Harris Teeter 2012 Annual Report Download - page 44

The tax effects of temporary differences giving rise to the Company’s consolidated deferred tax assets and liabilities as
of October 2, 2012 and October 2, 2011 are as follows (in thousands):
2012 2011
Deferred Tax Assets:
Employee benefits $ 57,880 $ 44,380
Rent obligations 28,960 23,034
Reserves not currently deductible 18,053 17,163
Vendor allowances 6,626 6,782
Other 14,886 6,142
Total deferred tax assets $ 126,405 $ 97,501
Deferred Tax Liabilities:
Property, plant and equipment $(114,144) $(102,135)
Inventories (14,537) (14,534)
Other (2,621) 815
Total deferred tax liabilities $(131,302) $(115,854)
As of October 2, 2012, the Company had approximately $7,529,000 of cumulative net operating loss carryforwards, which
will begin to expire in fiscal 2018. A valuation allowance of $3,653,000 and $67,000 is included with deferred income taxes
as of October 2, 2012 and October 2, 2011, respectively. The valuation allowance increased by $3,586,000 from fiscal 2011
to fiscal 2012, increased by $13,000 from fiscal 2010 to fiscal 2011 and decreased by $54,000 from fiscal 2009 to fiscal 2010.
The allowance was developed based upon the uncertainty of the realization of certain federal or state deferred tax assets related
to net operating losses and capital loss carryforwards. Although realization is not assured for the remaining deferred tax assets,
it is considered more likely than not that the deferred tax assets will be realized through future taxable earnings.
The following table provides a reconciliation of the unrecognized tax liability for fiscal 2012, 2011 and 2010 (in thousands):
2012 2011 2010
Gross taxes at beginning of year $ 4,338 $ 4,104 $3,956
Additions based on tax positions related to the current year - - -
Additions for tax positions of prior years 185 1,396 876
Reductions for tax positions of prior years (4,073) (1,162) (728)
Reductions for settlements - - -
Reductions for deposits made - - -
Gross taxes at end of year 450 4,338 4,104
Accumulated interest 59 1,322 1,347
Federal tax benefit of state income tax deduction (28) (242) (229)
Balance included in the Consolidated Balance Sheets at end of year $ 481 $ 5,418 $5,222
Because of the impact of deferred tax accounting, other than interest and penalties, the disallowance of the above positions
would not affect the annual effective tax rate but would accelerate the payment of cash to the tax authority to an earlier period.
15. EMPLOYEE BENEFIT PLANS
The Company maintains various retirement benefit plans for substantially all full-time employees of the Company and its
subsidiaries. These plans include the Harris Teeter Supermarkets, Inc. Retirement and Savings Plan (“Savings Plan”) which is
a defined contribution retirement plan, the Harris Teeter Supermarkets, Inc. Employees’ Pension Plan (“Pension Plan”) which
is a qualified non-contributory defined benefit plan and the Harris Teeter Supermarkets, Inc. Supplemental Executive Retirement
Plan (“SERP”) which is a non-qualified supplemental defined benefit pension plan for certain executive officers. Effective
September 30, 2005, participation in the Pension Plan was closed to new entrants and frozen for all participants, with certain
transition benefits provided to those participants that have achieved specified age and service levels on December 31, 2005.
HARRIS TEETER SUPERMARKETS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
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