Income Taxes

12 Months Ended

Jun. 30, 2011

Income Taxes

Income Taxes

Note 5 –   Income Taxes

We and our domestic subsidiaries file a consolidated Federal income tax return. Taxes based on income for the years ended June 30 have been provided as follows:

	2011	2010	2009
Currently payable:
Federal	$ 43,140	$ 55,422	$40,019
State and local	4,542	3,933	3,858
Total current provision	47,682	59,355	43,877
Deferred Federal, state and local provision	7,460	814	4,043
Total taxes based on income	$ 55,142	$ 60,169	$ 47,920

Certain tax benefits recorded directly to common stock for each of the years ending June 30 were as follows:

	2011	2010	2009
Tax benefits recorded directly to common stock	$    479	$     674	$    213

For the years ended June 30, our effective tax rate varied from the statutory Federal income tax rate as a result of the following factors:

	2011	2010	2009
Statutory rate	35.0 %	35.0 %	35.0 %
State and local income taxes	1.9 %	1.5 %	2.1 %
ESOP dividend deduction	(0.2)%	(0.1)%	(0.2)%
Domestic manufacturing deduction	(2.5)%	(1.9)%	(1.8)%
Other	(0.1)%	(0.1)%	(0.1)%
Effective rate	34.1 %	34.4 %	35.0 %

The tax effect of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at June 30 are comprised of:

	2011	2010
Deferred tax assets:
Inventories	$ 4,101	$ 3,499
Employee medical and other benefits	9,459	10,892
Receivable and other allowances	4,423	4,625
Other accrued liabilities	3,437	3,591
Total deferred tax assets	21,420	22,607
Total deferred tax liabilities–property and other	(20,429)	(12,380)
Net deferred tax asset	$    991	$ 10,227

Net current deferred tax assets and prepaid Federal, state and local income taxes were included in Deferred Income Taxes and Other Current Assets on the Consolidated Balance Sheet. The related balances at June 30 are as follows:

	2011	2010
Net current deferred tax assets	$ 15,739	$     14,681
Prepaid Federal, state and local income taxes	$   8,140	$        7,863

Cash payments for income taxes for each of the years ending June 30 were as follows:

	2011	2010	2009
Cash payments for income taxes	$ 47,598	$ 66,236	$ 30,415

The gross tax contingency reserve at June 30, 2011 was approximately $1.8 million. The unrecognized tax benefits recorded as the gross tax contingency reserve noted in the following table for June 30, 2011 and 2010 would affect our effective tax rate, if recognized.

The following table sets forth changes in our total gross tax contingency reserve (including interest and penalties):

	2011	2010
Balance, beginning of year	$1,921	$ 2,932
Tax positions related to current year:
Additions	18	15
Reductions	–	–
Tax positions related to prior years:
Additions	455	640
Reductions	(599)	(32)
Decreases due to settlements with taxing authorities	–	(1,634)
Balance, end of year	$1,795	$ 1,921

We have classified approximately $0.1 million of the gross tax contingency reserve at June 30, 2011 as current liabilities as these amounts are expected to be resolved within the next 12 months. The remaining liability of approximately $1.7 million is included in long-term liabilities. We expect that the amount of these liabilities will change within the next 12 months; however, we do not expect the change to have a significant effect on our financial position or results of operations.

During 2010, we executed several state tax voluntary disclosure agreements. The settlement of these liabilities resulted in pre-tax income of approximately $0.9 million, which impacted our effective tax rate for 2010 by approximately 0.4%.

        We recognize interest and penalties related to these tax liabilities in income tax expense. For each of the years ended June 30, we recognized the change in the accrual for net tax-related interest and penalties as follows:

	2011	2010
Expense (benefit) recognized for the net tax-related interest and penalties	$    96	$   (445)

        We had accrued interest and penalties at June 30 as follows:

	2011	2010
Accrued interest and penalties included in the gross tax contingency reserve..	$  802	$    706

        We file income tax returns in the U.S. and various state and local jurisdictions. With limited exceptions, we are no longer subject to examination of U.S. Federal or state and local income taxes for years prior to 2008.

The American Jobs Creation Act provided a tax deduction calculated as a percentage of qualified income from manufacturing in the United States. The deduction percentage for 2011 was 9%. In accordance with FASB guidance, this deduction is treated as a special deduction, as opposed to a tax rate reduction.