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Income Taxes | 12 Months Ended
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Jun. 25, 2017
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The following were the components of loss before income taxes (in thousands):
| Fiscal Years Ended
| June 25, 2017 |  | June 26, 2016 |  | June 28, 2015
Domestic |  | ($43,195 | ) |  |  | ($45,278 | ) |  |  | ($41,593 | )
Foreign | 38,531 |  |  | 21,772 |  |  | (42,346 | )
Total loss before income taxes |  | ($4,664 | ) |  |  | ($23,506 | ) |  |  | ($83,939 | )
The following were the components of income tax expense (benefit) (in thousands):
| Fiscal Years Ended
| June 25, 2017 |  | June 26, 2016 |  | June 28, 2015
Current: |  |  |  |  |
Federal |  | $10,304 |  |  |  | $5,347 |  |  |  | ($12,470 | )
Foreign | 7,332 |  |  | 7,278 |  |  | 13,327 |
State | 900 |  |  | 1,244 |  |  | 1,242 |
Total current | 18,536 |  |  | 13,869 |  |  | 2,099 |
Deferred: |  |  |  |  |
Federal | 68,199 |  |  | (26,086 | ) |  | (7,418 | )
Foreign | 190 |  |  | 12,340 |  |  | (12,754 | )
State | 6,529 |  |  | (2,093 | ) |  | (1,174 | )
Total deferred | 74,918 |  |  | (15,839 | ) |  | (21,346 | )
Income tax expense (benefit) |  | $93,454 |  |  |  | ($1,970 | ) |  |  | ($19,247 | )
Actual income tax expense (benefit) differed from the amount computed by applying the U.S. federal tax rate of 35% to pre-tax earnings as a result of the following (in thousands, except percentages):
| Fiscal Years Ended
| June 25, 2017 |  | % of Loss |  | June 26, 2016 |  | % of Loss |  | June 28, 2015 |  | % of Income
Federal income tax provision at statutory rate |  | ($1,632 | ) |  | 35% |  |  | ($8,227 | ) |  | 35% |  |  | ($29,379 | ) |  | 35%
(Decrease) increase in income tax expense resulting from: |  |  |  |  |  |  |  |  |  |  |
State tax provision, net of federal benefit | (727 | ) |  | 16% |  | (748 | ) |  | 3% |  | (817 | ) |  | 1%
State tax credits | (69 | ) |  | 1% |  | (269 | ) |  | 1% |  | (585 | ) |  | 1%
Tax exempt interest | (1,243 | ) |  | 27% |  | (2,019 | ) |  | 9% |  | (2,413 | ) |  | 3%
48C investment tax credit | (4,383 | ) |  | 94% |  | (4,334 | ) |  | 18% |  | (6,826 | ) |  | 8%
(Decrease) increase in tax reserve | (3,587 | ) |  | 77% |  | (80 | ) |  | —% |  | (225 | ) |  | —%
Research and development credits | (1,728 | ) |  | 37% |  | (2,138 | ) |  | 9% |  | (2,081 | ) |  | 2%
Foreign tax credit | (1,114 | ) |  | 24% |  | (954 | ) |  | 4% |  | (389 | ) |  | —%
Increase (decrease) in valuation allowance | 108,077 |  |  | (2,318)% |  | 9,286 |  |  | (39)% |  | — |  |  | —%
Qualified production activities deduction | — |  |  | —% |  | — |  |  | —% |  | (520 | ) |  | 1%
Stock-based compensation | 1,389 |  |  | (30)% |  | 1,346 |  |  | (6)% |  | 2,988 |  |  | (4)%
Statutory rate differences | (5,162 | ) |  | 111% |  | 2,748 |  |  | (12)% |  | 18,738 |  |  | (22)%
Foreign earnings taxed in U.S. | 1,313 |  |  | (28)% |  | 1,165 |  |  | (5)% |  | 1,793 |  |  | (2)%
Foreign currency fluctuations | 841 |  |  | (18)% |  | 748 |  |  | (3)% |  | (818 | ) |  | 1%
Other foreign adjustments | 715 |  |  | (15)% |  | 13 |  |  | —% |  | (83 | ) |  | —%
Net operating loss carryback | 494 |  |  | (11)% |  | 238 |  |  | (1)% |  | — |  |  | —%
Provision to return adjustments | 165 |  |  | (4)% |  | (10 | ) |  | —% |  | 391 |  |  | —%
Other | 105 |  |  | (2)% |  | 1,265 |  |  | (5)% |  | 979 |  |  | (1)%
Income tax expense (benefit) |  | $93,454 |  |  | (2,004)% |  |  | ($1,970 | ) |  | 8% |  |  | ($19,247 | ) |  | 23%
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities were as follows (in thousands):
| June 25, 2017 |  | June 26, 2016
Deferred tax assets: |  |  |
Compensation |  | $3,029 |  |  |  | $3,176 |
Inventories | 21,042 |  |  | 19,656 |
Sales return reserve and allowance for bad debts | 8,480 |  |  | 6,615 |
Warranty reserve | 10,340 |  |  | 8,013 |
Federal and state net operating loss carryforwards | 21,776 |  |  | 11,443 |
Federal credits | 13,425 |  |  | 8,802 |
State credits | 3,507 |  |  | 3,286 |
48C investment tax credits | 23,525 |  |  | 17,838 |
