Big Lots 2007 Annual Report Download - page 157

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BIG LOTS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 9 — Income Taxes (Continued)
We have estimated the reasonably possible expected net change in unrecognized tax benefits through
January 31, 2009 based on 1) anticipated positions to be taken in the next 12 months, 2) expected cash and
noncash settlements, and 3) lapses of the applicable statutes of limitations of unrecognized tax benefits. The
estimated reasonably possible net decrease in unrecognized tax benefits for the next 12 months is approximately
$5 million. Actual results may differ materially from this estimate.
Note 10 — Commitments and Contingencies
In November 2004, a civil putative collective action complaint was filed against us in United States District
Court for the Eastern District of Texas, Texarkana Division, wherein it was alleged that we had violated the Fair
Labor Standards Act regulations by misclassifying as exempt employees our furniture department managers,
sales managers, and assistant managers (“Texas matter”). Subsequent to its filing, the plaintiffs in the Texas
matter amended the complaint to limit its scope to furniture department managers. The plaintiffs in the Texas
matter sought to recover, on behalf of themselves and all other individuals who were similarly situated, alleged
unpaid overtime compensation, as well as liquidated damages, attorneys’ fees and costs. On August 8, 2005, the
District Court in Texas issued an order conditionally certifying a class of all current and former employees who
worked for us as a furniture department manager at any time between November 2, 2001 and October 1, 2003.
As a result of that order, notice was sent to approximately 1,300 individuals who had the right to opt-in to the
Texas matter. In the third quarter of 2006, we reached a tentative settlement with the plaintiffs concerning the
Texas matter. We recorded, in the third quarter of 2006, a pretax charge of $3.2 million included in selling and
administrative expenses for the estimated settlement liability of the Texas matter. On January 17, 2007, the court
approved the settlement, and in 2007, we paid the $3.2 million settlement.
In October 2005, a class action complaint was served upon us for adjudication in the Superior Court of the
State of California, County of Ventura, wherein it was alleged that we had violated certain California wage
and hour laws (“California matter”). The plaintiff seeks to recover, on her own behalf and on behalf of all other
individuals who are similarly situated, alleged unpaid wages and rest and meal period compensation, as well as
penalties, injunctive and other equitable relief, reasonable attorneys’ fees and costs. In the third quarter of 2006,
we reached a tentative settlement with the plaintiff concerning the California matter. On November 6, 2006,
the court issued an order granting preliminary approval of the tentative settlement. On April 30, 2007, the court
entered the final order approving the class action settlement and judgment of dismissal with prejudice. Two class
members whose objections to the settlement were overruled by the court have appealed the final order to the
California Court of Appeal, challenging the settlement. The same two objectors also filed a separate putative
class action in federal court in the Northern District of California alleging the same class claims that were
tentatively settled through the California matter. The federal court stayed the federal action pending resolution
of the appeal before the California Court of Appeal. The timing and outcome of the appeal are uncertain;
however, we intend to vigorously oppose the appeal of the court-approved settlement. We recorded, in the
third quarter of 2006, a pretax charge of $6.5 million included in selling and administrative expenses for the
agreed-upon settlement amount of the California matter. We believe that we had adequate liability reserves for
the California matter at February 2, 2008; however, the ultimate resolution of the pending appeal could have a
material adverse effect on our financial condition, results of operations, and liquidity.
In November 2004, a civil putative collective action complaint was filed against us in the United States District
Court for the Eastern District of Louisiana, wherein it was alleged that we violated the Fair Labor Standards
Act by misclassifying assistant store managers as exempt employees (“Louisiana matter”). The plaintiffs seek
to recover, on behalf of themselves and all other individuals who are similarly situated, alleged unpaid overtime
compensation, as well as liquidated damages, attorneys’ fees and costs. On July 5, 2005, the District Court in
Louisiana issued an order conditionally certifying a class of all current and former assistant store managers
who have worked for us since November 23, 2001. As a result of that order, notice of the lawsuit was sent to
approximately 5,500 individuals who had the right to opt-in to the Louisiana matter. As of November 3, 2007,