XML 40 R19.htm IDEA: XBRL DOCUMENT ﻿
v2.3.0.11

Income Taxes | 12 Months Ended
--- | ---
Jun. 26, 2011
Income Taxes |
Income Taxes | Note 12 – Income Taxes The following are the components of income from continuing operations before income taxes (in thousands):
|  | Fiscal Years Ended |
|  | June 26, 2011 |  |  | June 27, 2010 |  |  | June 28, 2009 |
Domestic |  | $ | 110,959 |  |  | $ | 153,848 |  |  | $ | 811 |
Foreign |  |  | 67,268 |  |  |  | 51,624 |  |  |  | 38,856 |
Total |  | $ | 178,227 |  |  | $ | 205,472 |  |  | $ | 39,667 |
The following are the components of income tax expense from continuing operations (in thousands):
|  | Fiscal Years Ended |
|  | June 26, 2011 |  |  | June 27, 2010 |  |  | June 28, 2009 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 31,503 |  |  | $ | 45,005 |  |  | $ | 12,363 |
Foreign |  |  | 13,796 |  |  |  | 12,963 |  |  |  | 6,605 |
State |  |  | 2,736 |  |  |  | 6,260 |  |  |  | 811 |
Total Current |  |  | 48,035 |  |  |  | 64,228 |  |  |  | 19,779 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | (5,008 | ) |  |  | (8,180 | ) |  |  | (6,831 | )
Foreign |  |  | (10,825 | ) |  |  | (2,837 | ) |  |  | (3,209 | )
State |  |  | (475 | ) |  |  | (29 | ) |  |  | (722 | )
Total Deferred |  |  | (16,308 | ) |  |  | (11,046 | ) |  |  | (10,762 | )
Income tax expense |  | $ | 31,727 |  |  | $ | 53,182 |  |  | $ | 9,017 |
Actual income tax expense from continuing operations differed from the amount computed by applying the U.S. federal tax rate of 35% to pre-tax earnings from continuing operations as a result of the following (in thousands, except percentages):
|  | Fiscal Years Ended |
|  | June 26, 2011 |  |  | % of Income |  |  | June 27, 2010 |  |  | % of Income |  |  | June 28, 2009 |  |  | % of Income |
Federal income tax provision at statutory rate |  | $ | 62,378 |  |  |  | 35 | % |  | $ | 71,916 |  |  |  | 35 | % |  | $ | 13,883 |  |  |  | 35 | %
Increase (decrease) in income tax expense resulting from: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
State tax provision, net of federal benefit |  |  | 2,169 |  |  |  | 1 | % |  |  | 4,135 |  |  |  | 2 | % |  |  | 88 |  |  |  | 0 | %
Tax exempt interest |  |  | (1,646 | ) |  | – | 1 | % |  |  | (1,089 | ) |  | – | 1 | % |  |  | (669 | ) |  | – | 2 | %
Exam settlements |  |  | — |  |  |  | 0 | % |  |  | 1,645 |  |  |  | 1 | % |  |  | 494 |  |  |  | 1 | %
48C investment tax credit |  |  | (4,023 | ) |  | – | 2 | % |  |  | (1,401 | ) |  | – | 1 | % |  |  | — |  |  |  | 0 | %
Increase (decrease) in tax reserve |  |  | (2,175 | ) |  | – | 1 | % |  |  | (3,462 | ) |  | – | 2 | % |  |  | 4,720 |  |  |  | 12 | %
Research and development credits |  |  | (3,619 | ) |  | – | 2 | % |  |  | (1,092 | ) |  | – | 1 | % |  |  | (580 | ) |  | – | 1 | %
Qualified production activities deduction |  |  | (2,714 | ) |  | – | 1 | % |  |  | (3,945 | ) |  | – | 2 | % |  |  | (560 | ) |  | – | 1 | %
Statutory rate differences |  |  | (16,117 | ) |  | – | 9 | % |  |  | (14,939 | ) |  | – | 7 | % |  |  | (8,249 | ) |  | – | 21 | %
Effect of tax rate change |  |  | (2,998 | ) |  | – | 2 | % |  |  | (707 | ) |  |  | 0 | % |  |  | (202 | ) |  | – | 1 | %
Other |  |  | 472 |  |  |  | 0 | % |  |  | 2,121 |  |  |  | 1 | % |  |  | 92 |  |  |  | 0 | %
Income tax expense |  | $ | 31,727 |  |  |  | 18 | % |  | $ | 53,182 |  |  |  | 26 | % |  | $ | 9,017 |  |  |  | 23 | %
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows (in thousands):
|  | June 26, 2011 |  |  | June 27, 2010 |
Deferred tax assets: |  |  |  |  |  |  |  |
Compensation |  | $ | 1,494 |  |  | $ | 5,067 |
Inventory |  |  | 10,132 |  |  |  | 3,204 |
Sales return reserve and allowance for bad debts |  |  | 4,160 |  |  |  | 8,151 |
Federal and state net operating loss carryforwards |  |  | 1,010 |  |  |  | 532 |
State credits |  |  | 3,688 |  |  |  | 480 |
48C investment tax credits |  |  | 11,176 |  |  |  | — |
Investments |  |  | 970 |  |  |  | 976 |
Stock-based compensation |  |  | 16,731 |  |  |  | 10,109 |
Other |  |  | 2,071 |  |  |  | — |
Deferred revenue |  |  | — |  |  |  | 1,921 |
Total gross deferred assets |  |  | 51,432 |  |  |  | 30,440 |
Less valuation allowance |  |  | (1,620 | ) |  |  | (1,437 | )
