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RITE AID CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the Years Ended March 3, 2012, February 26, 2011 and February 27, 2010
(In thousands, except per share amounts)
4. Income Taxes
The provision for income taxes was as follows:
Year Ended
March 3, February 26, February 27,
2012 2011 2010
(53 Weeks) (52 Weeks) (52 Weeks)
Current tax expense (benefit):
Federal ............................ $ 0 $ (36) $(4,819)
State .............................. 3,654 9,348 3,330
3,654 9,312 (1,489)
Deferred tax expense (benefit):
Federal ............................ 1,729 1,959 1,849
State .............................. (29,069) (1,429) 26,398
(27,340) 530 28,247
Total income tax expense (benefit) .......... $(23,686) $ 9,842 $26,758
A reconciliation of the expected statutory federal tax and the total income tax benefit was as
follows:
Year Ended
March 3, February 26, February 27,
2012 2011 2010
(53 Weeks) (52 Weeks) (52 Weeks)
Expected federal statutory expense at 35% .... $(137,279) $(190,956) $(167,972)
Nondeductible expenses ................. 2,408 1,354 2,941
State income taxes, net .................. 11,492 (18,139) (24,662)
Increase (decrease) of previously recorded
liabilities ........................... (17,771) 647 18,359
Recoverable AMT tax due to special 5-year
NOL carryback ...................... — — (4,790)
Valuation allowance .................... 117,464 216,936 202,882
Total income tax expense (benefit) .......... $ (23,686) $ 9,842 $ 26,758
Net loss for fiscal 2012 included income tax benefit of $23,686 and was primarily comprised of
adjustments to unrecognized tax benefits due to the lapse of statute of limitations. 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.
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