Dollar Tree 2010 Annual Report Download - page 41

Notes to Consolidated Financial Statements
A valuation allowance of $4.8 million, net of
Federal tax benefi ts, has been provided principally for
certain state credit carryforwards and net operating loss
carryforwards. In assessing the realizability of deferred
tax assets, the Company considers whether it is more
likely than not that some portion or all of the deferred
taxes will not be realized. Based upon the availability of
carrybacks of future deductible amounts to the past two
years’ taxable income and the Company’s projections
for future taxable income over the periods in which the
deferred tax assets are deductible, the Company believes
it is more likely than not the remaining existing
deductible temporary differences will reverse during
periods in which carrybacks are available or in which
the Company generates net taxable income.
The company is participating in the Internal
Revenue Service (“IRS”) Compliance Assurance
Program (“CAP”) for the 2010 tax year and will
participate for 2011. This program accelerates the
examination of key transactions with the goal of
resolving any issues before the tax return is fi led. Our
federal tax returns have been examined and all issues
have been settled through our fi scal 2009 tax year. In
addition, several states completed their examination
during fi scal 2010. In general, fi scal years 2007 and
forward are within the statute of limitations for state
tax purposes. The statute of limitations is still open
prior to 2007 for some states.
The balance for unrecognized tax benefi ts at
January 29, 2011, was $15.2 million. The total amount
of unrecognized tax benefi ts at January 29, 2011, that,
if recognized, would affect the effective tax rate was
$10.1 million (net of the federal tax benefi t). The
following is a reconciliation of the Company’s total
gross unrecognized tax benefi ts for the year ended
January 29, 2011:
(in millions)
Balance at January 30, 2010 $ 14.4
Additions, based on tax positions
related to current year 0.7
Additions for tax positions of
prior years 1.0
Reductions for tax positions of
prior years (0.1)
Settlements (0.4)
Lapses in statute of limitations (0.4)
Balance at January 29, 2011 $ 15.2
During fi scal 2010, the Company accrued potential
interest of $0.7 million, related to these unrecognized
tax benefi ts. No potential penalties were accrued during
2010 related to the unrecognized tax benefi ts. As of
January 29, 2011, the Company has recorded a liability
for potential penalties and interest of $0.1 million and
$3.7 million, respectively.
It is possible that state tax reserves will be reduced for
audit settlements and statute expirations within the next
12 months. At this point it is not possible to estimate a
range associated with the resolution of these audits.
NOTE 4—COMMITMENTS AND
CONTINGENCIES
Operating Lease Commitments
Future minimum lease payments under noncancelable
store operating leases are as follows:
(in millions)
2011 $ 415.7
2012 365.5
2013 298.0
2014 234.0
2015 161.9
Thereafter 228.3
Total minimum lease payments $ 1,703.4
The above future minimum lease payments
include amounts for leases that were signed prior to
January 29, 2011 for stores that were not open as of
January 29, 2011.
Minimum rental payments for operating leases
do not include contingent rentals that may be paid
under certain store leases based on a percentage of
sales in excess of stipulated amounts. Future minimum
lease payments have not been reduced by expected
future minimum sublease rentals of $1.8 million under
operating leases.
DOLLAR TREE, INC. ♦ 2010 Annual Report 39