XML 38 R22.htm IDEA: XBRL DOCUMENT v3.23.2
Income Taxes
 12 Months Ended
Jun. 25, 2023
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The following were the components of loss before income taxes:
 Fiscal Years Ended
(in millions of U.S. Dollars)June 25, 2023June 26, 2022June 27, 2021
Domestic($331.8)($289.1)($348.7)
Foreign3.3 3.0 8.5 
Loss before income taxes($328.5)($286.1)($340.2)
The following were the components of income tax expense:
 Fiscal Years Ended
(in millions of U.S. Dollars)June 25, 2023June 26, 2022June 27, 2021
Current:
Federal$0.3 $0.3 $0.1 
Foreign0.5 8.0 0.1 
State0.1 0.1 0.2 
Total current0.9 8.4 0.4 
Deferred:
Federal0.7 0.7 0.7 
Foreign(0.2)(0.1)— 
State— — — 
Total deferred0.5 0.6 0.7 
Income tax expense$1.4 $9.0 $1.1 
Actual income tax expense differed from the amount computed by applying each period's U.S. federal statutory tax rate to pre-tax earnings as a result of the following:
 Fiscal Years Ended
(in millions of U.S. Dollars)June 25, 2023% of LossJune 26, 2022% of LossJune 27, 2021% of Loss
Federal income tax provision at statutory rate($69.0)21 %($60.1)21 %($71.4)21 %
(Decrease) increase in income tax expense resulting from:
State tax provision, net of federal benefit(1.2)— %(2.5)1 %(1.9)1 %
Tax exempt interest(0.5)— %(0.2)— %(0.1)— %
(Decrease) increase in tax reserve(0.4)— %(0.2)— %— — %
Research and development credits(10.8)3 %(5.4)2 %(4.3)1 %
Foreign tax credit— — %(0.3)— %(0.4)— %
Increase (decrease) in valuation allowance79.7 (24)%(51.6)18 %75.0 (22)%
Extinguishment of convertible notes— — %(4.5)2 %— — %
Stock-based compensation3.0 (1)%(3.3)1 %(2.8)1 %
Statutory rate differences0.1 — %— — %1.1 — %
Foreign earnings taxed in U.S.(0.4)— %6.8 (2)%2.7 (1)%
Other foreign adjustments— — %— — %(0.1)— %
Provision to return adjustments0.1 — %0.3 — %(0.2)— %
Impact of rate changes— — %0.5 — %2.7 (1)%
Expiration of state credits0.2 — %0.1 — %0.7 — %
Corporate restructuring adjustment— — %129.1 (45)%— — %
Other0.6 — %0.3 — %0.1 — %
Income tax expense$1.4 — %$9.0 (3)%$1.1 — %
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 millions of U.S. Dollars)June 25, 2023June 26, 2022
Deferred tax assets:
Compensation$7.7 $11.8 
Inventories39.3 22.5 
Sales return reserve and allowance for bad debts7.0 5.0 
Federal and state net operating loss carryforwards366.1 321.0 
Federal income tax credits59.0 48.2 
State income tax credits1.0 1.2 
48C investment tax credits35.7 35.7 
Investments5.2 5.3 
Stock-based compensation10.0 7.2 
Deferred revenue9.0 18.9 
Lease liabilities29.5 12.6 
Capitalized research and development57.1 — 
Convertible notes73.7 — 
Other6.9 4.7 
Total gross deferred assets707.2 494.1 
Less valuation allowance(543.9)(339.2)
Deferred tax assets, net163.3 154.9 
Deferred tax liabilities:
Property and equipment(107.1)(75.1)
Intangible assets(22.7)(19.1)
Prepaid taxes and other(0.5)(0.6)
Foreign earnings recapture(4.3)(4.3)
Taxes on unremitted foreign earnings(6.5)(7.4)
Lease assets(24.9)(12.6)
Convertible notes— (38.0)
Total gross deferred liability(166.0)(157.1)
Deferred tax liability, net($2.7)($2.2)
The components giving rise to the net deferred tax assets (liabilities) have been included in the consolidated balance sheets as follows:
 Balance at June 25, 2023
(in millions of U.S. Dollars)AssetsLiabilities
U.S. federal income taxes$— ($3.9)
Foreign income taxes1.2 — 
Total$1.2 ($3.9)
 Balance at June 26, 2022
(in millions of U.S. Dollars)AssetsLiabilities
U.S. federal income taxes$— ($3.2)
Foreign income taxes1.0 — 
Total$1.0 ($3.2)
The Company weighs all available evidence, both positive and negative, to estimate if sufficient future taxable income will be generated to utilize the existing deferred tax assets by jurisdiction. The Company has concluded that it is necessary to recognize a full valuation allowance against its U.S. deferred tax assets as of June 25, 2023. As of June 26, 2022, the U.S. valuation allowance was $339.2 million. For the fiscal year ended June 25, 2023, the Company increased the U.S. valuation allowance by $204.7 million due to a decrease in deferred tax liabilities related to convertible notes upon adoption of ASU 2020-06, increase in deferred tax assets related to the 2029 Notes Capped Call Transactions, and increases in deferred tax assets related to the current year domestic loss and domestic capitalized research and development.
