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Income Taxes | 12 Months Ended
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Jun. 02, 2012
Income Taxes [Abstract] |
INCOME TAXES | 11. INCOME TAXES The components of income (loss) before income taxes are (in thousands):
|  | Fiscal Year Ended |
|  | June 2, 2012 |  |  | May 28, 2011 |  |  | May 29, 2010 |
United States |  | $ | 982 |  |  | $ | (947 | ) |  | $ | (7,084 | )
Foreign |  |  | 6,675 |  |  |  | 3,397 |  |  |  | 2,834 |
Income (loss) before income taxes |  | $ | 7,657 |  |  | $ | 2,450 |  |  | $ | (4,250 | )
The provision for income taxes differs from income taxes computed at the federal statutory tax rate of 34% during fiscal 2012 and 35% during fiscal 2011 and 2010 as a result of the following items (in thousands):
|  | Fiscal Year Ended |
|  | June 2, 2012 |  |  | May 28, 2011 |  |  | May 29, 2010 |
Federal statutory rate |  |  | 34.0 | % |  |  | 35.0 | % |  |  | 35.0 | %
Effect of: |  |  |  |  |  |  |  |  |  |  |  |
State income taxes, net of federal tax benefit |  |  | .04 |  |  |  | (1.4 | ) |  |  | 4.0 |
Foreign income inclusion |  |  |  |  |  |  | 16.9 |  |  |  | — |
Foreign taxes at other rates |  |  | (17.45 | ) |  |  | (13.0 | ) |  |  | 11.42 |
Permanent tax differences |  |  | 6.29 |  |  |  | (3.9 | ) |  |  | — |
Tax reserves |  |  | (1.56 | ) |  |  | (14.5 | ) |  |  | 8.77 |
APB 23 |  |  | (25.37 | ) |  |  |  |  |  |  |  |
Net increase (decrease) in valuation allowance for deferred tax assets |  |  |  |  |  |  | — |  |  |  | (56.72 | )
Other |  |  | (0.32 | ) |  |  | — |  |  |  | (0.87 | )
Effective tax rate |  |  | (4.37 | )% |  |  | 19.1 | % |  |  | 1.6 | %
The effective income tax rates for continuing operations during fiscal 2012, 2011, and 2010, were (4.37%), 19.1%, and 1.6%, respectively. The difference between the effective tax rates as compared to the U.S. federal statutory rate of 34% during fiscal 2012 and 35% during fiscal 2011 and 2010, primarily results from our geographical distribution of taxable income or losses, return to provision adjustments, the release of ASC-740 income tax reserves, and a change in the amount of foreign earnings considered to be permanently reinvested. There were no changes in judgment during the fiscal year end regarding the beginning-of-year valuation allowance which would require a benefit to be excluded from the annual effective tax rate and allocated to the interim period. The provision (benefit) for income taxes consists of the following (in thousands):
|  | Fiscal Year Ended |
|  | June 2, 2012 |  |  | May 28, 2011 |  |  | May 29, 2010 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 950 |  |  | $ | (282 | ) |  | $ | 37 |
State |  |  | 2 |  |  |  | (39 | ) |  |  | — |
Foreign |  |  | 1,156 |  |  |  | 789 |  |  |  | (98 | )
Total current |  |  | 2,108 |  |  |  | 468 |  |  |  | (61 | )
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | (2,392 | ) |  |  | — |  |  |  | — |
State |  |  | — |  |  |  | — |  |  |  | — |
Foreign |  |  | 50 |  |  |  | — |  |  |  | (7 | )
Total deferred |  |  | (2,442 | ) |  |  | — |  |  |  | (7 | )
Income tax provision (benefit) |  | $ | (334 | ) |  | $ | 468 |  |  | $ | (68 | )
Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Our deferred tax assets and liabilities reflect continuing operations as of June 2, 2012 and May 28, 2011. Significant components are as follows (in thousands):
|  | June 2, 2012 |  |  | May 28, 2011 |
Deferred tax assets: |  |  |  |  |  |  |  |
NOL carryforwards – foreign and domestic |  | $ | 2,827 |  |  | $ | 2,865 |
Inventory valuation |  |  | 1,031 |  |  |  | 1,464 |
Goodwill – impaired assets |  |  | 1,442 |  |  |  | 2,128 |
Alternative minimum tax credit carryforward |  |  |  |  |  |  | — |
Foreign tax credits |  |  |  |  |  |  | — |
Severance reserve |  |  | 151 |  |  |  | 159 |
Foreign capital loss |  |  | 4,373 |  |  |  | — |
Other |  |  | 2,656 |  |  |  | 2,252 |
Subtotal |  |  | 12,480 |  |  |  | 8,868 |
Valuation allowance – foreign and domestic |  |  | (7,068 | ) |  |  | (2,790 | )
Net deferred tax assets after valuation allowance |  |  | 5,413 |  |  |  | 6,078 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Accelerated depreciation |  |  | (312 | ) |  |  | (474 | )
Tax on Undistributed Earnings |  |  | (7,622 | ) |  |  | (11,344 | )
Other |  |  | (799 | ) |  |  | (260 | )
Subtotal |  |  | (8,734 | ) |  |  | (12,078 | )
Net deferred tax assets(liabilities) |  | $ | (3,321 | ) |  | $ | (6,000 | )
