Income Taxes

12 Months Ended

Sep. 28, 2013

Income Tax Disclosure [Abstract]

Income Taxes

13. Income Taxes

The provision for income tax expense (benefit) consists of the following:

	Fiscal Year Ended
	September 28, 2013			September 29, 2012			September 24, 2011
	(in thousands)
Current:
Federal.	$	52		$	(1,003	)	$	(5,512	)
State.		958			603			160
Foreign.		0			35			35
Total		1,010			(365	)		(5,317	)
Deferred:
Federal.		(2,915	)		12,671			22,667
State.		(687	)		198			1,214
Foreign.		0			312			1,031
Total		(3,602	)		13,181			24,912
Total	$	(2,592	)	$	12,816		$	19,595

A reconciliation of the statutory federal income tax rate to the Company’s effective income tax rate is as follows:

	Fiscal Year Ended
	September 28, 2013			September 29, 2012			September 24, 2011
Statutory federal income tax rate		(35.0	)%		35.0	%		35.0	%
State income taxes, net of federal benefit		(5.2	)		2.3			2.8
Other permanent differences		2.4			0.6			1.4
Adjustment of prior year accruals		1.8			0.2			1.2
Uncertain tax positions		3.7			0.0			(0.3	)
Credits		(29.3	)		(1.2	)		(2.9	)
Change in valuation allowances		(9.0	)		(0.1	)		3.2
Foreign rate differential		(3.6	)		(0.1	)		0.4
Effective income tax rate (benefit)		(74.2	%)		36.7	%		40.8	%

Deferred income taxes reflect the impact of “temporary differences” between asset and liability amounts for financial reporting purposes and such amounts as determined based on existing tax laws. The tax effect of temporary differences and carryforwards which give rise to deferred tax assets and liabilities are as follows:

	September 28, 2013					September 29, 2012
	Deferred Tax Assets			Deferred Tax Liabilities		Deferred Tax Assets			Deferred Tax Liabilities
	(in thousands)
Current:
Allowance for doubtful accounts .	$	7,758		$	0	$	6,741		$	0
Inventory write-downs		14,983			0		10,411			0
Prepaid expenses.		620			0		112			0
Nondeductible reserves		2,782			0		997			0
State taxes.		0			188		0			245
Employee benefits		6,062			0		5,885			0
Other.		3,012			0		3,509			0
Total		35,218			188		27,655			245
Noncurrent:
Depreciation and amortization.		0			39,100		0			30,358
Equity income.		0			393		0			280
State net operating loss carryforward		4,816			0		4,160			0
Stock based compensation		6,061			0		5,225			0
State credits		2,421			0		2,241			0
Other.		5,349			0		2,866			0
Valuation allowance		(6,968	)		0		(7,282	)		0
Total.		11,679			39,493		7,210			30,638
Total.	$	46,897		$	39,681	$	34,865		$	30,883

The Company has state tax net operating losses of $94.9 million which expire at various times between 2013 and 2033, and foreign losses of $2.4 million, which do not expire. The Company has federal income tax credits of $1.4 million which expire between 2023 and 2033. The Company also has state income tax credits of $3.7 million, which expire at various times beginning in 2013 through 2029. In evaluating the Company’s ability to recover its deferred tax assets, the Company considers all available positive and negative evidence including past operating results, future taxable income, and ongoing prudent and feasible tax planning strategies in assessing the need for a valuation allowance against any deferred tax assets. The Company has determined there will be insufficient future separate state and international taxable income for the separate parent company and the Company’s foreign operations to realize its deferred tax assets. Therefore, valuation allowances of $7.0 million and $7.3 million (net of federal impact) at September 28, 2013 and September 29, 2012, respectively, have been provided to reduce state and foreign deferred tax assets to amounts considered recoverable.

The Company classifies uncertain tax positions as non-current income tax liabilities unless expected to be paid within one year. The Company recognizes interest and/or penalties related to income tax matters as a component of pretax income. As of September 28, 2013 and September 29, 2012 accrued interest was less than $0.1 million and no penalties were accrued related to uncertain tax positions.

The following table, which excludes interest and penalties, summarizes the activity related to the Company’s unrecognized tax benefits for fiscal years ended September 29, 2012 and September 28, 2013 (in thousands):

Balance as of September 24, 2011	$	282
Increases related to prior year tax positions		1
Increases related to current year tax positions		16
Settlements		(37	)
Balance as of September 29, 2012	$	262
Increases related to prior year tax positions		247
Increases related to current year tax positions		60
Settlements		(202	)
Decreases related to lapse of statute of limitations		(3	)
Balance as of September 28, 2013	$	364

As of September 28, 2013, unrecognized income tax benefits totaled approximately $0.4 million and all of the unrecognized tax benefits would, if recognized, impact the Company’s effective income tax rate.

The Company is principally subject to taxation by the United States and various states within the United States. The Company’s tax filings in major jurisdictions are open to examination by tax authorities by the Internal Revenue Service from fiscal year ended 2010 forward and in various state taxing authorities generally from fiscal year ended 2009 forward.

The Company does not believe there will be any significant change in its unrecognized tax benefits within the next twelve months.