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Income Taxes | 12 Months Ended
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Jan. 02, 2015
Income Taxes [Abstract] |
Income Taxes | 10. Income Taxes The Company files federal income tax returns, as well as multiple state, local and foreign jurisdiction tax returns. A number of years may elapse before an uncertain tax position is audited and finally resolved. While it is often difficult to predict the final outcome or the timing of resolution on any particular uncertain tax position, the Company believes that its reserves for income taxes reflect the most probable outcome. The Company adjusts these reserves, as well as the related interest, in light of changing facts and circumstances. The resolution of a matter would be recognized as an adjustment to the provision for income taxes and the effective tax rate in the period of resolution. The Company is no longer subject to examinations of its federal income tax returns by the Internal Revenue Service for years through 2010 and all significant state, local and foreign matters have been concluded for years through 2010. The components of income before income taxes are as follows (in thousands):
|  | Year Ended
|  | January 2, |  | December 27, |  | December 28,
|  | 2015 |  | 2013 |  | 2012
Domestic |  | $ | 6,549 |  | $ | 15,823 |  | $ | 15,269
Foreign |  |  | 5,417 |  |  | (696) |  |  | 950
Income before income taxes |  | $ | 11,966 |  | $ | 15,127 |  | $ | 16,219
The components of income tax expense (benefit) are as follows (in thousands):
|  | Year Ended
|  | January 2, |  | December 27, |  | December 28,
|  | 2015 |  | 2013 |  | 2012
Current tax expense (benefit) |  |  |  |  |  |  |  |  |
Federal |  | $ | 155 |  | $ | 10 |  | $ | (314)
State |  |  | 131 |  |  | 530 |  |  | 961
Foreign |  |  | 132 |  |  | 103 |  |  | 66
|  |  | 418 |  |  | 643 |  |  | 713
Deferred tax expense (benefit) |  |  |  |  |  |  |  |  |
Federal |  |  | 200 |  |  | 6,450 |  |  | 4,532
State |  |  | (238) |  |  | 394 |  |  | (3,587)
Foreign |  |  | 1,875 |  |  | (1,089) |  |  | (2,136)
|  |  | 1,837 |  |  | 5,755 |  |  | (1,191)
Income tax expense (benefit) |  | $ | 2,255 |  | $ | 6,398 |  | $ | (478)
The income tax benefit s in 2012 included the release of valuation allowance of $6.7 million. A reconciliation of the federal statutory tax rate with the effective tax rate is as follows:
|  | Year Ended
|  | January 2, |  | December 27, |  | December 28,
|  | 2015 |  | 2013 |  | 2012
U.S statutory income tax expense rate |  | 35.0 | % |  | 35.0 | % |  | 35.0 | %
State income taxes, net of federal income tax expense |  | (0.6) |  |  | 4.0 |  |  | 8.0 |
Valuation reduction |  | (1.0) |  |  | (0.5) |  |  | (47.7) |
Meals and entertainment |  | 2.0 |  |  | 1.7 |  |  | 1.5 |
Foreign rate differential |  | (10.6) |  |  | 1.0 |  |  | (0.2) |
Bargain purchase gain |  | (8.7) |  |  | — |  |  | — |
Foreign exchange loss |  | 0.1 |  |  | 0.4 |  |  | 0.1 |
Other, net |  | 2.6 |  |  | 0.7 |  |  | 0.3 |
Effective tax rate |  | 18.8 | % |  | 42.3 | % |  | (3.0) | %
The components of the net deferred income tax asset (liability) are as follows (in thousands):
|  |  |  |  | Year Ended
|  |  |  |  | January 2, |  | December 27,
|  |  |  |  | 2015 |  | 2013
Deferred income tax assets: |  |  |  |  |  |  |  |  |
Allowance for doubtful accounts |  |  |  |  | $ | 518 |  | $ | 661
Net operating loss and tax credits carryforward |  |  |  |  |  | 9,283 |  |  | 12,855
Accrued expenses and other liabilities |  |  |  |  |  | 3,160 |  |  | 3,967
|  |  |  |  |  | 12,961 |  |  | 17,483
Valuation allowance |  |  |  |  |  | (1,452) |  |  | (1,569)
|  |  |  |  |  | 11,509 |  |  | 15,914
Deferred income tax liabilities: |  |  |  |  |  |  |  |  |
Depreciation |  |  |  |  |  | (4,628) |  |  | (4,614)
Tax over book amortization on goodwill and intangibles |  |  |  |  |  | (9,872) |  |  | (10,546)
Other items |  |  |  |  |  | (106) |  |  | (11)