Supplemental disclosure of deferred tax asset(liabilities) |  |  |  |  |  |  |  |
information: |  |  |  |  |  |  |  |
Domestic |  | $ | (2,458 | ) |  | $ | (6,487 | )
Foreign |  | $ | 6,204 |  |  | $ | 3,227 |
As of June 2, 2012, we had no domestic federal net operating loss (“NOL”) carryforwards as all NOL carryforwards were fully utilized in the prior year. Domestic state NOL carryforwards amounted to approximately $2.0 million primarily related to states where the utilization of NOLs have been suspended for the next two taxable years. Foreign NOL carryforwards totaled approximately $0.8 million with various or indefinite expiration dates. We also had no alternative minimum tax credit carryforward or foreign tax credit carryforwards as of June 2, 2012 as these attributes were also fully utilized in the prior year. Based on this, our future U.S. federal statutory tax rate is expected to be closer to 34%, our state effective tax rate is expected to be approximately 4.5%, and our foreign effective tax rate is expected to be approximately 26%. Income taxes paid, including foreign estimated tax payments, were $40.1 million, $3.4 million, and $1.5 million during fiscal 2012, 2011, and 2010, respectively. As of June 2, 2012, $44.5 million of cumulative positive earnings of some of our foreign subsidiaries are still considered permanently reinvested pursuant to ASC 740-30, Income Taxes – Other Considerations or Special Areas (“ASC 740-30”). Due to various tax attributes that are continuously changing, it is not practical to determine what, if any, tax liability might exist if such earnings were to be repatriated. In the normal course of business, we are subject to examination by taxing authorities throughout the world. We are no longer subject to either U.S. federal, state or local, or non-U.S. tax examinations by tax authorities for years prior to fiscal 2005. Currently, we are under federal audit in the U.S. for fiscal years 2009 and 2010. Based on the recent commencement of the audit, no tax matters have arisen that would result in material adjustments. The IRS has also verbally notified the company that the fiscal year 2011 tax return will be audited. Our primary foreign tax jurisdictions are China, Japan, Germany, Singapore, and the Netherlands. We have tax years open in Germany beginning in fiscal 2005; in Japan and the Netherlands beginning in fiscal 2007; in Singapore beginning in fiscal 2008; and in China beginning in calendar year 2007. The uncertain tax positions as of June 2, 2012, and May 28, 2011, totaled $1.8 million and $2.0 million, respectively. Unrecognized tax benefits of $1.8 million would affect our effective tax rate if recognized. The following table summarizes the activity related to the unrecognized tax benefits (in thousands):
|  | June 2, 2012 |  |  | May 28, 2011 |
Unrecognized tax benefits, beginning of period |  | $ | 2,034 |  |  | $ | 3,272 |
Increase(decrease) due to currency translation |  |  | (36 | ) |  |  | 94 |
Increase in positions taken in prior period |  |  | — |  |  |  | 404 |
Decrease in positions taken in prior period |  |  | — |  |  |  | (1,424 | )
Increase in positions taken in current period |  |  | — |  |  |  | 85 |
Decreases in positions due to settlements |  |  | — |  |  |  | (250 | )
Decrease related to the expiration of statute of limitations |  |  | (248 | ) |  |  | (147 | )
Unrecognized tax benefits, end of period |  | $ | 1,750 |  |  | $ | 2,034 |
Unrecognized tax benefits for continuing and discontinued operations are as follows (in thousands):
|  | June 2, 2012 |  |  | May 28, 2011 |
Continuing operations |  | $ | 358 |  |  | $ | 534 |
Discontinued operations |  |  | 1,392 |  |  |  | 1,500 |
|  | $ | 1,750 |  |  | $ | 2,034 |
We record penalties and interest relating to uncertain tax positions in the income tax expense line item within the consolidated statements of operations and comprehensive income (loss). As of June 2, 2012 and May 28, 2011, we recorded a liability for interest and penalties of $0.1 million and $0.1 million, respectively. It is reasonably possible that there will be a change in the unrecognized tax benefits, excluding interest and penalties, in the range of $0 to approximately $0.3 million due to the expiration of various statutes of limitations within the next 12 months.

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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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