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Income Taxes | 12 Months Ended
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Jul. 31, 2011
Income Taxes |
Income Taxes | F. INCOME TAXES The components of the provision (benefit) for income taxes are as follows:
|  | July 31, |  |  | July 31, |  |  | July 31, |
Income Taxes: |  | 2011 |  |  | 2010 |  |  | 2009 |
Federal |  | $ | 48,943 |  |  | $ | 55,462 |  |  | $ | (2,563) |
State and local |  |  | 250 |  |  |  | 9,337 |  |  |  | 3,304 |
Foreign |  |  | – |  |  |  | (11) |  |  |  | (900) |
Total current expense (benefit) |  |  | 49,193 |  |  |  | 64,788 |  |  |  | (159) |
Federal |  |  | (2,989) |  |  |  | (3,430) |  |  |  | 6,163 |
State and local |  |  | 150 |  |  |  | (29) |  |  |  | 248 |
Total deferred expense (benefit) |  |  | (2,839) |  |  |  | (3,459) |  |  |  | 6,411 |
Total income tax expense |  | $ | 46,354 |  |  | $ | 61,329 |  |  | $ | 6,252 |
Current Federal Tax Expense Current federal tax expense decreased $6,519 to $48,943 from fiscal year 2010 to fiscal year 2011. Of this decrease, $6,568 was due to the reduction in pre-tax income of $18,766. In addition, current federal tax expense decreased by $1,491 as a result of the increased Domestic Manufacturing Deduction in fiscal year 2011 and increased by $1,207 due to increases in various temporary items. Further, current federal tax expense decreased $1,578 when compared to fiscal year 2010 as a result of a disallowed executive compensation deduction in 2010. The other changes to current federal tax expense, including temporary items, are detailed in the schedule below. Current federal tax expense increased $58,025 to $55,462 from fiscal year 2009 to fiscal year 2010. Of this increase, $51,800 was due to the increase in pre-tax income of $147,998. In addition, current federal tax expense increased from fiscal year 2009 to fiscal year 2010 by $1,578 as a result of a disallowed executive compensation deduction in fiscal year 2010 and by $5,902 due to increases in various temporary items. Current federal tax expense decreased by $3,325 as a result of the increased Domestic Manufacturing Deduction in fiscal year 2010 and by $3,027 due to a decrease in the Company's unrecognized tax benefits, primarily related to lapses in the statute of limitations. Further, current federal tax expense for fiscal year 2010 decreased by $3,235 when compared to fiscal year 2009 as a result of the nondeductible goodwill charge in fiscal year 2009. The other changes to current federal tax expense, including temporary items, are detailed in the schedule below. Current State and Local Tax Expense Current state tax expense decreased $9,087 to $250 from fiscal year 2010 to fiscal year 2011. Of this decrease, $657 was due to the reduction in pre-tax income of $18,766. In addition, current state tax expense increased $232 due to increases in various temporary items. Current state tax expense decreased by $2,329 due to a decrease in the Company's state related unrecognized tax benefits and also decreased by $3,731 as a result of a reduction in the Company's state blended tax rate and increased income tax credits. Further, current state tax expense decreased $212 when compared to fiscal year 2010 as a result of the disallowed executive compensation deduction in 2010. The other changes to current state tax expense, including temporary items, are detailed in the schedule below. Current state tax expense increased $6,033 to $9,337 from fiscal year 2009 to fiscal year 2010. Of this increase, $6,956 was due to the increase in pre-tax income of $147,998. In addition, current state tax expense increased from fiscal year 2009 to fiscal year 2010 by $212 as a result of disallowed executive compensation in fiscal year 2010, by $635 due to increases in various temporary items, and by $1,096 due to an increase in the Company's unrecognized tax benefits. Current state tax expense decreased by $472 when compared to fiscal year 2009 as a result of the nondeductible goodwill charge in fiscal year 2009. The other changes to current state tax expense, including temporary items, are detailed in the schedule below. The table below shows the components of the total current income tax expense for fiscal 2011, 2010 and 2009:
|  | July 31, 2011 |  |  | July 31, 2010 |  |  | July 31, 2009 |
Federal tax expense at statutory rates |  | $ | 53,420 |  |  | $ | 59,988 |  |  | $ | 8,188 |
State tax expense at various state tax rates (net of federal benefit) |  |  | 956 |  |  |  | 5,153 |  |  |  | 738 |
