Income Taxes

12 Months Ended

Dec. 31, 2011

Income Taxes [Abstract]

Income Tax Disclosure [Text Block]

Note 9 - Income Taxes

Income tax expense (benefit) is made up of the following components:

(in thousands)	2011	2010	2009
Current:
Federal	$             12,293	$              6,268	$            27,382
State	1,480	783	3,231
Tax credits	(384)	(400)	(268)
Deferred:
Federal	8,408	13,154	(8,271)
State	826	1,380	(1,102)
Total	$             22,623	$            21,185	$            20,972

Income tax expense differed from amounts computed by applying the federal income tax rate to pre‑tax income as a result of the following:

	2011	2010	2009
Federal statutory tax rate	35.0%	35.0%	35.0%
State taxes, net of federal income tax benefit	3.5%	3.7%	4.7%
Non-deductible goodwill	0.2%	-	73.6%
Change in tax contingencies	-	(8.0%)	4.4%
Gain on litigation settlement	-	-	(12.7%)
Gain on acquisition of a business	-	-	(11.2%)
Federal refund claim	-	-	(6.8%)
Other, net	-	(1.3%)	1.3%
Effective tax rate	38.7%	29.4%	88.3%

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows:

(in thousands)	December 31, 2011	January 1,      2011
Deferred tax assets:
Compensation related accruals	$          20,869	$          19,566
Reserve for bad debts	2,646	2,440
Reserve for store shutdown and special charges	976	1,024
Workers compensation accruals	2,763	3,493
Pension accruals	9,504	7,030
Reserve for future rents	2,161	2,671
Other	4,201	4,505
Total deferred tax assets	43,120	40,729
Deferred tax liabilities:
Property, plant and equipment	14,140	11,862
Intangible assets	23,270	20,928
Inventories	13,265	12,407
Convertible debt interest	24,905	23,022
Other	1,315	573
Total deferred tax liabilities	76,895	68,792
Net deferred tax liability	$        (33,775)	$        (28,063)

Our income tax expense was $22.6 million, $21.2 million and $21.0 million for fiscal years 2011, 2010 and 2009, respectively.  The income tax rate for fiscal 2011 was 38.7% compared to 29.4% for fiscal 2010 and 88.3% for fiscal 2009.  The effective income tax rate for fiscal 2011, 2010 and 2009 represented income tax expense incurred on pre-tax income from continuing operations.  The effective tax rate for fiscal 2011 was impacted by the reversal of previously unrecognized tax benefits of $0.1 million primarily due to statute of limitation closures and audit resolutions, an increase in reserves of $0.1 million, and non-deductible goodwill charges of $0.1 million..

                Net income taxes paid were $14.5 million, $23.9 million, and $22.4 million during fiscal 2011, 2010 and 2009, respectively.  No significant income tax benefits were recognized directly to stockholders’ equity related to compensation expense for tax purposes being higher than expense recognized for financial reporting purposes.

At December 31, 2011, the total amount of unrecognized tax benefits was $2.1 million compared to $1.7 million at January 1, 2011.  The net increase in unrecognized tax benefits of $0.4 million since January 1, 2011 was comprised of the following: $0.1 million due to a decrease in the unrecognized tax benefits relating to the expiration of the applicable statutes of limitation and $0.5 million due to the increase in unrecognized tax benefits as a result of tax positions taken in the current period.  The net decrease in unrecognized tax benefits of $10.2 million during the year ended January 1, 2011, was comprised of the following: $3.5 million due to a decrease in the unrecognized tax benefits relating to the expiration of the applicable statutes of limitation,  $7.8 million due to the reduction of unrecognized tax benefits relating to prior period tax positions, $2.3 million due to the reduction of unrecognized tax benefits relating to current period tax positions and $3.4 million due to the increase in unrecognized tax benefits as a result of tax positions taken in the current period. 

The following table summarizes the activity related to our unrecognized tax benefits:

($ in thousands)
Unrecognized tax benefits - opening balance at 1/02/11	$	1,747
Increases related to current year tax period		511
Lapse of statute of limitations		(129)
Unrecognized tax benefits - ending balance 12/31/11	$	2,129
($ in thousands)
Unrecognized tax benefits - opening balance at 1/03/10	$	11,905
Increases related to current year tax period		3,409
Decreases related to current year tax periods		(2,288)
Decreases related to prior year tax periods		(7,779)
Lapse of statute of limitations		(3,500)
Unrecognized tax benefits - ending balance 1/01/11	$	1,747

The total amount of tax benefits that if recognized would impact the effective tax rate was $0.5 million at December 31, 2011 and $0.4 million at January 1, 2011.  The accrual for potential penalties and interest related to unrecognized tax benefits did not materially change in 2011, and in total, as of December 31, 2011, is $0.1 million.  The accrual for potential penalties and interest related to unrecognized tax benefits decreased by $2.1 million in fiscal 2010.

We do not expect our unrecognized tax benefits to change significantly over the next 12 months.

The Company or its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and local jurisdictions.  During fiscal 2010, we completed an audit by the federal tax authorities of our 2008 tax year.  No adjustments that would have a substantial impact on the effective tax rate occurred.  With few exceptions, we are no longer subject to U.S. federal, state or local examinations by tax authorities for years 2007 and prior.