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Income Taxes
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6 Months Ended |
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Jul. 02, 2011
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| Income Taxes | Ìý |
| Income Taxes |
Note K — Income Taxes
The effective income tax rate was 23.9% in the first half of 2010, compared with 22.9% in the first half of 2011. The tax rates in both periods were lowered by discrete items. The first half of 2010 included a $13.0Ìýmillion income tax benefit related to refund claims in a foreign jurisdiction. The first six months of 2011 included $10.0Ìýmillion in tax benefits related to settlements of prior years' tax audits and $2.8Ìýmillion of tax benefits related to the realization of unrecognized tax benefits resulting from expiration of statutes of limitations. In addition, the tax rate in the first six months of 2011 benefited from a higher percentage of income in lower tax rate jurisdictions compared with the 2010 period. The effective tax rate for the full year 2010 was 23.6% (24.9% on earnings before the goodwill and intangible asset impairment charge).
ÂÒÂ×°ÍÊ¿ files a consolidated U.S. federal income tax return, as well as separate and combined income tax returns in numerous states and foreign jurisdictions. During 2010, the United States Internal Revenue Service ("IRS") commenced an examination of tax years 2007, 2008 and 2009. During the first quarter of 2011, ÂÒÂ×°ÍÊ¿ settled with the IRS its examination of tax years 2004, 2005 and 2006. ÂÒÂ×°ÍÊ¿ is currently subject to examination by various state tax authorities. While the outcome of any one examination is not expected to have a material impact on ÂÒÂ×°ÍÊ¿'s consolidated financial statements, management regularly assesses the outcomes of both ongoing and future examinations to ensure ÂÒÂ×°ÍÊ¿'s provision for income taxes is sufficient. Management believes that some of these audits and negotiations will conclude during the next 12Ìýmonths.
During the first six months of 2011, the amount of unrecognized tax benefits and associated interest decreased by $16.3Ìýmillion, primarily due to the audit settlements. Of the $16.3Ìýmillion net decrease, $6.4Ìýmillion favorably impacted income tax expense in the first six months. Management believes that it is reasonably possible that the amount of unrecognized income tax benefits may decrease during the next 12Ìýmonths by approximately $4.7Ìýmillion related to the completion of audits and other settlements with tax authorities and the expiration of statutes of limitations. Of the $4.7Ìýmillion, $1.8Ìýmillion would reduce income tax expense.
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