Safeway 2011 Annual Report Download - page 78

SAFEWAY INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
strategy to reduce the overall incremental tax cost of repatriation to an acceptable level, and Safeway’s Board of Directors
declared a $1.1 billion dividend from the Company’s Canadian subsidiary. Safeway accrued taxes on that dividend of
$98.9 million.
Safeway anticipates that it will continue to repatriate future Canadian earnings to the United States, and accordingly,
following the $1.1 billion dividend, began accruing taxes on current Canadian earnings effective as of the second quarter
of 2011.
At year-end 2011, no deferred tax liability has been recognized for the $1.2 billion of unremitted foreign earnings
accumulated prior to the second quarter of 2011, because the Company intends to utilize those earnings in the foreign
operations for an indefinite period of time. If Safeway did not consider these earnings to be indefinitely reinvested, the
deferred tax liability would have been in the range of $125.0 million to $160.0 million at year-end 2011.
A reconciliation of the beginning and ending amount of unrecognized tax benefits follows (in millions):
2011 2010 2009
Balance at beginning of year $159.9 $151.0 $129.2
Additions based on tax positions related to the current year 17.8 4.3 4.1
Additions for tax positions of prior years 0.5 10.6 105.3
Reductions for tax positions of prior years (3.5) (4.7) (69.2)
Foreign currency translation (0.1) 0.4 1.0
Expiration of statute of limitations –(0.8) (0.9)
Settlements (13.3) (0.9) (18.5)
Balance at end of year $161.3 $159.9 $151.0
As of December 31, 2011, January 1, 2011 and January 2, 2010, the balance of unrecognized tax benefits included tax
positions of $43.1 million (net of tax), $43.7 million (net of tax) and $37.4 million (net of tax), respectively, that would
reduce the Company’s effective income tax rate if recognized in future periods.
Income tax expense in 2011, 2010 and 2009 included benefits of $0.4 million (net of tax), $0.5 million (net of tax) and
$10.0 million (net of tax), respectively, related to interest and penalties. As of December 31, 2011 and January 1, 2011,
the Company’s accrual for net interest and penalties was a liability of $3.0 million and $2.0 million, respectively.
The Company and its domestic subsidiaries file income tax returns with federal, state and local tax authorities within the
United States. The Company’s foreign affiliates file income tax returns in various foreign jurisdictions, the most significant
of which are Canada and certain of its provinces. The IRS examination of the Company’s federal income tax returns for
2004 and 2005 is complete. With limited exceptions, including certain income tax refund claims, the Company is no
longer subject to federal income tax examinations for fiscal years before 2006, and is no longer subject to state and local
income tax examinations for fiscal years before 2002. With limited exceptions, including proposed deficiencies which the
Company is protesting, Safeway’s foreign affiliates are no longer subject to examination by Canada and certain of its
provinces for fiscal years before 2006.
The Company does not anticipate that unrecognized tax benefits will significantly change in the next 12 months.
Note K: Employee Benefit Plans and Collective Bargaining Agreements
Pension Plans The Company maintains defined benefit, non-contributory retirement plans for substantially all of its
employees not participating in multiemployer pension plans. Safeway recognizes the funded status of its retirement plans
on its consolidated balance sheet.
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