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Income Taxes
 6 Months Ended
Jul. 02, 2011
Income Taxes  
Income Taxes

3. INCOME TAXES

The Company's income tax expense and related effective rate were as follows (in thousands, except percentage data):

 

     For the 13 Weeks Ended
July 2, 2011		     For the 13 Weeks Ended
July 3, 2010		     For the 26 Weeks Ended
July 2, 2011		     For the 26 Weeks Ended
July 3, 2010		  

Income tax expense

    $ 27,657      $ 7,965      $ 58,850      $ 24,008   

Income tax rate

      33.9 %      12.3 %      34.4 %      20.3 % 

 

The lower effective tax rates in the Prior Year Quarter and Prior Year YTD Period were attributable to the recognition of previously unrecognized tax benefits during the Prior Year Quarter.

As of July 2, 2011, the total amount of unrecognized tax benefits, excluding interest and penalties, was $15.6 million, of which $12.5 million would favorably impact the effective tax rate in future periods, if recognized. During the Prior Year Quarter, the examination phase of the Internal Revenue Service ("IRS") audit for tax years 2005 and 2006 was completed. The IRS proposed certain adjustments and the Company filed a protest. This protest is under review by the IRS Office of Appeals and it is possible that it may be resolved within the next twelve months. The Company is also subject to examinations in various state and foreign jurisdictions for the 2004-2009 tax years, none of which are individually significant. Audit outcomes and the timing of audit settlements are subject to significant uncertainty.

The Company has classified uncertain tax positions as long-term income taxes payable unless such amounts are expected to be paid within twelve months of the condensed consolidated balance sheet date. As of July 2, 2011, the Company has recorded unrecognized tax benefits of $2.7 million, excluding interest and penalties, for positions that could be settled within the next twelve months. Consistent with its past practice, the Company recognizes interest and/or penalties related to income tax overpayments and income tax underpayments in income tax expense and income taxes payable, respectively. The total amount of accrued income tax-related interest included in the condensed consolidated balance sheet at July 2, 2011 was $2.0 million. There were no penalties accrued in the condensed consolidated balance sheet at July 2, 2011. For the Second Quarter, the Company accrued income tax-related interest expense of $0.2 million.