Family Dollar 2013 Annual Report Download - page 61

The following table summarizes the components of income tax expense in fiscal 2013, fiscal 2012 and fiscal
2011:
Years Ended
August 31, 2013 August 25, 2012 August 27, 2011
(in thousands)
Income tax
expense
% of pre-tax
income
Income tax
expense
% of pre-tax
income
Income tax
expense
% of pre-tax
income
Computed federal income tax ...... $241,744 35.0% $232,378 35.0% $216,005 35.0%
State income taxes, net of federal
income tax benefit ............. 19,765 2.9 17,893 2.7 17,695 2.9
Tax credits ..................... (12,281) (1.8) (9,810) (1.5) (10,010) (1.6)
Foreign rate differences ........... (5,290) (0.8) (2,379) (0.4) 684 0.1
Uncertain tax positions ........... 6,783 1.0 2,493 0.4 3,798 0.6
Valuation allowance ............. (247) 0.0 1,732 0.3 1,566 0.3
Other ......................... (3,352) (0.5) (609) (0.1) (1,025) (0.2)
Actual income tax expense ........ $247,122 35.8% $241,698 36.4% $228,713 37.1%
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and
deferred tax liabilities as of the end of fiscal 2013 and the end of fiscal 2012, were as follows:
(in thousands) August 31, 2013 August 25, 2012
Deferred income tax liabilities:
Excess of book over tax basis of property and equipment ..... $101,865 $109,397
Deferred income tax assets:
Excess of tax over book basis of inventories ................ $ 25,436 $ 26,359
Nondeductible accruals for:
Insurance ....................................... 10,824 12,395
Compensation ................................... 37,580 34,717
Net operating losses ............................... 6,266 7,123
Deferred rent .................................... 24,398 19,063
Litigation charge ................................. 1,789 4,149
Other .............................................. 12,547 12,594
Gross deferred income tax assets ............................. 118,840 116,400
Less: valuation allowance .................................. (5,483) (5,730)
Net deferred tax assets ..................................... $113,357 $110,670
The Company had state net operating loss carryforwards of $145.4 million as of August 31, 2013, and
$128.4 million as of August 25, 2012, in various states. These carryforwards expire at different intervals up to
fiscal year 2033. Management considers all available evidence in determining the likelihood that a deferred tax
asset will not be realized.
The Company classifies accrued interest expense and penalties related to uncertain tax positions as a component
of income tax expense. Interest and penalties increased income tax expense by $1.4 million in fiscal 2013,
reduced income tax expense by $0.6 million in fiscal 2012, and increased income tax expense by $1.0 million in
fiscal 2011. The increase in fiscal 2013 relates to changes in uncertain tax positions as compared to changes in
uncertain tax positions during fiscal 2012 and additional uncertain tax positions recorded during fiscal 2011.
As of August 31, 2013, the Company had a liability related to uncertain tax positions of $30.2 million, including
a gross unrecognized tax benefit of $24.1 million and accrued interest and penalties of $6.1 million. The related
non-current deferred tax asset balance was $6.9 million as of August 31, 2013. If the Company were to prevail on
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