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Income Taxes
3 Months Ended
Dec. 23, 2012
Income Taxes [Abstract]  
Income Taxes
13. Income Taxes

The Company recorded a tax benefit of $2.4 million or 6.9 percent against a loss of $35.1 million for the three months ended December 23, 2012.  The benefit was mainly due to a reduction in foreign uncertain tax positions arising from lapses in statutes of limitation totaling $4.3 million.  This benefit was partially offset by an expense related to foreign withholding taxes, foreign income taxes and the Company's inability to benefit its losses.
 
The Company recorded a tax expense of $4.5 million or 8 percent against a loss of $57 million for the six months ended December 23, 2012.  This was mainly due to a decrease in the United Kingdom ("U.K.") statutory tax rates, which reduced the value of the Company's net deferred tax assets in the U.K. by $3.2 million, expenses related to foreign income taxes and foreign withholding taxes, and no tax benefit from the ordinary loss in the U.S. due to the Company's valuation allowance position, all of which was partially offset by the second fiscal quarter benefit noted above of the $4.3 million reduction in uncertain tax positions and by the benefitting of a loss in a foreign jurisdiction.

The Company's effective tax rate was a tax expense of 21.2 percent against a loss of $5.2 million for the three months ended December 25, 2011 and a tax expense of 32 percent against income of $23 million for the six months ended December 25, 2011, respectively.  For the three months and six months ended December 25, 2011, the Company's effective tax rate differed from the U.S. federal statutory tax rate of 35 percent mainly as a result of no tax benefit arising from the ordinary loss in the U.S. due to its full valuation allowance, an increase in uncertain tax positions which originated in prior fiscal years, unfavorable book to tax differences in certain foreign jurisdictions, and statutory rate changes in the U.K. and Japan.  The Company's provision was partially offset by an overall lower tax rate in certain foreign jurisdictions.

The Company evaluates its net deferred income tax assets quarterly to determine if valuation allowances are required. Based on the consideration of all available evidence using a "more-likely-than-not" standard, the Company determined that the valuation allowance established against its federal and California deferred tax assets in the U.S. should remain in place through fiscal year 2013.  These valuation allowances relate to beginning of fiscal year 2013 balances of reserves that were established during fiscal year 2009.  

The Company operates in multiple foreign jurisdictions with lower statutory tax rates, and its operations in Singapore generally have the most significant impact on the Company's effective tax rate. During fiscal year 2011, the Company was granted certain incentives by the Singapore Economic Development Board.  As a result, the Company operates under a tax holiday in Singapore, effective from December 27, 2010 through December 26, 2020.  The tax holiday is conditioned upon the Company meeting certain employment and investment thresholds which have been met to date.  The Company has not realized a benefit for this reporting period.

During the three months ended December 23, 2012, the reserve for uncertain tax positions decreased by $6.3 million to $43.4 million.  This decrease resulted primarily from an expiration of statute of limitations of $4.4 million and $1.0 million from changes in currency exchange rates related to prior year uncertain tax positions in certain foreign jurisdictions.  For fiscal year 2013, the benefits associated with uncertain tax positions would result in a benefit to income taxes on the consolidated statement of operations of $14.9 million, and if recognized, would reduce the Company's future effective tax rate.  The reserve is expected to decrease by $10.2 million during the next 12 months primarily due to a lapse in the statute of limitations in certain foreign jurisdictions.

As of September 23, 2012, the Company had accrued $4.6 million of interest and penalties related to uncertain tax positions.  For the three months ended December 23, 2012, penalties and interest included in the reserves decreased by $0.3 million.

While it is often difficult to predict the final outcome or the timing of the resolution of any particular uncertain tax position, the Company believes its reserve for income taxes represents the most probable outcome. The Company adjusts this reserve, including the portion related to interest, in light of changing facts and circumstances.

As of June 24, 2012, U.S. income taxes have not been provided on approximately $95.3 million of undistributed earnings of foreign subsidiaries since those earnings are considered to be invested indefinitely. Determination of the amount of unrecognized deferred tax liabilities for temporary differences related to investments in these non-U.S. subsidiaries that are essentially permanent in duration is not practicable.  

Pursuant to Sections 382 and 383 of the U.S. Internal Revenue Code, the utilization of net operating losses ("NOLs") and other tax attributes may be subject to substantial limitations if certain ownership changes occur during a three-year testing period (as defined). The Company does not believe an ownership change has occurred that would limit the Company's utilization of any NOL, credit carry forward or other tax attributes.