Investments | 796 |  |  | 872 |
Stock-based compensation | 46,922 |  |  | 48,191 |
Deferred revenue | 3,262 |  |  | 4,159 |
Other | 2,522 |  |  | 2,792 |
Total gross deferred assets | 158,626 |  |  | 134,843 |
Less valuation allowance | (107,544 | ) |  | (10,770 | )
Deferred tax assets, net | 51,082 |  |  | 124,073 |
Deferred tax liabilities: |  |  |
Property and equipment | (7,443 | ) |  | (9,549 | )
Intangible assets | (73,692 | ) |  | (69,355 | )
Investments | (4,102 | ) |  | (2,445 | )
Prepaid taxes and other | (1,461 | ) |  | (1,527 | )
Foreign earnings recapture | (2,481 | ) |  | (3,576 | )
Total gross deferred liability | (89,179 | ) |  | (86,452 | )
Deferred tax (liability) asset, net |  | ($38,097 | ) |  |  | $37,621 |
The components giving rise to the net deferred tax assets (liabilities) have been included in the Consolidated Balance Sheets as follows (in thousands):
| Balance at June 25, 2017
| Assets |  | Liabilities
| Current |  | Noncurrent |  | Current |  | Noncurrent
U.S. federal income taxes |  | $— |  |  |  | $— |  |  |  | $— |  |  |  | ($49,103 | )
Foreign income taxes | — |  |  | 11,763 |  |  | — |  |  | (757 | )
Total net deferred tax assets/(liabilities) |  | $— |  |  |  | $11,763 |  |  |  | $— |  |  |  | ($49,860 | )
| Balance at June 26, 2016
| Assets |  | Liabilities
| Current |  | Noncurrent |  | Current |  | Noncurrent
U.S. federal income taxes |  | $— |  |  |  | $26,411 |  |  |  | $— |  |  |  | $— |
Foreign income taxes | — |  |  | 12,153 |  |  | — |  |  | (943 | )
Total net deferred tax assets/(liabilities) |  | $— |  |  |  | $38,564 |  |  |  | $— |  |  |  | ($943 | )
During the third quarter of fiscal 2017, the Company concluded that it was necessary to recognize a full valuation allowance against its U.S. deferred tax assets and other deferred charges primarily due to the Company’s three-year cumulative pre-tax loss position in the U.S. and the termination of the Wolfspeed sale transaction, which was anticipated to generate U.S. taxable income. Based on this evaluation, during the fiscal year ended June 25, 2017, the Company recorded a valuation allowance of $101.8 million against its U.S. deferred tax assets. In addition, the company recognized a related deferred tax charge of $17.9 million. During the fourth quarter of fiscal 2016, the Company concluded it is likely that sufficient future taxable income needed to fully utilize net operating loss carryovers in Luxembourg will not be generated due to additional losses on the Company’s equity method investment held there. The Company recorded a $9.5 million valuation allowance against the related deferred tax asset, representing the $32.4 million net operating loss carryover net of tax. During the fiscal year ended June 25, 2017, the Company reduced the valuation allowance against the loss carryover deferred tax assets by $1.0 million as a result of a decrease in the effective tax rate. As of June 25, 2017, the Company had approximately $36.2 million of foreign net operating loss carryovers, of which $32.4 million are offset by a valuation allowance. The foreign net operating loss carryovers have no carry forward limitation. As of June 25, 2017, the Company had approximately $39.3 million of state net operating loss carryovers which are fully offset by a valuation allowance. Additionally, the Company had $45.7 million of federal and $6.3 million of state income tax credit carryforwards which are fully offset by a valuation allowance. The state net operating loss carryovers will begin to expire in fiscal 2018. The federal and state income tax credit carryforwards will begin to expire in fiscal 2032 and fiscal 2018, respectively. U.S. GAAP requires 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. As of June 26, 2016 the Company’s liability for unrecognized tax benefits was $17.7 million. During the fiscal year ended June 25, 2017, the Company recognized a $4.4 million decrease to the liability for unrecognized tax benefits; $3.7 million following statute expirations, $0.6 million related to settlement