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INCOME TAXES | 12 Months Ended
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Oct. 28, 2012
INCOME TAXES [Abstract] |
INCOME TAXES | NOTE 13 - INCOME TAXES The income before income tax provision consists of the following:
|  | Year Ended |
|  | October 28, 2012 |  |  | October 30, 2011 |  |  | October 31, 2010 |
United States |  | $ | (5,474 | ) |  | $ | (20,396 | ) |  | $ | (27,507 | )
Foreign |  |  | 46,122 |  |  |  | 56,295 |  |  |  | 60,060 |
|  | $ | 40,648 |  |  | $ | 35,899 |  |  | $ | 32,553 |
The income tax provision consists of the following:
|  | Year Ended |
|  | October 28, 2012 |  |  | October 30, 2011 |  |  | October 31, 2010 |
Current: |  |  |  |  |  |  |  |  |
Federal |  | $ | 81 |  |  | $ | 291 |  |  | $ | - |
State |  |  | (5 | ) |  |  | 74 |  |  |  | - |
Foreign |  |  | 11,332 |  |  |  | 15,550 |  |  |  | 7,303 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | - |  |  |  | - |  |  |  | - |
State |  |  | - |  |  |  | - |  |  |  | - |
Foreign |  |  | (615 | ) |  |  | (224 | ) |  |  | 168 |
Total |  | $ | 10,793 |  |  | $ | 15,691 |  |  | $ | 7,471 |
The income tax provision differs from the amount computed by applying the statutory U.S. federal income tax rate to the income before income taxes as a result of the following:
|  | Year Ended |
|  | October 28, 2012 |  |  | October 30, 2011 |  |  | October 31, 2010 |
U.S. federal income tax at statutory rate |  | $ | 14,227 |  |  | $ | 12,564 |  |  | $ | 11,393 |
Changes in valuation allowances |  |  | 1,806 |  |  |  | (8,334 | ) |  |  | 9,693 |
Distributions from foreign subsidiaries |  |  | 2,073 |  |  |  | 1,925 |  |  |  | 1,750 |
State income taxes, net of federal benefit |  |  | (1,956 | ) |  |  | 503 |  |  |  | (1,270 | )
Foreign tax rate differentials |  |  | (3,805 | ) |  |  | (4,467 | ) |  |  | (6,381 | )
Tax credits |  |  | (1,071 | ) |  |  | (522 | ) |  |  | (2,954 | )
Uncertain tax positions, including reserves, settlements and resolutions |  |  | 1,984 |  |  |  | 1,499 |  |  |  | 93 |
Debt extinguishment losses |  |  | (2,879 | ) |  |  | 11,942 |  |  |  | - |
Shanghai, China operations closure |  |  | - |  |  |  | - |  |  |  | (6,127 | )
Other, net |  |  | 414 |  |  |  | 581 |  |  |  | 1,274 |
|  | $ | 10,793 |  |  | $ | 15,691 |  |  | $ | 7,471 |
The effective tax rate differs from the U.S. statutory rate of 35% in fiscal year 2012 primarily due to a higher level of earnings being taxed at lower statutory rates in foreign jurisdictions combined with the benefit of various investment credits in certain foreign jurisdictions. 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 28, 2012 |  |  | October 30, 2011 |
Deferred income tax assets: |  |  |  |  |  |
Reserves not currently deductible |  | $ | 6,382 |  |  | $ | 5,889 |
Net operating losses |  |  | 56,252 |  |  |  | 51,991 |
Alternative minimum tax credits |  |  | 3,116 |  |  |  | 3,217 |
Tax credit carryforwards |  |  | 4,785 |  |  |  | 5,410 |
Future lease obligation |  |  | - |  |  |  | 3,108 |
Other |  |  | 2,634 |  |  |  | 3,359 |
|  |  | 73,169 |  |  |  | 72,974 |
Valuation allowances |  |  | (55,536 | ) |  |  | (53,063 | )
|  |  | 17,633 |  |  |  | 19,911 |
Deferred income tax liabilities: |  |  |  |  |  |  |  |
Property, plant and equipment |  |  | (604 | ) |  |  | (2,744 | )
Undistributed earnings of foreign subsidiaries |  |  | (4,575 | ) |  |  | (4,417 | )
Investments |  |  | (170 | ) |  |  | (1,203 | )
Other |  |  | (351 | ) |  |  | (481 | )
|  |  | (5,700 | ) |  |  | (8,845 | )
Net deferred income tax assets |  | $ | 11,933 |  |  | $ | 11,066 |
Reported as: |  |  |  |  |  |  |  |
Current deferred tax assets |  | $ | 1,199 |  |  | $ | 609 |
Long-term deferred tax assets |  |  | 11,395 |  |  |  | 11,239 |
Accrued liabilities |  |  | - |  |  |  | (45 | )
Long-term deferred tax liabilities |  |  | (661 | ) |  |  | (737 | )
|  | $ | 11,933 |  |  | $ | 11,066 |
