7. Income Taxes

During the thirteen weeks ended June 28, 2014, the Company recorded an income tax benefit of $1,553,000 while an income tax provision of $23,000 was recognized for the thirteen weeks ended June 29, 2013. During the twenty-six weeks ended June 28, 2014, the Company recorded an income tax benefit of $1,524,000 while an income tax provision of $39,000 was recognized for the twenty-six weeks ended June 29, 2013. The income tax benefits for both the thirteen and twenty-six weeks ended June 28, 2014 is primarily due to a $1,582,000 benefit recognized in connection with the release of the valuation allowance on the Company’s international deferred income tax assets partially offset by deferred taxes recognized on goodwill amortized for income tax purposes but not for financial reporting purposes. The tax provisions for both the thirteen and twenty-six weeks ended June 29, 2013 are due to deferred taxes recognized on goodwill amortized for income tax purposes but not for financial reporting purposes.

The Company has reserved all of its domestic net deferred tax assets as of June 28, 2014 and all of its domestic and international net deferred tax assets as of December 28, 2013 with a valuation allowance in accordance with the provisions of FASB ASC 740, “Income Taxes," which requires an estimation of the recoverability of the recorded income tax asset balances. As of June 28, 2014, the Company has recorded $31.5 million of valuation allowances attributable to its domestic net deferred tax assets.

Beginning in the third quarter of 2009, the Company maintained a full valuation allowance against both its domestic and international deferred tax assets, having determined it was more likely than not that the deferred tax assets would not be realized. The determination of recording and releasing valuation allowances against deferred tax assets is made, in part, pursuant to the Company’s assessment as to whether it is more likely than not that the Company will generate sufficient future taxable income against which benefits of the deferred tax assets may or may not be realized. Significant judgment is required in making estimates regarding the Company’s ability to generate income in future periods. The Company continued to maintain full valuation allowances on its domestic and international deferred tax assets through the first quarter of 2014 as there was insufficient positive evidence to overcome the substantial negative evidence of cumulative losses in periods preceding 2014.

In the second quarter of 2014, the Company reached the conclusion that it was appropriate to release the valuation allowance reserves against its international deferred tax assets due to the sustained positive operating performance of its UK operations and the availability of expected future taxable income. The Company achieved a cumulative three-year positive pre-tax book income position within its UK operations. The Company also considered forecasts of future operating results and utilization of its UK net operating losses, which do not expire. As a result, the Company recorded a $1.6 million reversal of its deferred tax asset valuation allowance reserves in the second quarter of 2014 after determining it was more likely than not that its international deferred tax assets would be realized. However, as mentioned above, a full valuation allowance remains in place for the Company’s domestic deferred tax assets at June 28, 2014.

The Company analyzes its uncertain tax positions pursuant to the provisions of FASB ASC 740 “Income Taxes.” There was no material activity related to the liability for uncertain tax positions during the thirteen and twenty-six weeks ended June 28, 2014 and June 29, 2013, and the Company has determined it does not have any material uncertain tax positions requiring reserves at June 28, 2014.

The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction, and in various states and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2000. As of June 28, 2014, the Company has no income tax examinations in process.