of the audit by the Italian Revenue Agency and $0.1 million related to a decrease in the effective tax rate. As a result, the total liability for unrecognized tax benefits as of June 25, 2017 was $13.3 million. If any portion of this $13.3 million is recognized, the Company will then include that portion in the computation of its effective tax rate. Although the ultimate timing of the resolution and/or closure of audits is highly uncertain, the Company believes it is reasonably possible that approximately $0.2 million of gross unrecognized tax benefits will change in the next 12 months as a result of statute requirements. The following is a tabular reconciliation of the Company’s change in uncertain tax positions (in thousands):
| Fiscal Years Ended
| June 25, 2017 |  | June 26, 2016 |  | June 28, 2015
Balance at beginning of period |  | $17,727 |  |  |  | $17,795 |  |  |  | $18,389 |
Increases related to prior year tax positions | — |  |  | 617 |  |  | — |
Decreases related to prior year tax positions | (100 | ) |  | (530 | ) |  | (407 | )
Settlements with tax authorities | (608 | ) |  | — |  |  | — |
Expiration of statute of limitations for assessment of taxes | (3,681 | ) |  | (155 | ) |  | (187 | )
Balance at end of period |  | $13,338 |  |  |  | $17,727 |  |  |  | $17,795 |
The Company’s policy is to include interest and penalties related to unrecognized tax benefits within the Income tax (benefit) expense line item in the Consolidated Statements of Loss. Total interest and penalties accrued were as follows (in thousands):
| June 25, 2017 |  | June 26, 2016
Accrued interest and penalties |  | $2 |  |  |  | ($5 | )
Total interest and penalties recognized were as follows (in thousands):
| Fiscal Years Ended
| June 25, 2017 |  | June 26, 2016 |  | June 28, 2015
Recognized interest and penalties (benefit) |  | $7 |  |  |  | ($15 | ) |  |  | ($94 | )
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 tax examinations for fiscal years prior to 2014. For U.S. state tax returns, the Company is generally no longer subject to tax examinations for fiscal years prior to 2013. For foreign purposes, the Company is generally no longer subject to examination for tax periods 2007 and prior. Certain carryforward tax attributes generated in prior years remain subject to examination, adjustment and recapture. On January 20, 2017, the Company settled an ongoing audit by the Italian Revenue Agency for the fiscal year ended June 30, 2013, resulting in immaterial impact on tax expense. 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 25, 2017, U.S. income taxes were not provided for on a cumulative total of approximately $262.0 million of undistributed earnings for certain non-U.S. subsidiaries, as the Company currently intends to reinvest these earnings in these foreign operations indefinitely. If, at a later date, these earnings were repatriated to the U.S., the Company would be required to pay taxes on these amounts. Determination of the amount of any deferred tax liability on these undistributed earnings is not practicable. During the fiscal year ended June 26, 2011, the Company was awarded a tax holiday in Malaysia with respect to its manufacturing and distribution operations. This arrangement allows for 0% tax for 10 years starting in the fiscal year ended June 26, 2011. For the fiscal years 2015, 2016 and 2017, the Company did not meet the requirements for the tax holiday, and as such, no benefit has been recognized.

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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 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 2: 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=65882285&loc=d3e32559-109319 Reference 3: 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=65882285&loc=d3e32718-109319 Reference 4: 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=65882285&loc=d3e32639-109319 Reference 5: 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=65882285&loc=d3e32537-109319 + Details
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