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Income Taxes
6 Months Ended
Aug. 30, 2013
Income Tax Disclosure [Abstract]  
Income Taxes

Note 16 – Income Taxes

The Corporation’s provision for income taxes in interim periods is computed by applying its estimated annual effective tax rate against income (loss) before income tax expense (benefit) for the period. In addition, non-recurring or discrete items are recorded during the period in which they occur. The magnitude of the impact that discrete items have on the Corporation’s quarterly effective tax rate is dependent on the level of income in the period. The effective tax rate was 191.9% and 51.6% for the three and six months ended August 30, 2013, respectively, and 29.9% and 31.1% for the three and six months ended August 24, 2012, respectively. The higher than statutory rate in the current period is due primarily to the recording of an $8.0 million valuation allowance against certain net operating loss and foreign tax credit carryforwards which the Corporation believes will expire unused. The valuation allowance was recorded in accordance with Internal Revenue Code sections 382 and 383 due to the Merger as previously disclosed in Note 3. The lower than statutory rate for the prior period was due primarily to the release of reserves upon lapse of the applicable statutes.

 

At February 28, 2013, the Corporation had unrecognized tax benefits of $21.7 million that, if recognized, would have a favorable effect on the Corporation’s income tax expense of $18.5 million. There were no significant changes to this amount during the first two quarters of 2014. It is reasonably possible that the Corporation’s unrecognized tax positions as of February 28, 2013 could decrease $3.1 million during the next twelve months due to anticipated settlements and resulting cash payments related to open years after 1996, which are currently under examination.

The Corporation recognizes interest and penalties accrued on unrecognized tax benefits and refundable income taxes as a component of income tax expense. During the six months ended August 30, 2013, the Corporation recognized net expense of $0.1 million for interest and penalties on unrecognized tax benefits and refundable income taxes. As of August 30, 2013, the total amount of gross accrued interest and penalties related to unrecognized tax benefits less refundable income taxes was a net payable of $4.6 million.

The Corporation is subject to examination by the Internal Revenue Service for tax years 2010 to the present and various U.S. state and local jurisdictions for tax years 1996 to the present. The Corporation is also subject to tax examination in various international tax jurisdictions including Australia, Canada, New Zealand and the United Kingdom for tax years 2006 to the present.