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Income Taxes
9 Months Ended
Jan. 02, 2015
Income Tax Disclosure [Abstract]  
Income Taxes

Note 9 — Income Taxes

The Company currently estimates its annual effective income tax expense rate to be approximately 21.2% for fiscal year 2015. The estimated effective tax rate is different from the expected statutory rate primarily due to federal research and development tax credits recorded as a result of the Tax Increase Prevention Act of 2014 enacted on December 19, 2014, which extended the research and development credit from January 1, 2014 to December 31, 2014. In the first two quarters of fiscal year 2015, the Company’s estimated annual effective income tax rate did not include the effect of the extension of the research and development tax credit, which resulted in an adjustment of approximately $5.9 million in tax benefits in the third quarter of fiscal year 2015. Also as a result of the extension of the research and development tax credit, approximately $2.4 million of research and development credit generated in the fourth quarter of fiscal year 2014 was recognized as a discrete tax benefit in the third quarter of fiscal year 2015. If the federal research and development tax credit is reinstated through the end of fiscal year 2015, the Company may have a lower annual effective income tax expense rate for fiscal year 2015, and the amount of any such decrease will depend on the effective date of any such reinstatement, the terms of the reinstatement, as well as the amount of eligible research and development expenses in the reinstated period.

Future realization of the existing deferred tax asset ultimately depends on future profitability and the existence of sufficient taxable income of appropriate character (for example, ordinary income versus capital gains) within the carryforward period available under tax law. In the event that the Company’s estimate of taxable income is less than that required to utilize the full amount of any deferred tax asset, a valuation allowance is established which would cause a decrease to income in the period such determination is made. The Company’s analysis of the need for a valuation allowance on deferred tax assets considered the losses incurred during the fiscal years ended April 4, 2014 and March 29, 2013 and the income generated during the nine months ended January 2, 2015. In fiscal year 2013, the Company recorded a significant loss, a substantial portion of which resulted from an extinguishment of debt charge that was recorded upon the refinancing of the Company’s former 2016 Notes with the proceeds from the issuance of additional 2020 Notes, which provides a benefit to net income due to the lower interest rate of the 2020 Notes. The loss from fiscal year 2014 was less significant and a substantial portion of that loss related to legal expense focused on protecting and extending our technology advantages in the litigation against SS/L and its former parent company Loral, which was resolved in the Company’s favor during the second quarter of fiscal year 2015 (see Note 8). In addition to these events, the Company’s evaluation considered other factors, including the Company’s contractual backlog, the Company’s history of positive earnings, current earnings trends assuming the Company’s satellite subscriber base continues to grow, taxable income adjusted for certain items, and forecasted income by jurisdiction. The Company also considered the lengthy period over which these net deferred tax assets can be realized and the Company’s history of not having federal tax loss carryforwards expire unused. The Company will continue to evaluate the ability to realize its deferred tax assets on a quarterly basis to determine if the weight of available evidence suggests that an additional valuation allowance is needed.

For the three and nine months ended January 2, 2015, the Company’s gross unrecognized tax benefits increased by $2.3 million and $3.8 million, respectively. In the next twelve months it is reasonably possible that the amount of unrecognized tax benefits will not change significantly.