Note 12. Income Taxes (Tables)

12 Months Ended

Jun. 30, 2011

Income Tax Disclosure [Abstract]

Schedule of Income before Income Taxes, Domestic and Foreign

The components of income (loss) before income taxes are as follows:

	Year ended June 30,
(In thousands)	2011		2010		2009
Domestic income (loss) before income taxes	$	752,163	$	122,219	$	(534,439	)
Foreign income (loss) before income taxes	357,903		168,962		(68,092		)
Total income (loss) before income taxes	$	1,110,066	$	291,181	$	(602,531	)

Schedule of Components of Income Tax Expense (Benefit)

The provision for (benefit from) income taxes is comprised of the following:

(In thousands)	Year ended June 30,
	2011			2010			2009
Current:
Federal	$	225,192		$	63,687		$	(136,906	)
State	2,095			8,799			(3,545		)
Foreign	31,578			30,225			32,647
	$	258,865		$	102,711		$	(107,804	)
Deferred:
Federal	$	40,908		$	(9,258	)	$	43,194
State	26,458			(3,689		)	31,577
Foreign	(10,653		)	(10,883		)	(46,130		)
	56,713			(23,830		)	28,641
Provision for (benefit from) income taxes	$	315,578		$	78,881		$	(79,163	)

Schedule of Deferred Tax Assets and Liabilities

The significant components of deferred income tax assets and liabilities are as follows:

(In thousands)	As of June 30,
	2011			2010
Deferred tax assets:
Tax credits and net operating losses	$	62,173		$	83,480
Employee benefits accrual	86,741			70,845
Stock-based compensation	66,638			88,078
Capitalized R&D expenses	84,283			110,286
Inventory reserves	55,451			67,141
Non-deductible reserves	50,304			54,038
Deferred profit	95,157			83,700
Unearned revenue	27,723			19,648
Other	36,853			43,352
Gross deferred tax assets	565,323			620,568
Valuation allowance	(30,722		)	(44,184		)
Net deferred tax assets	$	534,601		$	576,384
Deferred tax liabilities:
Unremitted earnings of foreign subsidiaries not permanently reinvested	$	(25,293	)	$	(19,863	)
Depreciation and amortization	(21,047		)	(6,148		)
Unrealized gain on investments	(2,215		)	(1,409		)
Total deferred tax liabilities	(48,555		)	(27,420		)
Total net deferred tax assets	$	486,046		$	548,964

Schedule of Effective Income Tax Rate Reconciliation

The reconciliation of the United States federal statutory income tax rate to KLA-Tencor’s effective income tax rate is as follows:

	Year ended June 30,
	2011		2010		2009
Federal statutory rate	35.0	%	35.0	%	35.0	%
State income taxes, net of federal benefit	3.2	%	0.7	%	(0.1	)%
Effect of foreign operations taxed at various rates	(9.0	)%	(9.6	)%	(1.5	)%
Research and development tax credit	(1.2	)%	(1.2	)%	1.8	%
Net change in tax reserves	2.1	%	0.5	%	2.2	%
Domestic manufacturing benefit	(1.9	)%	(1.7	)%	(0.2	)%
Change in valuation allowance	(0.7	)%	(0.1	)%	(6.4	)%
Non-deductible impairment of goodwill	—	%	—	%	(16.0	)%
Effect of stock-based compensation	1.4	%	4.0	%	(0.5	)%
Other	(0.5	)%	(0.5	)%	(1.2	)%
Effective income tax rate	28.4	%	27.1	%	13.1	%

Summary of Income Tax Contingencies

A reconciliation of the gross unrecognized tax benefit is as follows:

	Year ended June 30,
(In thousands)	2011			2010			2009
Unrecognized tax benefits at the beginning of the period	$	53,492		$	49,738		$	64,602
Increases for tax positions taken in prior years	5,228			6,553			231
Decreases for tax positions taken in prior years	—			(1,897		)	(11,037		)
Increases for tax positions taken in current year	32,152			10,912			4,832
Decreases for settlements with taxing authorities	(11,786		)	—			(968		)
Decreases for lapsing of the statute of limitations	(749		)	(11,814		)	(7,922		)
Unrecognized tax benefits at the end of the period	$	78,337		$	53,492		$	49,738