Desert states ufcw pension plan

Document and Entity Information
Document and Entity Information - USD ($) $ in Billions 12 Months Ended
Jan. 28, 2017 Mar. 22, 2017 Aug. 13, 2016
Document and Entity Information Abstract
Entity Registrant Name KROGER CO
Entity Central Index Key 56,873
Document Type 10-K
Document Period End Date Jan. 28, 2017
Amendment Flag false
Current Fiscal Year End Date --01-28
Entity Well-known Seasoned Issuer Yes
Entity Voluntary Filers No
Entity Current Reporting Status Yes
Entity Filer Category Large Accelerated Filer
Entity Public Float $ 30.6
Entity Common Stock, Shares Outstanding 914,240,326
Document Fiscal Year Focus 2,016
Document Fiscal Period Focus FY
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions Jan. 28, 2017 Jan. 30, 2016
Current assets
Cash and temporary cash investments $ 322 $ 277
Store deposits in-transit 910 923
Receivables 1,649 1,734
FIFO inventory 7,852 7,440
LIFO reserve (1,291) (1,272)
Prepaid and other current assets 898 790
Total current assets 10,340 9,892
Property, plant and equipment, net 21,016 19,619
Intangibles, net 1,153 1,053
Goodwill 3,031 2,724
Other assets 965 609
Total Assets 36,505 33,897
Current liabilities
Current portion of long-term debt including obligations under capital leases and financing obligations 2,252 2,370
Trade accounts payable 5,818 5,728
Accrued salaries and wages 1,234 1,426
Deferred income taxes 251 221
Other current liabilities 3,305 3,226
Total current liabilities 12,860 12,971
Long-term debt including obligations under capital leases and financing obligations 11,825 9,709
Deferred income taxes 1,927 1,752
Pension and postretirement benefit obligations 1,524 1,380
Other long-term liabilities 1,659 1,287
Total Liabilities 29,795 27,099
Commitments and contingencies (see Note 13)
SHAREHOLDERS’ EQUITY
Preferred shares, $100 per share, 5 shares authorized and unissued
Common shares, $1 par per share, 2,000 shares authorized; 1,918 shares issued in 2016 and 2015 1,918 1,918
Additional paid-in capital 3,070 2,980
Accumulated other comprehensive loss (715) (680)
Accumulated earnings 15,543 14,011
Common shares in treasury, at cost, 994 shares in 2016 and 951 shares in 2015 (13,118) (11,409)
Total Shareholders’ Equity - The Kroger Co. 6,698 6,820
Noncontrolling interests 12 (22)
Total Equity 6,710 6,798
Total Liabilities and Equity $ 36,505 $ 33,897
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares shares in Millions Jan. 28, 2017 Jan. 30, 2016
CONSOLIDATED BALANCE SHEETS
Preferred shares, per share (in dollars per share) $ 100 $ 100
Preferred shares, shares authorized 5 5
Common shares, par per share (in dollars per share) $ 1 $ 1
Common shares, shares authorized 2,000 2,000
Common shares, shares issued 1,918 1,918
Common shares in treasury, shares 994 951
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Millions, $ in Millions 3 Months Ended 4 Months Ended 12 Months Ended
Jan. 28, 2017 Nov. 05, 2016 Aug. 13, 2016 Jan. 30, 2016 Nov. 07, 2015 Aug. 15, 2015 May 21, 2016 May 23, 2015 Jan. 28, 2017 Jan. 30, 2016 Jan. 31, 2015
CONSOLIDATED STATEMENTS OF OPERATIONS
Sales $ 27,611 $ 26,557 $ 26,565 $ 26,165 $ 25,075 $ 25,539 $ 34,604 $ 33,051 $ 115,337 $ 109,830 $ 108,465
Merchandise costs, including advertising, warehousing, and transportation, excluding items shown separately below 21,483 20,653 20,697 20,193 19,478 20,065 26,669 25,760 89,502 85,496 85,512
Operating, general and administrative 4,483 4,443 4,473 4,355 4,169 4,068 5,779 5,354 19,178 17,946 17,161
Rent 215 199 205 181 172 155 262 215 881 723 707
Depreciation and amortization 572 549 525 508 484 477 694 620 2,340 2,089 1,948
Operating profit 858 713 665 928 772 774 1,200 1,102 3,436 3,576 3,137
Interest expense 126 124 116 113 107 114 155 148 522 482 488
Earnings before income tax expense 732 589 549 815 665 660 1,045 954 2,914 3,094 2,649
Income tax expense 230 206 171 250 238 227 350 330 957 1,045 902
Net earnings including noncontrolling interests 502 383 378 565 427 433 695 624 1,957 2,049 1,747
Net earnings (loss) attributable to noncontrolling interests (4) (8) (5) 6 (1) (1) 5 (18) 10 19
Net earnings attributable to The Kroger Co. $ 506 $ 391 $ 383 $ 559 $ 428 $ 433 $ 696 $ 619 $ 1,975 $ 2,039 $ 1,728
Net earnings attributable to The Kroger Co. per basic common share $ 0.54 $ 0.41 $ 0.40 $ 0.57 $ 0.44 $ 0.44 $ 0.72 $ 0.63 $ 2.08 $ 2.09 $ 1.74
Average number of common shares used in basic calculation 929 940 943 966 965 963 954 969 942 966 981
Net earnings attributable to The Kroger Co. per diluted common share $ 0.53 $ 0.41 $ 0.40 $ 0.57 $ 0.43 $ 0.44 $ 0.71 $ 0.62 $ 2.05 $ 2.06 $ 1.72
Average number of common shares used in diluted calculation 943 953 959 980 979 977 966 983 958 980 993
Dividends declared per common share $ 0.120 $ 0.120 $ 0.120 $ 0.105 $ 0.105 $ 0.105 $ 0.105 $ 0.093 $ 0.465 $ 0.408 $ 0.350
