Harris Teeter 2008 Annual Report Download - page 44

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RUDDICK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
Income Taxes
The Company and its subsidiaries file a consolidated federal income tax return. Tax credits are recorded as
a reduction of income taxes in the years in which they are generated. Deferred tax liabilities or assets at the end of
each period are determined using the tax rate expected to be in effect when taxes are settled or realized. Accordingly,
income tax expense will increase or decrease in the same period in which a change in tax rates is enacted. A valuation
allowance is established for deferred tax assets for which realization is not more likely than not.
Earnings Per Share (“EPS”)
Basic EPS is based on the weighted average outstanding common shares. Diluted EPS is based on the
weighted average outstanding common shares adjusted by the dilutive effect of potential common stock
equivalents resulting from the operation of the Company’s comprehensive stock option and awards plans.
Stock Options and Stock Awards
The Company adopted SFAS 123R as of the beginning of the first quarter of fiscal 2006 utilizing the
modified prospective method which requires fair-value accounting for all share-based payments to employees
for new awards and previously granted awards that were not vested as of the adoption date. Compensation
expense for stock awards are based on the grant date fair value and are expensed ratably over their vesting
period, resulting in more expense in the early years. Income tax benefits attributable to stock options exercised
are credited to capital stock.
Other Comprehensive Income
Other comprehensive income refers to revenues, expenses, gains and losses that are not included in
net earnings but rather are recorded directly in shareholders’ equity. The accumulated components of other
comprehensive income, net of taxes at September 28, 2008 were accumulated net losses for minimum pension
liabilities of $33,527,000, accumulated net gains for postemployment liabilities of $78,000 and accumulated net
gains for foreign currency translation adjustments of $6,470,000.
Reclassifications
To conform with classifications used in the current year, the financial statements for the prior year reflect
certain reclassifications.
INVENTORIES
Inventories are valued at the lower of cost or market with the cost of substantially all domestic U.S.
inventories being determined using the last-in, first-out (LIFO) method. The LIFO cost of such inventories
was $32,651,000 and $22,175,000 less than the first-in, first-out (FIFO) cost method at September 28, 2008 and
September 30, 2007, respectively. Foreign inventories and limited categories of domestic inventories, totaling
$76,360,000 for fiscal 2008 and $72,616,000 for fiscal 2007, are valued on the weighted average and on the
FIFO cost methods. The following table summarizes the components of inventories at September 28, 2008 and
September 30, 2007 (in thousands):
2008 2007
Finished Goods .......................................... $ 281,952 $ 264,375
Raw Materials and Supplies ................................ 23,901 24,783
Work in Process ......................................... 6,736 6,504
Total Inventories ......................................... $ 312,589 $ 295,662