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Note 9 - Income Taxes
 12 Months Ended
Dec. 29, 2012
Income Tax Disclosure [Text Block]
(9)
Income Taxes

The components of the provision for income taxes are as follows (in thousands):

   
2012
   
2011
   
2010
 
Current:
                 
Federal
  $ -     $ -     $ (171 )
State
    165       (439 )     31  
Foreign
    790       906       859  
Deferred:
                       
Federal
    -       11,592       (1,965 )
State
    (928 )     2,281       (1,205 )
Foreign
    839       70       (125 )
Income tax expense (benefit)
  $ 866     $ 14,410     $ (2,576 )

A reconciliation between the statutory federal income tax rate and the effective income tax rate is as follows (in thousands):

   
2012
   
2011
   
2010
 
                   
Loss before income taxes
  $ (48,429 )   $ (2,652 )   $ (2,472 )
Statutory federal income tax rate
    34 %     34 %     34 %
Income tax expense (benefit) at statutory federal rate
    (16,466 )     (902 )     (840 )
State income taxes, net of federal tax benefit
    124       2       (74 )
Permanent difference - Goodwill impairment
    11,448       -       -  
Valuation allowance
    4,739       15,565       (1,249 )
Effect of lower foreign taxes
    296       (231 )     (174 )
Release of state tax reserves
    (23 )     (47 )     (174 )
Other items, net
    748       23       (65 )
Income tax expense (benefit)
  $ 866     $ 14,410     $ (2,576 )
Effective tax rate
    (1.8 )%     (543.4 )%     104.2 %

Temporary differences that gave rise to deferred tax assets and liabilities are as follows (in thousands):

   
2012
   
2011
 
             
Deferred tax assets:
           
Deferred revenue
  $ 4,676     $ 4,711  
Accrued rents
    1,884       2,414  
Net operating loss carryforwards
    4,336       1,770  
Intangible assets
    1,799       1,837  
Deferred compensation
    2,089       2,218  
Carryforward of tax credits
    4,585       2,251  
Receivable write-offs
    641       840  
Stock compensation
    179       179  
Depreciation
    1,871       743  
Other
    2,054       1,925  
      24,114       18,888  
Less: Valuation allowance
    20,865       16,126  
Total deferred tax assets
    3,249       2,762  
                 
Deferred tax liabilities:
               
Depreciation
    -       -  
Other
    (2,321 )     (1,925 )
Total deferred tax liabilities
    (2,321 )     (1,925 )
Net deferred tax asset
  $ 928     $ 837  

We evaluate the realizability of our deferred tax assets on a quarterly basis.  As the Company has incurred a cumulative book loss over the three year period ended December 31, 2011, management evaluated the realizability of the Company’s deferred tax assets.  The Company performed an analysis of all available evidence, both positive and negative, consistent with the provisions of ASC 740-10-30-17.  Some of the evidence evaluated includes our historical operating performance, the macroeconomic factors contributing to the recent fiscal loss for which the tax benefits have been fully realized by the carryback availability, and our forecast of future taxable income, including the availability of prudent and feasible tax planning strategies.  The three-year cumulative loss is a significant piece of negative evidence and while management believes that it is primarily a result of losses that were primarily attributable to the significant economic conditions experienced in 2009 and not an indication of continuing operations, ASC 740 requires that objective historical evidence be given more weight than subjective evidence, such as forecasts of future income.  Accordingly, in the fiscal 2011 fourth quarter, the Company recorded a $15.6 million valuation allowance on its US deferred tax assets.

The valuation allowance on US deferred tax assets will continue to increase as a result of temporary differences between the financial reporting and tax basis of the assets and liabilities as well as the generation of net operating loss and tax credit carryforwards.  Accordingly, the Company recorded an additional valuation allowance of $3.2 million on it US deferred tax assets in 2012.  The Company also evaluated the realizability of deferred tax assets in foreign jurisdictions and , upon determining that it was more likely than not that the assets were not realizable, recorded a $1.5 million valuation allowance of foreign deferred tax assets in 2012.

Included in the deferred tax asset is $4.3 million related to federal, state and foreign net operating loss carryforwards for which a valuation allowance of $4.3 million has been recorded.  US federal and foreign net operating loss carryforwards total $11.7 million and $4.3 million as of December 29, 2012, respectively, and do not expire.  Also included in the deferred tax asset is $4.6 million related to tax credits for which a valuation allowance of $4.6 million has been recorded.

The Company has not provided for United States income taxes on the accumulated but undistributed earnings of its non-U.S. subsidiaries of $9.0 million and $20.5 million as of December 29, 2012 and December 31, 2011, respectively, as the Company intends to indefinitely reinvest these undistributed earnings.  However, if any portion were to be distributed, the related U.S. tax liability may be reduced by foreign income taxes paid on these earnings.  Determination of the unrecognized deferred tax liability related to these undistributed earnings is not practicable because of the complexities with its hypothetical calculation.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

Balance as of January 1, 2011
  $ 263  
Lapse of statute
    (50 )
Balance as of December 31, 2011
    213  
Lapse of statute
    (28 )
Balance as of December 29, 2012
  $ 185  

As of December 29, 2012 and December 31, 2011, approximately $0.2 million of the unrecognized tax benefits would impact the Company’s provision for income taxes and effective tax rate if recognized.  In the normal course of business, the Company provides for uncertain tax positions and the related interest and penalties and adjusts its unrecognized tax benefits and accrued interest and penalties accordingly.  During the next fiscal year, unrecognized tax benefits are expected to remain unchanged.

The Company recognizes interest and penalties related to uncertain tax positions in income tax expense.  There was approximately $50,000 and $40,000 of accrued interest related to uncertain tax positions as of December 29, 2012 and December 31, 2011, respectively.

The Company’s income before income taxes from domestic and foreign operations (which include the United Kingdom, Canada, France and Ireland), are as follows (in thousands):

   
2012
   
2011
   
2010
 
Domestic
  $ (11,550 )   $ (6,200 )   $ (8,744 )
Foreign
    (36,879 )     3,548       6,272  
Total
  $ (48,429 )   $ (2,652 )   $ (2,472 )

The following tax years remain open in the Company’s major taxing jurisdictions as of December 29, 2012:

United States  (Federal)
2008 through 2012
United Kingdom
2006 through 2012
Canada
2009 through 2012
France
2007 through 2012
Ireland
2007 through 2012