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Income Taxes | 12 Months Ended
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Sep. 30, 2011
Income Tax Expense (Benefit) [Abstract] |
Income Taxes | INCOME TAXES Income before income taxes consists of the following components (in thousands):
| Fiscal Years Ended
| September 30, 2011 |  | October 1, 2010 |  | October 2, 2009
United States | $ | 208,926 |  |  | $ | 164,094 |  |  | $ | 65,603 |
Foreign | 84,960 |  |  | 30,980 |  |  | 4,153 |
| $ | 293,886 |  |  | $ | 195,074 |  |  | $ | 69,756 |
The provision (benefit) for income taxes consists of the following (in thousands):
| Fiscal Years Ended
| September 30, 2011 |  | October 1, 2010 |  | October 2, 2009
Current tax expense (benefit): |  |  |  |  |
Federal | $ | 25,421 |  |  | $ | 11,855 |  |  | $ | (251 | )
State | 422 |  |  | 946 |  |  | (413 | )
Foreign | 4,340 |  |  | 684 |  |  | 966 |
| 30,183 |  |  | 13,485 |  |  | 302 |
Deferred tax expense (benefit): |  |  |  |  |
Federal | 35,053 |  |  | 44,072 |  |  | — |
State | (1,048 | ) |  | (2,846 | ) |  | — |
Foreign | 961 |  |  | 235 |  |  | (93 | )
| 34,966 |  |  | 41,461 |  |  | (93 | )
Change in valuation allowance | 2,152 |  |  | 2,834 |  |  | (25,436 | )
Provision (benefit) for income taxes | $ | 67,301 |  |  | $ | 57,780 |  |  | $ | (25,227 | )
The actual income tax expense is different than that which would have been computed by applying the federal statutory tax rate to income before income taxes. A reconciliation of income tax expense as computed at the United States federal statutory income tax rate to the provision for income tax expense follows (in thousands):
| Fiscal Years Ended
| September 30, 2011 |  | October 1, 2010 |  | October 2, 2009
Tax expense at United States statutory rate | $ | 102,860 |  |  | $ | 68,276 |  |  | $ | 24,415 |
Foreign tax rate difference | (24,394 | ) |  | (8,889 | ) |  | (580 | )
Deemed dividend from foreign subsidiary | 43 |  |  | 884 |  |  | 774 |
Research and development credits | (17,720 | ) |  | (5,820 | ) |  | (7,211 | )
Change in tax reserve | 9,405 |  |  | 4,413 |  |  | 295 |
Change in valuation allowance | 2,152 |  |  | 2,834 |  |  | (39,089 | )
Non deductible debt retirement premium | — |  |  | 64 |  |  | (3,508 | )
Alternative minimum tax | — |  |  | — |  |  | (958 | )
Domestic production activities deduction | (6,055 | ) |  | (2,263 | ) |  | — |
International restructuring | — |  |  | (3,468 | ) |  | — |
Other, net | 1,010 |  |  | 1,749 |  |  | 635 |
Provision (benefit) for income taxes | $ | 67,301 |  |  | $ | 57,780 |  |  | $ | (25,227 | )
On October 2, 2010, the Company expanded its presence in Asia by launching operations in Singapore. The Company operates under a tax holiday in Singapore, which is effective through September 30, 2020. The tax holiday is conditional upon the Company's compliance in meeting certain employment and investment thresholds in Singapore. As a result of the enactment of the Tax Relief Act of 2010 which retroactively reinstated and extended the research and development tax credit, $6.2 million of federal research and development tax credits which were earned in fiscal year 2010 reduced our tax rate during the year ended September 30, 2011. During fiscal year 2010, the Company restructured its international operations resulting in a tax benefit of $3.5 million. This consisted of a tax benefit of $6.3 million due to reassessing the United States income tax required to be recorded on earnings of our operations in Mexico, offset by $2.8 million of tax provision related to the transfer of assets to an affiliated foreign company. As a result of this restructuring, the Company is no longer required to assess United States income tax on the earnings of its Mexican business. Deferred income tax assets and liabilities consist of the tax effects of temporary differences related to the following (in thousands):
| Fiscal Years Ended
| September 30, 2011 |  | October 1, 2010
Deferred Tax Assets: |  |  |
Current: |  |  |
Inventory | $ | 4,181 |  |  | $ | 4,451 |
Bad debts | 162 |  |  | 427 |
Accrued compensation and benefits | 3,946 |  |  | 2,536 |
Product returns, allowances and warranty | 1,222 |  |  | 572 |
Restructuring | 515 |  |  | 794 |
Other – net | 998 |  |  | 943 |
Current deferred tax assets | 11,024 |  |  | 9,723 |
Less valuation allowance | (2,431 | ) |  | (2,130 | )
Net current deferred tax assets | 8,593 |  |  | 7,593 |
Long-term: |  |  |
Intangible assets | 7,660 |  |  | 9,422 |
Retirement benefits and deferred compensation | 27,921 |  |  | 21,327 |
Net operating loss carry forwards | 22,143 |  |  | 6,120 |
Federal tax credits | 37,717 |  |  | 28,243 |
State investment credits | 26,111 |  |  | 24,173 |
Long-term deferred tax assets | 121,552 |  |  | 89,285 |
Less valuation allowance | (36,943 | ) |  | (23,480 | )
Net long-term deferred tax assets | 84,609 |  |  | 65,805 |
Deferred tax assets | 132,576 |  |  | 99,008 |
Less valuation allowance | (39,374 | ) |  | (25,610 | )
Net deferred tax assets | 93,202 |  |  | 73,398 |
Deferred Tax Liabilities: |  |  |
Current: |  |  |
Prepaid insurance | (723 | ) |  | (724 | )
Current deferred tax liabilities | (723 | ) |  | (724 | )
Long-term: |  |  |
Property, plant and equipment | (18,084 | ) |  | (4,636 | )
Other – net | (208 | ) |  | (272 | )
Intangible assets | (5,943 | ) |  | (329 | )
Long-term deferred tax liabilities | (24,235 | ) |  | (5,237 | )
Net deferred tax liabilities | (24,958 | ) |  | (5,961 | )
Total deferred tax assets | $ | 68,244 |  |  | $ | 67,437 |
