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Income Taxes
 12 Months Ended
Dec. 31, 2011
Income Taxes [Abstract]  
Income Taxes

5. Income Taxes

Our provision for (benefit from) income taxes consists of the following:

 

      September 30,       September 30,       September 30,  
    Fiscal Year
Ended
December 31,
2011		     Fiscal Year
Ended
January 1,
2011		     Fiscal Year
Ended
January 2,
2010		  
    (In thousands)  

Federal income taxes:

                        

Current

   $ (89 )    $ (637 )    $ (19,800 ) 

Deferred

     —         (556 )      18,475  

State income taxes:

                        

Current

     759       (145 )      (263 ) 

Deferred

     —         (100 )      5,745  

Foreign income taxes:

                        

Current

     317       793       407  

Deferred

     (25 )      56       —    
   

 

 

    

 

 

    

 

 

  

Provision for (benefit from) income taxes

   $ 962     $ (589 )    $ 4,564  
   

 

 

    

 

 

    

 

 

  

The federal statutory income tax rate was 35%. Our provision for (benefit from) income taxes is reconciled to the federal statutory amount as follows:

 

      September 30,       September 30,       September 30,  
    Fiscal Year
Ended
December 31,
2011		     Fiscal Year
Ended
January 1,
2011		     Fiscal Year
Ended
January 2,
2010		  
    (In thousands)  

Benefit from income taxes computed at the federal statutory tax rate

   $ (13,162 )    $ (18,841 )    $ (19,912 ) 

Benefit from state income taxes, net of federal benefit

     (1,296 )      (2,153 )      (2,276 ) 

Valuation allowance change

     14,498       18,433       25,864  

Other

     922       1,972       888  
   

 

 

    

 

 

    

 

 

  

Provision for (benefit from) income taxes

   $ 962     $ (589 )    $ 4,564  
   

 

 

    

 

 

    

 

 

  

 

Our income before provision for income taxes for our Canadian operations was $0.9 million, $1.6 million and $1.2 million for fiscal 2011, fiscal 2010, and fiscal 2009, respectively.

For fiscal 2011, we recognized tax expense of $1.0 million. The expense recognized for the year is primarily comprised of $0.7 million for current state income tax expense related to earnings generated on a separate company basis and $0.3 million of current income tax expense resulting from foreign income taxes.

For fiscal 2010, we recognized tax benefit of $0.6 million. The benefit recognized for the year was primarily comprised of $0.6 million of deferred income tax benefit resulting from the allocation of income tax expense to other comprehensive income, $0.7 million of current income tax benefit resulting from a net operating loss carryback and $0.8 million of current income tax expense resulting from foreign income taxes.

In accordance with the intraperiod tax allocation provisions of U.S. GAAP, we are required to consider all items (including items recorded in other comprehensive income) in determining the amount of tax benefit that results from a loss from continuing operations that should be allocated to continuing operations. In fiscal 2011, there was no intraperiod tax allocation due to the fact that there was a loss in other comprehensive income for the period. In fiscal 2010, in addition to our federal income tax benefit, we recorded a non-cash tax benefit on the loss from continuing operations of $0.6 million, which was offset in full by income tax expense recorded in other comprehensive income. While the income tax benefit from continuing operations is reported in our Consolidated Statements of Operations, the income tax expense on other comprehensive income is recorded directly to accumulated other comprehensive loss, which is a component of stockholders’ equity.

Our financial statements contain certain deferred tax assets which have arisen primarily as a result of tax benefits associated with the loss before income taxes incurred, as well as net deferred income tax assets resulting from other temporary differences related to certain reserves, pension obligations and differences between book and tax depreciation and amortization. We record a valuation allowance against our net deferred tax assets when we determine that based on the weight of available evidence, it is more likely than not our net deferred tax assets will not be realized.

In our evaluation of the weight of available evidence, we considered recent reported losses as negative evidence which carried substantial weight. Therefore, we considered evidence related to the four sources of taxable income, to determine whether such positive evidence outweighed the negative evidence associated with the losses incurred. The positive evidence considered included:

 

  • taxable income in prior carryback years, if carryback is permitted under the tax law;

 

  • future reversals of existing taxable temporary differences

 

  • tax planning strategies; and

 

  • future taxable income exclusive of reversing temporary differences and carryforwards.

