Income Taxes

12 Months Ended

Feb. 25, 2012

Income Taxes [Abstract]

INCOME TAXES

NOTE 8—INCOME TAXES

The provision for income taxes consisted of the following:

	2012			2011			2010
Current
Federal	$	71		$	2		$	65
State		14			—			9
Total current		85			2			74
Deferred		(73	)		(15	)		165
Total income tax provision (benefit)	$	12		$	(13	)	$	239

The difference between the actual tax provision and the tax provision computed by applying the statutory federal income tax rate to earnings (losses) before income taxes is attributable to the following:

	2012			2011			2010
Federal taxes based on statutory rate	$	(360	)	$	(533	)	$	221
State income taxes, net of federal benefit		(1	)		(4	)		20
Goodwill and intangible asset impairment		375			542			—
Other		(2	)		(18	)		(2	)
Total income tax provision (benefit)	$	12		$	(13	)	$	239

Deferred income taxes reflect the net tax effects of temporary differences between the bases of assets and liabilities for financial reporting and income tax purposes. The Company’s deferred tax assets and liabilities consisted of the following:

	2012			2011
Deferred tax assets:
Compensation and benefits	$	531		$	435
Self-insurance		217			241
Property, plant and equipment and capitalized lease assets		437			452
Net operating loss carryforward		39			38
Other		222			163
Gross deferred tax assets		1,446			1,329
Valuation allowance		(25	)		(24	)
Total deferred tax assets		1,421			1,305
Deferred tax liabilities:
Property, plant and equipment and capitalized lease assets		(356	)		(345	)
Inventories		(253	)		(267	)
Debt discount		(75	)		(78	)
Intangible assets		(223	)		(342	)
Other		(31	)		(26	)
Total deferred tax liabilities		(938	)		(1,058	)
Net deferred tax asset	$	483		$	247

The Company has valuation allowances to reduce deferred tax assets to the amount that is more-likely-than-not to be realized. The Company currently has state net operating loss (“NOL”) carryforwards of $816 for tax purposes. The NOL carryforwards expire beginning in 2013 and continuing through 2030 and have a $25 valuation allowance.

Changes in the Company’s unrecognized tax benefits consisted of the following:

	2012			2011			2010
Beginning balance	$	182		$	133		$	114
Increase based on tax positions related to the current year		14			18			7
Decrease based on tax positions related to the current year		(1	)		(1	)		(4	)
Increase based on tax positions related to prior years		21			41			34
Decrease based on tax positions related to prior years		(46	)		(9	)		(14	)
Decrease due to lapse of statute of limitations		(5	)		—			(4	)
Ending balance	$	165		$	182		$	133

Included in the balance of unrecognized tax benefits as of February 25, 2012, February 26, 2011 and February 27, 2010 are tax positions of $67, net of tax, $82, net of tax, and $58, net of tax, respectively, that would reduce the Company’s effective tax rate if recognized in future periods.

The Company expects to resolve $11, net, of unrecognized tax benefits within the next 12 months, representing several individually insignificant income tax positions. These unrecognized tax benefits represent items in which the Company may not prevail with certain taxing authorities, based on varying interpretations of the applicable tax law. The Company is currently in various stages of audits, appeals or other methods of review with taxing authorities from various taxing jurisdictions. The resolution of these unrecognized tax benefits would occur as a result of potential settlements from these negotiations. Based on the information available as of February 25, 2012, the Company does not anticipate significant additional changes to its unrecognized tax benefits.

The Company recognized (income) expense related to interest and penalties, net of settlement adjustments, of $2, $10 and ($2) for fiscal 2012, 2011 and 2010, respectively. There was also a reclassification from income taxes payable of ($12) related to prior year IRS audit settlements for fiscal 2012. In addition to the liability for unrecognized tax benefits, the Company had a liability of $40 and $50 as of February 25, 2012 and February 26, 2011, respectively, related to accrued interest and penalties for uncertain tax positions recorded in Other current liabilities and Other long-term liabilities in the Consolidated Balance Sheets. The Company settled various audits during fiscal 2012 and fiscal 2011 resulting in payments of less than $1 and $4, respectively, for interest and penalties.

The Company is currently under examination or other methods of review in several tax jurisdictions and remains subject to examination until the statute of limitations expires for the respective taxing jurisdiction or an agreement is reached between the taxing jurisdiction and the Company. As of February 25, 2012, the Company is no longer subject to federal income tax examinations for fiscal years before 2007 and in most states is no longer subject to state income tax examinations for fiscal years before 2005.