisted of (1) the write-off of
$31.9 million of goodwill on seven stores and a write-down of $58.8 million of investment in two mall
joint ventures where the estimated future cash flows were unable to sustain the amount of goodwill and
investment; (2) an accrual of $0.9 million for future rent, property tax and utility payments on one
store that was closed during the year; (3) a write-down of property and equipment and an accrual for
future rent, property tax and utility payments of $5.7 million on a store and distribution center that
were closed during the year and (4) a write-down of property and equipment on 32 stores that were
closed, scheduled to close or impaired based on the inability of the stores’ estimated future cash flows
to sustain their carrying values. A breakdown of the asset impairment and store closing charges for
fiscal 2008 follows:
Number of Impairment
(in thousands of dollars) Locations Amount
Store closed in prior year ........................... 1 $ 800
Stores closed in fiscal 2008 .......................... 9 31,993
Stores to close in fiscal 2009 ......................... 5 18,811
Stores impaired based on cash flows ................... 25 86,094
Non-operating facility ............................. 1 493
Distribution center ................................ 1 925
Joint ventures ................................... 2 58,806
Total ........................................ 44 $197,922
Income Taxes
The Company’s estimated federal and state income tax rate, inclusive of equity in losses of joint
ventures and exclusive of the effect of nondeductible goodwill write-off, was 32.0% in fiscal 2010,
15.6% in fiscal 2009 and 40.2% in fiscal 2008.
Fiscal 2010
During fiscal 2010, income taxes included approximately $1.4 million for an increase in deferred
liabilities due to an increase in the state effective tax rate, and included the recognition of tax benefits
of approximately $6.1 million for the net decrease in unrecognized tax benefits, interest, and penalties,
$2.9 million for the decrease in net operating loss valuation allowances, $0.7 million for the decrease in
the capital loss valuation allowance resulting from capital gain income, $1.2 million for the increase in
the cash surrender value of life insurance policies, and $2.5 million due to federal tax credits. The
Company is currently being examined by the IRS for the fiscal tax years 2008 and 2009. During fiscal
2010, the IRS completed its examination of the Company’s federal income tax returns for the fiscal tax
years 2006 and 2007. The Company is also under examination by various state and local taxing
jurisdictions for various fiscal years. During fiscal 2010, the Company reached settlements with federal
and state taxing jurisdictions which resulted in reductions in the liability for unrecognized tax benefits.
At this time, the Company does not expect the results from any income tax audit to have a material
impact on the Company’s financial statements.
Fiscal 2009
During fiscal 2009, income taxes included the recognition of tax benefits of approximately
$6.3 million for the net decrease in unrecognized tax benefits, interest, and penalties, $1.3 million for a
decrease in deferred liabilities due to a decrease in the state effective tax rate, $4.4 million for a
decrease in a capital loss valuation allowance resulting from capital gain income, and $2.4 million due
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