Income taxes

9 Months Ended

Sep. 23, 2012

Income taxes [Abstract]

Income taxes

NOTE 8 – Income taxes

The total amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate was approximately $77.7 million as of December 25, 2011 and $72.7 million as of September 23, 2012. These amounts reflect the federal tax benefit of state tax deductions. Excluding the federal tax benefit of state tax deductions, the total amount of unrecognized tax benefits as of December 25, 2011 was $110.3 million and as of September 23, 2012 was $98.5 million. The $11.8 million decrease reflects reductions for tax positions from prior years of $20.4 million, tax settlements of $7.1 million and the lapse of statutes of limitations of $2.9 million partially offset by additions in the current year of $7.5 million and an increase for prior year tax positions of $11.1 million.

The Company recognizes interest and penalties related to unrecognized tax benefits as a component of income tax expense. The Company also recognizes as a component of income tax expense interest income attributable to overpayment of income tax and interest credits for the reversal of interest expense previously recorded for uncertain tax positions which are subsequently released. The Company recognized a net benefit from the reversal of interest and penalty expense of $2.8 million and $6.2 million during the third quarters of 2012 and 2011, respectively. The net interest and penalty benefit recognized in the third quarters of 2012 and 2011 is primarily from the release of tax reserves on prior year tax positions related to tax settlements and the lapse of statutes of limitations. The amount of net accrued interest and penalties related to uncertain tax benefits as of December 25, 2011, was approximately $34.8 million and as of September 23, 2012, was approximately $27.2 million.

The Company files income tax returns in the U.S. and various state and foreign jurisdictions. The 2009 through 2011 tax years remain subject to examination by the IRS. The 2005 through 2011 tax years generally remain subject to examination by state authorities, and the years 2009-2011 are subject to examination in the UK. In addition, tax years prior to 2005 remain subject to examination by certain states primarily due to the filing of amended tax returns upon settlement of the IRS examination for those years and ongoing state audits.

It is reasonably possible that the amount of unrecognized benefits with respect to certain of the Company’s unrecognized tax positions will significantly increase or decrease within the next 12 months. These changes may be the result of settlement of ongoing audits, lapses of statutes of limitations or other regulatory developments. At this time, the Company estimates that the amount of its gross unrecognized tax positions may decrease by up to $49.3 million within the next 12 months.