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Table of Contents
GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Income tax expense/(benefit) for all periods consisted of the following components:
Successor Predecessor
Period Period
Year ended March 16 - January 1 - Year ended
December 31, December 31, March 15, December 31,
2008 2007 2007 2006
(in thousands)
Current:
Federal $ 3,082 $ — $ (21,547) $ 21,675
State 3,391 462 (279) 2,299
Foreign 1,157 2,835 444 1,840
7,630 3,297 (21,382) 25,814
Deferred:
Federal 22,753 8,266 9,984 (3,695)
State 1,618 1,037 701 107
Foreign — — — —
24,371 9,303 10,685 (3,588)
Income tax expense (benefit) $ 32,001 $ 12,600 $ (10,697) $ 22,226
The following table summarizes the differences between the Company's effective tax rate for financial reporting purposes and the federal
statutory tax rate.
Successor Predecessor
Year ended March 16- January 1- Year ended
December 31, December 31, March 15, December 31,
2008 2007 2007 2006
Percent of pretax earnings:
Statutory federal tax rate 35.0% 35.0% 35.0% 35.0%
Increase/(decrease):
Other permanent differences 1.1% 2.0% (17.4%) (1.1%)
State income tax, net of federal tax benefit 3.8% 3.1% (0.4%) 3.5%
Federal tax credits (3.0%) (0.2%) 0.1% (0.1%)
Effective income tax rate 36.9% 39.9% 17.3% 37.3%
In June 2006, the FASB issued Interpretation No. 48, "Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement
No. 109," ("FIN 48") which applies to all open tax positions accounted for in accordance with SFAS 109. This Interpretation is intended to result
in increased relevance and comparability in financial reporting of income taxes and to provide more information about the uncertainty in income
tax assets and liabilities.
The Company adopted the provisions of FIN 48 on January 1, 2007. As a result of the implementation of FIN 48, the Company recognized a
$0.4 million increase in the liability for unrecognized tax benefits which was accounted for as a reduction to the January 1, 2007 balance of
retained earnings. Additionally, as a result of the implementation of FIN 48, the Company recorded $15.0 million of
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