Family Dollar 2011 Annual Report Download - page 38

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$33.7 million non-current) as of the end of fiscal 2011, and $37.9 million ($3.2 million current and $34.7 million
non-current) as of the end of fiscal 2010. The current portion of the assets is included in prepayments and other
current assets on the Consolidated Balance Sheets, and the non-current portion is included in other assets. There
were no other material estimates for insurance liabilities during fiscal 2011 or fiscal 2010. Our insurance expense
during fiscal 2011, fiscal 2010 and fiscal 2009 was impacted by changes in our liabilities for workers’
compensation, general liability and auto liability costs. See our discussion of SG&A expenses under “Results of
Operations” above for more information.
Contingent Income Tax Liabilities:
We are subject to routine income tax audits that occur periodically in the normal course of business and we
record contingent income tax liabilities related to our uncertain tax positions. Our liabilities related to uncertain
tax positions require an assessment of the probability of the income-tax-related exposures and settlements and are
influenced by our historical audit experiences with various state and federal taxing authorities as well as by
current income tax trends. If circumstances change, we may be required to record adjustments that could be
material to our reported financial condition and results of operations. Our liabilities related to uncertain tax
positions were $26.3 million as of the end of fiscal 2011, and $23.4 million as of the end of fiscal 2010. There
were no material changes in the estimates or assumptions used to determine contingent income tax liabilities
during fiscal 2011. See Note 8 to the Consolidated Financial Statements included in this Report for more
information on our contingent income tax liabilities.
Contingent Legal Liabilities:
We are involved in numerous legal proceedings and claims. Our accruals, if any, related to these
proceedings and claims are based on a determination of whether or not the loss is both probable and estimable.
We review outstanding claims and proceedings with external counsel to assess probability and estimates of loss.
We re-evaluate the claims and proceedings each quarter or as new and significant information becomes available,
and we adjust or establish accruals, if necessary. If circumstances change, we may be required to record
adjustments that could be material to our reported financial condition and results of operations. Our total legal
liabilities were not material as of the end of fiscal 2011 or fiscal 2010. There were no material changes in the
estimates or assumptions used to determine contingent legal liabilities during fiscal 2011. See Note 10 to the
Consolidated Financial Statements included in this Report for more information on our contingent legal
liabilities.
Stock-based Compensation Expense:
We measure stock-based compensation expense based on the estimated fair value of the award on the grant
date. The determination of the fair value of our employee stock options on the grant date is calculated using a
Black-Scholes option-pricing model and is affected by our stock price as well as by assumptions regarding a
number of complex and subjective variables. These variables include, but are not limited to, the expected stock
price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors.
We also grant performance share rights and adjust compensation expense each quarter based on the ultimate
number of shares expected to be issued. If factors change and we employ different assumptions to measure stock-
based compensation in future periods, the compensation expense recorded may differ significantly from the
amount recorded in the current period. Our results for fiscal 2011, fiscal 2010 and fiscal 2009 include stock-
based compensation expense of $14.7 million, $15.7 million and $13.3 million, respectively. There were no
material changes in the estimates or assumptions used to determine stock-based compensation during fiscal 2011.
See Note 11 to the Consolidated Financial Statements included in this Report for more information on stock-
based compensation.
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