AutoZone 2012 Annual Report Download - page 110

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The Company retains a significant portion of the insurance risks associated with workers’ compensation,
employee health, general, products liability, property and vehicle insurance. A portion of these self-insured losses
is managed through a wholly owned insurance captive. The Company maintains certain levels for stop-loss
coverage for each self-insured plan in order to limit its liability for large claims. The limits are per claim and are
$1.5 million for workers’ compensation and property, $0.5 million for employee health, and $1.0 million for
general, products liability, and vehicle.
Note D – Income Taxes
The provision for income tax expense consisted of the following:
Year Ended
(in thousands)
August 25,
2012
August 27,
2011
August 28,
2010
Current:
Federal ............................................................................. $ 449,670 $ 391,132 $ 397,062
State ................................................................................. 47,386 39,473 34,155
497,056 430,605 431,217
Deferred:
Federal ............................................................................. 28,379 49,698 (3,831)
State ................................................................................. (2,822) (5,031) (5,192)
25,557 44,667 (9,023)
Income tax expense ............................................................. $ 522,613 $ 475,272 $ 422,194
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 25,
2012
August 27,
2011
August 28,
2010
Federal tax at statutory U.S. income tax rate ...................... 35.0% 35.0% 35.0%
State income taxes, net ........................................................ 2.0% 1.7% 1.6%
Other ................................................................................... (1.0%) (0.8%) (0.2%)
Effective tax rate ................................................................. 36.0% 35.9% 36.4%
Significant components of the Company's deferred tax assets and liabilities were as follows:
(in thousands)
August 25,
2012
August 27,
2011
Deferred tax assets:
Net operating loss and credit carryforwards ................................................
.
$ 36,605 $ 31,772
Insurance reserves .......................................................................................
.
18,185 17,542
Accrued benefits ..........................................................................................
.
63,320 61,436
Pension ........................................................................................................
.
43,904 30,967
Other ............................................................................................................
.
41,658 39,878
Total deferred tax assets ...........................................................................
.
203,672 181,595
Less: Valuation allowances .....................................................................
.
(9,532) (7,973)
Net deferred tax assets ..........................................................................
.
194,140 173,622
Deferred tax liabilities:
Property and equipment ...............................................................................
.
(67,480) (64,873)
Inventory .....................................................................................................
.
(244,414) (220,234)
Other ............................................................................................................
.
(31,437) (44,303)
Total deferred tax liabilities .................................................................
.
(343,331) (329,410)
Net deferred tax liability .................................................................................
.
$ (149,191) $ (155,788)
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