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Millions 12 Months Ended
Jan. 28, 2017 Jan. 30, 2016 Jan. 31, 2015
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Net earnings including noncontrolling interests $ 1,957 $ 2,049 $ 1,747
Other comprehensive income (loss)
Realized and unrealized gains and losses on available for sale securities, net of income tax [1] (20) 3 5
Change in pension and other postretirement defined benefit plans, net of income tax [2] (64) 131 (329)
Unrealized gains and losses on cash flow hedging activities, net of income tax [3] 47 (3) (25)
Amortization of unrealized gains and losses on cash flow hedging activities, net of income tax 2 1 1
Total other comprehensive income (loss) (35) 132 (348)
Comprehensive income 1,922 2,181 1,399
Comprehensive income (loss) attributable to noncontrolling interests (18) 10 19
Comprehensive income attributable to The Kroger Co. $ 1,940 $ 2,171 $ 1,380
[1] Amount is net of tax of $(16) in 2016 and $2 in 2015 and $3 2014.
[2] Amount is net of tax of $(39) in 2016, $77 in 2015 and $(193) in 2014.
[3] Amount is net of tax of $27 in 2016, $(2) in 2015 and $(14) in 2014.
CONSOLIDATED STATEMENTS OF COM6
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) - USD ($) $ in Millions 12 Months Ended
Jan. 28, 2017 Jan. 30, 2016 Jan. 31, 2015
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Unrealized gain on available for sale securities, income tax $ (16) $ 2 $ 3
Change in pension and other postretirement defined benefit plans, income tax (39) 77 (193)
Unrealized gains and losses on cash flow hedging activities, income tax $ 27 $ (2) $ (14)
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions 12 Months Ended
Jan. 28, 2017 Jan. 30, 2016 Jan. 31, 2015
Cash Flows from Operating Activities:
Net earnings including noncontrolling interests $ 1,957 $ 2,049 $ 1,747
Adjustments to reconcile net earnings including noncontrolling interests to net cash provided by operating activities:
Depreciation and amortization 2,340 2,089 1,948
Asset impairment charge 26 46 37
LIFO charge 19 28 147
Stock-based employee compensation 141 165 155
Expense for Company-sponsored pension plans 94 103 55
Deferred income taxes 201 317 73
Other (28) 54 72
Changes in operating assets and liabilities net of effects from mergers of businesses:
Store deposits in-transit 13 95 (27)
Receivables (110) (59) (141)
Inventories (382) (184) (147)
Prepaid and other current assets (172) (28) 2
Trade accounts payable 16 440 135
Accrued expenses (118) 275 249
Income taxes receivable and payable 261 (359) (68)
Contribution to Company-sponsored pension plans (5)
Other 14 (109) (22)
Net cash provided by operating activities 4,272 4,917 4,215
Cash Flows from Investing Activities:
Payments for property and equipment, including payments for lease buyouts (3,699) (3,349) (2,831)
Proceeds from sale of assets 132 45 37
Payments for mergers (401) (168) (252)
Other 93 (98) (14)
Net cash used by investing activities (3,875) (3,570) (3,060)
Cash Flows from Financing Activities:
Proceeds from issuance of long-term debt 2,781 1,181 576
Payments on long-term debt (1,355) (1,245) (375)
Net borrowings (payments) on commercial paper 435 (285) 25
Dividends paid (429) (385) (338)
Excess tax benefits on stock-based awards 97 52
Proceeds from issuance of capital stock 68 120 110
Treasury stock purchases (1,766) (703) (1,283)
Investment in the remaining equity of a noncontrolling interest (26)
Other (86) (92) (55)
Net cash used by financing activities (352) (1,338) (1,288)
Net increase (decrease) in cash and temporary cash investments 45 9 (133)
Cash and temporary cash investments:
Beginning of year 277 268 401
End of year 322 277 268
Reconciliation of capital investments:
Payments for property and equipment, including payments for lease buyouts (3,699) (3,349) (2,831)
Payments for lease buyouts 5 35 135
Changes in construction-in-progress payables 72 (35) (56)
Total capital investments, excluding lease buyouts (3,622) (3,349) (2,752)
Disclosure of cash flow information:
Cash paid during the year for interest 505 474 477
Cash paid during the year for income taxes $ 557 $ 1,001 $ 941
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREOWNERS' EQUITY - USD ($) $ in Millions Common Stock Additional Paid-In Capital Treasury Stock Accumulated Other Comprehensive Gain (Loss) Accumulated Earnings Noncontrolling Interest Total
Balances at Feb. 01, 2014 $ 1,918 $ 2,590 $ (9,641) $ (464) $ 10,981 $ 11 $ 5,395
Balances (in shares) at Feb. 01, 2014 1,918 902
Issuance of common stock:
Stock options exercised $ 110 110
Stock options exercised (in shares) (10)
Restricted stock issued (91) $ 40 (51)
Restricted stock issued (in shares) (5)
Treasury stock activity:
Treasury stock purchases, at cost $ (1,129) (1,129)
