5. 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						For the 26 Weeks Ended
	June 30, 2012			July 2, 2011			June 30, 2012			July 2, 2011
Income tax expense	$	27,705		$	27,657		$	51,229		$	58,850
Income tax rate		31.4	%		33.9	%		29.7	%		34.4	%

The lower effective tax rate in the Second Quarter and Year To Date Period was attributable to a higher portion of foreign income taxed at lower overall foreign rates, a reduction in income tax rates in several countries and management’s decision to indefinitely reinvest the undistributed earnings of certain foreign subsidiaries, partially offset by the impact of certain discrete items.

As of June 30, 2012, the Company’s total amount of unrecognized tax benefits, excluding interest and penalties, was $19.9 million, of which $13.1 million would favorably impact the effective tax rate in future periods, if recognized. The examination phase of the Internal Revenue Service (“IRS”) audit for tax years 2005 and 2006 was completed in 2010. 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 2004-2011 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 June 30, 2012, the Company had 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 receivable/payable, respectively. The total amount of accrued income tax-related interest and penalties included in the condensed consolidated balance sheets at June 30, 2012 was $3.3 million and $1.1 million, respectively. For the Second Quarter, the Company accrued income tax-related interest expense of $0.3 million.