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INCOME TAXES | 12 Months Ended
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Oct. 30, 2011
INCOME TAXES [Abstract] |
INCOME TAXES | NOTE 13 - INCOME TAXES The income (loss) before income tax provision consists of the following:
|  | Year Ended |
|  | October 30, 2011 |  |  | October 31, 2010 |  |  | November 1, 2009 |
United States |  | $ | (20,396 | ) |  | $ | (27,507 | ) |  | $ | (35,228 | )
Foreign |  |  | 56,295 |  |  |  | 60,060 |  |  |  | (1,876 | )
|  | $ | 35,899 |  |  | $ | 32,553 |  |  | $ | (37,104 | )
The income tax provision consists of the following:
|  | Year Ended |
|  | October 30, 2011 |  |  | October 31, 2010 |  |  | November 1, 2009 |
Current: |  |  |  |  |  |  |  |  |
Federal |  | $ | 291 |  |  | $ | - |  |  | $ | - |
State |  |  | 74 |  |  |  | - |  |  |  | - |
Foreign |  |  | 15,550 |  |  |  | 7,303 |  |  |  | 7,266 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | - |  |  |  | - |  |  |  | - |
State |  |  | - |  |  |  | - |  |  |  | - |
Foreign |  |  | (224 | ) |  |  | 168 |  |  |  | (2,943 | )
Total |  | $ | 15,691 |  |  | $ | 7,471 |  |  | $ | 4,323 |
The income tax provision differs from the amount computed by applying the statutory U.S. federal income tax rate to the income (loss) before income taxes as a result of the following:
|  | Year Ended |
|  | October 30, 2011 |  |  | October 31, 2010 |  |  | November 1, 2009 |
U.S. federal income tax at statutory rate |  | $ | 12,564 |  |  | $ | 11,393 |  |  | $ | (12,986 | )
Debt extinguishment losses |  |  | 11,942 |  |  |  | - |  |  |  | - |
Distributions from foreign subsidiaries |  |  | 1,925 |  |  |  | 1,750 |  |  |  | 10,407 |
State income taxes, net of federal benefit |  |  | 503 |  |  |  | (1,270 | ) |  |  | (464 | )
Changes in valuation allowances |  |  | (8,334 | ) |  |  | 9,693 |  |  |  | 6,427 |
Foreign tax rate differentials |  |  | (4,467 | ) |  |  | (6,381 | ) |  |  | 3,497 |
Tax credits in foreign jurisdictions |  |  | (522 | ) |  |  | (2,954 | ) |  |  | (1,581 | )
Uncertain tax positions, including reserves, settlements and resolutions |  |  | 1,499 |  |  |  | 93 |  |  |  | (1,218 | )
Shanghai, China operations closure |  |  | - |  |  |  | (6,127 | ) |  |  | - |
Other, net |  |  | 581 |  |  |  | 1,274 |  |  |  | 241 |
|  | $ | 15,691 |  |  | $ | 7,471 |  |  | $ | 4,323 |
Subsequent to the issuance of the Company's 2010 consolidated financial statements, the Company identified two errors in the classifications of line items within the Tax Rate Reconciliation table (above). The first error of $6 million was primarily due to incorrectly including the tax effects of cumulative earnings from a foreign subsidiary whose earnings were considered not to be reinvested resulting in an overstatement of both the Distributions from foreign subsidiaries line and the Changes in valuation allowances line of the 2010 Tax Rate Reconciliation table. The second error of $1 million was due to a State tax benefit that was not recorded as the result of the Shanghai, China operations closure resulting in an overstatement of the State income taxes, net of federal benefit line and an overstatement of the Changes in valuation allowances line. As a result, the Tax Rate Reconciliation table has been restated from the amounts previously reported. The corrections had no effect on the net deferred tax asset, the income tax provision, the consolidated balance sheet and statements of operations previously reported for all years presented. In addition to these restatements, the Company has reclassified certain prior amounts from the Foreign tax rate differentials line into a separate line, Tax credits in foreign jurisdictions line, to conform with the current year presentation within this table. The effective tax rate differs from the U.S. statutory rate of 35% in fiscal year 2011 primarily due to the impact of the non-deductible debt extinguishment losses related to the Company's acquisition of a portion of its 5.5% convertible senior notes and the impact of a foreign subsidiary tax