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Income Taxes
12 Months Ended
Jun. 30, 2013
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes


Income (loss) before income taxes is as follows (in thousands):
 
Fiscal Year Ended
 
June 30, 2013
 
June 24, 2012
 
June 26, 2011
Domestic
$
(105,575
)
 
$
(88,430
)
 
$
81,587

Foreign
28,745

 
16,623

 
76,205

Total income (loss) before income taxes
$
(76,830
)
 
$
(71,807
)
 
$
157,792



The provision for (benefit from) income taxes is as follows (in thousands):
 
Fiscal Year Ended
 
June 30, 2013
 
June 24, 2012
 
June 26, 2011
Current income taxes:
 
 
 
 
 
Domestic
$
1,735

 
$
5,971

 
$
190

Foreign
(1,129
)
 
2,455

 
10,749

 
$
606

 
$
8,426

 
$
10,939

Deferred income taxes:
 
 
 
 
 
Domestic
$
352

 
$
5,728

 
$
(6,551
)
Foreign
11,032

 
(30,911
)
 
(13,142
)
 
11,384

 
(25,183
)
 
(19,693
)
Total provision (benefit)
$
11,990

 
$
(16,757
)
 
$
(8,754
)


The tax benefit from stock-based compensation reduced current or future income taxes payable for the fiscal years ended June 30, 2013, June 24, 2012, and June 26, 2011 by $0.0 million, $1.7 million, and $1.4 million, respectively.

The Company’s effective tax rate on pretax income (loss) differs from the U.S. federal statutory tax rate as follows:
 
Fiscal Year Ended
 
June 30, 2013
 
June 24, 2012
 
June 26, 2011
Statutory tax rate
(35.0
)%
 
(35.0
)%
 
35.0
 %
State taxes, net of federal benefit
(0.1
)
 
14.6

 
(5.0
)
Change in valuation allowance
58.2

 
(38.9
)
 
(19.2
)
Multijurisdictional taxation
(8.4
)
 
(1.5
)
 
(9.5
)
Actual and deemed foreign dividends
2.7

 
3.7

 
2.1

Foreign tax credit
(4.8
)
 
(7.0
)
 
(5.8
)
Research and development credit
(8.0
)
 
(2.6
)
 
(3.5
)
Uncertain tax positions
(6.6
)
 
3.7

 
(2.2
)
Tax rate changes
9.7

 
0.7

 
0.1

Withholding tax
4.3

 
6.7

 
2.0

Stock based compensation
2.4

 
2.5

 

Goodwill impairment

 
30.1

 

Other, net
1.2

 
(0.3
)
 
0.4

Effective tax rate (benefit)
15.6
 %
 
(23.3
)%
 
(5.6
)%


The major components of the net deferred tax assets (liabilities) are as follows (in thousands):
 
June 30, 2013
 
June 24, 2012
Deferred tax assets:
 
 
 
Accrued expenses
$
13,514

 
$
13,423

Accrued compensation
18,011

 
19,584

Property, plant and equipment
8,499

 
24,299

Unrealized loss on securities

 

Losses carryforward
108,921

 
72,627

Research and experimental credits
51,015

 
40,614

Other tax credits
36,745

 
33,139

Other
636

 
240

Total deferred tax assets
237,341

 
203,926

Valuation allowance
(204,233
)
 
(161,517
)
Deferred tax liabilities:
 
 
 
Unrealized gain on securities
(2,992
)
 
(2,206
)
Prepaid expenses
(1,347
)
 
(880
)
Other

 
(16
)
Total deferred tax liabilities
(4,339
)
 
(3,102
)
Net deferred tax assets
$
28,769

 
$
39,307




Realization of deferred tax assets is dependent upon generating sufficient future taxable income, carryback of losses, offsetting deferred tax liabilities, and the availability of tax planning strategies. Based on the consideration of all available evidence using a “more-likely-than-not” standard, the Company has determined that the valuation allowance established against its United States ("U.S.") federal and California deferred tax assets should remain in place as of the end of fiscal year 2013. The valuation allowance for U.S. federal tax assets relates to beginning of the year balances of reserves that were established during fiscal year 2009. In addition, the Company determined during fiscal year 2012 that its California deferred tax assets should be fully reserved with a valuation allowance. The Company further determined that the valuation allowance established against its deferred tax assets in the United Kingdom (“U.K.”) during fiscal year 2009, and which was partially released during fiscal year 2011, should be fully released by the end of fiscal year 2012 based on sustained cumulative pretax income.

