Rite Aid 2011 Annual Report Download - page 78

RITE AID CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the Years Ended February 26, 2011, February 27, 2010 and February 28, 2009
(In thousands, except per share amounts)
5. Income Taxes (Continued)
A reconciliation of the expected statutory federal tax and the total income tax benefit was as
follows:
Year Ended
February 26, February 27, February 28,
2011 2010 2009
(52 Weeks) (52 Weeks) (52 Weeks)
Expected federal statutory expense at 35% . . . $(190,956) $(167,972) $(903,974)
Nondeductible expenses ................. 1,354 2,941 9,445
State income taxes, net ................. (18,139) (24,662) (54,921)
Increase of previously recorded liabilities .... 647 18,359 9,737
Recoverable AMT tax due to special 5-year
NOL carryback ...................... — (4,790) —
Goodwill Impairment ................... — — 595,856
Valuation allowance .................... 216,936 202,882 673,114
Total income tax expense ................ $ 9,842 $ 26,758 $ 329,257
Net loss for fiscal 2011 included income tax expense of $9,842 and was primarily comprised of an
accrual for state and local taxes, adjustments to unrecognized tax benefits and the need for an accrual
of additional state taxes resulting from the receipt of a final audit determination. The Company
maintains a full valuation allowance against its net deferred tax assets. ASC 740, ‘‘Income Taxes’’
requires a company to evaluate its deferred tax assets on a regular basis to determine if a valuation
allowance against the net deferred tax assets is required. According to ASC 740, a cumulative loss in
recent years is significant negative evidence in considering whether deferred tax assets are realizable.
Based on the negative evidence, ASC 740 precludes relying on projections of future taxable income to
support the recognition of deferred tax assets. The ultimate realization of deferred tax assets is
dependent upon the existence of sufficient taxable income generated in the carryforward periods.
The fiscal 2010 income tax expense was primarily comprised of an accrual for state and local taxes
net of federal tax recoveries and adjustments to unrecognized tax benefits. The income tax expense for
fiscal 2009 included $673,114 related to the write-down of our remaining net federal and state deferred
tax assets through an adjustment to our valuation allowance. The increase to the valuation allowance
for fiscal 2009 was primarily related to the impact of the current economic conditions on fiscal 2009
operating results.
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