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INCOME TAXES | 12 Months Ended
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Nov. 02, 2014
INCOME TAXES [Abstract] |
INCOME TAXES | NOTE 12 - INCOME TAXES Income before the income tax provisions consist of the following:
|  | Year Ended |
|  | November 2, 2014 |  |  | November 3, 2013 |  |  | October 28, 2012 |
United States |  | $ | (23,083 | ) |  | $ | (14,164 | ) |  | $ | (5,474 | )
Foreign |  |  | 64,413 |  |  |  | 40,969 |  |  |  | 46,122 |
|  | $ | 41,330 |  |  | $ | 26,805 |  |  | $ | 40,648 |
The income tax provisions consist of the following:
|  | Year Ended |
|  | November 2, 2014 |  |  | November 3, 2013 |  |  | October 28, 2012 |
Current: |  |  |  |  |  |  |  |  |
Federal |  | $ | 354 |  |  | $ | 208 |  |  | $ | 81 |
State |  |  | - |  |  |  | 65 |  |  |  | (5 | )
Foreign |  |  | 4,726 |  |  |  | 7,222 |  |  |  | 11,332 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | - |  |  |  | - |  |  |  | - |
State |  |  | (5 | ) |  |  | (181 | ) |  |  | - |
Foreign |  |  | 4,220 |  |  |  | (85 | ) |  |  | (615 | )
Total |  | $ | 9,295 |  |  | $ | 7,229 |  |  | $ | 10,793 |
The income tax provisions differ from the amount computed by applying the statutory U.S. federal income tax rate to income before income taxes as a result of the following:
|  | Year Ended |
|  | November 2, 2014 |  |  | November 3, 2013 |  |  | October 28, 2012 |
U.S. federal income tax at statutory rate |  | $ | 14,465 |  |  | $ | 9,382 |  |  | $ | 14,227 |
Changes in valuation allowances |  |  | (7,575 | ) |  |  | 1,325 |  |  |  | 1,806 |
Distributions from foreign subsidiaries |  |  | 12,674 |  |  |  | 1,957 |  |  |  | 2,073 |
State income taxes, net of federal benefit |  |  | (141 | ) |  |  | 267 |  |  |  | (1,956 | )
Foreign tax rate differentials |  |  | (4,864 | ) |  |  | (4,851 | ) |  |  | (3,805 | )
Tax credits |  |  | (2,847 | ) |  |  | (3,967 | ) |  |  | (1,071 | )
Uncertain tax positions, including reserves, settlements and resolutions |  |  | (2,255 | ) |  |  | 1,471 |  |  |  | 1,984 |
Debt extinguishment losses |  |  | - |  |  |  | - |  |  |  | (2,879 | )
Gain on acquisition of DPTT |  |  | (5,748 | ) |  |  | - |  |  |  | - |
Intercompany gain elimination |  |  | 4,759 |  |  |  | - |  |  |  | - |
Equity based compensation |  |  | 714 |  |  |  | 765 |  |  |  | 499 |
Other, net |  |  | 113 |  |  |  | 880 |  |  |  | (85 | )
|  | $ | 9,295 |  |  | $ | 7,229 |  |  | $ | 10,793 |
The effective tax rate differs from the U.S. statutory rate of 35% in fiscal years 2014, 2013 and 2012 primarily due to earnings, including the fiscal year 2014 gain on acquisition of DPTT, being taxed at lower statutory rates in foreign jurisdictions, combined with the benefit of various investment credits in a foreign jurisdiction. Valuation allowances in jurisdictions with historic and continuing losses eliminate the effective rate impact of these jurisdictions. The net deferred income tax assets consist of the following:
|  | As of |
|  | November 2, 2014 |  |  | November 3, 2013 |
Deferred income tax assets: |  |  |  |  |  |
Net operating losses |  | $ | 64,529 |  |  | $ | 57,631 |
Reserves not currently deductible |  |  | 6,948 |  |  |  | 7,101 |
Alternative minimum tax credits |  |  | 3,121 |  |  |  | 3,116 |
Tax credit carryforwards |  |  | 8,368 |  |  |  | 7,051 |
Other |  |  | 1,773 |  |  |  | 1,892 |
|  |  | 84,739 |  |  |  | 76,791 |
Valuation allowances |  |  | (49,548 | ) |  |  | (56,661 | )
|  |  | 35,191 |  |  |  | 20,130 |
Deferred income tax liabilities: |  |  |  |  |  |  |  |
Undistributed earnings of foreign subsidiaries |  |  | (5,366 | ) |  |  | (5,347 | )
Property, plant and equipment |  |  | (11,503 | ) |  |  | (890 | )
Investments |  |  | (2,660 | ) |  |  | (371 | )
Other |  |  | (448 | ) |  |  | (992 | )
|  |  | (19,977 | ) |  |  | (7,600 | )
Net deferred income tax assets |  | $ | 15,214 |  |  | $ | 12,530 |
Reported as: |  |  |  |  |  |  |  |
Current deferred tax assets |  | $ | 7,223 |  |  | $ | 1,082 |
Noncurrent deferred tax assets |  |  | 11,036 |  |  |  | 12,455 |
Noncurrent deferred tax liabilities |  |  | (3,045 | ) |  |  | (1,007 | )
|  | $ | 15,214 |  |  | $ | 12,530 |
A reconciliation of the beginning and ending amounts of unrecognized tax benefits, excluding interest and penalties, is as follows:
|  | Year Ended |
|  | November 2, 2014 |  |  | November 3, 2013 |  |  | October 28, 2012 |
Balance at beginning of year |  | $ | 4,757 |  |  | $ | 3,793 |  |  | $ | 1,824 |
Additions (reductions) for tax positions in prior years |  |  | 3,437 |  |  |  | 1,224 |  |  |  | 1,932 |
Additions based on current year tax positions |  |  | 272 |  |  |  | 207 |  |  |  | 616 |
Settlements |  |  | (3,155 | ) |  |  | (406 | ) |  |  | (518 | )
Lapses of statutes of limitations |  |  | (318 | ) |  |  | (61 | ) |  |  | (61 | )
Balance at end of year |  | $ | 4,993 |  |  | $ | 4,757 |  |  | $ | 3,793 |