Current tax expense effect of accrued product warranties |  |  | 1,698 |  |  |  | 3,622 |  |  |  | (7,253) |
Current tax expense effect of other temporary items |  |  | 1,989 |  |  |  | (407) |  |  |  | 842 |
Income tax credits and incentives |  |  | (2,421) |  |  |  | (1,069) |  |  |  | (3,669) |
Amended returns and tax exam settlements |  |  | – |  |  |  | – |  |  |  | (1,022) |
Domestic production activities deduction |  |  | (5,236) |  |  |  | (3,745) |  |  |  | (420) |
Executive compensation limitation |  |  | – |  |  |  | 1,578 |  |  |  | – |
Goodwill impairment |  |  | – |  |  |  | – |  |  |  | 3,707 |
Tax-exempt interest |  |  | (8) |  |  |  | (55) |  |  |  | (444) |
Change in uncertain tax positions |  |  | (1,426) |  |  |  | (1,931) |  |  |  | 1,271 |
True-up of current tax payable |  |  | (1,169) |  |  |  | 807 |  |  |  | (2,308) |
Other permanent items |  |  | 1,390 |  |  |  | 847 |  |  |  | 211 |
Total Current Income Taxes |  | $ | 49,193 |  |  | $ | 64,788 |  |  | $ | (159) |
The differences between income taxes at the federal statutory rate and the actual income taxes are as follows:
|  | July 31, 2011 |  |  | July 31, 2010 |  |  | July 31, 2009 |
Provision at federal statutory rate |  | $ | 53,420 |  |  | $ | 59,988 |  |  | $ | 8,188 |
State and local income taxes, net of federal benefit |  |  | 978 |  |  |  | 5,124 |  |  |  | 738 |
Income tax credits and incentives |  |  | (2,421) |  |  |  | (1,069) |  |  |  | (3,669) |
Amended returns and tax exam settlements |  |  | – |  |  |  | – |  |  |  | (1,022) |
Domestic production activities deduction |  |  | (5,236) |  |  |  | (3,745) |  |  |  | (420) |
Change in uncertain tax positions |  |  | (1,124) |  |  |  | (278) |  |  |  | 1,271 |
Goodwill impairment |  |  | – |  |  |  | – |  |  |  | 3,707 |
Executive compensation limitation |  |  | – |  |  |  | 1,578 |  |  |  | – |
Reduction of excess current tax payable and deferred tax liabilities |  |  | (645) |  |  |  | (1,061) |  |  |  | (2,308) |
Tax-exempt interest |  |  | (8) |  |  |  | (55) |  |  |  | (444) |
Other permanent items |  |  | 1,390 |  |  |  | 847 |  |  |  | 211 |
Income Taxes |  | $ | 46,354 |  |  | $ | 61,329 |  |  | $ | 6,252 |
Income before income taxes includes foreign income (loss) of $0, $(8,154) and $(2,659) in fiscal 2011, 2010 and 2009, respectively. The Company's foreign subsidiary was sold on April 30, 2010.
A summary of deferred income taxes is as follows: |  | July 31, |  |  | July 31, |
|  | 2011 |  |  | 2010 |
Current deferred tax asset (liability): |  |  |  |  |  |  |  |  |  |  |  |
Inventory basis |  |  |  | $ | (251) |  |  |  |  | $ | (715) |
Employee benefits |  |  |  |  | 3,102 |  |  |  |  |  | 2,506 |
Self-insurance reserves |  |  |  |  | 8,036 |  |  |  |  |  | 10,077 |
Accrued product warranties |  |  |  |  | 24,443 |  |  |  |  |  | 19,629 |
Accrued incentives |  |  |  |  | 2,948 |  |  |  |  |  | 2,538 |
Sales returns and allowances |  |  |  |  | 1,231 |  |  |  |  |  | 1,269 |
Accrued expenses |  |  |  |  | 2,938 |  |  |  |  |  | 1,088 |
Unrecognized tax benefits |  |  |  |  | 597 |  |  |  |  |  | 2,406 |
Other |  |  |  |  | (1,456) |  |  |  |  |  | 701 |
Total current net deferred tax asset |  |  |  | $ | 41,588 |  |  |  |  | $ | 39,499 |
Long-term deferred tax asset (liability): |  |  |  |  |  |  |  |  |  |  |  |
Property basis |  |  |  |  | (5,166) |  |  |  |  |  | (1,552) |
Investments |  |  |  |  | (898) |  |  |  |  |  | (1,330) |
Deferred compensation |  |  |  |  | 4,836 |  |  |  |  |  | 3,719 |
Intangibles |  |  |  |  | (37,513) |  |  |  |  |  | (5,436) |
Unrecognized tax benefits |  |  |  |  | 13,882 |  |  |  |  |  | 11,795 |
Total net long-term deferred tax asset (liability) |  |  |  |  | (24,859) |  |  |  |  |  | 7,196 |
Net deferred tax asset |  |  |  | $ | 16,729 |  |  |  |  | $ | 46,695 |
The Company's net deferred tax assets decreased $29,966 to $16,729 from fiscal year 2010 to fiscal year 2011. Of this decrease, $32,647 was due to the net deferred tax liability (primarily intangibles and accrued product warranty) acquired from Heartland and $3,614 was from an increased liability in property basis. These decreases were offset by a $1,117 increase in deferred compensation and a $1,850 increase in accrued expenses. As of July 31, 2011, the Company had a $38 capital loss carryover that it expects to realize The Company's net deferred tax assets increased $3,227 to $46,695 from fiscal year 2009 to fiscal year 2010. Of this increase, $3,622 was due to increased product warranty reserves and $1,491 was due to increased employee