|  |  |  |  |  | (14,606) |  |  | (15,171)
Net deferred income tax asset (liability) |  |  |  |  | $ | (3,097) |  | $ | 743
As of January 2, 2015 the Company had $12.0 million of U.S. federal net operating loss carryforwards available for tax purposes, primarily resulting from a worthless stock deduction taken in 2002, most of which will expire by 2022 if not utilized. As of January 2, 2015, the Company had $3.1 million of U.S. state net operating loss carryforwards. Additionally, at January 2, 2015, the Company had $11.7 million of foreign net operating loss carryforwards, of which $5.5 million related to operations in the U.K., $1.3 million related to operations in France and $0.6 million related to operations in Germany. A significant amount of the foreign net operating losses may be carried forward indefinitely. The liability method of accounting for deferred income taxes requires a valuation allowance against deferred tax assets if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. In determining the need for valuation allowances the Company considers evidence such as history of losses and general economic conditions. At January 2, 2015 and December 27, 2013, the Company had a valuation allowance of $1.5 million and $1.6 million to reduce deferred income tax assets primarily related to foreign and state net operating loss and tax credit carryforwards. The undistributed earnings in foreign subsidiaries of approximately $2.0 million are permanently invested abroad and will not be repatriated to the U.S. in the foreseeable future. Because they are considered to be indefinitely reinvested, no U.S. federal or state deferred income taxes have been provided on these earnings. Upon distribution of those earnings, in the form of dividends or otherwise, the Company would be subject to both U.S. income taxes (subject to an adjustment for foreign tax credits) and withholding taxes payable to the various foreign countries in which it operates. Because of the availability of U.S. foreign tax credits, it is not practicable to determine the U.S. foreign income tax liability that would be payable if such earnings were not reinvested indefinitely. Penalties and tax-related interest expense are reported as a component of income tax expense. For the years ended January 2, 2015 and December 27, 2013 the total amount of accrued income tax-related interest and penalties was $357 thousand and $226 thousand, respectively. In accordance with ASC 740-10, the Company prescribes a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This interpretation also provides guidance on de-recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, accounting for income taxes in interim periods and income tax disclosures. The following table sets forth the detail and activity of the ASC 740-10 liability during the twelve months ended January 2, 2015 and December 27, 2013 (in thousands):
|  |  |  |  | Year Ended
|  |  |  |  | January 2, |  | December 27,
|  |  |  |  | 2015 |  | 2013
Beginning balance |  |  |  |  | $ | 716 |  | $ | 1,015
Additions based on tax positions |  |  |  |  |  | 76 |  |  | —
Reduction for prior year tax deductions |  |  |  |  |  | — |  |  | (299)
Ending balance |  |  |  |  | $ | 792 |  | $ | 716
As of January 2, 2015 and December 27, 2013, the ASC 740-10 liability of $0.8 million and $0.7 million, respectively, was classified as a current liability and included in the current portion of the accrued expenses and other liabilities in the accompanying consolidated balance sheets. The Company does not believe there will be any material changes in its unrecognized tax positions over the next twelve months. The reversal of ASC 740-10 tax liabilities as of January 2, 2015 and December 27, 2013 would have a favorable impact on the effective tax rate in future periods.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 + Details
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