Deferred tax assets, net |  |  | 49,812 |  |  |  | 29,003 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Property and equipment |  |  | (19,590 | ) |  |  | (17,643 | )
Intangible assets |  |  | (29,952 | ) |  |  | (28,810 | )
Available-for-sale securities |  |  | (2,629 | ) |  |  | (2,072 | )
Prepaid taxes and other |  |  | (890 | ) |  |  | (1,053 | )
Total gross deferred liability |  |  | (53,061 | ) |  |  | (49,578 | )
Deferred tax liability, net |  | $ | (3,249 | ) |  | $ | (20,575 | )
The components giving rise to the net deferred tax assets (liabilities) have been included in the accompanying Consolidated Balance Sheet as follows (in thousands):
|  | As of June 26, 2011 |
|  | Asset |  |  | Liabilities |
|  | Current |  |  | Noncurrent |  |  | Current |  |  | Noncurrent |
U.S. federal income taxes |  | $ | 10,072 |  |  | $ | — |  |  | $ | — |  |  | $ | (21,902 | )
Hong Kong and other income taxes |  |  | 7,785 |  |  |  | 796 | * |  |  | — |  |  |  | — |
|  | $ | 17,857 |  |  | $ | 796 |  |  | $ | — |  |  | $ | (21,902 | )
| * | This amount is included in Other Assets on the Consolidated Balance Sheets.
|  | As of June 27, 2010 |
|  | Asset |  |  | Liabilities |
|  | Current |  |  | Noncurrent |  |  | Current |  |  | Noncurrent |
U.S. federal income taxes |  | $ | 18,258 |  |  | $ | — |  |  | $ | — |  |  | $ | (38,058 | )
Hong Kong and other income taxes |  |  | 565 |  |  |  | — |  |  |  | — |  |  |  | (1,340 | )
|  | $ | 18,823 |  |  | $ | — |  |  | $ | — |  |  | $ | (39,398 | )
As of June 26, 2011 the Company has approximately $10.7 million of state net operating loss carryovers against which a full valuation allowance has been recorded. Furthermore, the Company has approximately $0.8 million of alternative minimum tax credits carryforwards that relate to excess stock option benefits which, if and when realized, will credit additional paid in capital. Additionally, the Company has $5.7 million of state income tax credit carryforwards. The state net operating loss carryovers will begin to expire in fiscal 2015 and the state income tax credit carryforwards will begin to expire in fiscal 2016. During fiscal 2010, the Company was notified by the Internal Revenue Service that it had been allocated $39 million of federal tax credits as part of the American Recovery and Reinvestment Act of 2009 (Internal Revenue Section 48C). This $39 million allocation was based upon the Company projecting that it would put into service approximately $130 million of qualified equipment into its United States manufacturing locations over the next three years. During fiscal 2010 and 2011 the Company has generated $10.8 and $23.7 million of 48C credit, respectively. The tax benefit (net of related basis adjustments) will be amortized into income over the useful life (5 years) of the underlying equipment that was placed in service to generate these credits. As of June 26, 2011, the Company has recognized an income tax benefit of $4.0 million related to the credits generated to date. Effective with the beginning of the first quarter of fiscal 2008, the Company adopted the provisions of FASB Accounting Standards Codification Topic 740, "Income Taxes" (ASC 740). ASC 740 contains a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is cumulatively more than 50% likely to be realized upon ultimate settlement. During fiscal 2011, the Company recognized a net decrease in total unrecognized tax benefits of $0.6 million comprised of a decrease of $1.4 million related to Hong Kong statute expirations, offset with an increase of $0.8 million related to prior year tax positions. As a result, the total amount of unrecognized tax benefits as of June 26, 2011 is $7.0 million. Of the $7.0 million total unrecognized tax benefits, $7.0 million represents tax positions that, if recognized, would impact the effective tax rate. Although timing of the resolution and/or closure on audits is highly uncertain, the Company believes it is reasonably possible that approximately $2.6 million of gross unrecognized tax benefits will change in the next 12 months as a result of pending audit settlements or statute expirations. The following is a tabular reconciliation of the Company's change in uncertain tax positions under ASC 740 (in thousands):
