Income Taxes

6 Months Ended

Jul. 02, 2011

Income Taxes [Abstract]

Income Taxes

Note 11 — Income Taxes

     Our effective tax rate for the thirteen weeks ended July 2, 2011 was 28.7% as compared to 28.5% for the thirteen weeks ended July 3, 2010. For the twenty-six weeks ended July 2, 2011 and July 3, 2010, our effective tax rate was 29.8% and 28.1%, respectively. The increase in our effective tax rate for the current-year period is primarily the result of mix of income across our business units, including a higher proportion of losses in tax jurisdictions where we are not able to record a tax benefit versus profit before tax in our remaining jurisdictions in the current year.

     Our effective tax rate differed from the U.S. federal statutory rate of 35% during these periods primarily due to the relative mix of earnings or losses within the tax jurisdictions in which we operate, such as: a) earnings in lower-tax jurisdictions for which no U.S. taxes have been provided because such earnings are planned to be reinvested indefinitely outside the United States; and b) changes in the valuation allowance on deferred tax assets.

     At July 2, 2011, we had gross unrecognized tax benefits of $23,070 compared to $23,641 at January 1, 2011, representing a net decrease of $571 during the first half of 2011. Substantially all of the gross unrecognized tax benefits, if recognized, would impact our effective tax rate in the period of recognition. We recognize interest and penalties related to unrecognized tax benefits in income tax expense. In addition to the gross unrecognized tax benefits identified above, the interest and penalties recorded to date by us totaled $5,039 at July 2, 2011, as compared to $3,006 at January 1, 2011.

     Our future effective tax rate will continue to be affected by changes in the relative mix of taxable income and losses in the tax jurisdictions in which we operate, changes in the valuation of deferred tax assets or liabilities, or changes in tax laws or interpretations thereof. In addition, our income tax returns are subject to continuous examination by the U.S. Internal Revenue Service (“IRS”) and other tax authorities. In 2010, the IRS initiated an examination of tax years 2007 to 2009, which is still in progress. Furthermore, during 2010, the statute of limitations lapsed on tax year 2006. It is possible that within the next twelve months, this ongoing federal tax examination, as well as ongoing tax examinations in the U.S. states and several of our foreign jurisdictions may be resolved, that new tax examinations may commence and that other issues may be effectively settled. However, we do not expect our unrecognized tax benefits to change significantly over the next twelve months.