Income Taxes

3 Months Ended

Mar. 30, 2013

Income Taxes

F. Income Taxes

In September 2011, the Internal Revenue Service (the “IRS”) commenced an examination of the Company’s 2007 and 2008 amended consolidated corporate income tax returns 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. As of March 30, 2013, the examination has been effectively settled and resulted in a net decrease of $0.5 million in unrecognized tax benefits for the thirteen weeks ended March 30, 2013.

The Company is also being audited by one state as of March 30, 2013. 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.

As of March 30, 2013 and December 29, 2012, the Company had approximately $0.8 million and $1.3 million, respectively, of unrecognized income tax benefits.

The Company’s practice is to classify interest and penalties related to income tax matters in income tax expense. As of March 30, 2013 and December 29, 2012, the Company had $0.3 million and $0.7 million, respectively, accrued for interest and penalties.

The tax rate of 27.7% for the thirteen weeks ended March 30, 2013 was favorably impacted by the settlement of the IRS audit and the reinstatement of the 2012 Federal Research and Development credit. The Company expects its tax provision for the year ending December 28, 2013 to be approximately 37%.