Income Taxes (Notes)

9 Months Ended

Sep. 27, 2015

The benefit for income taxes for the three and nine months ended September 27, 2015 and September 28, 2014 was comprised of the following:



	Three Months Ended						Nine Months Ended
	September 27, 2015			September 28, 2014			September 27, 2015			September 28, 2014
Current	$	—		$	—		$	—		$	219
Deferred	1,989			(2,632		)	(4,210		)	(7,774		)
Valuation allowance	(1,989		)	—			$	4,210		$	—
	$	—		$	(2,632	)	$	—		$	(7,555	)

The benefit for income taxes for the three and nine months ended September 28, 2014 was derived using an estimated effective annual income tax rate for 2014 of 37.5%, which excluded any discrete tax adjustments.

The Company performed an assessment of positive and negative evidence regarding the realization of its deferred income tax assets at December 28, 2014 as required by ASC 740. Under ASC 740, the weight given to negative and positive evidence is commensurate only to the extent that such evidence can be objectively verified. ASC 740 also prescribes that objective historical evidence, in particular the Company’s three-year cumulative loss position at December 28, 2014, be given greater weight than subjective evidence, including the Company’s forecasts of future taxable income, which include assumptions that cannot be objectively verified. The Company determined, based on the required weight of that evidence under ASC 740, that a valuation allowance was needed for all of its net deferred income tax assets at December 28, 2014. As a result, the Company recorded a valuation reserve of $24.3 million in the fourth quarter of 2014. Consequently, the Company recorded no expense or benefit from income taxes in the three months and nine months ended September 27, 2015.

The Company decreased its valuation reserve by $1.9 million in the three months ended September 27, 2015 and increased its valuation reserve by $4.3 million in the nine months ended September 27, 2015 for changes in the net deferred income tax assets recognized in the respective periods. At September 27, 2015, the Company's valuation allowance on all its net deferred tax assets was $31.7 million.

The Company's net deferred tax assets at September 27, 2015 included $3.4 million related to certain state net operating loss carryforwards, of which the most significant states begin to expire in 2025. The Company's federal net operating loss carryforwards expire beginning in 2033. As of September 27, 2015, the Company had federal net operating loss carryforwards of approximately $36.5 million.

The estimation of future taxable income for federal and state purposes and the Company's ability to realize deferred tax assets can significantly change based on future events and operating results. Thus, recorded valuation allowances may be subject to future changes that could have a material impact on the consolidated financial statements. If the Company determines that it is more likely than not that it will realize these deferred tax assets in the future, the Company will make an adjustment to the valuation allowance at that time.

The Company's policy is to recognize interest and/or penalties related to uncertain tax positions in income tax expense. At September 27, 2015 and December 28, 2014, the Company had no unrecognized tax benefits and no accrued interest related to uncertain tax positions. The tax years 2012 - 2014 remain open to examination by the major taxing jurisdictions to which the Company is subject. In 2014, the Company concluded an examination of its consolidated federal income tax return for the tax years 2009 through 2012. Although it is not reasonably possible to estimate the amount by which unrecognized tax benefits may increase within the next twelve months due to the uncertainties regarding the timing of any examinations, the Company does not expect unrecognized tax benefits to significantly change in the next twelve months.