Income Taxes

As of December 30, 2012, the Company had $13.4 million of unrecognized tax benefits that, if recognized, would affect the effective tax rate, subject to possible offset by an increase in the valuation allowance. During the six months ended June 30, 2013, this amount was increased by $0.1 million and was recorded as an adjustment to goodwill. Additionally, the unrecognized tax benefit amount was reduced by $1.5 million relating to the expiration of statutes of limitations. This reduction in unrecognized tax benefits was recorded as a benefit from continuing operations.

The Company recognizes interest and penalties related to unrecognized tax benefits in its provision for income taxes. During the six months ended June 24, 2012, a $0.3 million expense was recorded related to interest and penalties. There was no material expense recorded during the six months ended June 30, 2013. The Company recorded a benefit for interest and penalties related to the reversal of prior positions of $0.1 million and$0.2 million for the six months ended June 24, 2012 and June 30, 2013, respectively. The Company believes that it is reasonably possible that as much as $0.1 million of the liabilities for uncertain tax positions will expire within twelve months of June 30, 2013 due to the expiration of various applicable statutes of limitations.

The Company is subject to taxation in the U.S., various state tax jurisdictions and various foreign tax jurisdictions. The Company's tax years for 2000 and later are subject to examination by the U.S. and state tax authorities due to the existence of net operating loss (“NOL”) carryforwards. Generally, the Company's tax years for 2006 and later are subject to examination by various foreign tax authorities.

In assessing the Company's ability to realize deferred tax assets, management considers, on a periodic basis, whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. As such, management has determined that it is appropriate to maintain a full valuation allowance against the Company's U.S. Federal, combined state, and certain foreign deferred tax assets, with the exception of an amount equal to its deferred tax liabilities, which can be expected to reverse over a definite life. Management will continue to evaluate the necessity to maintain a valuation allowance against the Company's net deferred tax assets.

A reconciliation of the total income tax provision to the amount computed by applying the statutory federal income tax rate of 35% to loss from continuing operations before income tax provision for the three and six months ended June 24, 2012 and June 30, 2013 is as follows (in millions):



	For the Three Months Ended						For the Six Months Ended
	June 24, 2012			June 30, 2013			June 24, 2012			June 30, 2013
Income tax benefit at federal statutory rate	$	(3.1	)	$	(2.7	)	$	(5.4	)	$	(4.5	)
State and foreign taxes, net of federal tax benefit and valuation allowance	4.1			0.8			1.1			1.7
Nondeductible expenses and other	0.3			0.2			0.8			0.3
Impact of indefinite lived deferred tax liabilities	2.5			0.8			1.4			2.7
Decrease in reserves for uncertain tax positions	—			(1.7		)	(0.1		)	(1.6		)
Increase in federal valuation allowance	2.8			2.5			4.7			4.1
Total	$	6.6		$	(0.1	)	$	2.5		$	2.7

Federal and state income tax laws impose restrictions on the utilization of NOL and tax credit carryforwards in the event that an “ownership change” occurs for tax purposes, as defined by Section 382 (“Section 382”) of the Internal Revenue Code of 1986, as amended (the “Code”). In general, an ownership change occurs when shareholders owning 5% or more of a “loss corporation” (a corporation entitled to use NOL or other tax attribute carryovers) have increased their ownership of stock in such corporation by more than 50 percentage points during any 3-year period. The annual base Section 382 limitation is calculated by multiplying the loss corporation's value (which may be modified for certain recent increases to capital) at the time of the ownership change times the greater of the long-term tax-exempt rate determined by the Internal Revenue Service (“IRS”) in the month of the ownership change or the two preceding months. The annual base Section 382 limitation may be increased for certain recognized built-in gains during the five year period succeeding an ownership change. In March 2010, an “ownership change” occurred that will limit the utilization of the loss carryforwards. Additionally, in May 2012, another “ownership change” was triggered. As a result of these changes, the amount of NOLs that can be used in any period are limited. For the three and six months ended June 30, 2013, there was no impact of such limitations on the income tax provision since the amount of taxable income did not exceed the annual limitation amount. In addition, future equity offerings or acquisitions that have equity as a component of the purchase price could also result in an ownership change. If and when any other “ownership change” occurs, utilization of the NOL or other tax attributes may be further limited. As discussed elsewhere, deferred tax assets relating to the NOL and credit carryforwards are offset by a full valuation allowance.