Income Taxes

12 Months Ended

Dec. 29, 2012

Income Tax Disclosure [Text Block]

(9)      Income Taxes

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

(in thousands)		2012		2011		2010
Current:
Federal	$	11,278	$	12,293	$	6,268
State		1,336		1,480		783
Tax credits		(139)		(384)		(400)
Deferred:
Federal		(36,186)		8,408		13,154
State		(4,111)		826		1,380
Total	$	(27,822)	$	22,623	$	21,185

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

	2012	2011	2010
Federal statutory tax rate	35.0%	35.0%	35.0%
State taxes, net of federal income tax benefit	1.4%	3.5%	3.7%
Non-deductible goodwill	(13.3%)	0.2%	-
Change in tax contingencies	0.2%	-	(8.0%)
Other, net	(0.4%)	-	(1.3%)
Effective tax rate	22.9%	38.7%	29.4%

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 29, 2012		December 31, 2011
Deferred tax assets:
Compensation related accruals	$	18,918	$	20,869
Reserve for bad debts		2,021		2,646
Reserve for store shutdown and special charges		428		976
Workers compensation accruals		2,734		2,763
Pension accruals		10,233		9,504
Reserve for future rents		1,797		2,161
Intangible assets		23,229		-
Other		4,465		4,201
Total deferred tax assets		63,825		43,120
Deferred tax liabilities:
Property, plant and equipment		14,231		14,140
Intangible assets		-		23,270
Inventories		14,894		13,265
Convertible debt interest		26,948		24,905
Other		1,247		1,315
Total deferred tax liabilities		57,320		76,895
Net deferred tax asset (liability)	$	6,505	$	(33,775)

Our income tax benefit was $27.8 million for fiscal 2012 as compared to income tax expense of $22.6 million and $21.2 million for fiscal years 2011 and 2010, respectively.  The income tax rate for fiscal 2012 was 22.9% compared to 38.7% for fiscal 2011 and 29.4% for fiscal 2010.  The effective income tax rate for fiscal 2012, 2011 and 2010 represented income tax expense incurred on pre-tax income from continuing operations.  The effective tax rate for fiscal 2012 was impacted by the reversal of previously unrecognized tax benefits of $0.3 million primarily due to statute of limitation closures and audit resolutions, an increase in reserves of $0.1 million, and the tax effect of the non-deductible portion of the goodwill impairment charges of $16.2 million.

Net income taxes paid were $13.3 million, $14.5 million, and $23.9 million during fiscal 2012, 2011 and 2010, respectively. During fiscal 2012, the Company recognized directly through equity the write-off of the $0.8 million deferred tax asset less current year charges of $0.3 million associated with the SARs that did not vest.

At December 29, 2012, the total amount of unrecognized tax benefits was $2.0 million compared to $2.1 million at December 31, 2011.  The net decrease in unrecognized tax benefits of $0.1 million since December 31, 2011 was comprised of the following: $0.2 million due to a decrease in the unrecognized tax benefits relating to the expiration of the applicable statutes of limitation offset by $0.1 million due to the increase in unrecognized tax benefits as a result of tax positions taken in the current period.  The net increase in unrecognized tax benefits of $0.4 million during the year ended December 31, 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 offset by $0.5 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 1/01/12	$	2,129
Increases related to current year tax period		78
Lapse of statute of limitations		(248)
Unrecognized tax benefits - ending balance 12/29/12	$	1,959
($ 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

The total amount of tax benefits that if recognized would impact the effective tax rate was $0.3 million at December 29, 2012 and $0.5 million at December 31, 2011.  The accrual for potential penalties and interest related to unrecognized tax benefits did not materially change in 2012, and in total, as of December 29, 2012, is $0.1 million.  The accrual for potential penalties and interest related to unrecognized tax benefits also did not materially change in fiscal 2011.

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 2008 and prior.