INCOME TAXES

9 Months Ended

Sep. 29, 2012

INCOME TAXES

INCOME TAXES

NOTE 9 — INCOME TAXES

At December 31, 2011, the Company maintained a valuation allowance against its net deferred tax assets of $4.6 million due to uncertainty of the utilization of such assets.  In the second quarter of 2012 the Company determined it was more likely than not that a portion of the net deferred tax assets would be realized based upon sustained profitability coupled with positive forecasted future operating results.  As a result, the Company reversed $0.4 million of the valuation allowance, recorded as a non-cash income tax benefit for the three and six months ended June 30, 2012.  The Company had retained a $0.4 million valuation allowance against certain state net operating loss carryforwards as of June 30, 2012.  In the third quarter of 2012, the Company determined it was more likely than not that these state net operating loss carryforwards will be realized due to anticipated positive operating results and a detailed analysis of future expected taxable income by state.  The Company is estimating an effective tax rate for the year ending December 29, 2012 which will be substantially lower than statutory rates due to the reversal of these deferred tax asset reserves.  Beginning with the first quarter of 2013, the Company expects to recognize income taxes at normalized rates.  The 2011 results did not include any provision for or benefit from income taxes due to the establishment of a full deferred tax valuation allowance.