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Income Taxes
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9 Months Ended |
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Sep. 29, 2012
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| Income Taxes [Abstract] | |
| INCOME TAXES |
NOTE 13 — INCOME TAXES For the nine months ended September 29, 2012 and September 24, 2011, an income tax benefit of (16.5%) of income before taxes and an income tax benefit of (24.7%) of loss before taxes was recorded, totaling ($49,000) and ($149,000), respectively. The amount of income tax benefit for the nine months ended September 29, 2012 is comprised of the reduction in the amount of federal and state income taxes paid in the prior year compared to the amount provided, primarily due to timing of expense payments, offset by the amount of state taxes currently 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 $108,000 during the nine months ended September 24, 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 September 29, 2012, it was determined that a valuation allowance against the entire amount of deferred tax assets continues to be appropriate as of September 29, 2012. Therefore, the Company’s net deferred tax assets of $18,256,000 are fully reserved as of September 29, 2012, and the need for this valuation allowance will be assessed in future periods. As of September 29, 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 a decrease of $101,000 in the balance of unrecognized tax liability for the nine months ended September 29, 2012, which is $221,000 as of September 29, 2012. |