INCOME TAXES

12 Months Ended

Jul. 30, 2011

INCOME TAXES

INCOME TAXES

(14) INCOME TAXES

        For the fiscal year July 30, 2011, income before income taxes consisted of $118.5 million from U.S. operations and $7.9 million from foreign operations. For the fiscal year ended July 31, 2010, income (loss) before income taxes consists of $112.9 million from U.S. operations and ($0.9) million from foreign operations. All income before income taxes for the fiscal year ended August 1, 2009 is from U.S. operations.

        Total federal and state income tax (benefit) expense consists of the following:

	Current			Deferred			Total
	(In thousands)
Fiscal year ended July 30, 2011:
U.S. Federal	$	24,971		$	14,273		$	39,244
State & Local		7,091			1,207			8,298
Foreign		2,180			40			2,220
	$	34,242		$	15,520		$	49,762
Fiscal year ended July 31, 2010:
U.S. Federal	$	31,818		$	5,488		$	37,306
State & Local		7,147			(427	)		6,720
Foreign		(345	)		—			(345	)
	$	38,620		$	5,061		$	43,681
Fiscal year ended August 1, 2009:
U.S. Federal	$	32,998		$	(33	)	$	32,965
State & local		7,761			272			8,033
	$	40,759		$	239		$	40,998

        Total income tax expense (benefit) was different than the amounts computed using the United States statutory income tax rate (35%) applied to income before income taxes as a result of the following:

	Fiscal year ended
	July 30, 2011			July 31, 2010			August 1, 2009
	(In thousands)
Computed "expected" tax expense	$	44,252		$	39,201		$	35,064
State and local income tax, net of Federal income tax benefit		5,394			4,368			5,222
Non-deductible expenses		1,111			872			861
Tax effect of share-based compensation		(440	)		78			(65	)
General Business Credits		(1,021	)		(215	)		(325	)
Other, net		466			(623	)		241
Total income tax expense	$	49,762		$	43,681		$	40,998

        Total income tax expense (benefit) for the years ended July 30, 2011, July 31, 2010 and August 1, 2009 was allocated as follows:

	July 30, 2011			July 31, 2010			August 1, 2009
	(In thousands)
Income tax expense	$	49,762		$	43,681		$	40,998
Stockholders' equity, difference between compensation expense for tax purposes and amounts recognized for financial statement purposes		(1,545	)		(1,822	)		598
Other comprehensive income (loss)		502			97			(647	)
	$	48,719		$	41,956		$	40,949

        The tax effects of temporary differences that give rise to significant portions of the net deferred tax assets and deferred tax liabilities at July 30, 2011 and July 31, 2010 are presented below:

	2011			2010
	(In thousands)
Deferred tax assets:
Inventories, principally due to additional costs inventoried for tax purposes	$	5,638		$	4,906
Compensation and benefits related		16,701			14,725
Accounts receivable, principally due to allowances for uncollectible accounts		2,286			2,655
Accrued expenses		7,037			6,586
Other comprehensive income		495			997
Net operating loss carryforwards		7,381			9,298
Other deferred tax assets		71			23
Total gross deferred tax assets		39,609			39,190
Less valuation allowance		5,071			5,052
Net deferred tax assets	$	34,538		$	34,138
Deferred tax liabilities:
Plant and equipment, principally due to differences in depreciation	$	30,333		$	15,546
Intangible assets		20,530			18,495
Other		203			135
Total deferred tax liabilities		51,066			34,176
Net deferred tax liabilities	$	(16,528	)	$	(38	)
Current deferred income tax assets	$	22,023		$	20,560
Non-current deferred income tax liabilities		(38,551	)		(20,598	)
	$	(16,528	)	$	(38	)

        The net increase (decrease) in total valuation in fiscal year 2011, 2010, and 2009 was $19, ($86), and $2,406 respectively.

        At July 30, 2011, the Company had net operating loss carryforwards of approximately $5.1 million for federal income tax purposes. The federal carryforwards are subject to an annual limitation of approximately $0.4 million under Internal Revenue Code Section 382. The carryforwards expire at various times between 2012 and 2024. In addition, the Company had net operating loss carryforwards of approximately $64.1 million for state income tax purposes that expire in years 2013 through 2020. At July 30, 2011, the Company also had state tax credit carryforwards of approximately $0.8 million, which will expire by fiscal 2012.

        In assessing the recoverability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. Due to the fact that the Company has sufficient taxable income in the federal carryback period and anticipates sufficient future taxable income over the periods which the deferred tax assets are deductible, the ultimate realization of deferred tax assets for federal and state tax purposes appears more likely than not at July 30, 2011, with the exception of certain state deferred tax assets. Valuation allowances were established against approximately $5.1 million of state deferred tax assets related to a previous stock-based business combination and certain state tax credit carryforwards. The subsequent release of this valuation allowance, if such release occurs, will reduce income tax expense.

        For the fiscal years ended July 30, 2011 and July 31, 2010, the Company did not have any material unrecognized tax benefits and thus, no significant interest and penalties related to unrecognized tax benefits were recognized. The Company records interest and penalties related to unrecognized tax benefits as a component of income tax expense. In addition, the Company does not expect that the amount of unrecognized tax benefits will change significantly within the next 12 months.

        The Company and its subsidiaries file income tax returns in the United States federal jurisdiction and in various state jurisdictions. Following the acquisition of the SDG assets from SunOpta, UNFI Canada files income tax returns in Canada and certain of its provinces. The Company is no longer subject to U.S. federal tax examinations for years before the Company's fiscal 2008. The tax years that remain subject to examination by state jurisdictions range from the Company's fiscal 2008 to fiscal 2011.