With respect to the U.S. valuation allowance, cumulative pre-tax losses for the current and prior two years in the Company's U.S. federal consolidated group constitute significant negative evidence, and therefore, positive evidence of equal or greater significance is needed at a minimum to overcome that negative evidence before a tax benefit is recognized for deductible temporary differences and loss carryforwards. The Company examined the four sources of income that allow the realization of deferred tax assets. These sources are carrybacks, reversals of existing temporary differences, tax planning strategies, and future taxable income exclusive of reversals of existing temporary differences. As of fiscal year 2013, the Company determined that none of the sources of income were meaningful enough to warrant the release of the U.S. federal and state valuation allowance.

The Company's fiscal years' 2008, 2009, and 2012 California pretax losses constitute negative evidence, which resulted in recording a $10.3 million valuation allowance in 2012 against all of the Company's California deferred tax assets. The pattern of losses for California makes the reliance on forecasted earnings a source of income which should not be used, and the carryback of losses is not permitted in California. Based upon this analysis, the Company concluded that a full valuation allowance was required in fiscal year 2013.
    
With regard to the Company's U.K. Newport, Wales subsidiary, the Company completed certain intercompany transactions and intercompany reorganizations during fiscal year 2011. As a result, the Company released a portion of its valuation allowance against its deferred tax assets in the U.K. based on all the available evidence including forecasted future taxable income for the U.K. entity. The Company concluded that $9.6 million of valuation allowance could be released to benefit the current tax provision as the associated deferred tax assets would be more likely than not realized. In addition, the Company reduced its deferred tax assets and associated valuation allowance in the U.K. by $18.4 million due to the taxable income for fiscal year 2011. During fiscal year 2012, the Company released the remaining $28.6 million of valuation allowance in the U.K.

Furthermore, the Company recorded a deferred charge of $14.6 million in connection with the aforementioned reduction of its deferred tax assets in the U.K. which is offset by the associated valuation allowance, and both balances were reduced by $0.8 million in fiscal year 2011. As of June 30, 2013, as a result of the amortization of the deferred charge reported during the fiscal year, the charge and the related valuation allowance were reduced to $7.2 million and $3.3 million, respectively.

During the third quarter of fiscal year 2012, the Company recorded a deferred charge of $16.5 million and valuation allowance of $13.4 million related to certain intercompany transactions which reduced its deferred tax assets and associated valuation allowance in the U.S. by $3.1 million. As of June 30, 2013, as a result of the amortization of the deferred charge reported during the fiscal year, the charge and the related valuation allowance were reduced to $12.1 million and $9.9 million, respectively.

During the three months ended September 23, 2012, the statutory tax rate in the U.K. was reduced from 24 percent to 23 percent, effective April 1, 2013. The Company reported a $3.2 million one-time expense due to the rate reduction on the deferred tax assets in the U.K. as a discrete item in the provision for income taxes. On July 17, 2013, the U.K. enacted the Finance Act of 2013 that will further reduce tax rates from 23 percent to 21 percent in April 2014, and eventually to 20 percent in April 2015. The Company expects the reduction of the statutory rates in the U.K. will result in an estimated $3.8 million one-time expense in the first quarter of the Company's 2014 fiscal year.

During fiscal year 2011, the Company was granted certain incentives by the Singapore Economic Development Board. As a result, the Company started to operate under a tax holiday in Singapore, effective from December 27, 2010 through December 26, 2020. The tax holiday was amended in the fourth fiscal quarter of 2013, resulting in an extension of the incentive through December 26, 2022. The tax holiday is conditional upon the Company meeting certain employment and investment thresholds. The impact of the Singapore tax holiday decreased the Singapore subsidiary's taxes by $1.0 million in fiscal year 2011 which benefited the tax provision. No benefit was generated in the 2012 and 2013 fiscal years.
 
The Company operated in multiple foreign jurisdictions with lower statutory tax rates than the U.S., and its operation in Singapore has the most significant impact on the Company's effective tax rate.

A reconciliation of unrecognized tax benefits from June 26, 2011 to June 30, 2013 is as follows (in thousands):
Beginning balances of June 26, 2011
$
46,057

Increases for positions taken in current year
1,774

Increases for positions taken in a prior year
3,253

Decreases for positions taken in a current year
(221
)
Decreases for positions taken in a prior year
(1,635
)
Decreases for settlements with taxing authorities

Decreases for lapses in the applicable statute of limitation
(352
)
Unrecognized tax benefits at June 24, 2012
$
48,876

 
 
Increases for positions taken in current year
$
2,262

Increases for positions taken in a prior year
2,395

Decreases for positions taken in a current year

Decreases for positions taken in a prior year
(3,953
)
Decreases for settlements with taxing authorities

Decreases for lapses in the applicable statute of limitation
(4,895
)
Unrecognized tax benefits at June 30, 2013
$
44,685



 As of June 30, 2013, the liability for income tax associated with uncertain tax positions was $12.3 million. If recognized, the liability associated with uncertain tax positions would result in a benefit to income taxes on the consolidated statement of operations which would reduce the Company's future effective tax rate.  For fiscal year 2013, $5.1 million of the decrease to uncertain tax positions impacted the effective tax rate. The remaining change in the uncertain tax positions was recorded against long-term deferred tax assets that receive a full valuation allowance and foreign currency translation adjustments.

