10.

INCOME TAXES

The fiscal year income taxes consist of the following (in thousands):


	2011			2010			2009
Current:
Federal	$	47,144		$	55,046		$	91,088
State		10,866			8,314			13,442

		58,010			63,360			104,530

Deferred:
Federal		(8,077	)		(24,070	)		(21,846	)
State		(4,755	)		(3,484	)		(3,229	)

		(12,832	)		(27,554	)		(25,075	)

Income tax expense from continuing operations	$	45,178		$	35,806		$	79,455

Income tax benefit from discontinued operations	$	-		$	-		$	(7,465	)

A reconciliation of the federal statutory income tax rate to our effective tax rate is as follows:


	2011		2010		2009
Computed at federal statutory rate		35.0%		35.0%		35.0%
State income taxes, net of federal tax benefit		3.4		3.2		3.2
Benefit of jobs tax credits		(1.5)		(1.8)		(0.7)
Expense/(benefit) related to COLIs		0.3		(2.3)		-
Others, net		(1.3)		(0.3)		0.2

		35.9%		33.8%		37.7%

The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities at each year-end are presented below (in thousands):


	2011			2010
Deferred tax assets:
Accrued pension and postretirement benefits	$	82,706		$	57,817
Accrued insurance		14,263			13,603
Leasing transactions		9,348			11,290
Accrued vacation pay expense		6,605			8,528
Deferred income		2,268			2,436
Other reserves and allowances		29,127			33,893
Tax loss and tax credit carryforwards		4,025			4,087
Share-based compensation		18,853			16,708
Other, net		4,620			4,515

Total gross deferred tax assets		171,815			152,877
Valuation allowance		(4,025	)		(4,087	)

Total net deferred tax assets		167,790			148,790
Deferred tax liabilities:
Property and equipment, principally due to differences in depreciation		(32,677	)		(38,250	)
Intangible assets		(24,021	)		(23,394	)

Total gross deferred tax liabilities		(56,698	)		(61,644	)

Net deferred tax assets	$	111,092		$	87,146

Deferred tax assets at October 2, 2011 include state net operating loss carryforwards of approximately $62.7 million expiring at various times between 2012 and 2029. At October 2, 2011 and October 3, 2010, we recorded a valuation allowance related to state net operating losses of $4.0 million and $4.1 million, respectively. The current year change in the valuation allowance of $0.1 million relates to net operating losses. We believe that it is more likely than not that these loss carryforwards will not be realized and that the remaining deferred tax assets will be realized through future taxable income or alternative tax strategies.

At October 3, 2010, our gross unrecognized tax benefits associated with uncertain income tax positions were $0.6 million, which if recognized, would favorably affect the effective income tax rate. As of October 2, 2011, the gross unrecognized tax benefits remain unchanged. A reconciliation of the beginning and ending amount of unrecognized tax benefits follows (in thousands):


	2011		2010
Balance beginning of year	$	629	$	608
Increases to tax positions recorded during current years		-		200
Reductions to tax positions due to settlements with taxing authorities		-		(179	)

Balance at end of year	$	629	$	629

From time to time, we may take positions for filing our tax returns which may differ from the treatment of the same item for financial reporting purposes. The ultimate outcome of these items will not be known until the IRS has completed its examination or until the statute of limitations has expired.

It is reasonably possible that changes of approximately $0.4 million to the gross unrecognized tax benefits will be required within the next twelve months. These changes relate 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 2008 and forward. The statutes of limitations for California and Texas, which constitute the Company's major state tax jurisdictions, have not expired for fiscal years 2001 and 2007, respectively, and forward. Generally, the statutes of limitations for the other state jurisdictions have not expired for fiscal years 2008 and forward.