Income Taxes

12 Months Ended

Mar. 31, 2012

Income Taxes [Abstract]

Income Taxes

Note 16. Income Taxes

The provision for income taxes consists of the following:

(In thousands)	2012			2011		2010
Federal:
Current	$	(17,333	)	$	14,172	$	(8,732	)
Deferred		74,911			95,660		56,085
		57,578			109,832		47,353
State:
Current		(2,999	)		2,365		6,174
Deferred		6,591			13,240		243
		3,592			15,605		6,417
Foreign:
Current		7,978			3,107		8,809
Deferred		(2,176	)		661		1,702
		5,802			3,768		10,511
Total	$	66,972		$	129,205	$	64,281

The domestic and foreign components of income before income taxes were as follows:

(In thousands)	2012		2011		2010
Domestic	$	74,959	$	161,784	$	59,473
Foreign		522,092		609,296		362,292
Income before income taxes	$	597,051	$	771,080	$	421,765

The tax benefits (expenses) associated with stock option exercises and the employee stock purchase plan recorded in additional paid-in capital were $9.9 million, $4.9 million and $(4.4) million, for fiscal 2012, 2011 and 2010, respectively.

As of March 31, 2012, the Company had federal and state net operating loss carryforwards of approximately $25.9 million. If unused, these carryforwards will expire in 2014 through 2030. All of the federal and state net operating loss carryforwards are subject to change of ownership limitations provided by the Internal Revenue Code and similar state provisions. The Company had federal and state research tax credit carryforwards of approximately $138.4 million and federal affordable housing tax credit carryforwards of approximately $9.3 million. If unused, $32.1 million of the tax credit carryforwards will expire in 2021 through 2032. The remainder of the credits has no expiration date. Some of the federal and state credit carryforwards are subject to change of ownership limitations provided by the Internal Revenue Code and similar state provisions.

Unremitted foreign earnings that are considered to be permanently invested outside the U.S. and on which no U.S. taxes have been provided, are approximately $1.67 billion as of March 31, 2012. The residual U.S. tax liability, if such amounts were remitted, would be approximately $544.3 million.

The provision for income taxes reconciles to the amount derived by applying the Federal statutory income tax rate to income before provision for taxes as follows:

(In thousands)	2012			2011			2010
Income before provision for taxes	$	597,051		$	771,080		$	421,765
Federal statutory tax rate		35	%		35	%		35	%
Computed expected tax		208,968			269,878			147,618
State taxes, net of federal benefit		2,162			10,317			4,527
Non-deductible stock-based compensation		2,658			2,220			1,813
Tax exempt interest		(263	)		(152	)		(396	)
Foreign earnings at lower tax rates		(117,013	)		(131,261	)		(67,651	)
Tax credits		(29,633	)		(17,431	)		(16,491	)
Deferred compensation		76			(1,297	)		(2,994	)
Other		17			(3,069	)		(2,145	)
Provision for income taxes	$	66,972		$	129,205		$	64,281

The Company has manufacturing operations in Singapore where the Company has been granted “Pioneer Status” that is effective through fiscal 2021. The Pioneer Status reduces the Company’s tax on the majority of Singapore income from 17% to zero. The benefit of Pioneer Status in Singapore for fiscal 2012, fiscal 2011 and fiscal 2010 are approximately $43.5 million ($0.16 per diluted share), $54.8 million ($0.21 per diluted share) and $18.7 million ($0.07 per diluted share), respectively, on income considered permanently reinvested outside the U.S. The tax effect of operations in low tax jurisdictions on the Company’s overall tax rate is reflected in the table above.

The major components of deferred tax assets and liabilities consisted of the following as of March 31, 2012 and April 2, 2011:

(In thousands)	2012			2011
Deferred tax assets:
Inventory valuation differences	$	498		$	1,490
Stock-based compensation		29,451			29,755
Deferred income on shipments to distributors		10,493			19,580
Accrued expenses		39,942			42,735
Tax loss carryforwards		3,856			8,508
Tax credit carryforwards		97,104			84,694
Intangible and fixed assets		4,115			7,547
Strategic and equity investments		7,313			9,198
Deferred compensation plan		17,423			16,503
Other		3,634			3,470
		213,829			223,480
Valuation allowance		(28,963	)		(17,841	)
Total deferred tax assets		184,866			205,639
Deferred tax liabilities:
Unremitted foreign earnings		(308,017	)		(264,230	)
State income taxes		(17,343	)		(17,842	)
Convertible debt		(192,397	)		(178,178	)
Other		(8,605	)		(4,257	)
Total deferred tax liabilities		(526,362	)		(464,507	)
Total net deferred tax liabilities	$	(341,496	)	$	(258,868	)

Long-term deferred tax assets of $56.7 million and $57.3 million as of March 31, 2012 and April 2, 2011, respectively, were included in other assets on the consolidated balance sheet. Current deferred tax liabilities of zero and $404 thousand as of March 31, 2012 and April 2, 2011, respectively, were included in other accrued liabilities on the consolidated balance sheet.

As of March 31, 2012, gross deferred tax assets were offset by valuation allowances of $29.0 million, all of which was associated with state tax credit carryforwards.

The aggregate changes in the balance of gross unrecognized tax benefits for fiscal 2012 and 2011 were as follows:

(In thousands)	2012			2011
Balance as of beginning of fiscal year	$	79,690		$	96,269
Increases in tax positions for prior years		56			11,964
Decreases in tax positions for prior years		(653	)		(20,030	)
Increases in tax positions for current year		3,768			2,588
Settlements		(39	)		(6,749	)
Lapse in statute of limitations		(17,784	)		(4,352	)
Balance as of end of fiscal year	$	65,038		$	79,690

If the remaining balance of $65.0 million and $79.7 million of unrecognized tax benefits as of March 31, 2012 and April 2, 2011, respectively, were realized in a future period, it would result in a tax benefit of $41.7 million and $56.0 million, respectively, thereby reducing the effective tax rate.

The Company’s policy is to include interest and penalties related to income tax liabilities within the provision for income taxes on the consolidated statements of income. The balance of accrued interest and penalties was $839 thousand and $2.2 million as of March 31, 2012 and April 2, 2011, respectively. Interest and penalties released from the Company’s provision for income taxes totaled $644 thousand, $840 thousand and $900 thousand for fiscal 2012, 2011 and 2010, respectively.

The Company is no longer subject to U.S. federal audits by taxing authorities for years through fiscal 2008. The Company is no longer subject to U.S. state audits for years through fiscal 2004, except for fiscals 1996 through 2001 which are still open for audit purposes. The Company is no longer subject to tax audits in Ireland for years through fiscal 2007.

It is reasonably possible that changes to our unrecognized tax benefits could be significant in the next twelve months due to tax audit settlements and lapses of statutes of limitation. As a result of uncertainties regarding tax audit settlements and their possible outcomes, an estimate of the range of increase or decrease that could occur in the next twelve months cannot be made.