H. Income Taxes

Significant components of the provision (benefit) for income taxes are as follows:


	2011 (53 weeks)			2010		2009
	(In thousands)
Current:
Federal	$	31,845		$	20,989	$	16,336
State		5,809			5,505		4,832

Total current		37,654			26,494		21,168
Deferred:
Federal		(47	)		3,938		1,871
State		(166	)		534		210

Total deferred		(213	)		4,472		2,081

Total income tax provision	$	37,441		$	30,966	$	23,249

The Company’s reconciliations to statutory rates are as follows:


	2011			2010			2009
Statutory rate		35.0	%		35.0	%		35.0	%
State income taxes, net of federal benefit		4.1			4.0			3.6
Deduction relating to U.S. production activities		(3.0	)		(2.9	)		(1.9	)
Change in income tax contingencies		0.6			1.1			2.1
State audit settlement		(2.0	)		—			—
Other		1.5			1.0			4.0

		36.2	%		38.2	%		42.8	%

Significant components of the Company’s deferred tax assets and liabilities are as follows at:


	December 31, 2011			December 25, 2010
	(In thousands)
Deferred tax assets:
Accrued expenses	$	2,424		$	2,451
Stock-based compensation expense		6,059			4,573
Inventory		2,099			1,477
Other		2,340			2,105

Total deferred tax assets		12,922			10,606
Valuation allowance		(545	)		(311	)

Total deferred tax assets net of valuation allowance		12,377			10,295
Deferred tax liabilities:
Property, plant and equipment		(24,068	)		(22,484	)
Prepaid expenses		(907	)		(900	)
Goodwill		(388	)		(350	)

Total deferred tax liabilities		(25,363	)		(23,734	)

Net deferred tax liabilities	$	(12,986	)	$	(13,439	)

The Company’s practice is to classify interest and penalties related to income tax matters in income tax expense. Interest and penalties included in the provision for income taxes amounted to $0.4 million, $0.7 million and $0.5 million for fiscal years 2011, 2010 and 2009, respectively. Accrued interest and penalties amounted to $1.0 million and $3.7 million at December 31, 2011 and December 25, 2010, respectively.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:


	2011			2010
	(In thousands)
Balance at beginning of year	$	7,129		$	6,633
Increases related to current year tax positions		175			200
(Decrease)/Increase related to prior year tax positions		(1,808	)		656
Decreases related to settlements		(3,561	)		(360	)
Decreases related to lapse of statute of limitations		—			—

Balance at end of year	$	1,935		$	7,129

Included in the balance of unrecognized tax benefits at December 31, 2011 and December 25, 2010 are potential net benefits of $1.6 million and $4.9 million, respectively, that would favorably impact the effective tax rate if recognized. Unrecognized tax benefits are included in accrued expenses in the accompanying consolidated balance sheets and adjusted in the period in which new information about a tax position becomes available or the final outcome differs from the amount recorded.

The Company’s state income tax returns remain subject to examination for three or four years depending on the state’s statute of limitations. In addition, the Company is generally obligated to report changes in taxable income arising from federal income tax audits.

In August 2008, the Massachusetts Department of Revenue (the “MA DOR”) commenced an examination of the Company’s 2004, 2005 and 2006 corporate income tax returns. In addition, in October 2009, the MA DOR expanded the original examination to include the 2007 and 2008 corporate income tax returns. In October 2011, the Company settled the 2004 to 2008 MA DOR examinations. The settlement resulted in a benefit to its fourth quarter provision for income taxes of $2.1 million. The Company is also being audited by three other states as of December 31, 2011.

The Company was audited by other states and settled various issues that resulted in no change in unrecognized tax benefits in 2009 and a decrease of $0.4 million in unrecognized tax benefits in 2010 and no change in unrecognized tax benefits in 2011.

In September 2011, the Internal Revenue Service (“IRS”) commenced an examination of the Company’s 2007 and 2008 amended consolidated corporate income tax return and the related loss carry back claim to 2006. In addition, in October 2011, the IRS expanded the original examination to include the 2009 corporate income tax return. The examination was in progress as of December 31, 2011.

It is reasonably possible that the Company’s unrecognized tax benefits may increase or decrease in 2012 if there is a completion of certain state income tax audits; however, the Company cannot estimate the range of such possible changes. The Company does not expect that any potential changes would have a material impact on the Company’s financial position, results of operations or cash flows.