The Company's policy is to recognize interest and penalties related to uncertain tax positions as a component of income tax expense. The Company had accrued interest and penalties related to uncertain tax positions as of June 30, 2013 and June 24, 2012 of $3.9 million and $4.4 million, respectively. The change in interest and penalties during fiscal year 2013 of $0.5 million was primarily the result of lapses in the statutes of limitation offset by the accrual of additional interest. The change in interest and penalties during fiscal year 2012 was an increase of $0.3 million, primarily the result of the accrual of interest related to outstanding uncertain tax positions.

The uncertain tax positions are expected to decrease by an estimated $8.3 million during the next twelve months primarily due to a significant decrease from lapses of statutes of limitation in certain foreign tax jurisdictions partially offset by increases in uncertain tax positions in certain domestic and foreign tax jurisdictions.

The Company received a refund on taxes it believes it overpaid in Japan. The amount received of $2.6 million is reserved as an uncertain tax position, and therefore, no benefit has been recorded in the Company's financial statements.

The Company anticipates that there will be other changes to the unrecognized tax benefit associated with uncertain tax positions due to the expiration of statutes of limitation, audit settlements and other changes in reserves. However, due to the uncertainty regarding the timing of these events, a current estimate of the range of other changes that may occur within the next twelve months cannot be made.

The Company recognizes certain tax liabilities for anticipated tax audit findings in the United States and other tax jurisdictions based on our estimate of whether, and the extent to which additional taxes would be due. If the audit findings result in actual taxes owed more or less than what was anticipated, income tax expense would be increased or decreased, accordingly, in the period of the determination.



The Company's major tax jurisdictions are U.S. Federal, California, Japan, United Kingdom, Singapore, Germany, Hong Kong and Mexico. In the ordinary course of business, the Company is subject to examination by taxing authorities. As of June 30, 2013, the Company is no longer subject to U.S. federal income tax examinations for years before the fiscal year ended June 28, 2009; California income tax examinations before the fiscal year ended June 29, 2008, subject to fiscal years 2000 through 2005 being currently under appeal and being subject to reopening for examination by the Franchise Tax Board; Japan income tax examinations before the fiscal year ended July 1, 2007; United Kingdom before the fiscal year ended June 24, 2012;  Germany tax examinations before the fiscal year ended June 27, 2010; Singapore tax examination before fiscal year 2007; Mexico tax examination for the assessment year ended December 31, 2001; and Hong Kong profits tax examinations before the assessment year ended March 31, 2008.

As a matter of course, the Company is regularly audited by various taxing authorities. Unfavorable settlement of any particular issue may require the use of cash. Favorable resolution may be recognized as a reduction to the effective tax rate in the year of resolution. The Company's interest and penalties associated with income taxes are included in both accrued income taxes and long-term income taxes payable, as appropriate.

The Company has federal, state and foreign net operating loss carryforwards. The federal net operating loss of $188.9 million will expire in 2029 through 2033, and the California net operating loss of $103.4 million will expire in 2015 through 2033. The foreign net operating losses of $11.1 million have no expiration. The Company has foreign tax credits of $59.0 million that will expire from 2019 through 2023. The Company also has federal research credits of $23.9 million that will expire in 2026 through 2033, California research credits of $39.2 million that have no expiration, and Massachusetts research credits of $1.7 million that will expire in 2023 through 2028.

As of June 30, 2013, U.S. income taxes have not been provided on approximately $123.4 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. There was a change in 2012 to the Company's position on undistributed earnings regarding the pending liquidation of two foreign subsidiaries into the U.S. consolidated group. The Company has not recorded a deferred tax liability on any potential gain as the earnings and profits of the subsidiaries had been recognized as U.S. income in previous periods.

Pursuant to Sections 382 and 383 of the U.S. Internal Revenue Code, the utilization of operating loss carryforward and other tax attributes may be subject to limitations if certain ownership changes occur during a three-year testing period. The Company does not believe an ownership change has occurred as of June 30, 2013 that would limit the Company's utilization of any operating loss carryforward or other tax attributes.