Treasury stock purchases, at cost (in shares) 51
Stock options exchanged $ (154) (154)
Stock options exchanged (in shares) 6
Share-based employee compensation 155 155
Other comprehensive gain (loss) net of income tax of $(28),$77 and $(204) for 2016,2015 and 2014 respectively (348) (348)
Other 94 $ (35) 59
Cash dividends declared ($0.465, $0.408 and $0.350 per common share for 2016,2015 and 2014, respectively) (342) (342)
Net earnings (loss) including non-controlling interests 1,728 19 1,747
Balances at Jan. 31, 2015 $ 1,918 2,748 $ (10,809) (812) 12,367 30 5,442
Balances (in shares) at Jan. 31, 2015 1,918 944
Issuance of common stock:
Stock options exercised $ 120 120
Stock options exercised (in shares) (9)
Restricted stock issued (122) $ 37 (85)
Restricted stock issued (in shares) (5)
Treasury stock activity:
Treasury stock purchases, at cost $ (500) (500)
Treasury stock purchases, at cost (in shares) 14
Stock options exchanged $ (203) (203)
Stock options exchanged (in shares) 7
Share-based employee compensation 165 165
Other comprehensive gain (loss) net of income tax of $(28),$77 and $(204) for 2016,2015 and 2014 respectively 132 132
Investment in the remaining equity of a non-controlling interest 26 (57) (31)
Other 163 $ (54) (5) 104
Cash dividends declared ($0.465, $0.408 and $0.350 per common share for 2016,2015 and 2014, respectively) (395) (395)
Net earnings (loss) including non-controlling interests 2,039 10 2,049
Balances at Jan. 30, 2016 $ 1,918 2,980 $ (11,409) (680) 14,011 (22) 6,798
Balances (in shares) at Jan. 30, 2016 1,918 951
Issuance of common stock:
Stock options exercised (1) $ 68 67
Stock options exercised (in shares) (5)
Restricted stock issued (116) $ 57 (59)
Restricted stock issued (in shares) (3)
Treasury stock activity:
Treasury stock purchases, at cost $ (1,661) (1,661)
Treasury stock purchases, at cost (in shares) 47
Stock options exchanged $ (105) $ (105)
Stock options exchanged (in shares) 4 3,000,000
Share-based employee compensation 141 $ 141
Other comprehensive gain (loss) net of income tax of $(28),$77 and $(204) for 2016,2015 and 2014 respectively (35) (35)
Other 66 $ (68) 52 50
Cash dividends declared ($0.465, $0.408 and $0.350 per common share for 2016,2015 and 2014, respectively) (443) (443)
Net earnings (loss) including non-controlling interests 1,975 (18) 1,957
Balances at Jan. 28, 2017 $ 1,918 $ 3,070 $ (13,118) $ (715) $ 15,543 $ 12 $ 6,710
Balances (in shares) at Jan. 28, 2017 1,918 994
CONSOLIDATED STATEMENTS OF CHA9
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREOWNERS' EQUITY (Parenthetical) - USD ($) $ in Millions 12 Months Ended
Jan. 28, 2017 Jan. 30, 2016 Jan. 31, 2015
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREOWNERS' EQUITY
Other comprehensive gain (loss), income tax $ (28) $ 77 $ (204)
Cash dividends declared per common share (in dollars per share) $ 0.465 $ 0.408 $ 0.350
ACCOUNTING POLICIES
ACCOUNTING POLICIES 12 Months Ended
Jan. 28, 2017
ACCOUNTING POLICIES
ACCOUNTING POLICIES 1. The following is a summary of the significant accounting policies followed in preparing these financial statements. Description of Business, Basis of Presentation and Principles of Consolidation The Kroger Co. (the “Company”) was founded in 1883 and incorporated in 1902. As of January 28, 2017, the Company was one of the largest retailers in the world based on annual sales. The Company also manufactures and processes food for sale by its supermarkets. The accompanying financial statements include the consolidated accounts of the Company, its wholly-owned subsidiaries and the variable interest entities in which the Company is the primary beneficiary. Intercompany transactions and balances have been eliminated. On June 25, 2015, the Company’s Board of Directors approved a two-for-one stock split of the Company’s common shares in the form of a 100% stock dividend, which was effective July 13, 2015. All share and per share amounts in the Company’s Consolidated Financial Statements and related notes have been retroactively adjusted to reflect the stock split for all periods presented. Refer to Note 17 for a description of changes to the Consolidated Statement of Operations and Consolidated Statement of Cash Flows for a recently adopted accounting standard regarding the presentation of employee share-based compensation payments. Fiscal Year The Company’s fiscal year ends on the Saturday nearest January 31. The last three fiscal years consist of the 52-week periods ended January 28, 2017, January 30, 2016 and January 31, 2015. Pervasiveness of Estimates The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities. Disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of consolidated revenues and expenses during the reporting period is also required. Actual results could