Unrecognized tax benefits associated with uncertain tax positions were $5.1 million at November 2, 2014, of which $5.0 million is recorded in other liabilities in the consolidated balance sheet and $0.1 million is recorded as a reduction to deferred tax assets, and were $4.9 million at November 3, 2013, of which $1.7 million is recorded in other liabilities in the consolidated balance sheet, and $3.2 million is recorded as a reduction to deferred tax assets. If recognized, $5.0 million of the benefits would favorably impact the Company's effective tax rate in future periods. Included in these amounts for both fiscal years 2014 and 2013 was $0.1 million of interest and penalties. The Company includes any applicable interest and penalties related to uncertain tax positions in its income tax provision. The above table includes the fiscal year 2014 settlement of an Internal Revenue Service (“IRS”) income tax examination of the Company’s 2011 and 2012 federal income tax returns, as well as the recognition of previously unrecognized tax benefits resulting from the lapse of the assessment periods, which were offset in part by uncertain tax positions related to the acquisition of DPTT (as discussed in Note 2). The IRS income tax settlement had limited impact on the fiscal 2014 income tax expense, as the changes that resulted from the examination were offset by loss carryforwards, for which the related deferred tax assets were subject to a valuation allowance. Shortly after the close of the 2013 fiscal year, the Company reached a settlement with the relevant tax authorities regarding one of its non-US subsidiary’s 2010 tax year, as reflected in the fiscal 2013 table above. As of November 2, 2014, the Company does not believe it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase or decrease in the next twelve months. The Company is no longer subject to examination by the U.S. for years prior to and including fiscal year 2012. With respect to major foreign and state tax jurisdictions, the Company is no longer subject to tax authority examinations for years prior to and including fiscal year 2009. As of November 2, 2014, the Company had available U.S. Federal tax operating loss carryforwards of approximately $123.6 million which expire between 2023 and 2034, and research and development tax credit carryforwards of approximately $4.0 million which expire between 2019 and 2034. As of November 2, 2014, the Company also has U.S. state tax operating loss carryforwards of approximately $209.5 million and foreign tax operating loss carryforwards of approximately $73.1 million, including $34.6 million remaining of the $58.6 million acquired in the acquisition of DPTT. These loss carryforwards expire between 2015 and 2034 with the exception of $1.0 million that has 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 will expire prior to utilization. The valuation allowance increased (decreased) by $(7.1 million), $1.1 million and $2.5 million in fiscal years 2014, 2013 and 2012, respectively. As of November 2, 2014, the Company had $3.1 million of alternative minimum tax credit carryforwards that are available to offset future federal income taxes payable and will not expire. The Company also has state tax credits available of $5.6 million which, if they are not utilized, will expire between 2015 and 2034 and a foreign investment tax credit of $0.8 million that expires in 2019 if not utilized. As of November 2, 2014, the undistributed earnings of foreign subsidiaries included in consolidated retained earnings amounted to $142.5 million, of which $15.3 million is not considered to be permanently invested. No provision has been made for future U.S. taxes payable on the remaining undistributed earnings of $127.2 million, as they are expected to be indefinitely invested in foreign jurisdictions and therefore are not anticipated to be subject to U.S. tax. The amount of undistributed earnings is calculated taking into account the net amount of earnings of the Company’s foreign subsidiaries, considering its multitier subsidiary structure, and translating those earnings into U.S. dollars using exchange rates in effect as of the balance sheet date. Prior to the acquisition of DPTT, PDMC (formerly PSMC), in accordance with the ownership provisions in the DPTT acquisition agreements, made a onetime remittance of $35 million in earnings that were previously considered to be indefinitely invested. The Company has not changed its assertion on the balance of PDMC earnings which remain 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. This tax holiday had no dollar or per share effect in the fiscal years ended November 2, 2014, November 3, 2013 and October 28, 2012. PDMC, acquired an IC manufacturing facility in Taiwan as a result of the DPTT Acquisition, that has been accorded a tax holiday which is scheduled to commence in 2015 and expire in 2019. This tax holiday had no dollar or per share effect on the 2014, 2013 or 2012 fiscal years. In Korea, various investment tax credits have been earned to reduce the Company's effective income tax rate. Income tax payments were $5.2 million, $10.7 million and $14.3 million in fiscal 2014, 2013 and 2012, respectively. Cash received for refunds of income taxes paid in prior years amounted to $1.4 million, $0.3 million and $0.1 million in fiscal years 2014, 2013 and 2012, respectively.

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