INCOME TAXES

12 Months Ended

Jul. 28, 2012

Income Taxes [Abstract]

Income Taxes

10. Income Taxes

The Company accounts for income taxes under the asset and liability method. This approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities. The Company's effective income tax rate differs from the statutory rate for the tax jurisdictions where it operates primarily as the result of the impact of non-deductible and non-taxable items and tax credits recognized in relation to pre-tax results. Measurement of certain aspects of the Company's tax positions are based on interpretations of tax regulations, federal and state case law and the applicable statutes.

The components of the provision for income taxes are as follows:

	Fiscal Year Ended
	2012		2011			2010
	(Dollars in thousands)
Current:
Federal	$	11,831	$	(3,116	)	$	2,429
State		3,478		765			531
		15,309		(2,351	)		2,960
Deferred:
Federal		9,392		14,375			1,895
Foreign		49		107			(40	)
State		433		246			66
		9,874		14,728			1,921
Total tax provision	$	25,183	$	12,377		$	4,881

Substantially all of the Company's pre-tax income is from operations in the United States. There were immaterial amounts of pre-tax income related to foreign operations for fiscal 2012, 2011, and 2010.

The deferred tax provision represents the change in the deferred tax assets and liabilities representing the tax consequences of changes in the amount of temporary differences and changes in tax rates during the year. The significant components of deferred tax assets and liabilities are comprised of the following:

	July 28,			July 30,
	2012			2011
	(Dollars in thousands)
Deferred tax assets:
Insurance and other reserves	$	22,014		$	23,396
Allowance for doubtful accounts and reserves		484			708
Net operating loss carryforwards		1,473			6,907
Other		4,378			4,333
Total deferred tax assets		28,349			35,344
Valuation allowance		(1,696	)		(2,097	)
Deferred tax assets, net of valuation allowance	$	26,653		$	33,247
Deferred tax liabilities:
Property and equipment	$	35,832		$	35,935
Goodwill and intangibles		24,039			20,592
Other		686			686
Deferred tax liabilities	$	60,557		$	57,213
Net deferred tax liabilities	$	(33,904	)	$	(23,966	)

The above valuation allowance reduces the deferred tax asset balances to the amount that the Company has determined is more likely than not to be realized. Prior to fiscal 2009, the Company incurred non-cash impairment charges on an investment for financial statement purposes and recorded a deferred tax asset reflecting the tax benefits of those impairment charges. During the first quarter of fiscal 2010, the investment became impaired for tax purposes and the Company determined that it was more likely than not that the associated tax benefit would not be realized prior to its eventual expiration. Accordingly, the Company recognized a non-cash income tax charge of $1.1 million for a valuation allowance of the associated deferred tax asset during fiscal 2010.  During fiscal 2012, the Company was able to utilize approximately $0.3 million of the underlying tax asset.  As a result, there is $0.8 million remaining in the valuation allowance related to the investment that became impaired during fiscal 2010. The remaining valuation allowance was deemed necessary due to the uncertainty of the Company's ability to benefit from several state deferred tax assets for net operating loss carryforwards.  As of July 28, 2012, the Company had immaterial state net operating loss carryforwards, which generally begin to expire in fiscal 2022.

The difference between the total tax provision and the amount computed by applying the statutory federal income tax rates to pre-tax income is as follows:

	Fiscal Year Ended
	2012			2011		2010
	(Dollars in thousands)
Statutory rate applied to pre-tax income	$	22,600		$	9,970	$	3,756
State taxes, net of federal tax benefit		2,766			659		388
Non-deductible and non-taxable items		208			1,517		1,064
Change in accruals for uncertain tax positions		93			53		(823	)
Valuation allowance of deferred tax asset		(313	)		-		1,090
Other items, net		(171	)		178		(594	)
Total tax provision	$	25,183		$	12,377	$	4,881

The Company files income tax returns in the U.S. federal jurisdiction, multiple state jurisdictions and in Canada. With limited exceptions, the Company is no longer subject to U.S. federal and most state and local income tax examinations for fiscal years ended 2008 and prior. During fiscal 2012 the Company was notified by the Internal Revenue Service that its federal income tax return for a recent period was selected for examination. Management believes its provision for income taxes is adequate; however, any significant assessment could affect the Company's results of operations and cash flows.

In the normal course of business, tax positions exist for which the ultimate outcome is uncertain. The Company establishes reserves against some or all of the tax benefit of the Company's tax positions at the time the Company determines that the ultimate outcome becomes uncertain. For purposes of evaluating whether a tax position is uncertain, management presumes the tax position will be examined by the relevant taxing authority; the technical merits of a tax position are derived from authorities in the tax law and their applicability to the facts and circumstances of the tax position; and each tax position is evaluated without consideration of the possibility of offset or aggregation with other tax positions taken. A number of years may elapse before a particular uncertain tax position is audited and finally resolved or when a tax assessment is raised. The number of years subject to tax assessments varies depending on the tax jurisdiction. The tax benefit that has been previously reserved because of a failure to meet the "more likely than not" recognition threshold would be recognized in the Company's income tax expense in the first interim period when the uncertainty disappears; when the matter is effectively settled; or when the applicable statute of limitations expires.

A summary of unrecognized tax benefits is as follows (dollars in thousands):

	Fiscal Year Ended
	2012			2011			2010
	(Dollars in thousands)
Balance at beginning of year	$	2,054		$	1,977		$	2,897
Additions based on tax positions related to the fiscal year		154			226			231
Additions based on tax positions related to prior years		6			36			74
Reductions related to the expiration of statutes of limitation		(20	)		(185	)		(1,225	)
Balance at end of year	$	2,194		$	2,054		$	1,977

During fiscal 2010 the provision for income taxes included the reversal of $1.2 million of certain income tax liabilities which were no longer required due to the expiration of statutes of limitation. These amounts were immaterial during fiscal 2012 and 2011. As of July 28, 2012 and July 30, 2011, the Company had total unrecognized tax benefits of $2.2 million and $2.1 million, respectively, which would reduce the Company's effective tax rate during future periods if it is subsequently determined that those liabilities are not required. The Company had approximately $0.6 million and $0.5 million for the payment of interest and penalties accrued at July 28, 2012 and July 30, 2011, respectively. The Company recognizes interest related to unrecognized tax benefits in interest expense and penalties in general and administrative expenses. Interest expense related to unrecognized tax benefits was immaterial for each of fiscal 2012, 2011, and 2010.