Income Taxes

12 Months Ended

Jul. 01, 2012

Income Taxes

Income Taxes

Note 11. Income Taxes

        The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. The Company has concluded its federal examination by the Internal Revenue Service for its fiscal years 2007 through 2009. Fiscal 2010 and fiscal 2011 remain subject to federal examination. Due to non-conformity with the federal statute of limitations for assessment, certain states remain open from fiscal 2008.

        The Company's policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. At July 1, 2012, the Company has an unrecognized tax position of approximately $0.5 million, including accrued interest and penalties of $0.1 million. The Company does not believe there will be any material changes in its unrecognized tax positions over the next twelve months.

        Significant components of the income tax provision from continuing operations are as follows:

	Years ended
	July 1, 2012			July 3, 2011		June 27, 2010
	(in thousands)
Current provision (benefit):
Federal	$	(1,643	)	$	526	$	(213	)
State		1,155			805		502
		(488	)		1,331		289
Deferred provision (benefit):
Federal		8,479			2,080		(25	)
State		(220	)		106		(65	)
		8,259			2,186		(90	)
Income tax expense	$	7,771		$	3,517	$	199

        A reconciliation of the U.S. federal statutory tax rate to the Company's effective tax rate is as follows:

	Years ended
	July 1, 2012			July 3, 2011			June 27, 2010
Tax at U.S. statutory rates		35.0	%		35.0	%		35.0	%
State income taxes, net of federal tax benefit		4.0			6.8			(31.2	)
Non-deductible stock-based compensation		0.6			1.9			(25.5	)
Non-deductible goodwill amortization		1.7			—			(8.9	)
Rate change		(1.1	)		0.1			—
Tax credits		(2.9	)		(2.9	)		9.5
Tax settlements		—			(1.6	)		—
Other, net		(0.1	)		(0.4	)		2.2
		37.2	%		38.9	%		(18.9	)%

        Deferred taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The significant components of the Company's deferred tax assets (liabilities) are as follows:

	July 1, 2012			July 3, 2011
	(in thousands)
Deferred tax assets:
Net operating loss and credit carryforwards	$	3,569		$	11,648
Accrued expenses and reserves		5,680			5,159
Stock-based compensation		3,494			3,452
Gross deferred tax assets		12,743			20,259
Less: Valuation allowance		(1,578	)		(1,776	)
		11,165			18,483
Deferred tax liabilities:
Other intangibles		(3,036	)		(1,154	)
Tax in excess of book depreciation		(312	)		(504	)
		(3,348	)		(1,658	)
Net deferred tax assets	$	7,817		$	16,825

        A valuation allowance is provided when it is more likely than not that some portion, or all, of the deferred tax assets will not be realized. The Company has established valuation allowances primarily for net operating loss carryforwards in certain states. At July 1, 2012, the Company's federal net operating loss carryforwards were approximately $3.3 million, which if not utilized, will begin to expire in fiscal year 2025.