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Income Taxes
6 Months Ended
Dec. 29, 2013
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes



The Company recorded a tax benefit of $1.6 million, or (10.0) percent of pre-tax income of $16.3 million, for the three months ended December 29, 2013. The main component of the tax benefit was an $8.1 million net reduction in foreign uncertain tax positions, primarily related to: (i) a reduction of taxes of $6.3 million and (ii) related interest and penalties of $1.3 million, both arising from lapses in statutes of limitation in certain foreign jurisdictions. The remaining $0.5 million benefit arose from settlements with certain foreign tax authorities. The benefit was partially offset by: (i) a $5.7 million expense related primarily to foreign income taxes, (ii) a $0.5 million expense related to foreign withholding taxes, and (iii) a $0.4 million expense in other income taxes.

The Company recorded a tax expense of $5.2 million, or 16.4 percent of pre-tax income of $31.9 million, for the six months ended December 29, 2013. The main components of the tax expense were: (i) an $8.8 million expense primarily related to foreign income taxes, (ii) a reduction in the United Kingdom ("U.K.") statutory tax rates, reducing the value of the Company's net deferred tax assets in the U.K. by $4.0 million, (iii) $1.0 million in foreign withholding taxes, and (iv) $0.5 million in settlements with respect to income tax audits in certain tax jurisdictions. These expenses were partially offset by a net reduction in various foreign uncertain tax positions and related interest and penalties, which arose from lapses in statutes of limitation, totaling approximately $8.9 million.

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 main component of the tax benefit was 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 lack of tax benefit from the ordinary loss in the U.S. due to the Company's valuation allowance position.

The Company recorded a tax expense of $4.5 million, or (8.0) percent against a loss of $57.0 million, for the six months ended December 23, 2012. The main components of the tax expense were: (i) a decrease in the 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, (ii) expenses related to foreign income taxes and foreign withholding taxes, and (iii) the lack of tax benefit from the ordinary loss in the U.S. due to the Company's valuation allowance position. These expenses were partially offset by a reduction in uncertain tax positions, and by the benefit of a loss in a foreign jurisdiction.

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, as of December 29, 2013 the Company has determined that the valuation allowance established against its federal and state deferred tax assets in the U.S. should remain in place through fiscal year 2014.  These valuation allowances relate to the Company's beginning of fiscal year 2014 balances of reserves, which were established during fiscal year 2009.

The Company operates in multiple foreign jurisdictions with lower statutory tax rates compared to the U.S., 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, which were then amended in fiscal year 2013, by the Singapore Economic Development Board. As a result of these incentives, the Company operates under a tax holiday in Singapore, effective from December 27, 2010 through December 26, 2022.  The tax holiday is conditioned upon the Company meeting certain employment and investment thresholds which have been met to date. The Company did not realize a benefit from this tax holiday for this reporting period.

During the three months ended December 29, 2013, the reserve for uncertain tax positions decreased by $6.3 million to $39.6 million. The reduction in the reserve for uncertain tax position consisted of: (i) a $6.3 million reduction due to lapses in the statutes of limitation in certain foreign jurisdictions, (ii) $0.5 million resulting from settlements with certain foreign tax authorities, and (iii) a $0.2 million foreign currency translation adjustment. The reduction was partially offset by a $0.7 million accrual for new uncertain tax positions. For fiscal year 2014, the benefits associated with uncertain tax positions are anticipated to result in a benefit to income taxes on the consolidated statement of operations of $3.3 million, and if recognized, would reduce the Company's future effective tax rate accordingly. The reserve is expected to decrease by $0.7 million during the next 12 months primarily due to lapses in the statutes of limitation in certain foreign jurisdictions.


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 December 29, 2013, the Company had a reserve balance of $1.3 million of interest and penalties related to uncertain tax positions. For the three months ended December 29, 2013, penalties and interest included in the reserves decreased by $1.4 million primarily due to lapses in the applicable statutes of limitation.

As of December 29, 2013, U.S. income taxes have been provided on approximately $4.0 million of undistributed earnings of foreign subsidiaries. The amount represents excess cash held by foreign subsidiaries not required for working capital, capital expenditures and other needs of the foreign subsidiaries. The remaining unrepatriated foreign earnings are considered to be invested indefinitely.

Pursuant to Sections 382 and 383 of the U.S. Internal Revenue Code (the "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 under the Code). 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 related tax attributes.