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Income taxes
 12 Months Ended
Mar. 31, 2012
Income taxes [Abstract]  
Income taxes

9.

  

Income taxes:

 

(a)

The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. As of March 31, 2012, the Company had no accrued interest related to uncertain tax positions due to available tax loss carry forwards. The tax years 2008 through 2012 remain open to examination by the major taxing jurisdictions to which the Company is subject.

 

The Company evaluates its deferred tax assets to determine if any adjustments to its valuation allowances are required. As part of this analysis, the Company could not reach the required conclusion that it would be able to more likely than not realize the value of both its U.S. and Canadian net deferred tax assets in the future. As a result, the Company has a non-cash valuation allowance of $57.2 million against the full value of the Company’s net deferred tax assets.

The significant items comprising the Company’s net deferred tax assets at March 31, 2012 and March 26, 2011 are as follows:

 

                 
    Fiscal Year Ended  
    March 31,
2012		     March 26,
2011		  
    (In thousands)  

Deferred tax assets:

                

Loss and tax credit carry forwards

   $ 41,018     $ 41,576  

Difference between book and tax basis of property and equipment

     4,015       5,165  

Interest expense limitations carry forward

     5,127       3,820  

Inventory allowances

     834       1,231  

Other reserves not currently deductible

     1,080       1,069  

Capital lease obligation

     3,759       3,915  

Expenses not currently deductible

     1,276       725  

Other

     134       294  
   

 

 

    

 

 

  

Net deferred tax asset before valuation allowance

     57,243       57,795  

Valuation allowance

     (57,243 )      (57,795 ) 
   

 

 

    

 

 

  

Net deferred tax asset

   $ –     $ –  
   

 

 

    

 

 

  

The following table reconciles the unrecognized tax benefits at March 31, 2012 and March 26, 2011:

 

                 
    Fiscal Year Ended  
    March 31,
2012		     March 26,
2011		  
    (In thousands)  

Unrecognized tax benefits at the beginning of the year

   $ –     $ –  

Gross increase – tax position in current period

     332       444  

Applied against certain element of deferred tax assets

     (332 )      (444 ) 
   

 

 

    

 

 

  

Unrecognized tax benefits at the end of the year

   $ –     $ –  
   

 

 

    

 

 

  

All unrecognized tax benefits would affect the effective tax rate if recognized.

The Company’s income tax expense (benefit) consists of the following components:

 

                         
    Fiscal Year Ended  
    March 31,
2012		     March 26,
2011		     March 27,
2010		  
    (In thousands)  

Income tax expense (benefit):

                        

Current

   $ 332     $ 444     $ 461  

Deferred

     (820 )      (4,789 )      (7,266 ) 

Valuation allowance

     511       4,369       6,803  
   

 

 

    

 

 

    

 

 

  

Income tax expense (benefit)

   $ 23     $ 24     $ (2 ) 
   

 

 

    

 

 

    

 

 

  

The Company’s current federal tax payable at March 31, 2012, March 26, 2011, and March 27, 2010, was $25,000 for each of these three years.

 

The Company’s provision (benefit) for income taxes varies from the amount computed by applying the statutory income tax rates for the reasons summarized below:

 

                         
    Fiscal Year Ended  
    March 31,
2012		     March 26,
2011		     March 27,
2010		  

Canadian statutory rate

     27.5 %      29.3 %      30.9 % 

Rate differential for U.S. operations

     (139.1 )%      13.9 %      6.7 % 

Adjustment to valuation allowance

     493.9 %      (62.4 )%      (37.2 )% 

Utilization of unrecognized losses and other tax attributes

     (395.5 )%      17.8 %      –  

Permanent differences and other

     22.7 %      1.1 %      (0.4 )% 
   

 

 

    

 

 

    

 

 

  

Total

     9.5 %      (0.3 )%      0.0 % 
   

 

 

    

 

 

    

 

 

  

 

(b)

At March 31, 2012, the Company had federal non-capital losses of Cdn$20.3 million and investment tax credits (“ITC’s”) in Canada of Cdn$260,000 which will expire between 2022 and 2032.

 

(c)

As of March 31, 2012, Mayors had federal and state net operating loss carry forwards in the U.S. of approximately $102.8 million and $93.7 million, respectively. Due to Section 382 limitations from the change in ownership for the year ended March 29, 2003, the utilization of approximately $35.3 million of the pre-acquisition net operating loss carry forwards is limited to approximately $953,000 on an annual basis through 2022. The federal net operating loss carry forwards expire beginning in fiscal 2020 through fiscal 2032 and the state net operating loss carry forwards expire beginning in fiscal 2018 through fiscal 2032. Mayors also has an alternative minimum tax credit carry forward of approximately $1.0 million to offset future federal income taxes.