XML 46 R21.htm IDEA: XBRL DOCUMENT v2.4.0.6
Income Taxes
 12 Months Ended
Jan. 01, 2012
Income Taxes [Abstract]  
Income Taxes

14.    Income Taxes

The current income tax provision represents the estimated amount of income taxes paid or payable for the year, as well as changes in estimates from prior years. The deferred income tax provision represents the change in deferred tax liabilities and assets. The following table presents the significant components of the provision for income taxes for 2011, 2010 and 2009.

 

                         
    Fiscal Year  

In thousands

   2011     2010     2009  

Current:

                        

Federal

   $ 9,295     $ 25,988     $ 8,657  

State

     2,345       567       291  
   

 

 

    

 

 

    

 

 

  

Total current provision

   $ 11,640     $ 26,555     $ 8,948  
   

 

 

    

 

 

    

 

 

  

Deferred:

                        

Federal

   $ 6,636     $ (6,695 )    $ 6,349  

State

     1,252       1,789       1,284  
   

 

 

    

 

 

    

 

 

  

Total deferred provision (benefit)

   $ 7,888     $ (4,906 )    $ 7,633  
   

 

 

    

 

 

    

 

 

  

Income tax expense

   $ 19,528     $ 21,649     $ 16,581  
   

 

 

    

 

 

    

 

 

  

The Company’s effective income tax rate, as calculated by dividing income tax expense by income before income taxes, for 2011, 2010 and 2009 was 37.9%, 35.4% and 29.0%, respectively. The Company’s effective tax rate, as calculated by dividing income tax expense by the difference of income before income taxes minus net income attributable to noncontrolling interest, for 2011, 2010 and 2009 was 40.6%, 37.5% and 30.3%, respectively. The following table provides a reconciliation of income tax expense at the statutory federal rate to actual income tax expense.

 

                         
    Fiscal Year  

In thousands

   2011     2010     2009  

Statutory expense

   $ 16,848     $ 20,197     $ 19,151  

State income taxes, net of federal benefit

     2,096       2,516       2,315  

Adjustments for uncertain tax positions

     (221 )      (985 )      (6,266 ) 

Valuation allowance change

     445       (56 )      (5 ) 

Manufacturing deduction benefit

     (1,190 )      (1,995 )      (420 ) 

Meals and entertainment

     1,113       1,008       871  

Other, net

     437       964       935  
   

 

 

    

 

 

    

 

 

  

Income tax expense

   $ 19,528     $ 21,649     $ 16,581  
   

 

 

    

 

 

    

 

 

  

As of January 1, 2012, the Company had $4.7 million of uncertain tax positions, including accrued interest, of which $2.3 million would affect the Company’s effective rate if recognized. As of January 2, 2011, the Company had $4.8 million of uncertain tax positions, including accrued interest, of which $2.5 million would affect the Company’s effective tax rate if recognized. While it is expected that the amount of uncertain tax positions may change in the next 12 months, the Company does not expect such change would have a significant impact on the consolidated financial statements.

 

A reconciliation of the beginning and ending balances of the total amounts of uncertain tax positions (excludes accrued interest) is as follows:

 

                         
    Fiscal Year  

In thousands

   2011     2010     2009  

Gross uncertain tax positions at the beginning of the year

   $ 4,386     $ 4,649     $ 8,000  

Increase as a result of tax positions taken during a prior period

     28       —       —  

Decrease as a result of tax positions taken in a prior period

     —       —       (214 ) 

Increase as a result of tax positions taken in the current period

     641       769       2,535  

Decrease relating to settlements with tax authorities

     —       —       (594 ) 

Reduction as a result of a lapse of the applicable statute of limitations

     (774 )      (1,032 )      (5,078 ) 
   

 

 

    

 

 

    

 

 

  

Gross uncertain tax positions at the end of the year

   $ 4,281     $ 4,386     $ 4,649  
   

 

 

    

 

 

    

 

 

  

The Company recognizes potential interest and penalties related to uncertain tax positions in income tax expense. As of January 1, 2012 and January 2, 2011, the Company had approximately $.4 million of accrued interest related to uncertain tax positions. Income tax expense included an interest credit of $15,000 in 2011, an interest credit of $.5 million in 2010 and interest credit of $1.6 million in 2009 primarily due to the reduction in the liability for uncertain tax positions.

The Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 include provisions that will reduce the tax benefits available to employers that receive Medicare Part D subsidies. As a result, during the first quarter of 2010, the Company recorded tax expense totaling $.5 million related to changes made to the tax deductibility of Medicare Part D subsidies.

Tax years from 2008 remain open to examination by the Internal Revenue Service, and various tax years from 1993 remain open to examination by certain state tax jurisdictions to which the Company is subject due to loss carryforwards.

The Company’s income tax assets and liabilities are subject to adjustment in future periods based on the Company’s ongoing evaluations of such assets and liabilities and new information that becomes available to the Company.

In the first quarter of 2009, the Company reached an agreement with a tax authority to settle prior tax positions for which the Company had previously provided a liability due to uncertainty of resolution. As a result, the Company reduced the liability for uncertain tax positions by $1.7 million. The net effect of the adjustment was a decrease in income tax expense in 2009 of approximately $1.7 million.

In the third quarter of 2009, 2010 and 2011, the Company reduced its liability for uncertain tax positions by $5.4 million, $1.7 million and $.9 million, respectively. The net effect of the adjustments was a decrease to income tax expense in 2009, 2010 and 2011 by $5.4 million, $1.7 mission and $.9 million, respectively. The reduction of the liability for uncertain tax positions during these years was due mainly to the lapse of the applicable statute of limitations.

The valuation allowance increase in 2011 and the decreases in 2010 and 2009 were due to the Company’s assessments of its ability to use certain net operating loss carryforwards.

 

Deferred income taxes are recorded based upon temporary differences between the financial statement and tax bases of assets and liabilities and available net operating loss and tax credit carryforwards. Temporary differences and carryforwards that comprised deferred income tax assets and liabilities were as follows:

 

                 

In thousands

   Jan. 1, 2012     Jan. 2, 2011  

Intangible assets

   $ 123,995     $ 122,963  

Depreciation

     76,758       70,226  

Investment in Piedmont

     41,504       41,755  

Debt exchange premium

     2,099       2,634  

Inventory

     9,511       6,173  
   

 

 

    

 

 

  

Deferred income tax liabilities

     253,867       243,751  
   

 

 

    

 

 

  

Net operating loss carryforwards

     (5,527 )      (5,706 ) 

Deferred compensation

     (38,398 )      (36,322 ) 

Postretirement benefits

     (25,666 )      (22,950 ) 

Capital lease agreements

     (5,567 )      (4,830 ) 

Pension (nonunion)

     (29,412 )      (22,608 ) 

Pension (union)

     (3,550 )      (3,671 ) 

Other

     (9,837 )      (7,732 ) 
   

 

 

    

 

 

  

Deferred income tax assets

     (117,957 )      (103,819 ) 
   

 

 

    

 

 

  

Valuation allowance for deferred tax assets

     1,464       499  
   

 

 

    

 

 

  

Total deferred income tax liability

     137,374       140,431  

Net current deferred income tax asset

     (4,886 )      (3,531 ) 
   

 

 

    

 

 

  

Net noncurrent deferred income tax liability

   $ 142,260     $ 143,962  
   

 

 

    

 

 

  

 

Note: Net current deferred income tax asset from the table is included in prepaid expenses and other current assets on the consolidated balance sheets.

Deferred tax assets are recognized for the tax benefit of deductible temporary differences and for federal and state net operating loss and tax credit carryforwards. Valuation allowances are recognized on these assets if the Company believes that it is more likely than not that some or all of the deferred tax assets will not be realized. The Company believes the majority of the deferred tax assets will be realized due to the reversal of certain significant temporary differences and anticipated future taxable income from operations.

In addition to a valuation allowance related to net operating loss carryforwards, the Company records liabilities for uncertain tax positions related to certain income tax positions. These liabilities reflect the Company’s best estimate of the ultimate income tax liability based on currently known facts and information. Material changes in facts or information as well as the expiration of statute and/or settlements with individual tax jurisdictions may result in material adjustments to these estimates in the future.

The valuation allowance of $1.5 million as of January 1, 2012 and $.5 million as of January 2, 2011, respectively, was established primarily for certain net operating loss carryforwards which expire in varying amounts through 2030.