Note 4 - Income Taxes

12 Months Ended

Aug. 31, 2013

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

4. Income Taxes

The provision for income taxes consists of the following (in thousands):

Year ended	August 31, 2013		August 25, 2012			August 27, 2011
Current:
Federal	$	39,455	$	43,470		$	22,372
Foreign		3,999		3,604			3,664
State		6,722		8,066			5,089
Total current	$	50,176	$	55,140		$	31,125
Deferred:
Federal	$	17,514	$	540		$	11,424
Foreign		151		90			(94	)
State		3,083		(25	)		1,631
Total deferred	$	20,748	$	605		$	12,961
Total	$	70,924	$	55,745		$	44,086

The following table reconciles the provision for income taxes using the statutory federal income tax rate to the actual provision for income taxes (in thousands):

	August 31, 2013			August 25, 2012			August 27, 2011
Income taxes at the statutory federal income tax rate		35.0	%		35.0	%		35.0	%
State income taxes		3.5			3.5			3.7
Adjustments to tax reserves		-0.1			-0.6			-1.1
Foreign tax rate differential		-0.8			-1.0			-1.0
Permanent and other		0.2			0.1			0.0
Total		37.8	%		37.0	%		36.6	%

The tax effect of items giving rise to the Company’s deferred tax assets and liabilities is as follows (in thousands):

	August 31, 2013		August 25, 2012
Deferred Tax Assets
Payroll and benefit related	$	16,524	$	15,577
Insurance related		13,073		12,928
Environmental		7,133		7,886
Other		11,421		12,588
	$	48,151	$	48,979
Deferred Tax Liabilities
Tax in excess of book depreciation	$	42,512	$	42,282
Purchased intangible assets		28,632		26,666
Rental merchandise in service		38,722		20,992
		109,866		89,940
Net deferred tax liability	$	61,715	$	40,961

The Company has evaluated its deferred tax assets and believes that they will be fully recovered. As a result, the Company has not established a valuation allowance. The Company’s deferred liability related to rental merchandise in service increased from $21.0 million as of August 25, 2012 to $38.7 million as of August 31, 2013 as a result of a change in tax regulations impacting the timing of certain allowable deductions.

As of August 31, 2013 and August 25, 2012, there was $0.7 million and $0.8 million, respectively, in total unrecognized tax benefits, which if recognized, would favorably impact the Company’s effective tax rate. The Company recognizes interest and penalties related to uncertain tax positions as a component of income tax expense which is consistent with the recognition of these items in prior reporting periods. As of August 31, 2013 and August 25, 2012, the Company had accrued a total of $0.1 million in interest and penalties, in its long-term accrued liabilities. For the year ended August 31, 2013 the Company recognized a nominal benefit in its Consolidated Statement of Income related to interest and penalties. For the year ended August 25, 2012, the Company recognized a benefit in its Consolidated Statement of Income related to interest and penalties totaling $0.5 million.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

Balance at August 27, 2011	$	2,320
Additions based on tax positions related to the current year		137
Statute expirations		(1,406	)
Balance at August 25, 2012	$	1,051
Additions based on tax positions related to the current year		350
Statute expirations		(475	)
Balance at August 31, 2013	$	926

The Company has a significant portion of its operations in the United States and Canada.  It is required to file federal income tax returns as well as state income tax returns in a majority of the U.S. states and also in the Canadian provinces of Alberta, British Columbia, Ontario, Saskatchewan and Quebec.  At times, the Company is subject to audits in these jurisdictions, which typically are complex and can require several years to resolve. The final resolution of any such tax audits could result in either a reduction in the Company’s accruals or an increase in its income tax provision, both of which could have a material impact on the consolidated results of operations in any given period.

U.S. and Canadian federal income tax statutes have lapsed for filings up to and including fiscal years 2009 and 2005, respectively, and the Company recently concluded an audit of U.S. federal income taxes for 2010 and 2011. With a few exceptions, the Company is no longer subject to state and local income tax examinations for periods prior to fiscal 2008. The Company is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change significantly in the next 12 months.