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Income Taxes
 12 Months Ended
Dec. 29, 2012
Income Taxes [Abstract]  
Income Taxes
5.  Income Taxes
 
Our provision for (benefit from) income taxes consists of the following:
 
   
Fiscal Year
Ended
December 29,
2012
    
Fiscal Year
Ended
December 31,
2011
    
Fiscal Year
Ended
January 1,
2011
  
   
(In thousands)
  
Federal income taxes:
                  
Current
   $ 16     $ (89 )   $ (637 )
Deferred
     —       —       (556 )
State income taxes:
                        
Current
     334       759       (145 )
Deferred
     —       —       (100 )
Foreign income taxes:
                        
Current
     56       317       793  
Deferred
     (20 )     (25 )     56  
Provision for (benefit from) income taxes
   $ 386     $ 962     $ (589 )
 
The federal statutory income tax rate was 35%. Our provision for (benefit from) income taxes is reconciled to the federal statutory amount as follows:
 
   
Fiscal Year
Ended
December 29,
2012
    
Fiscal Year
Ended
December 31,
2011
    
Fiscal Year
Ended
January 1,
2011
  
   
(In thousands)
  
Benefit from income taxes computed at the federal statutory tax rate
   $ (7,924 )   $ (13,162 )   $ (18,841 )
Benefit from state income taxes, net of federal benefit
     (866 )     (1,296 )     (2,153 )
Valuation allowance change
     8,820       14,498       18,433  
Nondeductible items
     484       806       3,128  
Other
     (128 )     116       (1,156 ) 
Provision for (benefit from) income taxes
   $ 386     $ 962     $ (589 )
 
Our income before provision for income taxes for our Canadian operations was $0.1 million, $0.9 million and $1.6 million for fiscal 2012, fiscal 2011, and fiscal 2010, respectively.
 
For fiscal 2012, we recognized tax expense of $0.4 million. The expense recognized for the year is primarily comprised of $0.3 million for current state income tax expense related to earnings generated on a separate company basis.
 
For fiscal 2011, we recognized tax expense of $1.0 million. The expense recognized for the year is primarily comprised of $0.8 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.
 
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 2012 and fiscal 2011, there was no intraperiod tax allocation due to the fact that there was a loss in other comprehensive income for the period. 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 that 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 2012 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 2012 and 2011.
 
The components of our net deferred income tax assets (liabilities) are as follows:
 
   
December 29,
2012
    
December 31,
2011
  
   
(In thousands)
  
Deferred income tax assets:
            
Inventory reserves
   $ 2,816     $ 3,012  
Compensation-related accruals
     5,838       5,979  
Accruals and reserves
     92       176  
Accounts receivable
     1,327       1,169  
Restructuring costs
     118       2,540  
Pension
     16,936       13,713  
Benefit from NOL carryovers(1)
     52,088       41,770  
Other
     695       646  
Total gross deferred income tax assets
     79,910       69,005  
Less: Valuation allowances
     (78,050 )     (66,793 )
Total net deferred income tax assets
   $ 1,860     $ 2,212  
Deferred income tax liabilities:
                
Intangible assets
     (60 )     (176 )
Property and equipment
     (1,065 )     (1,211 )
Pension
     —       —  
Other
     (739 )     (849 )
Total deferred income tax liabilities
     (1,864 )     (2,236 )
Deferred income tax assets (liabilities), net
   $ (4 )   $ (24 )
 
 
(1)
Our federal and state NOL carryovers will expire over 1 to 20 years.
 
Activity in our deferred tax asset valuation allowance for fiscal 2012 and fiscal 2011 was as follows (in thousands):
 
   
Fiscal Year
Ended
December 29,
2012
    
Fiscal Year
Ended
December 31,
2011
  
Balance at beginning of the year                                                                                                                            
   $ 66,793     $ 46,528  
Valuation allowance removed for taxes related to:
                
Income before income taxes
     —       —  
Valuation allowance provided for taxes related to:
                
Loss before income taxes
     11,257       20,265  
Effect of a change in judgment
     —       —  
Balance at end of the year
   $ 78,050     $ 66,793  
 
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:
 
   
(In thousands)
  
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  
Increases related to current year tax positions
     —  
Additions for tax positions in prior years
     —  
Reductions for tax positions in prior years
     —
Reductions due to lapse of applicable statute of limitations
     (47 ) 
Settlements
     —  
Balance at December 29, 2012
   $ 826  
 
Included in the unrecognized tax benefits at December 29, 2012 and December 31, 2011 were $0.8 million and $0.9 million, respectively, of tax benefits that, if recognized, would reduce our annual effective tax rate. We also accrued an immaterial amount of interest related to these unrecognized tax benefits during 2012 and 2011, and this amount is reported in “Interest expense” in our Consolidated Statements of Operations. We do not expect our unrecognized tax benefits to change materially over the next 12 months.
 
We file U.S., state, and foreign income tax returns in jurisdictions with varying statutes of limitations. The 2009 through 2012 tax years generally remain subject to examination by federal and most state and foreign tax authorities.