In accordance with GAAP, management has determined that it is more likely than not that a portion of its historic and current year income tax benefits will not be realized. As of September 30, 2011, the Company has maintained a valuation allowance of $39.4 million. This valuation allowance is comprised of $26.1 million related to U.S. State tax credits and $13.3 million related to foreign deferred tax assets of which $11.6 million are foreign deferred tax assets acquired from SiGe. If these benefits are recognized in a future period the valuation allowance on deferred tax assets will be reversed and up to a $39.0 million income tax benefit, and up to a $0.4 million reduction to goodwill may be recognized. The Company will need to generate $180.2 million of future United States federal taxable income to utilize our United States deferred tax assets as of September 30, 2011. Based on the Company’s evaluation of the realizability of its United States net deferred tax assets and other future deductible items through the generation of future taxable income, during fiscal year 2010 the Company recognized a net decrease in its valuation allowance of $1.0 million. The change in the valuation allowance resulted in a tax expense of $2.8 million and an increase to additional paid-in capital of $3.8 million. On February 20, 2009, the California governor signed into law tax legislation that permitted California taxpayers to apportion their income using a single sales factor apportionment formula for tax years beginning on or after January 1, 2011. As a result of this legislation, the Company recognized a net decrease to its deferred tax assets as of September 30, 2011 of $0.8 million, resulting in a corresponding tax expense. The Mexican presidential decree allowing Mexican Maquiladoras to calculate their tax using an income based method was set to expire on December 31, 2011. Accordingly, the Company would then be required to use the alternative Flat Tax Regime to compute its annual tax. This resulted in a decrease in the Company's deferred tax assets of $1.1 million and a corresponding tax expense. After September 30, 2011, but prior to the release of the Company's financial statement, the Mexican Government extended the special tax incentives for Mexican Maquiladoras. As a result, the Company expects to recognize an increase to its deferred tax assets and a corresponding tax benefit in the first quarter of fiscal year 2012. Deferred tax assets are recognized for foreign operations when management believes it is more likely than not that the deferred tax assets will be recovered during the carry forward period. The Company will continue to assess its valuation allowance in future periods. As of September 30, 2011, the Company has United States federal net operating loss carry forwards of approximately $60.5 million, including $43.3 million related to the acquisition of SiGe, which will expire at various dates through 2030 and aggregate state net operating loss carry forwards of approximately $1.3 million, which will expire at various dates through 2020. The utilization of these net operating losses is subject to certain annual limitations as required under Internal Revenue Code section 382 and similar state income tax provisions. The Company also has United States federal and state income tax credit carry forwards of approximately $80.1 million, of which $23.0 million of federal income tax credit carry forwards have not been recorded as a deferred tax asset. The United States federal tax credits expire at various dates through 2031. The state tax credits relate primarily to California research tax credits which can be carried forward indefinitely. The Company has continued to expand its operations and increase its investments in numerous international jurisdictions. These activities will increase the Company’s earnings attributable to foreign jurisdictions. As of September 30, 2011, no provision has been made for United States federal, state, or additional foreign income taxes related to approximately $147.0 million of undistributed earnings of foreign subsidiaries which have been or are intended to be permanently reinvested. It is not practicable to determine the United States federal income tax liability, if any, which would be payable if such earnings were not permanently reinvested. The Company’s gross unrecognized tax benefits totaled $32.1 million and $19.9 million as of September 30, 2011 and October 1, 2010, respectively. Of the total unrecognized tax benefits at September 30, 2011, $19.7 million would impact the effective tax rate, if recognized. The remaining unrecognized tax benefits would not impact the effective tax rate, if recognized, due to the Company’s valuation allowance and certain positions which were required to be capitalized. There are no positions which the Company anticipates could change within the next twelve months. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows (in thousands):
Balance at October 1, 2010 | $ | 19,900 |
Increases based on positions related to prior years | 935 |
Increases based on positions related to current year | 11,334 |
Decreases relating to settlements with taxing authorities | — |
Decreases relating to lapses of applicable statutes of limitations | (33 | )
Balance at September 30, 2011 | $ | 32,136 |
The Company’s major tax jurisdictions as of September 30, 2011 are the United States, California, Iowa, Singapore and Canada. For the United States, the Company has open tax years dating back to fiscal year 1998 due to the carry forward of tax attributes. For California and Iowa, the Company has open tax years dating back to fiscal year 2002 due to the carry forward of tax attributes. For Singapore, the Company has open tax years dating back to fiscal year 2011. For Canada, the Company has open tax years dating back to fiscal year 2004. During the year ended September 30, 2011, the Company did not recognize any significant amount of previously unrecognized tax benefits related to the expiration of the statute of limitations. The Company's policy is to recognize accrued interest and penalties, if incurred, on any unrecognized tax benefits as a component of income tax expense. The Company recognized $0.5 million of accrued interest or penalties related to unrecognized tax benefits during fiscal year 2011.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 136, 172 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 43, 44, 45, 46, 47, 48, 49 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690 + Details
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