Big Lots 2008 Annual Report Download - page 135

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BIG LOTS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
in the acceleration of the payment of cash to the taxing authority to an earlier period. Included in the $34.7
million for 2008 and $37.2 million for 2007 is $9.3 million and $9.7 million, respectively, of unrecognized tax
benefits primarily related to our claims for welfare to work and work opportunity tax credits. If we prevail with
respect to the welfare to work and work opportunity tax credit claims, we would owe approximately $1.9 million
of fees, which have not been accrued, to an outside service provider who assists us with the administration of
these refund claims.
We recognized interest and penalties on unrecognized tax benefits of approximately $0.8 million and $0.9
million, during 2008 and 2007, respectively, as a component of income tax expense. The amount of accrued
interest and penalties recorded in the accompanying consolidated balance sheets at the end of 2008 and 2007
was $9.0 million and $8.2 million, respectively.
We are subject to U.S. federal income tax as well as income tax of multiple state and local jurisdictions.
Our 2005 federal income tax return is currently being examined by the IRS. The statute of limitation for
assessments on our federal income tax returns for periods prior to 2005 has lapsed. In addition, the state income
tax returns filed by us are subject to examination generally for periods beginning with 2004, although state
income tax carryforward attributes generated prior to 2004 may still be adjusted upon examination. We have
various state returns in the process of examination or administrative appeal.
We have estimated the reasonably possible expected net change in unrecognized tax benefits through January
30, 2010 based on 1) anticipated positions to be taken in the next 12 months, 2) expected cash and non-cash
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, Contingencies and Legal Proceedings
In November 2004, a civil collective action complaint was filed against us in the United States District Court
for the Eastern District of Louisiana, alleging 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, approximately
1,100 individuals had joined the Louisiana matter. We filed a motion to decertify the class and the motion was
denied on August 24, 2007. The trial began on May 7, 2008 and concluded on May 15, 2008. On June 20, 2008,
the court issued an Order decertifying the action and dismissed, without prejudice, the claims of the opt-in
plaintiffs. After this ruling, four named-plaintiffs remained before the Court. On January 26, 2009, three of
the plaintiffs presented their respective cases before the Court. Since then, one of the plaintiffs in the January
action and the fourth plaintiff dismissed their claims against us with prejudice. Since we are awaiting a decision
from the Court we cannot make a determination as to the probability of a loss contingency resulting from the
Louisiana matter or the estimated range of possible loss; however, we currently believe that such claims, both
individually and in the aggregate, will be resolved without material adverse effect on our financial condition,
results of operations, or liquidity.
In September 2006, a class action complaint was filed against us in the Superior Court of California, Los
Angeles County, alleging that we violated certain California wage and hour laws by misclassifying California
store managers as exempt employees (“Seals matter”). The plaintiffs seek to recover, on their own behalf and
on behalf of all other individuals who are similarly situated, damages for alleged unpaid overtime, unpaid
minimum wages, wages not paid upon termination, improper wage statements, missed rest breaks, missed
Note 9 — Income Taxes (Continued)