Income Taxes:

Our income tax expense (benefit) consists of the following for the periods presented:



		Successor		Predecessor
		For the 317 Day Period Ended		For the 47 Day Period Ended		Fiscal Years
		December 28, 2014		February 14, 2014		2013		2012
	(in thousands)
Current tax expense (benefit):
Federal		26,702		2,505		26,950		23,903
State		4,984		390		4,191		2,936
Foreign		(255	)	(92	)	78		77
		31,431		2,803		31,219		26,916
Deferred tax expense (benefit):
Federal		(52,251	)	(2,282	)	(2,099	)	(619	)
State		(9,909	)	302		(732	)	(36	)
Foreign		(394	)	195		(194	)	(181	)
		(62,554	)	(1,785	)	(3,025	)	(836	)
Income tax expense (benefit)		(31,123	)	1,018		28,194		26,080

A reconciliation of the federal statutory income tax rate to our effective tax rate is as follows:



	Successor		Predecessor
	For the 317 Day Period Ended		For the 47 Day Period Ended		Fiscal Years
	December 28, 2014		February 14, 2014		2013		2012
Federal statutory rate	35.0	%	35.0	%	35.0	%	35.0	%
State income taxes, net of federal benefit	3.8	%	20.5	%	3.0	%	3.4	%
Federal income tax credits, net	0.4	%	(2.0	)%	(1.2	)%	(0.5	)%
Merger and acquisition related costs	(4.8	)%	3.1	%	—	%	—	%
State tax credit, valuation adjustment	(0.4	)%	5.6	%	—	%	—	%
Other	(0.6	)%	(3.1	)%	0.3	%	(0.5	)%
Effective tax rate	33.4	%	59.1	%	37.1	%	37.4	%



	Successor			Predecessor
	December 28, 2014			December 29, 2013
	(in thousands)
Deferred tax assets:
Accrued compensation	$	2,548		$	2,180
Unearned revenue	2,105			3,645
Deferred rent	2,497			23,209
Stock-based compensation	270			2,781
Accrued insurance and employee benefit plans	8,462			7,915
Unrecognized tax benefits ⁽¹⁾	1,471			1,373
NOL and Other Carryforwards	8,483			—
Loan Costs	1,758			—
Other	527			2,880
Gross deferred tax assets	28,121			43,983
Deferred tax liabilities:
Depreciation and amortization	(59,871		)	(96,394		)
Prepaid assets	(1,238		)	(1,636		)
Intangibles	(183,102		)	—
Favorable/Unfavorable Leases	(795		)	—
Other	(2,087		)	(1,693		)
Gross deferred tax liabilities	(247,093		)	(99,723		)
Net deferred tax liability	$	(218,972	)	$	(55,740	)
Amounts reported on Consolidated Balance Sheets:
Current deferred tax asset	$	3,943		$	2,091
Non-current deferred tax liability	(222,915		)	(57,831		)
Net deferred tax liability	$	(218,972	)	$	(55,740	)

_________________


(1)	Amount represents the value of future tax benefits that would result if the liabilities for uncertain state tax positions and accrued interest related to uncertain tax positions are settled.

Our effective income tax rate of 33.4% for the 317 day period ended December 28, 2014 differs from the statutory rate primarily due to the unfavorable impact of non-deductible costs related to the Merger as well as the Peter Piper Pizza Acquisition.

Our effective income tax rate of 59.1% for the 47 day period ended February 14, 2014 differs from the statutory rate due to the unfavorable impact of non-deductible costs related to the Merger, a net increase in our liability for uncertain tax positions, an increase in income tax expense resulting from certain state income tax credits carried forward which we estimate will expire unused, partially offset by federal employment related tax credits.

As of December 28, 2014, we have $21.2 million of federal net operating loss carryforwards (expiring at the end of tax years 2019 through 2030), $3.8 million of state net operating loss carryforwards (expiring at the end of tax years 2015 through 2034), and $0.2 million of Alternative Minimum Tax credit carryforwards (with no expiration). These net operating loss and credit carryforwards relate to Peter Piper Pizza, and our ability to use these tax attributes to offset future taxable income and tax is limited by Section 382 of the Internal Revenue Code. However, we do not believe the Section 382 limitation will prevent us from fully utilizing these carryforwards.

As of December 28, 2014, we have state income tax credit carryforwards, net of federal benefits of $1.3 million (which are not subject to Section 382 limitations), with a valuation allowance, net of federal benefit, of $0.6 million. As of December 29, 2013, we had state income tax credit carryforwards, net of federal benefit, of $1.4 million with a valuation allowance, net of federal benefit, of $0.1 million.

Our net deferred tax liability increased from $55.7 million as of December 29, 2013 to $219.0 million as of December 28, 2014. The increase primarily relates to the tax effect of acquisition accounting adjustments made to the financial statement carrying value of our assets and liabilities of $214.8 million resulting from the Merger, $12.9 million related to the Peter Piper Pizza Acquisition (including the tax effect of acquisition accounting adjustments relating to the carrying value of Peter Piper Pizza’s assets and liabilities) partially offset by a deferred tax benefit of $1.8 million in the 47 day period ended February 14, 2014 and a deferred tax benefit of $62.6 million in the 317 day period ended December 28, 2014.

We file numerous federal, state, and local income tax returns in the U.S. and some foreign jurisdictions. As a matter of ordinary course, we are subject to regular examination by various tax authorities. Certain of our federal and state income tax returns are currently under examination and are in various stages of the audit/appeals process. In general, the U.S. federal statute of limitations has expired for our federal income tax returns filed for tax years ended before 2011 with the exception of adjustments included in certain amended returns filed in 2011, 2012 and 2013 for tax years 2006 through 2009 and Peter Piper Pizza federal income tax returns with net operating losses which have been carried forward (whereas, adjustments can be made to these returns until the respective statute of limitations expire for the particular tax years the net operating losses are utilized). In general, our state income tax statutes of limitations have expired for tax years ended before 2010 with similar exceptions as noted above regarding our federal tax returns (amended state tax returns filed for tax years 2006 through 2009 and Peter Piper Pizza state income tax returns generating net operating loss carryforwards). In general, the statute of limitations for our Canada income tax returns has expired for tax years ended before 2010.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:



	Fiscal Year
	2014			2013			2012
	(in thousands)
Balance at beginning of period	$	2,598		$	2,923		$	4,497
Additions for tax positions taken in the current year	168			223			511
Increases for tax positions taken in prior years	613			463			1,076
Decreases for tax positions taken in prior years	(421		)	(422		)	(1,063		)
Settlement with tax authorities	(114		)	(283		)	(1,699		)
Expiration of statute of limitations	(962		)	(306		)	(399		)
Balance at end of period	$	1,882		$	2,598		$	2,923

Our liability for uncertain tax positions (excluding interest and penalties) was $1.9 million and $2.6 million as of December 28, 2014 and December 29, 2013, respectively, and if recognized would decrease our provision for income taxes by $1.2 million. Within the next twelve months, we could settle or otherwise conclude certain ongoing income tax audits. As such, it is reasonably possible that the liability for uncertain tax positions could decrease by as much as $0.4 million as a result of settlements with certain taxing authorities and expiring statutes of limitations within the next twelve months.

The total accrued interest and penalties related to unrecognized tax benefits as of December 28, 2014 and December 29, 2013, was $1.5 million and $1.9 million, respectively. On the Consolidated Balance Sheets, we include current accrued interest related to unrecognized tax benefits in “Accrued interest,” current accrued penalties in “Accrued expenses” and non-current accrued interest and penalties in “Other non-current liabilities.”