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36’04฀Annual฀Report
Notes฀to฀Consolidated฀Financial฀Statements฀
(continued)
Note฀C—Accrued฀Expenses฀
Accrued฀expenses฀at฀August฀28,฀2004,฀and฀August฀30,฀2003,฀consisted฀of฀the฀following:
(in฀thousands)
August฀28,฀
2004
฀
August฀30,฀
2003
Medical฀and฀casualty฀insurance฀claims $110,227 $฀ 92,666
Accrued฀compensation฀and฀related฀payroll฀taxes 83,650 87,955
Property฀and฀sales฀taxes 46,780 44,371
Accrued฀interest 23,041 18,651
Accrued฀sales฀and฀warranty฀returns 11,493 78,482
Other 35,689
฀
39,341
$310,880
฀
$361,466
The฀Company฀or฀the฀vendors฀supplying฀its฀products฀provide฀its฀customers฀limited฀warranties฀on฀certain฀products฀that฀range฀from฀30฀days฀
to฀lifetime฀warranties.฀In฀most฀cases,฀the฀Company’s฀vendors฀are฀primarily฀responsible฀for฀warranty฀claims.฀Warranty฀costs฀relating฀to฀mer-
chandise฀sold฀under฀warranty฀not฀covered฀by฀vendors฀are฀estimated฀and฀recorded฀as฀warranty฀obligations฀at฀the฀time฀of฀sale฀based฀on฀each฀
product’s฀historical฀return฀rate.฀These฀obligations,฀which฀are฀often฀funded฀by฀vendor฀allowances,฀are฀recorded฀as฀a฀component฀of฀accrued฀
expenses.฀The฀Company฀periodically฀assesses฀the฀adequacy฀of฀its฀recorded฀warranty฀liability฀and฀adjusts฀the฀amount฀as฀necessary฀resulting฀
in฀income฀or฀expense฀recognition.฀The฀Company฀has฀successfully฀negotiated฀with฀certain฀vendors฀to฀transfer฀warranty฀obligations฀to฀such฀
vendors฀in฀order฀to฀minimize฀the฀Company’s฀warranty฀exposure฀resulting฀in฀credits฀to฀earnings฀of฀$42.1฀million฀in฀fiscal฀2004฀and฀$8.7฀
million฀in฀fiscal฀2003,฀and฀ongoing฀reductions฀in฀allowances฀received฀and฀claim฀settlements.฀Changes฀in฀the฀Company’s฀accrued฀sales฀and฀
warranty฀returns฀for฀the฀last฀three฀fiscal฀years฀consisted฀of฀the฀following:
฀ Year฀Ended
(in฀thousands)
August฀28,฀
2004 ฀
August฀30,฀
2003 ฀
August฀31,฀
2002
Balance,฀beginning฀of฀fiscal฀year $฀78,482 $฀ 82,035 $฀ 63,467
฀ Allowances฀received฀from฀vendors 37,388 116,808 109,498
฀ Expense฀(income) (42,094) (25,522) 2,978
฀ Claim฀settlements (62,283) ฀ (94,839)฀ (93,908)
Balance,฀end฀of฀fiscal฀year $฀11,493 ฀ $฀ 78,482 ฀ $฀ 82,035
Note฀D—Income฀Taxes฀
The฀provision฀for฀income฀tax฀expense฀for฀each฀of฀the฀last฀three฀fiscal฀years฀consisted฀of฀the฀following:
Year฀Ended
(in฀thousands)
August฀28,฀
2004 ฀
August฀30,฀
2003 ฀
August฀31,฀
2002
Current:
฀ Federal $268,013 $219,699 $210,457
฀ State 27,189 ฀ 30,003 ฀ 24,060
295,202 249,702 234,517
Deferred:
฀ Federal 41,532 60,835 26,200
฀ State 2,966 ฀ 4,866 ฀ 2,283
44,498 ฀฀ 65,701 ฀ 28,483
$339,700 ฀ $315,403 ฀ $263,000
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
(in฀thousands)
August฀28,฀
2004 ฀
August฀30,฀
2003 ฀
August฀31,฀
2002
Expected฀tax฀at฀statutory฀rate $317,066 $291,552 $241,902
State฀income฀taxes,฀net 19,601 22,665 17,123
Other 3,033 ฀ 1,186 ฀ 3,975
$339,700 ฀ $315,403 ฀ $263,000