Income Taxes

12 Months Ended

Sep. 28, 2011

Notes to Financial Statements

Income Taxes

The components of the provision for income taxes consist of the following:

	2011			2010			2009
Current:
Federal	$	13,217		$	10,212		$	(4,875	)
State		2,836			1,600			(419	)
Deferred		(2,186	)		207			6,457
Total income taxes	$	13,867		$	12,019		$	1,163
Reconciliation of effective income tax:
Tax at U.S. statutory rates (35%)	$	16,741		$	14,504		$	2,517
State income taxes, net of federal benefit		1,410			1,463			615
Federal income tax credits		(4,307	)		(4,146	)		(2,339	)
Share-based payments		68			189			289
Other		(45	)		9			81
Total income taxes	$	13,867		$	12,019		$	1,163

Income taxes paid totaled $12,436 in fiscal year 2011, $9,878 in fiscal year 2010, and $987 in fiscal year 2009. Income tax refunds totaled $2,856 in fiscal year 2011.

As of September 28, 2011, we had approximately $1,750 of unrecognized tax benefits, including approximately $270 of interest and penalties, which are included in Other long-term liabilities in the Consolidated Balance Sheet. During fiscal year 2011, we recognized approximately $92 in potential interest and penalties associated with uncertain tax positions. Our continuing practice is to recognize interest expense and penalties related to income tax matters in Income tax expense. Of the $1,750 of unrecognized tax benefits, $1,153 would impact the effective income tax rate if recognized.

The following table summarizes the Company’s unrecognized tax benefits, excluding interest and penalties:

September 24, 2008	$	773
Gross increases – prior period tax positions		439
Lapse of statute of limitations	(7		)
September 30, 2009	1,205
Gross increases – prior period tax positions	281
Lapse of statute of limitations	(251		)
September 29, 2010	1,235
Gross increases – current period tax positions	178
Gross increases – prior period tax positions		238
Lapse of statute of limitations	(171		)
September 28, 2011	$	1,480

We file income tax returns which are periodically audited by various federal, state, and local jurisdictions. With few exceptions, we are no longer subject to federal, state, and local tax examinations for fiscal years prior to 2006. We believe we have certain state income tax exposures related to fiscal years 2006 through 2011. Due to the expiration of the various state statutes of limitations for these fiscal years, it is possible that the total amount of unrecognized tax benefits will decrease by approximately $1,086 within 12 months. 

Deferred tax assets and liabilities are determined based on differences between financial reporting and tax basis of assets and liabilities and are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. Our deferred tax assets and liabilities consist of the following:

	2011			2010
Deferred tax assets:
Insurance reserves	$	2,539		$	1,639
Share-based payments		330			676
Compensation accruals		1,645			882
Gift card accruals		561			619
State net operating loss credit carryforward		107			518
Investments		3,603			—
Other	1,724			1,650
Total deferred tax assets	10,509			5,984
Deferred tax liabilities:
Fixed asset basis difference		7,833			9,484
Goodwill and intangibles		3,190			2,280
Other	—			727
Total deferred tax liabilities	11,023			12,491
Net deferred tax liability	(514		)	(6,507		)
Less current portion	6,150			3,802
Long-term liability	$	(6,664	)	$	(10,309	)

Receivables on the Consolidated Balance Sheet include income tax receivables of $1,853 as of September 29, 2010. Accrued expenses on the Consolidated Balance Sheet include income tax payables of $4,372 as of September 28, 2011.