differ from those estimates. Cash, Temporary Cash Investments and Book Overdrafts Cash and temporary cash investments represent store cash and short-term investments with original maturities of less than three months. Book overdrafts are included in “Trade accounts payable” and “Accrued salaries and wages” in the Consolidated Balance Sheets. Deposits In-Transit Deposits in-transit generally represent funds deposited to the Company’s bank accounts at the end of the year related to sales, a majority of which were paid for with debit cards, credit cards and checks, to which the Company does not have immediate access but settle within a few days of the sales transaction. Inventories Inventories are stated at the lower of cost (principally on a last-in, first-out “LIFO” basis) or market. In total, approximately 89% of inventories in 2016 and 95% of inventories in 2015 were valued using the LIFO method. Cost for the balance of the inventories, including substantially all fuel inventories, was determined using the first-in, first-out (“FIFO”) method. Replacement cost was higher than the carrying amount by $1,291 at January 28, 2017 and $1,272 at January 30, 2016. The Company follows the Link-Chain, Dollar-Value LIFO method for purposes of calculating its LIFO charge or credit. The item-cost method of accounting to determine inventory cost before the LIFO adjustment is followed for substantially all store inventories at the Company’s supermarket divisions. This method involves counting each item in inventory, assigning costs to each of these items based on the actual purchase costs (net of vendor allowances and cash discounts) of each item and recording the cost of items sold. The item-cost method of accounting allows for more accurate reporting of periodic inventory balances and enables management to more precisely manage inventory. In addition, substantially all of the Company’s inventory consists of finished goods and is recorded at actual purchase costs (net of vendor allowances and cash discounts). The Company evaluates inventory shortages throughout the year based on actual physical counts in its facilities. Allowances for inventory shortages are recorded based on the results of these counts to provide for estimated shortages as of the financial statement date. Property, Plant and Equipment Property, plant and equipment are recorded at cost or, in the case of assets acquired in a business combination, at fair value. Depreciation and amortization expense, which includes the depreciation of assets recorded under capital leases, is computed principally using the straight-line method over the estimated useful lives of individual assets. Buildings and land improvements are depreciated based on lives varying from 10 to 40 years. All new purchases of store equipment are assigned lives varying from three to nine years. Leasehold improvements are amortized over the shorter of the lease term to which they relate, which generally varies from four to 25 years, or the useful life of the asset. Food production plant and distribution center equipment is depreciated over lives varying from three to 15 years. Information technology assets are generally depreciated over five years. Depreciation and amortization expense was $2,340 in 2016, $2,089 in 2015 and $1,948 in 2014. Interest costs on significant projects constructed for the Company’s own use are capitalized as part of the costs of the newly constructed facilities. Upon retirement or disposal of assets, the cost and related accumulated depreciation and amortization are removed from the balance sheet and any gain or loss is reflected in net earnings. Refer to Note 4 for further information regarding the Company’s property, plant and equipment. Deferred Rent The Company recognizes rent holidays, including the time period during which the Company has access to the property for construction of buildings or improvements and escalating rent provisions on a straight-line basis over the term of the lease. The deferred amount is included in “Other current liabilities” and “Other long-term liabilities” on the Company’s Consolidated Balance Sheets. Goodwill The Company reviews goodwill for impairment during the fourth quarter of each year, and also upon the occurrence of a triggering event. The Company performs reviews of each of its operating divisions and variable interest entities (collectively, “reporting units”) that have goodwill balances. Generally, fair value is determined using a multiple of earnings, or discounted projected future cash flows, and is compared to the carrying value of a reporting unit for purposes of identifying potential impairment. Projected future cash flows are based on management’s knowledge of the current operating environment and expectations for the future. If potential