benefits. This increase was offset by a $1,653 decrease in the deferred tax asset for unrecognized tax benefits from fiscal year 2009 to fiscal year 2010. As of July 31, 2010, the Company had a $1,843 capital loss carryover that it will realize upon the filing of its 2011 tax returns. Unrecognized Tax Benefits: The Company adopted guidance surrounding accounting for uncertainty in income taxes on August 1, 2007. This guidance clarifies the accounting for uncertainties in income tax law by prescribing a minimum recognition threshold a tax position is required to meet before being recognized for financial accounting purposes. It also provides guidance on derecognition, measurement, classification, interest and penalties, and disclosure. The total amount of unrecognized tax benefits that, if recognized, would impact the Company's effective tax rate were $21,453 for 2011, $20,719 for 2010 and $19,944 for 2009. As of 2009, the Company corrected a misclassification in the presentation of the liability for unrecognized tax benefits. The Company is no longer reporting the liability for unrecognized tax benefits net of the related deferred income tax asset. In the table below, the $11,031 reflects the increase in the liability for unrecognized tax benefits due to the related deferred income tax asset, exclusive of the deferred tax benefit for interest and penalties. Changes in the unrecognized tax benefit during fiscal years 2011, 2010 and 2009 were as follows:
|  | 2011 Unrecognized Tax Benefit |  |  | 2010 Unrecognized Tax Benefit |  |  | 2009 Unrecognized Tax Benefit |
Beginning balance |  |  |  | $ | 31,039 |  |  |  |  | $ | 30,235 |  |  |  |  | $ | 21,032 |
Increase in liability due to federal benefit |  |  |  |  | – |  |  |  |  |  | – |  |  |  |  |  | 11,031 |
Tax positions related to prior years: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Additions |  |  |  |  | 1,817 |  |  |  |  |  | 760 |  |  |  |  |  | 1,880 |
Reductions |  |  |  |  | (1,062) |  |  |  |  |  | (1,883) |  |  |  |  |  | – |
Tax positions related to current year: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Additions |  |  |  |  | 3,713 |  |  |  |  |  | 4,095 |  |  |  |  |  | 622 |
Reductions |  |  |  |  | – |  |  |  |  |  | – |  |  |  |  |  | – |
Settlements |  |  |  |  | (2,642) |  |  |  |  |  | (817) |  |  |  |  |  | (3,002) |
Lapses in statute of limitations |  |  |  |  | (691) |  |  |  |  |  | (1,351) |  |  |  |  |  | (1,328) |
Ending balance |  |  |  | $ | 32,174 |  |  |  |  | $ | 31,039 |  |  |  |  | $ | 30,235 |
It is the Company's policy to recognize interest and penalties accrued relative to unrecognized tax benefits in income tax expense. Interest and penalties are not included in the schedule above of unrecognized tax benefits. The total amount of liabilities accrued for interest and penalties related to unrecognized tax benefits as of July 31, 2011, July 31, 2010 and July 31, 2009, as adjusted to correct the misclassification referred to above, were $12,533, $13,326 and $17,100 respectively. The total amount of interest and penalties recognized in our consolidated statement of operations for July 31, 2011, July 31, 2010 and July 31, 2009 were $(995), $(2,200) and $1,320, respectively. Generally, fiscal years 2008, 2009 and 2010 remain open for federal, state and foreign income tax purposes. The Company and its corporate subsidiaries file a consolidated U.S. federal income tax return and multiple state income tax returns. The federal returns are subject to examination by taxing authorities for all years after fiscal 2007. The Internal Revenue Service audit for fiscal 2007 was completed during 2009. Additionally, the California state income tax audit for fiscal 2003 through fiscal 2006 was settled during 2009. The Company is currently being audited by the state of California for tax years July 31, 2007 and July 31, 2008. The Company has reserved for this exposure in its liability for unrecognized tax benefits. The Company anticipates a decrease of approximately $3,515 in unrecognized tax benefits, $761 in interest and $29 in penalties within the next 12 months from expected settlements or payments of uncertain tax positions and lapses of the applicable statute of limitations. Actual results may differ materially from this estimate.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 136, 172 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 43, 44, 45, 46, 47, 48, 49 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690 + Details
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