Income Taxes

12 Months Ended

Jan. 01, 2012

Income Taxes [Abstract]

Income Taxes

Note 11.    Income Taxes

Provision (benefit) for income taxes was as follows (in millions):

	2011			2010			2009
Current
Federal	$	29.1		$	36.8		$	20.5
State		8.1			(1.8	)		6.6
Foreign		10.0			(1.4	)		3.5
Total current		47.2			33.6			30.6
Deferred
Federal		28.3			16.1			16.2
State		(5.1	)		3.9			3.2
Foreign		(0.9	)		—			—
Total deferrred		22.3			20.0			19.4
Provision for income taxes	$	69.5		$	53.6		$	50.0

Income before income taxes included income from domestic operations of $180.7 million for 2011, $168.1 million for 2010 and $148.6 million for 2009.

The following is a reconciliation of the statutory federal income tax rate to the actual effective income tax rate:

	2011			2010			2009
U.S. federal statutory tax rate		35.0	%		35.0	%		35.0	%
State and local taxes, net of federal benefit		1.8			3.8			4.2
Reseach and development tax credits		(2.6	)		(6.7	)		(9.1	)
Qualified production activity deduction		(1.4	)		(1.8	)		(0.6	)
Non-U.S. subsidiaries taxed at other than 35%		(2.2	)		—			—
Accruals for uncertain tax positions		2.3			—			—
Other		—			0.6			0.5
Effective income tax rate		32.9	%		30.9	%		30.0	%

Deferred income taxes result from temporary differences in the recognition of income and expense for financial and income tax reporting purposes, and differences between the fair value of assets acquired in business combinations accounted for as purchases for financial reporting purposes and their corresponding tax bases. Deferred income taxes represent future tax benefits or costs to be recognized when those temporary differences reverse. A valuation allowance of $0.9 million, $0.3 million and $0.4 million existed against deferred tax assets for 2011, 2010 and 2009, respectively.

The categories of assets and liabilities that have resulted in differences in the timing of the recognition of income and expense were as follows (in millions):

	2011		2010
Deferred income tax assets:
Current
Accrued liabilities	$	11.8	$	11.0
Inventory valuation		11.1		8.8
Accrued vacation		10.4		10.2
Deferred compensation and other benefits plans		1.0		0.9
Intangible amortization		3.0		0.9
Long-term
Postretirement benefits other than pensions		6.4		7.2
Accrued liabilities		18.3		8.9
Deferred compensation and other benefit plans		16.0		29.5
Tax credit and NOL carryforward amounts		28.2		1.5
Total deferred income tax assets		106.2		78.9
Deferred income tax liabilities:
Current
Other items		2.2		3.4
Long-term
Property, plant and equipment differences		24.3		16.3
Intangible amortization		57.0		34.0
Other items		0.7		3.0
Total deferred income tax liabilities		84.2		56.7
Net deferred income tax assets	$	22.0	$	22.2

Additional paid in capital was credited $7.2 million in 2011, $1.5 million in 2010 and $0.8 million in 2009 for the tax benefit resulting from the exercise of stock options.

The following presents a rollforward of our unrecognized tax benefits (in millions):

	2011			2010
	Unrecognized Tax Benefits			Unrecognized Tax Benefits
Beginning of year	$	10.1		$	25.2
Increase (decrease) in prior year tax positions		18.7			(3.5	)
Increase for tax positions taken during the current period		0.7			0.6
Decrease related to settlements with taxing authorities		—			(9.2	)
Decrease related to lapse of the statue of limitations		(3.5	)		(3.0	)
Impact of exchange rate changes		(0.2	)		—
End of year	$	25.8		$	10.1

We recognized interest related to unrecognized tax benefits of $1.7 million and $0.9 million within the provision for income taxes in our statements of operations for fiscal year 2011 and 2010, respectively. Interest in the amount of $2.5 million and $0.8 million was recognized in the 2011 and 2010 statement of financial position, respectively. As of January 1, 2012, we estimated that the entire balance of unrecognized tax benefits, if resolved in our favor, would positively impact the effective tax rate and, therefore, be recognized as additional tax benefits in our income statement.

We file income tax returns in the United States federal jurisdiction and in various states and foreign jurisdictions. The Company has concluded on all U.S. federal income tax matters for all years through 2007, California income tax matters for all years through 2006 and Canadian income tax matters for all years through 2003. All other material state and local and foreign income tax matters have been concluded for years through 2006.

At January 1, 2012, the Company had approximately $12.0 million of Canadian (federal & provincial) and U.K. net operation loss carry forward amounts, of which $1.6 million has no expiration date, and $4.8 million of Canadian federal net operating losses and $5.5 million Canadian provincial net operating losses have expiration dates ranging from 2030 through 2031. The Company had Canadian Investment Tax Credits of $21.2 million, which have expiration dates of 2048 through 2052. In addition, the Company had domestic federal and state net operating losses of approximately $4.4 million and $103.7 million respectively. The material federal and net operating loss carry forward amounts have expiration dates ranging from 2023 to 2031 and the material state net operating loss carry forward amounts have expiration dates ranging from 2024 to 2026. Finally, the Company had state tax credits of $3.0 million, which have no expiration date.

The Company anticipates the total unrecognized tax benefit for various federal and state tax items may be reduced by $6.4 million due to the expiration of statutes of limitation and settlements with tax authorities for various federal, state and Canadian tax issues in the next 12 months.

The Company’s intention is to permanently reinvest the earnings of its subsidiaries in Canada, The United Kingdom and The Netherlands, thus indefinitely postponing their remittance of any earnings to the United States. At January 1, 2012, the amount of undistributed foreign earnings was $54.5 million and the estimated deferred tax liability is $10.3 million.