for impairment is identified, the fair value of a reporting unit is measured against the fair value of its underlying assets and liabilities, excluding goodwill, to estimate an implied fair value of the reporting unit’s goodwill. Goodwill impairment is recognized for any excess of the carrying value of the reporting unit’s goodwill over the implied fair value. Results of the goodwill impairment reviews performed during 2016, 2015 and 2014 are summarized in Note 3. Impairment of Long-Lived Assets The Company monitors the carrying value of long-lived assets for potential impairment each quarter based on whether certain triggering events have occurred. These events include current period losses combined with a history of losses or a projection of continuing losses or a significant decrease in the market value of an asset. When a triggering event occurs, an impairment calculation is performed, comparing projected undiscounted future cash flows, utilizing current cash flow information and expected growth rates related to specific stores, to the carrying value for those stores. If the Company identifies impairment for long-lived assets to be held and used, the Company compares the assets’ current carrying value to the assets’ fair value. Fair value is based on current market values or discounted future cash flows. The Company records impairment when the carrying value exceeds fair market value. With respect to owned property and equipment held for disposal, the value of the property and equipment is adjusted to reflect recoverable values based on previous efforts to dispose of similar assets and current economic conditions. Impairment is recognized for the excess of the carrying value over the estimated fair market value, reduced by estimated direct costs of disposal. The Company recorded asset impairments in the normal course of business totaling $26, $46 and $37 in 2016, 2015 and 2014, respectively. Costs to reduce the carrying value of long-lived assets for each of the years presented have been included in the Consolidated Statements of Operations as “Operating, general and administrative” expense. Store Closing Costs The Company provides for closed store liabilities relating to the present value of the estimated remaining non-cancellable lease payments after the closing date, net of estimated subtenant income. The Company estimates the net lease liabilities using a discount rate to calculate the present value of the remaining net rent payments on closed stores. The closed store lease liabilities usually are paid over the lease terms associated with the closed stores, which generally have remaining terms ranging from one to 20 years. Adjustments to closed store liabilities primarily relate to changes in subtenant income and actual exit costs differing from original estimates. Adjustments are made for changes in estimates in the period in which the change becomes known. Store closing liabilities are reviewed quarterly to ensure that any accrued amount that is not a sufficient estimate of future costs is adjusted to income in the proper period. Owned stores held for disposal are reduced to their estimated net realizable value. Costs to reduce the carrying values of property, equipment and leasehold improvements are accounted for in accordance with the Company’s policy on impairment of long-lived assets. Inventory write-downs, if any, in connection with store closings, are classified in the Consolidated Statements of Operations as “Merchandise costs.” Costs to transfer inventory and equipment from closed stores are expensed as incurred. The current portion of the future lease obligations of stores is included in “Other current liabilities,” and the long-term portion is included in “Other long-term liabilities” in the Consolidated Balance Sheets. Interest Rate Risk Management The Company uses derivative instruments primarily to manage its exposure to changes in interest rates. The Company’s current program relative to interest rate protection and the methods by which the Company accounts for its derivative instruments are described in Note 7. Benefit Plans and Multi-Employer Pension Plans The Company recognizes the funded status of its retirement plans on the Consolidated Balance Sheets. Actuarial gains or losses, prior service costs or credits and transition obligations that have not yet been recognized as part of net periodic benefit cost are required to be recorded as a component of Accumulated Other Comprehensive Income (“AOCI”). All plans are measured as of the Company’s fiscal year end. The determination of the obligation and expense for Company-sponsored pension plans and other post-retirement benefits is dependent on the selection of assumptions used by actuaries and the Company in calculating those amounts. Those assumptions are