Note 5 - Income Taxes

12 Months Ended

Jul. 28, 2012

Notes

Note 5 - Income Taxes

NOTE 5 — INCOME TAXES

The components of the provision for income taxes are:

	2012	2011	2010
Federal:
Current	$16,009	$12,539	$14,995
Deferred	931	(952)	(977)
State:
Current	5,165	4,265	4,142
Deferred	158	(591)	77
`	$22,263	15,261	$18,237

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax liabilities and assets are as follows:

	July 28, 2012	July 30, 2011	July 31, 2010
Deferred tax assets:
Leasing activities	$4,893	$4,261	$3,565
Federal benefit of uncertain tax positions	6,681	5,514	4,474
Compensation related costs	4,344	5,922	3,902
Pension costs	10,316	7,429	6,947
Other	1,656	1,062	1,030
Total deferred tax assets	27,890	24,188	19,918
Deferred tax liabilities:
Tax over book depreciation	17,826	16,651	14,511
Patronage dividend receivable	4,392	3,656	3,550
Investment in partnerships	950	950	950
Other	163	170	170
Total deferred tax liabilities	23,331	21,427	19,181
Net deferred tax asset	$4,559	$2,761	$737

Deferred income tax assets (liabilities) are included in the following captions on the consolidated balance sheets at July 28, 2012 and July 30, 2011:

	2012	2011
Other current assets	$4,154	$3,583
Other assets	1,644	-
Accounts payable and accrued expenses	(714)	(545)
Other liabilities	(525)	(277)

A valuation allowance is provided when it is more likely than not that some portion of the deferred tax assets will not be realized. In management’s opinion, in view of the Company’s previous, current and projected taxable income and reversal of deferred tax liabilities, such tax assets will more likely than not be fully realized. Accordingly, no valuation allowance was deemed to be required at July 28, 2012 and July 30, 2011.

The effective income tax rate differs from the statutory federal income tax rate as follows:

	2012		2011		2010
Statutory federal income tax rate	35.0	%	35.0	%	35.0	%
State income taxes, net of federal tax benefit	6.4		6.6		6.3
Other	0.1		0.5		0.5
Effective income tax rate	41.5	%	42.1	%	41.8	%

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

	2012	2011
Balance at beginning of year	$12,476	$10,249
Additions based on tax positions related to the current year	2,419	2,227
Balance at end of year	$14,895	$12,476

Unrecognized tax benefits at July 28, 2012 and July 30, 2011 include tax positions of $9,682 and $8,109 (net of federal benefit), respectively, that would reduce the Company’s effective income tax rate, if recognized in future periods.

The Company recognizes interest and penalties on income taxes in income tax expense. The Company recognized $1,008, $817, and $696, related to interest and penalties on income taxes in fiscal 2012, 2011, and 2010, respectively. The amount of accrued interest and penalties included in the consolidated balance sheet was $4,609 and $3,601 at July 28, 2012 and July 30, 2011, respectively.

The state of New Jersey audited the Company’s tax returns for fiscal 2002 through 2005 and has assessed two separate tax deficiencies related to nexus and the deductibility of certain payments between subsidiaries. The Company contested both these assessments through the state’s conference and appeals process. During fiscal 2011, Village received two determinations that the Company’s protests were denied. The Company has filed two complaints in Tax Court against the New Jersey Division of Taxation contesting these decisions. In addition, during fiscal 2012 the state of New Jersey audited the Company’s tax returns for fiscal 2006 through 2009 and has assessed a tax deficiency related to the same issue as above. The Company is currently contesting this assessment through the state’s conference and appeals process.  The ultimate resolution of these matters could significantly increase or decrease the total amount of the Company’s unrecognized tax benefits. An examination of the Company’s fiscal 2009 federal tax return was completed in fiscal 2011 with no change.