As of June 25, 2023, the Company had approximately $2.2 million of foreign net operating loss carryovers, of which less than $0.1 million are offset by a valuation allowance. Of the Company's foreign net operating loss carryovers, $2.1 million have no carry forward limitation. As of June 25, 2023, the Company had approximately $1.7 billion of federal net operating loss carryovers and $331.7 million of state net operating loss carryovers which are fully offset by a valuation allowance. Additionally, the Company had $97.6 million of federal and $1.0 million of state income tax credit carryforwards which are fully offset by a valuation allowance. The federal and state net operating loss carryovers will begin to expire in fiscal 2038 and fiscal 2024, respectively. The federal and state income tax credit carryforwards will begin to expire in fiscal 2031 and fiscal 2024, 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, 2022, the Company’s liability for unrecognized tax benefits was $7.2 million. During the fiscal year ended June 25, 2023, the Company recognized a $2.6 million increase to the liability for unrecognized tax benefits primarily due to an increase in generated research and development credits. As a result, the total liability for unrecognized tax benefits as of June 25, 2023 was $9.8 million. If any portion of this $9.8 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 $2.0 million of gross unrecognized tax benefits will change in the next 12 months as a result of statute requirements or settlement with tax authorities.
The following is a tabular reconciliation of the Company’s change in uncertain tax positions:
Fiscal Years Ended
(in millions of U.S. Dollars)June 25, 2023June 26, 2022June 27, 2021
Balance at beginning of period$7.2 $7.4 $7.4 
Increases related to prior year tax positions1.7 — — 
Decreases related to prior year tax positions— — — 
Settlements with tax authorities(0.2)— — 
Expiration of statute of limitations for assessment of taxes(0.1)(0.2)— 
Increases related to current year positions1.2 — — 
Balance at end of period$9.8 $7.2 $7.4 
The Company's policy is to include interest and penalties related to unrecognized tax benefits within the income tax expense (benefit) line item in the consolidated statements of operations. Interest and penalties relating to unrecognized tax benefits recognized in the consolidated statements of operations totaled less than $0.1 million for the fiscal years ended June 25, 2023, June 26, 2022, and June 27, 2021. The Company accrued less than $0.1 million for interest and penalties relating to unrecognized tax benefits in the consolidated balance sheets as of June 25, 2023 and June 26, 2022.
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 2018. For U.S. state tax returns, the Company is generally no longer subject to tax examinations for fiscal years prior to 2019. For foreign purposes, the Company is generally no longer subject to examination for tax periods prior to 2013. Certain carryforward tax attributes generated in prior years remain subject to examination, adjustment and recapture.
The Company provides for income taxes on the earnings of foreign subsidiaries unless the subsidiaries’ earnings are considered indefinitely reinvested outside the United States. As of June 25, 2023, the Company has approximately $205.7 million of undistributed earnings for certain non-U.S. subsidiaries. The Company has determined that $187.7 million of the $205.7 million of undistributed foreign earnings are expected to be repatriated in the foreseeable future. The Company expects to incur $6.5 million of foreign income taxes upon repatriation of the $187.7 million foreign earnings. As of June 25, 2023, the Company has not provided income taxes on the remaining undistributed foreign earnings of $18.0 million as the Company continues to maintain its intention to reinvest these earnings in foreign operations indefinitely. If, at a later date, these earnings were repatriated to the United States, the Company would be required to pay approximately $0.3 million in taxes on these amounts.