INCOME TAXES

FASB authoritative guidance prescribes accounting for and disclosure of uncertain tax positions ("UTP") and requires application of a more likely than not threshold to the recognition and de-recognition of UTP. FASB authoritative guidance permits recognition of the amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement. A change in judgment related to the expected ultimate resolution of UTP is recognized in earnings in the quarter of change. At December 31, 2011 and January 1, 2011, the Company had $0.2 million and $0.1 million, respectively of gross unrecognized tax benefits; if recognized, the net impact on the Company’s effective tax rate would be less than $0.2 million and $0.1 million, respectively. The Company recognizes accrued interest and penalties, as appropriate, related to unrecognized tax benefits as a component of income tax expense.

In fiscal 2011, the Company's major taxing jurisdictions include the U.S. (federal and state). The Company is no longer subject to federal examinations on years prior to fiscal 2007. The number of years open for state tax audits varies, depending on the tax jurisdiction, but is generally from three to five years. Currently, several state examinations are in progress. The Company does not anticipate that any state or federal audits will have a significant impact on the Company’s results of operations or financial position. In addition, the Company does not reasonably expect any significant changes to the estimated amount of liability associated with the Company's unrecognized tax positions in fiscal 2012.

Income tax expense attributable to income from continuing operations before income taxes consists of the following (in thousands):



	December 31, 2011		January 1, 2011		January 2, 2010
Current:
Federal	$	58,903	$	21,491	$	11,741
State	13,461		4,356		2,702
Foreign	467		—		—
Deferred:
Federal and State	30,045		253		10,646
	$	102,876	$	26,100	$	25,089

Income tax expense for the years ended December 31, 2011, January 1, 2011 and January 2, 2010, differed from the amount computed by applying the statutory U.S. federal income tax rate to income from continuing operations before income taxes as a result of the following (in thousands):



	December 31, 2011			January 1, 2011			January 2, 2010
Computed "expected" tax expense	$	95,303		$	24,620		$	23,408
State income taxes	10,621			2,679			2,491
Section 199 deduction	(5,306		)	(2,079		)	(744		)
Non-deductible employee compensation	778			363			201
Tax credits	(58		)	(80		)	(441		)
Tax reserves	44			(52		)	(212		)
Other, net	1,494			649			386
	$	102,876		$	26,100		$	25,089

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2011 and January 1, 2011 are presented below (in thousands):



	December 31, 2011			January 1, 2011
Deferred tax assets:
Net operating loss carryforwards	$	1,515		$	1,754
Loss contingency reserves	8,867			9,941
Employee benefits	3,380			3,453
Pension liability	19,000			12,623
Intangible assets amortization, including taxable goodwill	2,957			233
Other	9,477			6,705
Total gross deferred tax assets	45,196			34,709
Less valuation allowance	(46		)	(45		)
Net deferred tax assets	45,150			34,664

Deferred tax liabilities:
Intangible assets amortization, including taxable goodwill	(14,152		)	—
Property, plant and equipment depreciation	(43,472		)	(23,192		)
Other	(11,194		)	(10,438		)
Total gross deferred tax liabilities	(68,818		)	(33,630		)
	$	(23,668	)	$	1,034

At December 31, 2011, the Company had net operating loss carryforwards for federal income tax purposes of approximately $4.0 million expiring through 2020. The availability of the net operating loss carryforwards to reduce future taxable income is subject to various limitations. As a result of the change in ownership which occurred pursuant to the May 2002 recapitalization, utilization of the net operating loss carryforwards is limited to approximately $0.7 million per year for the remaining life of the net operating losses.

The Company has assessed that it is more likely than not that it will generate sufficient taxable income in future periods to realize its deferred income tax assets.