Papa Johns 2008 Annual Report Download - page 93

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86
14. Income Taxes (continued)
The Company had approximately $19.9 million and $15.2 million of foreign tax net operating loss
carryovers as of December 28, 2008 and December 30, 2007, respectively, for which a valuation
allowance has been provided. A substantial majority of our foreign tax net operating losses do not have
an expiration date.
Management believes it is more likely than not that the Company’s future earnings will be sufficient to
ensure the realization of the recorded net deferred tax assets for federal and state purposes.
The reconciliation of income tax computed at the U.S. federal statutory rate to income tax expense,
exclusive of income associated with discontinued operations, for the years ended December 28, 2008,
December 30, 2007 and December 31, 2006 is as follows (in thousands):
2008 2007 2006
Tax at U.S. federal statutory rate 19,872$ 16,110$ 33,655$
State and local income taxes 1,462 1,167 2,501
Foreign income taxes 810 620 619
Settlement of certain tax issues (1,684) (3,408) (2,494)
Tax credits and other (480) (1,196) (1,110)
Total 19,980$ 13,293$ 33,171$
Income taxes paid were $23.9 million in 2008, $24.0 million in 2007 and $28.0 million in 2006.
The Company files income tax returns in the U.S. federal jurisdiction and various states and foreign
jurisdictions. The Company, with few exceptions, is no longer subject to U.S. federal, state and local, or
non-U.S. income tax examinations by tax authorities for years before 2004. The Company is currently
undergoing examinations by various state and local tax authorities. The Company anticipates that the
finalization of these current examinations and other issues could result in a decrease in the liability for
unrecognized tax benefits (and a decrease of income tax expense) of approximately $1.0 million during
the next 12 months.
A reconciliation of the beginning and ending liability for unrecognized tax benefits is as follows (in
thousands):
Balance at December 31, 2006 8,009$
Cumulative effect of adoption of FIN 48 (614)
Adjusted beginning balance 7,395$
Additions based on tax positions related to current year 357
Reductions for tax positions of prior years (17)
Reductions for lapse of statute of limitations (1,826)
Settlements (60)
Balance at December 30, 2007 5,849$
Reductions for tax positions of prior years (464)
Reductions for lapse of statute of limitations (911)
Settlements (271)
Balance at December 28, 2008 4,203$