described in Note 15 and include, among others, the discount rate, the expected long-term rate of return on plan assets, mortality and the rates of increase in compensation and health care costs. Actual results that differ from the assumptions are accumulated and amortized over future periods and, therefore, generally affect the recognized expense and recorded obligation in future periods. While the Company believes that the assumptions are appropriate, significant differences in actual experience or significant changes in assumptions may materially affect the pension and other post-retirement obligations and future expense. The Company also participates in various multi-employer plans for substantially all union employees. Pension expense for these plans is recognized as contributions are funded or when commitments are probable and reasonably estimable, in accordance with GAAP. Refer to Note 16 for additional information regarding the Company’s participation in these various multi-employer pension plans. The Company administers and makes contributions to the employee 401(k) retirement savings accounts. Contributions to the employee 401(k) retirement savings accounts are expensed when contributed. Refer to Note 15 for additional information regarding the Company’s benefit plans. Share Based Compensation The Company accounts for stock options under fair value recognition provisions . Under this method, the Company recognizes compensation expense for all share-based payments granted. The Company recognizes share-based compensation expense, net of an estimated forfeiture rate, over the requisite service period of the award. In addition, the Company records expense for restricted stock awards in an amount equal to the fair market value of the underlying stock on the grant date of the award, over the period the awards lapse. Excess tax benefits related to share-based payments are recognized in the provision for income taxes. Refer to Note 12 for additional information regarding the Company’s stock based compensation. Deferred Income Taxes Deferred income taxes are recorded to reflect the tax consequences of differences between the tax basis of assets and liabilities and their financial reporting basis. Refer to Note 5 for the types of differences that give rise to significant portions of deferred income tax assets and liabilities. Deferred income taxes are classified as a net current or noncurrent asset or liability based on the classification of the related asset or liability for financial reporting purposes. A deferred tax asset or liability that is not related to an asset or liability for financial reporting is classified according to the expected reversal date. Uncertain Tax Positions The Company reviews the tax positions taken or expected to be taken on tax returns to determine whether and to what extent a benefit can be recognized in its consolidated financial statements. Refer to Note 5 for the amount of unrecognized tax benefits and other related disclosures related to uncertain tax positions. Various taxing authorities periodically audit the Company’s income tax returns. These audits include questions regarding the Company’s tax filing positions, including the timing and amount of deductions and the allocation of income to various tax jurisdictions. In evaluating the exposures connected with these various tax filing positions, including state and local taxes, the Company records allowances for probable exposures. A number of years may lapse before a particular matter, for which an allowance has been established, is audited and fully resolved. As of January 28, 2017, the Internal Revenue Service had concluded its examination of the Company’s 2012 and 2013 federal tax returns. The assessment of the Company’s tax position relies on the judgment of management to estimate the exposures associated with the Company’s various filing positions. Self-Insurance Costs The Company is primarily self-insured for costs related to workers’ compensation and general liability claims. Liabilities are actuarially determined and are recognized based on claims filed and an estimate of claims incurred but not reported. The liabilities for workers’ compensation claims are accounted for on a present value basis. The Company has purchased stop-loss coverage to limit its exposure to any significant exposure on a per claim basis. The Company is insured for covered costs in excess of these per claim limits. The following table summarizes the changes in the Company’s self-insurance liability through January 28, 2017. 2016 2015 2014 Beginning balance $ $ $ Expense Claim payments Assumed from mergers — — Ending balance Less: Current portion Long-term portion $ $ $ The current portion of the self-insured liability is included in “Other current liabilities,”