
	INCOME TAXES

The income tax provisions reflect tax rates of 33.8% in the quarter and 35.9% year-to-date in 2014, compared with 37.4% and 34.6%, respectively, a year ago. The major components of the year-over-year change in tax rates were an increase in operating earnings before income taxes, a decrease in tax credits and an increase in the market performance of insurance products used to fund certain non-qualified retirement plans which are excluded from taxable income. The final annual tax rate cannot be determined until the end of the fiscal year; therefore, the actual 2014 rate could differ from our current estimates.

During the quarter ended July 6, 2014, the Company completed a fixed asset cost segregation study. The study resulted in a $4.3 million increase in current deferred tax assets, a $38.8 million decrease in non-current deferred tax assets, a $9.9 million decrease in income taxes payable, a $24.3 million increase in income tax refunds receivable and $0.3 million of income tax expense.

At July 6, 2014, our gross unrecognized tax benefits associated with uncertain income tax positions were $0.8 million, which if recognized would favorably impact the effective income tax rate. There was no significant change in our gross unrecognized tax benefits from the end of fiscal year 2013. It is reasonably possible that changes to the gross unrecognized tax benefits will be required within the next twelve months due to the possible settlement of state tax audits.

The major jurisdictions in which the Company files income tax returns include the United States and states in which we operate that impose an income tax. The federal statutes of limitations have not expired for fiscal years 2011 and forward. The Company’s federal statute of limitations for fiscal year 2009 was extended and remains open. The statutes of limitations for California and Texas, which constitute the Company’s major state tax jurisdictions, have not expired for fiscal years 2009 and forward. However, the Company has pending appeals for California (related to fiscal years 2001 to 2007) and Texas (related to fiscal year 2007) for specific claims.