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Income Taxes
3 Months Ended
Mar. 24, 2013
Income Taxes [Abstract]  
Income Taxes
13. Income Taxes

The Company recorded a tax expense of $1.6 million or 8.1 percent against a loss of $19.6 million for the three months ended March 24, 2013.   The expense was mainly due to $1.9 million in foreign income taxes, $0.5 million in withholding taxes, and $0.2 million in domestic tax expense.  This expense was partially offset by a reduction in foreign uncertain tax positions, arising from lapses in statutes of limitation of approximately $0.6 million, and the utilization of a $0.4 million state tax credit.

The Company recorded a tax expense of $6.1 million or 8.0 percent against a loss of $76.6 million for the nine months ended March 24, 2013.  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 of $4.6 million, foreign withholding taxes of $2.0 million, and domestic tax expense of $1.4 million.  The expense was partially offset by the benefit of $4.7 million arising from reduction in uncertain tax positions during the second and third quarters, and the utilization of a $0.4 million state tax credit.

The Company recorded a tax benefit of $4.5 million or 64.5 percent against a loss of $7.0 million for the three months ended March 25, 2012, and an expense of $2.8 million or 17.8 percent against income of $15.9 million for the nine months ended March 25, 2012.  For the three months ended March 25, 2012, the Company recorded a tax benefit of $4.5 million due to a valuation allowance release of $7.8 million related to deferred tax assets in the U.K., $3.1 million related to deferred tax assets in the U.S., a tax benefit of $1.6 million from an unrealized gain which was partially offset by $3.5 million in withholding taxes, $2.3 million in foreign taxes, $1.8 million of deferred charges, and $0.6 million increase in uncertain tax positions.  For the  nine months ended March 25, 2012, the Company recorded a tax expense of $2.8 million due to foreign taxes of $7.3 million, withholding taxes of $3.5 million, deferred charges of $1.8 million, an increase in uncertain tax positions of $1.4 million, tax rate changes that decreased the Company's deferred tax assets by $0.6 million, and $0.6 million in domestic tax expense which was partially offset by the release of $10.9 million of valuation allowances and a $1.6 million benefit from an unrealized gain.

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 March 24, 2013, the reserve for uncertain tax positions increased by $1.6 million to $45.1 million.  This increase resulted primarily from a $3.0 million increase to reserves associated with domestic uncertain tax positions.  The increase was offset by an expiration of statute of limitations of $0.6 million and $0.8 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 $13.2 million, and if recognized, would reduce the Company's future effective tax rate.  The reserve is expected to decrease by $7.5 million during the next 12 months primarily due to a lapse in the statute of limitations in certain foreign jurisdictions.

As of March 24, 2013, the Company's accrual of interest and penalties related to uncertain tax positions was $4.0 million.  For the three months ended March 24, 2013, 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.  




13. Income Taxes (Continued)

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.