Income Taxes

12 Months Ended

Apr. 01, 2012

Income Taxes [Abstract]

Income Taxes

Note 15. Income Taxes

Income before income taxes from continuing operations consists of the following components:

	2012		2011		2010
	(In thousands)
United States	$	35,733	$	55,595	$	95,615
International		97,693		97,303		41,275
	$	133,426	$	152,898	$	136,890

The components of income taxes from continuing operations are as follows:

	2012			2011			2010
	(In thousands)
Current:
Federal	$	11,054		$	(2,726	)	$	50,992
State		1,279			4,029			8,099
Foreign		1,904			4,645			2,134
Total current		14,237			5,948			61,225
Deferred:
Federal		3,360			9,208			6,704
State		(4,781	)		(2,223	)		1,104
Foreign		1,167			(1,381	)		312
Total deferred		(254	)		5,604			8,120
	$	13,983		$	11,552		$	69,345

The income tax benefit related to discontinued operations for fiscal 2012, 2011 and 2010 was $9.4 million, $5.9 million and $14.6 million, respectively. The income tax benefit for fiscal 2012 includes a $5.6 million net benefit associated with the sale of the IB Business, including the tax effect of the related liquidation of two domestic subsidiaries which were engaged in the IB Business. In connection with this liquidation, the Company recognized losses for tax purposes related to its investment in these subsidiaries. The tax benefit of these losses was substantially offset by the tax related to the gain on sale of the IB Business. The $5.6 million net tax benefit is included in the gain on sale from discontinued operations, net of income taxes, in the consolidated statement of income for fiscal 2012.

The effect of deferred taxes associated with the change in unrealized gains and losses on the Company’s available-for-sale securities was immaterial for all periods presented and was recorded in other comprehensive income.

A reconciliation of the income tax provision with the amount computed by applying the federal statutory tax rate to income from continuing operations before income taxes is as follows:

	2012			2011			2010
	(In thousands)
Expected income tax provision at the statutory rate	$	46,699		$	53,514		$	47,912
State income taxes, net of federal tax benefit		1,198			3,680			4,358
Tax rate differential on foreign earnings and other international related tax items		(30,277	)		(31,231	)		20,987
Benefit from research and other credits		(5,090	)		(6,728	)		(4,261	)
Stock-based compensation		2,602			3,679			2,608
Resolution of prior period tax matters		(2,530	)		(10,995	)		(634	)
Other, net		1,381			(367	)		(1,625	)
	$	13,983		$	11,552		$	69,345

The Company implemented a globalization initiative to expand its worldwide footprint beginning in fiscal 2005. As part of this initiative, certain intellectual property and other rights were licensed to one of the Company’s international subsidiaries. During fiscal 2010, the license agreement was amended which resulted in a fully paid-up license. The Company recorded a tax charge of $29.7 million in fiscal 2010 related to the globalization initiative, primarily due to the amendment to the license agreement. As a result of the amendment, the Company determined that all payment obligations under the license agreement had been satisfied in fiscal 2010.

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

	2012			2011
	(In thousands)
Deferred tax assets:
Reserves and accruals not currently deductible	$	19,830		$	22,206
Stock-based compensation		17,237			14,570
Net operating loss carryforwards		14,635			14,443
Research credits		11,222			6,618
Investment securities		1,386			1,545
Other		2,828			3,194
Total gross deferred tax assets		67,138			62,576
Valuation allowance		(1,540	)		(3,654	)
Total deferred tax assets, net of valuation allowance		65,598			58,922
Deferred tax liabilities:
State income taxes		8,266			6,036
Property and equipment		7,044			4,086
Research and development expenditures		2,924			3,348
Purchased intangible assets		26			2,365
Total deferred tax liabilities		18,260			15,835
Net deferred tax assets	$	47,338		$	43,087

Based upon the Company’s current and historical pre-tax earnings, management believes it is more likely than not that the Company will realize the full benefit of the existing deferred tax assets as of April 1, 2012, except for the deferred tax assets related to certain investment securities and capital loss carryovers. Management believes the existing net deductible temporary differences will reverse during periods in which the Company generates net taxable income or that there would be sufficient tax carrybacks available; however, there can be no assurance that the Company will generate any earnings or any specific level of continuing earnings in future years.

