Income Taxes

12 Months Ended

Aug. 27, 2011

Income Taxes [Abstract]

Income Taxes

Note D — Income Taxes

The provision for income tax expense consisted of the following:

	Year Ended
	August 27,			August 28,			August 29,
(in thousands)	2011			2010			2009
Current:
Federal	$	391,132		$	397,062		$	303,929
State		39,473			34,155			26,450
		430,605			431,217			330,379
Deferred:
Federal		49,698			(3,831	)		46,809
State		(5,031	)		(5,192	)		(491	)
		44,667			(9,023	)		46,318
Income tax expense	$	475,272		$	422,194		$	376,697

A reconciliation of the provision for income taxes to the amount computed by applying the federal statutory tax rate of 35% to income before income taxes is as follows:

	Year Ended
	August 27,			August 28,			August 29,
(in thousands)	2011			2010			2009
Federal tax at statutory U.S. income tax rate		35.0	%		35.0	%		35.0	%
State income taxes, net		1.7	%		1.6	%		1.6	%
Other		(0.8	%)		(0.2	%)		(0.2	%)
Effective tax rate		35.9	%		36.4	%		36.4	%

Significant components of the Company’s deferred tax assets and liabilities were as follows:

	August 27,			August 28,
(in thousands)	2011			2010
Deferred tax assets:
Net operating loss and credit carryforwards	$	31,772		$	25,781
Insurance reserves		17,542			20,400
Accrued benefits		61,436			50,991
Pension		30,967			34,965
Other		39,878			34,764
Total deferred tax assets		181,595			166,901
Less: Valuation allowances		(7,973	)		(7,085	)
		173,622			159,816
Deferred tax liabilities:
Property and equipment		(64,873	)		(35,714	)
Inventory		(220,234	)		(205,000	)
Other		(44,303	)		(19,850	)
		(329,410	)		(260,564	)
Net deferred tax liability	$	(155,788	)	$	(100,748	)

Deferred taxes are not provided for temporary differences of approximately $140.2 million at August 27, 2011, and $91.1 million of August 28, 2010, representing earnings of non-U.S. subsidiaries that are intended to be permanently reinvested. Computation of the potential deferred tax liability associated with these undistributed earnings and other basis differences is not practicable.

At August 27, 2011, and August 28, 2010, the Company had deferred tax assets of $8.0 million and $8.2 million from federal tax operating losses (“NOLs”) of $22.8 million and $23.4 million, and deferred tax assets of $1.1 million and $1.6 million from state tax NOLs of $22.5 million and $35.5 million, respectively. At August 27, 2011, the Company had deferred tax assets of $1.5 million from Non-U.S. NOLs of $5.1 million. At August 28, 2010, the Company had no deferred tax assets from Non-U.S. NOLs. The federal and state NOLs expire between fiscal 2012 and fiscal 2026. At August 27, 2011, and August 28, 2010, the Company had a valuation allowance of $8.0 million and $6.8 million, respectively, for certain federal, state and Non-U.S. NOLs resulting primarily from annual statutory usage limitations. At August 27, 2011, and August 28, 2010, the Company had deferred tax assets of $21.2 million and $16.0 million, respectively, for federal, state, and Non-U.S. income tax credit carryforwards. Certain tax credit carryforwards have no expiration date and others will expire in fiscal 2012 through fiscal 2031. At August 27, 2011, the Company had no valuation allowance for credits subject to such expiration. At August 28, 2010, the Company had a valuation allowance of $0.3 million for credits subject to such expiration periods.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

	August 27,			August 28,
(in thousands)	2011			2010
Beginning balance	$	38,554		$	44,192
Additions based on tax positions related to the current year		6,205			16,802
Additions for tax positions of prior years		11,787			2,125
Reductions for tax positions of prior years		(20,998	)		(6,390	)
Reductions due to settlements		(3,829	)		(16,354	)
Reductions due to statue of limitations		(1,813	)		(1,821	)
Ending balance	$	29,906		$	38,554

Included in the August 27, 2011 balance is $19.3 million of unrecognized tax benefits that, if recognized, would reduce the Company’s effective tax rate.

The Company accrues interest on unrecognized tax benefits as a component of Income tax expense. In addition, penalties, if incurred, would be recognized as a component of Income tax expense. The Company had $5.2 million and $7.9 million accrued for the payment of interest and penalties associated with unrecognized tax benefits at August 27, 2011 and August 28, 2010, respectively.

The major jurisdictions where the Company files income tax returns are the U.S. and Mexico. With few exceptions, tax returns filed for tax years 2007 through 2010 remain open and subject to examination by the relevant tax authorities. The Company is typically engaged in various tax examinations at any given time, both by U.S. federal and state taxing jurisdictions and Mexican tax authorities. As of August 27, 2011, the Company estimates that the amount of unrecognized tax benefits could be reduced by approximately $6.3 million over the next twelve months as a result of tax audit closings, settlements, and the expiration of statutes to examine such returns in various jurisdictions. While the Company believes that it has adequately accrued for possible audit adjustments, the final resolution of these examinations cannot be determined at this time and could result in final settlements that differ from current estimates.