Income Taxes

9 Months Ended

Sep. 24, 2011

Income Taxes [Abstract]

Income Taxes

NOTE 5 INCOME TAXES

We file income tax returns in the U.S., with various states and foreign jurisdictions, and are subject to tax audits in all jurisdictions for which we file tax returns. Tax audits by their very nature are often complex and can require several years to complete. As of September 24, 2011, we have recorded a valuation allowance against all of our deferred tax assets. For interim periods, we recognize a provision (benefit) for income taxes based on an estimated annual effective tax rate expected for the entire year. Based on our current projection, we expect our annual effective tax rate for 2011 to be 0%.

Significant judgment is required in evaluating our tax positions and determining our provision for income taxes. We establish reserves for tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due. These reserves are established when we believe that certain positions might be challenged despite our belief that our tax return positions are fully supportable. We adjust these reserves in light of changing facts and circumstances, such as the outcome of a tax audit. The provision for income taxes includes the impact of reserve provisions and changes to reserves that are considered appropriate.

Under the tax statute of limitations applicable to the Internal Revenue Code, we are no longer subject to U.S. federal income tax examinations by the Internal Revenue Service for years before 2004. However, because we are carrying forward income tax attributes, such as net operating losses and tax credits from 2002 and earlier tax years, these attributes can still be audited when used on returns filed in the future. Under the statutes of limitation applicable to most state income tax laws, we are no longer subject to state income tax examinations by tax authorities for years before 2004 in states in which we have filed income tax returns. Certain states may take the position that we are subject to income tax in such states even though we have not filed income tax returns in such states and, depending on the varying state income tax statutes and administrative practices, the statute of limitations in such states may extend to years before 2004. We are subject to foreign tax examinations by tax authorities for all years of operation.

At December 25, 2010, we had net U.S. Federal operating loss carry-forwards of approximately $138 million that we can use in certain circumstances to offset future U.S. taxable income. Pursuant to Section 382 of the Internal Revenue Code, the Company's use of the operating loss carry-forwards for U.S. federal income tax purposes may be limited in any given year as a result of certain changes in the Company's ownership, including significant increases in ownership by the Company's 5-percent shareholders. While the company believes that its operating loss carry-forwards as of September 24, 2011 are not limited under section 382, significant changes in ownership in the future may limit such usage. In August 2011, in an effort to protect the use of its operating loss carry-forwards, the Company adopted a "NOL" Rights Agreement that discourages significant changes in ownership of the Company's stock that might limit the use of our operating loss carry-forwards, as further discussed in Note 9.