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Income Taxes
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6 Months Ended |
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Jun. 30, 2012
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| Income Taxes [Abstract] | |
| INCOME TAXES |
NOTE 13 — INCOME TAXES For the six months ended June 30, 2012 and June 25, 2011, an income tax expense of 3.5% of loss before taxes and an income tax benefit of (49.3%) of income before taxes was recorded, totaling $25,000 and ($171,000), respectively. The amount of income tax expense for the six months ended June 30, 2012 is comprised of state taxes payable. During the first quarter of 2011, a refund of federal alternative minimum taxes paid in the prior year of $257,000 was received, which was recorded as a benefit in the current period since it was fully reserved at December 31, 2010. This was offset by state and federal alternative minimum taxes payable of $86,000 during the six months ended June 25, 2011. At December 31, 2011, U.S. federal net operating loss carryforwards of approximately $9,535,000 were available to offset future taxable income and, as of such date, the Company had foreign net operating loss carryforwards of $6,626,000, which have an unlimited life, federal alternative minimum tax credit carryforwards of $539,000, which do not expire, and federal research and development tax credit carryforwards of $490,000, which begin to expire in 2021 and various net operating loss and credit carryforwards for state tax purposes. The U.S. federal operating loss carryforwards begin to expire in 2021. These amounts do not include the settlement payment in the Barnhard matter (see Note 12) of $18,500,000 that was made in March 2012, which is deductible in 2012.
The Company established a valuation allowance to fully offset net deferred tax assets as of December 31, 2010 due to the uncertainty created by the unfavorable Barnhard jury verdict. A valuation allowance for deferred tax assets is recorded to the extent it cannot be determined that the realization of these assets is more likely than not. Since the March 2012 settlement payment in the Barnhard litigation will increase the Company’s net operating loss carryforwards by $18,500,000, and since the Company incurred cumulative losses during the three year period ended June 30, 2012, it was determined that a valuation allowance against the entire amount of deferred tax assets continues to be appropriate as of June 30, 2012. Therefore, the Company’s net deferred tax assets of $18,420,000 are fully reserved as of June 30, 2012, and the need for this valuation allowance will be assessed in future periods. As of June 30, 2012, approximately $47,000,000 of future taxable income is needed to fully realize the Company’s deferred tax assets. The difference between this figure and the net operating loss carryforwards and credits is primarily cumulative book versus tax differences related to various expenses. The Company files income tax returns in the U.S. federal jurisdiction, the United Kingdom and various state jurisdictions. The Company is no longer subject to U.S. federal, United Kingdom and state income tax examinations by tax authorities for years before 2007. The Company has evaluated any uncertain tax positions in its federal income tax return, United Kingdom return and the state tax returns it is currently filing. The Company has also made an evaluation of the potential impact of additional state taxes being assessed by jurisdictions in which the Company does not currently consider itself liable. Based on this analysis, there has been no change during the period in the balance of unrecognized tax liability of $322,000 as of December 31, 2011. |