Note 19.

Income Taxes

The company’s provision for income tax expense consists of the following for fiscal years 2012, 2011 and 2010:


	Fiscal 2012		Fiscal 2011			Fiscal 2010
	(Amounts in thousands)
Current Taxes:
Federal	$	54,599	$	60,129		$	60,472
State		6,602		10,109			8,973

		61,201		70,238			69,445

Deferred Taxes:
Federal		9,703		(1,492	)		4,372
State		1,747		(208	)		(484	)

		11,450		(1,700	)		3,888

Income tax expense	$	72,651	$	68,538		$	73,333

Fiscal 2012 deferred income tax expense is significantly higher than in the prior years presented. Pension funding, tax amortization of acquired intangibles, and an increase in the amount of federal net operating loss available were significant factors contributing to the increase. On January 2, 2013, tax legislation was enacted that will require the recognition of an immaterial discrete benefit in the first quarter of fiscal 2013. This benefit relates to credits generated in 2012 which cannot be recognized until the period that includes the enactment date of the legislation.

Income tax expense differs from the amount computed by applying the U.S. federal income tax rate (35%) because of the effect of the following items for fiscal years 2012, 2011 and 2010:


	Fiscal 2012			Fiscal 2011			Fiscal 2010
	(Amounts in thousands)
Tax at U.S. federal income tax rate	$	73,070		$	67,188		$	73,633
State income taxes, net of federal income tax benefit		5,427			6,546			5,795
Section 199 qualifying production activities benefit		(5,407	)		(5,645	)		(6,019	)
Other		(439	)		449			(76	)

Income tax expense	$	72,651		$	68,538		$	73,333

Deferred tax assets (liabilities) are comprised of the following:


	December 29, 2012			December 31, 2011
	(Amounts in thousands)
Self-insurance	$	5,633		$	6,183
Compensation and employee benefits		11,612			12,045
Deferred income		6,697			6,519
Loss and credit carryforwards		31,187			36,270
Equity-based compensation		12,198			12,541
Hedging		2,578			9,345
Pension		54,843			53,199
Postretirement benefits		7,805			8,407
Other		13,453			13,338
Deferred tax assets valuation allowance		(4,545	)		(4,874	)

Deferred tax assets		141,461			152,973

Depreciation		(88,494	)		(90,174	)
Intangible assets		(60,304	)		(59,527	)
Other		(2,671	)		(2,383	)

Deferred tax liabilities		(151,469	)		(152,084	)

Net deferred tax (liability) asset	$	(10,008	)	$	889

The company has a deferred tax asset of $20.2 million related to a federal net operating loss carryforward which we expect to fully utilize. Additionally, the company and various subsidiaries have a net deferred tax asset of $9.0 million related to state net operating loss carryforwards with expiration dates through fiscal 2024. The utilization of a portion of these state carryforwards could be limited in the future; therefore, a valuation allowance has been recorded. Should the company determine at a later date that certain of these losses which have been reserved for may be utilized, a benefit may be recognized in the Consolidated Statements of Income. Likewise, should the company determine at a later date that certain of these net operating losses for which a deferred tax asset has been recorded may not be utilized, a charge to the Consolidated Statements of Income may be necessary.

The gross amount of unrecognized tax benefits was $7.3 million and $8.7 million as of December 29, 2012 and December 31, 2011, respectively. This decrease is primarily due to the expiration of the statute of limitations on several previously unrecognized tax benefits. These amounts are exclusive of interest accrued and are recorded in other long-term liabilities on the Consolidated Balance Sheet. If recognized, the $7.3 million (less $1.7 million related to tax imposed in other jurisdictions) would impact the effective rate.

The company accrues interest expense and penalties related to income tax liabilities as a component of income before taxes. No accrual of penalties is reflected on the company’s balance sheet as the company believes the accrual of penalties is not necessary based upon the merits of its income tax positions. The company had an accrued interest balance of approximately $0.7 million and $0.7 million at December 29, 2012 and December 31, 2011, respectively. An insignificant amount of net interest expense was recognized during fiscal 2012 and $0.4 million was recognized during fiscal 2011. Interest expense recognized in 2010 was also insignificant.

The company defines the federal jurisdiction as well as various state jurisdictions as “major” jurisdictions. With limited exceptions, the company is no longer subject to federal or state examinations for years prior to 2009.

At this time, we do not anticipate material changes to the amount of gross unrecognized tax benefits over the next twelve months.

The following is a reconciliation of the total amounts of unrecognized tax benefits for fiscal years 2012, 2011 and 2010:


	Fiscal 2012			Fiscal 2011			Fiscal 2010
	(Amounts in thousands)
Unrecognized tax benefit at beginning of fiscal year	$	8,709		$	4,823		$	4,629
Gross increases — tax positions in a current period		331			876			553
Gross increases — acquisitions		—			3,863			—
Lapses of statutes of limitations		(1,736	)		(853	)		(359	)

Unrecognized tax benefit at end of fiscal year	$	7,304		$	8,709		$	4,823