Income Taxes

12 Months Ended

Apr. 01, 2012

Income Taxes [Abstract]

Income Taxes

NOTE 18.    INCOME TAXES

The components of the provision for (benefit from) income taxes were as follows as of the dates indicated (in thousands):

	April 1, 2012			March 27, 2011			March 28, 2010
Current:
Federal	$	110		$	(37	)	$	(181	)
State		(235	)		(106	)		(240	)
Foreign		218			388			250
Total current	$	93		$	245		$	(171	)
Deferred:
Federal	$	(39	)	$	9		$	(270	)
State		(3	)		1			(22	)
Total deferred	$	(42	)	$	10		$	(292	)
Total provision for (benefit from) income taxes	$	51		$	255		$	(463	)

Foreign income included in consolidated pre-tax income for the periods indicated were as follows (in thousands):

	Fiscal Years Ended
	April 1, 2012		March 27, 2011		March 28, 2010
Foreign income	$	1,243	$	786	$	2,412

Undistributed earnings of $7.7 million of our foreign subsidiaries are considered to be indefinitely reinvested and, accordingly, no provision for federal and state income taxes have been provided thereon. Upon distribution of those earnings in the form of a dividend or otherwise, we would be subject to both United States income taxes (subject to an adjustment for foreign tax credits) and withholding taxes payable to various foreign countries.

Significant components of our net deferred taxes are as follows as of the dates indicated (in thousands):

	April 1, 2012			March 27, 2011
Deferred tax assets:
Reserves and expenses not currently deductible	$	9,369		$	9,596
Net operating loss carryforwards		124,952			110,763
Tax credits		29,567			25,464
Losses on investments		2,261			2,259
Capitalized R&D expenses		8,215			13,159
Deferred margin		4,723			5,693
Depreciation		4,058			3,756
Total deferred tax assets		183,145			170,690
Deferred tax liabilities:
Unrealized investment gain		(247	)		—
Non-goodwill intangibles		(2,349	)		(4,026	)
Total deferred tax liabilities		(2,596	)		(4,026	)
Valuation allowance		(180,579	)		(166,684	)
Net deferred tax liabilities	$	(30	)	$	(20	)

The valuation allowance increased $13.9 million, $23.5 million and $11.4 million in fiscal years 2012, 2011 and 2010, respectively.

Reconciliations of the income tax provision at the statutory rate to our provision for (benefit from) income tax are as follows as of the dates indicated (in thousands):

	April 1, 2012			March 27, 2011			March 28, 2010
Income tax benefit at statutory rate	$	(10,061	)	$	(12,395	)	$	(9,830	)
State income taxes, net of federal tax benefit		(824	)		(997	)		(763	)
Deferred tax assets not benefited		11,967			14,599			9,910
Tax credits		(1,021	)		(1,605	)		(1,499	)
Stock-based compensation		432			751			570
Acquisition cost		—			—			2,348
Foreign rate differential		(373	)		(61	)		(730	)
Prior year tax expense true-up		12			(24	)		(150	)
Other, net		(81	)		(13	)		(319	)
Provision for (benefit from) income taxes	$	51		$	255		$	(463	)

As of April 1, 2012, our federal and state net operating loss carryforwards for income tax purposes were as follow (in thousands):

Federal net operating loss carryforwards	$	319,892
State net operating loss carryforwards	$	157,850

If not utilized, some of the federal net operating loss carryovers will begin expiring in fiscal year 2019, while the state net operating losses will begin to expire in fiscal year 2013. As of April 1, 2012, our Canadian net operating loss carryforward deferred tax asset was approximately $4.2 million. Due to the change in operations in fiscal year 2012, the Canadian net operating loss carryovers will no longer be available in future fiscal years.

As of April 1, 2012, our federal and state tax credit carryforwards, net of reserves, were as follows (in thousands):

Federal tax credit carryforwards	$	9,086
State tax credit carryforwards	$	11,729

Federal tax credits will begin to expire in fiscal year 2019. State tax credits do not expire.

Utilization of these federal and state net operating loss and tax credit carryforwards may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended, and similar state provisions.

We have evaluated our deferred tax assets and concluded that a valuation allowance is required for that portion of the total deferred tax assets that are not considered more likely than not to be realized in future periods. To the extent that the deferred tax assets with a valuation allowance become realizable in future periods, we will have the ability, subject to carryforward limitations, to benefit from these amounts. Approximately $7.4 million of these deferred tax assets pertain to certain net operating loss and credit carryforwards that resulted from the exercise of employee stock options. When recognized, the tax benefit of these carryforwards is accounted for as a credit to additional paid-in capital rather than a reduction of the income tax provision.

Uncertain Income Tax Benefits

A reconciliation of the beginning and ending amount of the unrecognized tax benefits during the tax year ended April 1, 2012 is as follows (in thousands):

	Amount
Unrecognized tax benefits as of March 29, 2009	$	9,932
Gross increase related to prior year tax positions		1,975
Gross increase related to current year tax positions		4,050
Lapses in statute of limitation		(94	)
Unrecognized tax benefits as of March 28, 2010		15,863
Gross increase related to prior year tax positions		179
Gross increase related to current year tax positions		857
Lapses in statute of limitation		(185	)
Unrecognized tax benefits as of March 27, 2011		16,714
Gross decrease related to prior year tax positions		(289	)
Gross increase related to current year tax positions		578
Lapses in statute of limitation		(183	)
Unrecognized tax benefits as of April 1, 2012	$	16,820

Of the total gross unrecognized tax benefits of $16.8 million as of April 1, 2012, if recognized, $14.2 million would impact the effective tax rate if recognized.

The total unrecognized gross tax benefits were as follow as of the dates indicated (in thousands):

	April 1, 2012		March 27, 2011
Unrecognized gross tax benefits	$	16,820	$	16,714
Less: amount used to reduce deferred tax assets		13,216		13,058
Net income tax payable(1)	$	3,604	$	3,656

(1) Included in other non-current obligations line item in consolidated balance sheet.

We believe that it is reasonably possible that the amount of gross unrecognized tax benefits related to the resolution of income tax matters could be reduced by approximately $1.4 million during the next 12 months as the statute of limitations expire.

Estimated interest and penalties related to the underpayment of income taxes were classified as a component of the provision for income taxes in the consolidated statement of operations. Accrued interest and penalties consisted of the following as of the dates indicated (in thousands):

	April 1, 2012		March 27, 2011
Accrued interest and penalties	$	295	$	283

Our only major tax jurisdictions are the United States federal and various states. The fiscal years 2001 through 2011 remain open and subject to examinations by the appropriate governmental agencies in the United States and certain of our state jurisdictions.