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INCOME TAXES
 9 Months Ended
Sep. 29, 2012
INCOME TAXES  
INCOME TAXES

5.  INCOME TAXES

 

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

 

 

 

For the 13 Weeks Ended

 

For the 39 Weeks Ended

 

 

 

September 29,
2012

 

October 1,
2011

 

September 29,
2012

 

October 1,
2011

 

Income tax expense

 

$

33,984

 

$

39,307

 

$

85,213

 

$

98,156

 

Income tax rate

 

29.8

%

35.2

%

29.7

%

34.7

%

 

The lower effective tax rate in the Third 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.

 

As of September 29, 2012, the Company’s total amount of unrecognized tax benefits, excluding interest and penalties, was $19.8 million, of which $15.1 million would favorably impact the effective tax rate in future periods, if recognized. On October 2, 2012, the IRS Office of Appeals and the Company executed a Closing Agreement to settle various issues under protest after the close of the Internal Revenue Service’s income tax audit for the 2005-2006 tax years.  As a result of this settlement, the Company will reduce the amount of unrecognized tax benefits by approximately $6.0 million in the fourth quarter of fiscal 2012.  The Internal Revenue Service opened an audit of the 2007-2009 tax years in January 2012.  The Company is also subject to examinations in various state and foreign jurisdictions for the 2005-2011 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 September 29, 2012, the Company had recorded unrecognized tax benefits of $13.9 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 September 29, 2012 was $3.2 million and $0.3 million, respectively. For the Third Quarter, the Company accrued income tax-related interest expense of $0.2 million.