During the first quarter of fiscal 2009, we evaluated the weight of available positive and negative evidence relative to changes in the environment during the first quarter of 2009. In late March and April, subsequent to the filing of the fiscal 2008 10-K, we experienced a substantial drop in revenue compared to expectations. As such, these changes in our internal assumptions and the revised external expectations of 2009 housing starts resulted in a change in our projections from cumulative pretax income to cumulative pretax loss for the three year period ended 2010, causing us to conclude that, as of April 4, 2009, the weight of the positive evidence was no longer sufficient to overcome the weight of the negative evidence of a three year cumulative loss, therefore, a full valuation allowance for all deferred income tax assets was necessary at the end of the first quarter of fiscal 2009.

During fiscal 2010 and 2011, we weighed all available positive and negative evidence and concluded the weight of the negative evidence of a three year cumulative loss continued to outweigh the positive evidence. Based on the conclusions reached, we continued to maintain a full valuation allowance during 2011 and 2010.

 

The components of our net deferred income tax assets (liabilities) are as follows:

 

      September 30,       September 30,  
    December 31,
2011		     January 1,
2011		  
    (In thousands)  

Deferred income tax assets:

                

Inventory reserves

   $ 3,012     $ 3,341  

Compensation-related accruals

     5,979       6,441  

Accruals and reserves

     176       356  

Accounts receivable

     1,169       1,341  

Restructuring costs

     2,540       4,212  

Derivatives

     —         814  

Pension

     13,713       7,332  

Benefit from NOL carryovers(1)

     41,770       24,867  

Other

     646       558  
   

 

 

    

 

 

  

Total gross deferred income tax assets

     69,005       49,262  

Less: Valuation allowances

     (66,793 )      (46,528 ) 
   

 

 

    

 

 

  

Total net deferred income tax assets

   $ 2,212     $ 2,734  
   

 

 

    

 

 

  

Deferred income tax liabilities:

                

Intangible assets

     (176 )      (230 ) 

Property and equipment

     (1,211 )      (1,695 ) 

Pension

     —         —    

Other

     (849 )      (858 ) 
   

 

 

    

 

 

  

Total deferred income tax liabilities

     (2,236 )      (2,783 ) 
   

 

 

    

 

 

  

Deferred income tax assets (liabilities), net

   $ (24 )    $ (49 ) 
   

 

 

    

 

 

  

 

(1) Our federal and state NOL carryovers will expire over 1 to 20 years.

Activity in our deferred tax asset valuation allowance for fiscal 2011 and fiscal 2010 was as follows (in thousands):

 

      September 30,       September 30,  
    Fiscal Year
Ended
December 31,
2011		     Fiscal Year
Ended
January 1,
2011		  

Balance at beginning of the year

   $ 46,528     $ 27,226  

Valuation allowance removed for taxes related to:

                

Income before income taxes

     —         —    

Valuation allowance provided for taxes related to:

                

Loss before income taxes

     20,265       19,302  

Effect of a change in judgment

     —         —    
   

 

 

    

 

 

  

Balance at end of the year

   $ 66,793     $ 46,528  
   

 

 

    

 

 

  

We have recorded income tax and related interest liabilities where we believe certain of our tax positions are not more likely than not to be sustained if challenged. The following table summarizes the activity related to our unrecognized tax benefits:

 

      September 30,  
    (In thousands)  

Balance at January 3, 2009

   $ 261  

Increases related to current year tax positions

     526  

Additions for tax positions in prior years

     —    

Reductions for tax positions in prior years

     (25 ) 

Settlements

     (23 ) 
   

 

 

  

Balance at January 2, 2010

   $ 739  

Increases related to current year tax positions

     —    

Additions for tax positions in prior years

     —    

Reductions for tax positions in prior years

     (62 ) 

Settlements

     —    
   

 

 

  

Balance at January 1, 2011

   $ 677  

Increases related to current year tax positions

     —    

Additions for tax positions in prior years

     196  

Reductions for tax positions in prior years

     —    

Settlements

     —    
   

 

 

  

Balance at December 31, 2011

   $ 873  
   

 

 

  

 

Included in the unrecognized tax benefits at December 31, 2011 and January 1, 2011 were $0.9 million and $0.7 million, respectively, of tax benefits that, if recognized, would reduce our annual effective tax rate. We also accrued a nominal amount of interest related to these unrecognized tax benefits during 2011 and 2010, and this amount is reported in “Interest expense” in our Consolidated Statements of Operations. We do not expect our unrecognized tax benefits to change significantly over the next 12 months.

We file U.S., state, and foreign income tax returns in jurisdictions with varying statutes of limitations. The 2008 through 2011 tax years generally remain subject to examination by federal and most state and foreign tax authorities.