Dollar General 2009 Annual Report Download - page 48

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Income Taxes. The effective income tax rates for 2009, 2008, and the 2007 Successor and
Predecessor periods were an expense of 38.5%, an expense of 44.4%, a benefit of 26.9% and an
expense of 300.2%, respectively.
The 2009 income tax rate is greater than the expected U.S. statutory tax rate of 35% due primarily
to the inclusion of state income taxes in the total effective tax rate. The 2009 effective tax rate is less
than the 2008 rate due principally to the unfavorable impact that the non-deductible, merger-related
lawsuit settlement had on the 2008 rate. This reduction in the effective tax rate was partially offset by a
decrease in the tax rate benefit related to federal jobs credits. While the total amount of jobs credits
earned in 2009 was similar to the amount earned in 2008, the impact of this benefit on the effective tax
rate was reduced due to the 2009 increase in income before income taxes.
The 2008 income tax rate was greater than the expected U.S. statutory tax rate of 35% principally
due to the non-deductibility of the settlement and related expenses associated with the shareholder
lawsuit related to our 2007 merger.
The income tax rate for the Successor period ended February 1, 2008 is a benefit of 26.9%. This
benefit is less than the expected U.S. statutory rate of 35% due to the incurrence of state income taxes
in several of the group’s subsidiaries that file their state income tax returns on a separate entity basis
and the election to include, effective February 3, 2007, income tax related interest and penalties in the
amount reported as income tax expense.
The income tax rate for the Predecessor period ended July 6, 2007 is an expense of 300.2%. This
expense is higher than the expected U.S. statutory rate of 35% due principally to the non-deductibility
of certain acquisition related expenses.
Off Balance Sheet Arrangements
We lease three of our distribution centers. The entities involved in the ownership structure
underlying these leases meet the accounting definition of a Variable Interest Entity (‘‘VIE’’). One of
these distribution centers has been recorded as a financing obligation whereby its property and
equipment are reflected in our consolidated balance sheets. The land and buildings of the other two
distribution centers have been recorded as operating leases. We are not the primary beneficiary of
these VIEs and, accordingly, have not included these entities in our consolidated financial statements.
Other than the foregoing, we are not party to any off balance sheet arrangements.
Unaudited Pro Forma Condensed Consolidated Financial Information
The following supplemental unaudited pro forma condensed consolidated statement of operations
data has been developed by applying pro forma adjustments to our historical consolidated statement of
operations. We were acquired on July 6, 2007 through a merger accounted for as a reverse acquisition.
Although we continued as the same legal entity after the merger, the accompanying unaudited pro
forma condensed consolidated financial information is presented for the Predecessor and Successor
relating to the periods preceding and succeeding the merger, respectively. As a result of the merger, we
applied purchase accounting standards and a new basis of accounting effective July 7, 2007. The
unaudited pro forma condensed consolidated statement of operations for the year ended February 1,
2008 gives effect to the merger as if it had occurred on February 3, 2007. Assumptions underlying the
pro forma adjustments are described in the accompanying notes, which should be read in conjunction
with this unaudited pro forma condensed consolidated financial statement.
The unaudited pro forma adjustments are based upon available information and certain
assumptions that we believe are reasonable under the circumstances. The unaudited pro forma
condensed consolidated financial information is presented for supplemental informational purposes
only, although we believe this information is useful in providing comparisons between years. The
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