Income Taxes

12 Months Ended

Mar. 29, 2014

NOTE 7 - INCOME TAXES

The components of the provision for income taxes are as follows:

			Year Ended Fiscal March
				2014		2013		2012
			(Dollars in thousands)
Current -
	Federal		$	25,978	$	22,366	$	26,002
	State			1,579		2,266		2,910
				27,557		24,632		28,912
Deferred -
	Federal			4,793		(101)		3,273
	State			(273)		(274)		(111)
				4,520		(375)		3,162
		Total	$	32,077	$	24,257	$	32,074

Deferred tax (liabilities) assets consist of the following:

			March 29,		March 30,
			2014		2013
		(Dollars in thousands)

Goodwill		$	(18,189)	$	(13,104)
Other			(734)		(242)

	Total deferred tax liabilities		(18,923)		(13,346)

Insurance reserves			9,774		8,872
Property and equipment			5,815		6,637
Warranty and other reserves			4,228		4,322
Stock options			3,897		2,982
Deferred rent			1,961		2,086
Accrued compensation			1,650		1,444
Other			5,168		5,477

	Total deferred tax assets		32,493		31,820

	Net deferred tax assets	$	13,570	$	18,474

We have $3.7 million of state net operating loss carryforwards available as of March 29, 2014. The carryforwards expire in varying amounts through 2034. Based on all available evidence, we have determined that it is more likely than not that sufficient taxable income of the appropriate character within the carryforward period will exist for the realization of the tax benefits on existing state net operating loss carryforwards.

We believe it is more likely than not that all other future tax benefits will be realized as a result of current and future income.

A reconciliation between the U. S. federal statutory tax rate and the effective tax rate reflected in the accompanying financial statements is as follows:

		Year Ended Fiscal March
		2014			2013			2012
			Amount	Percent		Amount	Percent		Amount	Percent
		(Dollars in thousands)
Federal income tax based on
	statutory tax rate applied
	to income before taxes	$	30,287	35.0	$	23,388	35.0	$	30,340	35.0
State income tax, net of
	federal income tax benefit		2,097	2.4		1,159	1.7		2,231	2.6
Other			(307)	(0.3)		(290)	(0.4)		(497)	(0.6)
		$	32,077	37.1	$	24,257	36.3	$	32,074	37.0

The following is a rollforward of Monro's liability for income taxes associated with unrecognized tax benefits:

Dollars in thousands	Dollars in thousands
Balance at March 26, 2011	$	5,964
Tax positions related to current year:
Additions		1,000
Reductions
Tax positions related to prior years:
Additions		230
Reductions		(904)
Settlements		(166)
Lapses in statutes of limitations		(640)
Balance at March 31, 2012		5,484
Tax positions related to current year:
Additions		1,198
Reductions
Tax positions related to prior years:
Additions
Reductions
Settlements		(266)
Lapses in statutes of limitations		(712)
Balance at March 30, 2013		5,704
Tax positions related to current year:
Additions		1,678
Reductions
Tax positions related to prior years:
Additions
Reductions		(88)
Settlements		(381)
Lapses in statutes of limitations		(1,013)
Balance at March 29, 2014	$	5,900

The total amount of unrecognized tax benefits was $5.9 million at March 29, 2014, the majority of which, if recognized, would affect the effective tax rate.

In the normal course of business, Monro provides for uncertain tax positions and the related interest and penalties, and adjusts its unrecognized tax benefits and accrued interest and penalties accordingly. During the years ended March 29, 2014, March 30, 2013 and March 31, 2012, we recorded a benefit from the reversal of accrued interest and penalties of approximately $.1 million, $.2 million and $.3 million, respectively, in income tax expense. Additionally, we had approximately $.3 million and $.5 million of interest and penalties associated with uncertain tax benefits accrued as of March 29, 2014 and March 30, 2013, respectively.

Monro is currently under state audit for the fiscal 2011 through 2012 tax years. It is reasonably possible that the examination phase of the audits for these years may conclude in the next 12 months, and that the related unrecognized tax benefits for tax positions taken regarding previously filed tax returns may change from those recorded as liabilities for uncertain tax positions in Monro's Consolidated Financial Statements as of March 29, 2014. However, based on the status of the examinations, it is not possible to estimate the effect of any amount of such change to previously recorded uncertain tax positions.

We file U.S. federal income tax returns and income tax returns in various state jurisdictions. Monro's fiscal 2011 through 2013 U.S. federal tax years and various state tax years remain subject to income tax examinations by tax authorities.

- 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.

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