Income Taxes

3 Months Ended

Mar. 30, 2012

Income Taxes [Abstract]

Income Taxes

8. Income Taxes

The Company recorded a tax benefit of $9.3 million for the Successor fiscal quarter ended March 30, 2012 primarily reflecting a $9.3 million decrease in deferred tax liability resulting from the impairment of the tax basis of indefinite-lived intangible assets and goodwill. The Company recorded a tax benefit of $9.0 million for the six fiscal months ended March 30, 2012 primarily reflecting a $6.5 million net decrease in deferred tax liability resulting from the impairment of the tax basis of indefinite-lived intangible assets and goodwill offset by amortization of the tax basis of indefinite-lived intangible assets and goodwill and $2.5 million release of estimated reserves for uncertain tax positions. The Company recorded a tax provision of $0.3 million and $0.4 million, respectively, for the Predecessor fiscal quarter and six fiscal months ended April 1, 2011, primarily reflecting income taxes imposed on the Company’s foreign subsidiaries.

The acquisition of the Company’s common stock in connection with the Merger triggered an ownership change under Section 382 of the Internal Revenue Code of 1986 (“Section 382”). Section 382 imposes an annual limitation (based upon the value at the time of the ownership change, as determined under Section 382) on the amount of taxable income that can be offset with net operating loss (“NOL”) carryovers that existed at time of the acquisition. Section 383 will also limit the Company’s ability to use R&D tax credit carryovers. In addition, as the tax basis of the Company’s assets exceeded the fair market value of its assets at the time of the ownership change, Section 382 will also limit the Company’s ability to use amortization of capitalized R&D and goodwill to offset taxable income for the first five years following the Merger. Any unused annual limitation may be carried over to later years until the applicable expiration date for the respective NOLs. Similar limitations have been implemented by states and certain foreign jurisdictions. The change of ownership resulting from the Merger has significantly limited the Company’s ability to utilize its federal and state deferred tax assets and impaired the carrying value of the deferred tax assets and changed the amount of our unrecognized tax benefits. As the federal and state deferred tax assets are fully reserved, this impairment has not had an impact on the Company’s current year financial position or results of operations. However, the limitation on the use of the Company’s NOLs, credits and amortization which resulted from the ownership changes could adversely impact the Company’s future operating results and financial condition.

In the fiscal quarter ended March 30, 2012, the Company determined that it was not in its best interest to elect under Section 338 of the Internal Revenue Code to treat the Merger as if it were an asset purchase for federal income tax purposes. There was no impact on the Company’s financial position and results of operations and cash flows of electing not to make the Section 338 election.