|  | June 26, 2011 |  |  | June 27, 2010 |
Beginning Balance |  | $ | 7,602 |  |  | $ | 10,878 |
Increases related to current year tax positions |  |  | — |  |  |  | — |
Increases related to prior year tax positions |  |  | 741 |  |  |  | 72 |
Decreases related to prior year tax positions |  |  | — |  |  |  | — |
Expiration of statute of limitations for assessment of taxes |  |  | (1,356 | ) |  |  | (427 | )
Settlement of tax positions |  |  | — |  |  |  | (2,921 | )
Ending Balance |  | $ | 6,987 |  |  | $ | 7,602 |
The Company's policy is to include interest and penalties related to unrecognized tax benefits within the income tax expense line item in the Consolidated Statements of Income. As of June 26, 2011, the Company accrued $137 thousand for the payment of interest related to unrecognized tax benefits. The Company files U.S. federal, U.S. state and foreign tax returns. For U.S. federal purposes, the Company is generally no longer subject to examinations for fiscal years ended June 29, 2008 and prior. For foreign purposes, the Company is no longer subject to examination for tax periods 2000 and prior. Certain carryforward tax attributes generated in prior years remain subject to examination and adjustment. For U.S. state tax returns the Company is generally no longer subject to tax examinations for fiscal years prior to 2008. The Company is currently under examination by the Internal Revenue Service for fiscal 2009. The Company is also currently under inquiry by the Hong Kong Inland Revenue Department for fiscal 2008 and fiscal 2009. The Company previously established a valuation allowance for state income tax losses and foreign tax losses, as well as unrealized losses on certain securities, as the Company believed that it was more likely than not that the tax benefits of the items would not be realized. During fiscal 2011, the valuation allowance increased by $0.2 million. This increase was comprised of a $0.2 million increase for state income tax credits and state net operating losses generated in certain tax jurisdictions. Based on all available evidence, the Company believes it will not realize the benefits attributable to the state income tax credits and net operating losses prior to their expiration. This $0.2 million increase was offset by a corresponding increase in the deferred tax asset. The Company provides for U.S. income taxes on the earnings of foreign subsidiaries unless the subsidiaries' earnings are considered indefinitely reinvested outside the United States. As of June 26, 2011, U.S. income taxes were not provided for on a cumulative total of approximately $186.0 million of undistributed earnings for certain non-U.S. subsidiaries, as the Company currently intends to reinvest these earnings in these foreign operations indefinitely. Determination of the amount of any deferred tax liability on these undistributed earnings is not practicable. During fiscal 2011, it was determined that the Company was no longer eligible for the previously disclosed China tax holiday with respect to its new chip manufacturing operations. As such, the deferred tax asset has been revalued at the 25% China statutory rate, resulting in an income tax benefit in the amount $0.7 million. Effective the third quarter of fiscal 2011, the Company no longer qualifies for a 15% tax rate with respect to its historic manufacturing facility in China. As such, the deferred tax asset has been revalued at the 25% China statutory rate, resulting in an income tax benefit in the amount of $2.3 million. During fiscal 2011, the Company was awarded a tax holiday in Malaysia with respect to its manufacturing and distribution operations. As a result of this arrangement, which allows for 0% tax for 10 years starting in fiscal 2011, our net income increased by $1.8 million ($0.02 per basic and diluted share).

X
- 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
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration

X
- Details
Name: | us-gaap_IncomeTaxExpenseBenefitAbstract
Namespace Prefix: | us-gaap
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration