Note 4. Income Tax

9 Months Ended

Sep. 23, 2012

Income Tax Disclosure [Text Block]

4.            The Company recorded non-cash income tax expense from continuing operations of $3.4 million and $10.2 million in the third quarter and first nine months of 2012, compared to $847 thousand and $6 million in the equivalent quarter and nine months of 2011. The Company’s tax provision for each period had an unusual relationship to pretax loss mainly because of the existence of a full deferred tax asset valuation allowance at the beginning of each period. This circumstance generally results in a zero net tax provision since the income tax expense or benefit that would otherwise be recognized is offset by the change to the valuation allowance. However, tax expense recorded in the third quarters of 2012 and 2011 included the accrual of non-cash tax expense of approximately $3.4 million and $3.6 million, respectively, of additional valuation allowance in connection with the tax amortization of the Company’s indefinite-lived intangible assets that was not available to offset existing deferred tax assets (termed a “naked credit”). Both periods reflected approximately $4 and $6 million respectively of non-cash tax expense in total that was allocated between continuing and discontinued operations. The “naked credit” expense was offset in the third quarter of 2011 by $732 thousand of tax benefit related to the intraperiod allocation items in Other Comprehensive Income and $2 million of tax benefit related to the interest rate swap termination.  After the sale of discontinued operations, the Company expects the naked credit to cause approximately $14 million of non-cash income tax expense from continuing operations for the full-year 2012; other discrete tax adjustments and intraperiod tax allocations that are difficult to forecast may impact the remainder of 2012. A full discussion of the naked credit issue is contained in Note 3 of Item 8 of the Company’s Form 10-K for the year ended December 25, 2011.