settlement offset by a higher level of earnings taxed at lower statutory rates in foreign jurisdictions. The Company's operations in Shanghai, China, were closed in the fiscal year ended October 31, 2010. The Company recognized a $10.5 million U.S. tax benefit as a result of the investment writedown. In China, additional income was recognized as a result of asset sales and intercompany loan settlements and the related China income tax liability was offset by accumulated net operating losses. As a result of the closure, the Company wrote off its Shanghai, China, subsidiary's deferred tax asset of $4.4 million, which arose as a result of unused operating losses. The deferred tax asset written off had been offset in its entirety by a valuation allowance. The net deferred income tax assets consist of the following:
|  | October 30, 2011 |  |  | October 31, 2010 |
Deferred income tax assets: |  |  |  |  |  |
Reserves not currently deductible |  | $ | 5,889 |  |  | $ | 5,007 |
Net operating losses |  |  | 51,991 |  |  |  | 57,764 |
Alternative minimum tax credits |  |  | 3,217 |  |  |  | 2,926 |
Tax credit carryforwards |  |  | 5,410 |  |  |  | 9,770 |
Future lease obligation |  |  | 3,108 |  |  |  | 5,705 |
Other |  |  | 3,359 |  |  |  | 3,796 |
|  |  | 72,974 |  |  |  | 84,968 |
Valuation allowances |  |  | (53,063 | ) |  |  | (61,303 | )
|  |  | 19,911 |  |  |  | 23,665 |
Deferred income tax liabilities: |  |  |  |  |  |  |  |
Property, plant and equipment |  |  | (2,744 | ) |  |  | (5,369 | )
Undistributed earnings of foreign subsidiaries |  |  | (4,417 | ) |  |  | (4,428 | )
Investments |  |  | (1,203 | ) |  |  | (2,622 | )
Other |  |  | (481 | ) |  |  | (440 | )
|  |  | (8,845 | ) |  |  | (12,859 | )
Net deferred income tax assets |  | $ | 11,066 |  |  | $ | 10,806 |
Reported as: |  |  |  |  |  |  |  |
Current deferred tax assets |  | $ | 609 |  |  | $ | 1,173 |
Long-term deferred tax assets |  |  | 11,239 |  |  |  | 10,132 |
Accrued liabilities |  |  | (45 | ) |  |  | - |
Long-term deferred tax liabilities |  |  | (737 | ) |  |  | (499 | )
|  | $ | 11,066 |  |  | $ | 10,806 |
Subsequent to the issuance of the Company's 2010 consolidated financial statements, the Company's management determined that there was an error in the classification of and within the deferred income tax assets and liabilities presented in the 2010 table of deferred tax assets and liabilities footnote presentation. The error primarily related to an overstatement of the Company's gross net operating loss carryforwards and the related $13 million deferred tax asset related to those same losses due to taxable gains that should have been recorded in a prior year on various intercompany transactions. Because a full valuation allowance has also been previously recorded against this overstated deferred tax asset, the error had no effect on the net deferred tax assets recorded in the financial statements. Additionally, the Company determined that certain deferred tax assets and liabilities had previously been improperly netted within the net operating loss line of the deferred tax asset composition table. As a result, the amounts presented in the 2010 table of deferred income tax assets and liabilities have been restated from the amounts previously reported. The corrections had no effect on the net deferred tax assets, the income tax provision, the consolidated balance sheet and statements of operations previously reported for all years presented. Unrecognized tax benefits associated with uncertain tax positions were $1.9 million at October 30, 2011, of which $0.5 million was recorded in income taxes payable and the balance in other liabilities in the consolidated balance sheet, and were $2.0 million at October 31, 2010 included in other liabilities in the consolidated balance sheet. If recognized, the benefits would favorably affect the Company's effective tax rate in future periods. Included in these amounts were $0.1 million and $0.3 million for interest and penalties in the two years, respectively. The Company includes any applicable interest and penalties related to uncertain tax positions in its income tax provision. As of October 30, 2011, the Company believes it is not reasonably possible that the total amounts of unrecognized tax benefits will significantly increase or decrease in the next twelve months. Currently, the statutes of limitations remain open subsequent to, and including, 2008 in the U.S., 2009 in the U.K., 2008 in Germany, 2011 in Korea, 2006 in Taiwan and in Singapore. A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding interest and penalties, is as follows:
|  | Year Ended |
|  | October 30, 2011 |  |  | October 31, 2010 |  |  | November 1, 2009 |
Balance at beginning of year |  | $ | 1,676 |  |  | $ | 1,573 |  |  | $ | 1,988 |
Additions (reductions) for tax positions in prior years |  |  | 709 |  |  |  | (351 | ) |  |  | - |
Additions based on current year tax positions |  |  | 502 |  |  |  | 454 |  |  |  | 377 |
Settlements |  |  | (1,063 | ) |  |  | - |  |  |  | (685 | )
Lapses of statutes of limitations |  |  | - |  |  |  | - |  |  |  | (107 | )
Balance at end of year |  | $ | 1,824 |  |  | $ | 1,676 |  |  | $ | 1,573 |
As of October 30, 2011, the Company had available U.S. Federal tax operating loss carryforwards of approximately $111.9 million which expire between 2020 and 2030, and research and development tax credit carryforwards of approximately $2.9 million which expire between 2018 and 2029. The Company has established a valuation allowance for a portion of its deferred tax assets because it believes, based on the weight of all available evidence, that it is more likely than not that a portion of its net operating loss carryforwards may expire prior to utilization. The valuation allowance (decreased) increased by $(8.2) million, $10.9 million and $5.7 million in fiscal years 2011, 2010 and 2009, respectively. As of October 30, 2011, the Company had $3.2 million of alternative minimum tax credit carryforwards that are available to offset future federal income taxes payable. The Company also has state tax credits available of $1.6 million which, if they are not utilized, will begin to expire in 2012. As of October 30, 2011, the undistributed earnings of foreign subsidiaries included in consolidated retained earnings amounted to $80.3 million, of which $12.6 million of earnings is considered not to be permanently reinvested. The amount of undistributed earnings is calculated taking into account the net amount of earnings of the Company's foreign subsidiaries considering its multi-tier subsidiary structure and translated into U.S. dollars using exchange rates in effect as of the balance sheet date. During fiscal year 2008 a decision was made to not indefinitely reinvest earnings in certain foreign jurisdictions. No provision has been made for taxes due on the remaining undistributed earnings of $67.7 million considered to be indefinitely invested. Should the Company elect in the future to repatriate the foreign earnings so invested, it may incur additional income tax expense on those foreign earnings, the amount of which is not practicable to compute. PKLT, the Company's FPD manufacturing facility in Taiwan, has been accorded a tax holiday, which starts in 2012 and expires in 2017. In addition, the Company had been accorded a tax holiday in China which expired in 2011. These tax holidays had no dollar or per share effect in the fiscal years ended October 30, 2011, October 31, 2010 and November 1, 2009. In Korea and at Photronics Semiconductor Mask Corporation (PSMC) in Taiwan, various investment tax credits have been earned to reduce the Company's effective income tax rate. Income tax payments were $10.4 million, $8.9 million and $9.6 million in fiscal 2011, 2010 and 2009, respectively. Cash received for refunds of income taxes paid in prior years amounted to $0.2 million in fiscal 2011 and $0.1 million in both fiscal years 2010 and 2009.

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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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