The Company’s deferred tax assets related to investment securities and capital loss carryovers consist primarily of temporary differences related to other-than-temporary impairments on the Company’s investment securities and realized losses on dispositions of investment securities that are subject to limitations on deductibility. As a result of limitations on the deductibility of capital losses and other factors, management is currently unable to assert that it is more likely than not that the Company will realize the full benefit of these deferred tax assets. Accordingly, the Company had previously recorded a valuation allowance against these deferred tax assets. The balance of this valuation allowance was $1.5 million as of April 1, 2012 and April 3, 2011.

As of April 3, 2011, the Company’s deferred tax assets relating to state net operating losses and state tax credits included attributes related to a subsidiary that filed state tax returns on a separate filing basis in certain tax jurisdictions. Based on various factors, including historical operating results, management was unable to assert that it was more likely than not that the Company would realize the benefit of these deferred tax assets and recorded a valuation allowance against these deferred tax assets of $2.2 million during fiscal 2011. In fiscal 2012, the Company wrote off these deferred tax assets and the related valuation allowance as a result of the sale of the IB business.

As of April 1, 2012, the Company has federal net operating loss carryforwards of $17.8 million, which will expire between fiscal 2027 and 2029, if not utilized, and state net operating loss carryforwards of $97.8 million, which will expire between fiscal 2017 and 2032, if not utilized. The Company also has state capital loss carryovers of $60.2 million, which will expire between fiscal 2013 and 2017, if not utilized, and state tax credit carryforwards of $10.8 million, which have no expiration date. The net operating loss carryforwards relating to acquired companies are subject to limitations on the timing of utilization.

The Company has made no provision for U.S. income taxes or foreign withholding taxes on the earnings of its foreign subsidiaries, as these amounts are intended to be indefinitely reinvested in operations outside the United States. As of April 1, 2012, the cumulative amount of undistributed earnings of the Company’s foreign subsidiaries was $376.5 million. Because of the availability of U.S. foreign tax credits, it is not practicable to determine the U.S. federal income tax liability that would be payable if such earnings were not reinvested indefinitely.

The Company is no longer subject to federal income tax examinations prior to fiscal 2008 and California income tax examinations prior to fiscal 2009. The Company’s federal consolidated income tax returns for fiscal years 2008 and 2009 are currently under examination by the Internal Revenue Service. With limited exceptions, the Company is no longer subject to other state and foreign income tax examinations by taxing authorities for periods prior to fiscal 2008. Management does not believe that the results of these examinations will have a material impact on the Company’s financial condition or results of operations.

A rollforward of the activity in the gross unrecognized tax benefits is as follows:

	2012			2011
	(In thousands)
Balance at beginning of year	$	57,510		$	65,385
Additions based on tax positions related to the current year		3,581			1,781
Additions for tax positions of prior years		140			472
Reductions for tax positions of prior years		(76	)		(2,834	)
Lapses of statute of limitations		(2,771	)		(7,294	)
Balance at end of year	$	58,384		$	57,510

If the unrecognized tax benefits as of April 1, 2012 were recognized, $57.2 million, net of $1.2 million of tax benefits from state income taxes, would favorably affect the Company’s effective income tax rate.

In addition to the unrecognized tax benefits noted above, the Company had accrued $4.4 million and $3.4 million of interest expense, net of the related tax benefit, and penalties as of April 1, 2012 and April 3, 2011, respectively. The Company recognized interest expense (benefit), net of the related tax effect, and penalties aggregating $1.0 million, $0.1 million and $(0.1) million during fiscal 2012, 2011 and 2010, respectively.