Income Taxes (Notes)

12 Months Ended

Dec. 28, 2013

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Income tax expense consisted of the following (in thousands):

Current:	2013		2012		2011
Federal	$	25,091	$	34,993	$	23,481
State	3,802		3,419		3,622
	28,893		38,412		27,103
Deferred:
Federal	1,953		2,176		2,434
State	84		1,323		405
	2,037		3,499		2,839
Income tax expense	$	30,930	$	41,911	$	29,942

The following table provides a reconciliation between the statutory federal income tax rate and our effective income tax rate:

	2013		2012		2011
Statutory federal income tax	35.0	%	35.0	%	35.0	%
State income taxes, net of federal benefit	3.0		2.9		3.2
Manufacturing deduction	(3.2	)	(3.1	)	(2.9	)
Changes in unrecognized tax benefits	0.3		(0.2	)	(0.8	)
Other	(1.1	)	0.3		(1.4	)
Effective income tax rate	34.0	%	34.9	%	33.1	%

We file income tax returns with the U.S. federal government and various state jurisdictions. In the normal course of business, we are subject to examination by federal and state taxing authorities. We are no longer subject to federal income tax examinations for years prior to 2010 or state income tax examinations prior to 2009.

Deferred Income Taxes

The tax effects of temporary differences that give rise to deferred income taxes were as follows (in thousands):

Deferred tax assets:	2013			2012
Current:
Warranty and returns liabilities	$	4,376		$	3,040
Compensation and benefits	1,379			1,448
Deferred rent and lease incentives	857			867
Other	539			246
Long-term:
Stock-based compensation	5,944			8,061
Deferred rent and lease incentives	4,524			3,237
Warranty liabilities	605			563
Net operating loss and capital loss carryforwards	827			1,339
Other	1,111			459
Total gross deferred tax assets	20,162			19,260
Valuation allowance	(587		)	(647		)
Total deferred tax assets after valuation allowance	19,575			18,613
Deferred tax liabilities:
Long-term:
Property and equipment	7,696			4,701
Total gross deferred tax liabilities	7,696			4,701
Net deferred tax assets	$	11,879		$	13,912

At December 28, 2013, we had net operating loss carryforwards for state income tax purposes of $5.0 million which will expire between 2014 and 2033.

We evaluate our deferred income taxes quarterly to determine if valuation allowances are required. As part of this evaluation, we assess whether valuation allowances should be established for any deferred tax assets that are not considered more likely than not to be realized, using all available evidence, both positive and negative. This assessment considers, among other matters, the nature, frequency, and severity of historical losses, forecasts of future profitability, taxable income in available carryback periods and tax planning strategies. In making such judgments, significant weight is given to evidence that can be objectively verified.

Unrecognized Tax Benefits

Reconciliations of the beginning and ending amounts of unrecognized tax benefits for 2013, 2012 and 2011 were as follows (in thousands): 

	Federal and State Tax
	2013		2012			2011
Beginning balance	$	213	$	425		$	1,354
Increases related to current-year tax positions	149		18			292
Increases related to prior-year tax positions	112		—			355
Decreases related to prior-year tax positions	—		(230		)	—
Settlements with taxing authorities	—		—			(1,506		)
Lapse of statute of limitations	—		—			(70		)
Ending balance	$	474	$	213		$	425

As of December 28, 2013, we had $0.5 million of unrecognized tax benefits, which if recognized, would affect our effective tax rate. As of December 29, 2012, we had $0.2 million of unrecognized tax benefits, which if recognized, would affect our effective tax rate. The amount of unrecognized tax benefits is not expected to change materially within the next 12 months.

In 2013, 2012 and 2011, we included $21 thousand, $20 thousand and $(0.2) million, respectively, of net penalties and interest in income tax expense. At December 28, 2013, and December 29, 2012, we had accrued interest and penalties of $22 thousand and $0.1 million, respectively.