INCOME TAXES

3 Months Ended

Jun. 30, 2011

INCOME TAXES

INCOME TAXES

NOTE 8—INCOME TAXES

        The difference between the effective tax rate on earnings from continuing operations before income taxes and the U.S. federal income tax statutory rate is as follows:

	Thirteen Weeks Ended
	June 30, 2011			July 1, 2010
Income tax expense (benefit) at the federal statutory rate	$	275		$	5,800
Effect of:
State income taxes		525			4,800
Permanent items		—			(100	)
Change in ASC 740 (formally FIN 48) reserve		(900	)		—
Valuation allowance		625			(3,600	)
Other, net		—			50
Income tax expense	$	525		$	6,950
Effective income tax rate		64.1	%		41.9	%

        The accounting for income taxes requires that deferred tax assets and liabilities be recognized, using enacted tax rates, for the tax effect of temporary differences between the financial reporting and tax bases of recorded assets and liabilities. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that some or all of the deferred tax assets will not be realized.

        The state tax provision was for the states that impose their income based taxes on a gross sales method, that impose a margin tax or that have suspended the use of net operating loss carryforwards into the current tax year.