Unrecognized tax benefits associated with uncertain tax positions were $3.9 million at October 28, 2012, of which $1.9 million is recorded in other liabilities in the consolidated balance sheet, and $2.0 million is recorded as a reduction to deferred tax assets and the related valuation allowance, and were $1.9 million at October 30, 2011, of which $0.5 million was recorded in income taxes payable and $1.4 million in other liabilities in the consolidated balance sheet. If recognized, $1.9 million of the benefits would favorably affect the Company's effective tax rate in future periods. Included in these amounts for both fiscal years 2012 and 2011 was $0.1 million for interest and penalties. The Company includes any applicable interest and penalties related to uncertain tax positions in its income tax provision. As of October 28, 2012, 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 in various jurisdictions subsequent to, and including, 2007. A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding interest and penalties, is as follows:
|  | Year Ended |
|  | October 28, 2012 |  |  | October 30, 2011 |  |  | October 31, 2010 |
Balance at beginning of year |  | $ | 1,824 |  |  | $ | 1,676 |  |  | $ | 1,573 |
Additions (reductions) for tax positions in prior years |  |  | 1,932 |  |  |  | 709 |  |  |  | (351 | )
Additions based on current year tax positions |  |  | 616 |  |  |  | 502 |  |  |  | 454 |
Settlements |  |  | (518 | ) |  |  | (1,063 | ) |  |  | - |
Lapses of statutes of limitations |  |  | (61 | ) |  |  | - |  |  |  | - |
Balance at end of year |  | $ | 3,793 |  |  | $ | 1,824 |  |  | $ | 1,676 |
As of October 28, 2012, the Company had available U.S. Federal tax operating loss carryforwards of approximately $120.3 million which expire between 2020 and 2032, and research and development tax credit carryforwards of approximately $3.1 million which expire between 2018 and 2029. As of October 28, 2012, the Company also has U.S. state tax operating loss carryforwards of approximately $190.4 million and foreign tax operating loss carryforwards of approximately $40.2 million which expire between 2013 and 2032 with the exception of $0.4 million that have an indefinite life. 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 increased (decreased) by $2.5 million, $(8.2) million and $10.9 million in fiscal years 2012, 2011 and 2010, respectively. As of October 28, 2012, the Company had $3.1 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 $2.6 million which, if they are not utilized, will begin to expire in 2013. As of October 28, 2012, the undistributed earnings of foreign subsidiaries included in consolidated retained earnings amounted to $104.8 million, of which $13.2 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 translating those earnings 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 $91.6 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 started 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 28, 2012, October 30, 2011 and October 31, 2010. 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 $ 14.3 million, $10.4 million and $8.9 million in fiscal 2012, 2011 and 2010, respectively. Cash received for refunds of income taxes paid in prior years amounted to $0.1 million, $0.2 million and $0.1 million in fiscal years 2012, 2011 and 2010, respectively.

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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 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 2: 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 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 4: 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 5: 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 6: 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 7: 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 8: 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 + Details
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