XML 50 R14.htm IDEA: XBRL DOCUMENT v2.4.0.6
Income Taxes
3 Months Ended
Dec. 30, 2011
Income Tax Expense (Benefit) [Abstract]  
Income Taxes
INCOME TAXES

The Company recorded income tax provisions of $17.5 million and $15.9 million for the three months ended December 30, 2011 and December 31, 2010, respectively. The provision for income taxes for the three months ended December 30, 2011 consisted of $15.5 million and $2.0 million of United States and foreign income taxes, respectively, as compared to $15.2 million and $0.7 million for United States and foreign income taxes, respectively, for the three months ended December 31, 2010.

For the three months ended December 30, 2011 and December 31, 2010, the difference between the Company's effective tax rate and the 35% U.S. federal statutory rate resulted primarily from foreign earnings taxed at rates lower than the federal statutory rate, the recognition of research and development tax credits earned, and the domestic production activities deduction, partially offset by an increase in our tax expense related to a change in our reserve for uncertain tax positions. In December 2010, the United States Congress enacted legislation to retroactively extend the federal research and development tax credit. As a result, the Company recognized $4.4 million of federal research and development tax credits in the three months ended December 31, 2010, which were earned in the fiscal year ended October 1, 2010.
On October 2, 2010, the Company expanded its presence in Asia by launching operations in Singapore. The Company operates under a tax holiday in Singapore, which is effective through September 30, 2020. The tax holiday is conditional upon the Company's compliance with meeting certain employment and investment thresholds in Singapore.
In accordance with GAAP, management has determined that it is more likely than not that a portion of the Company's historic and current year income tax benefits will not be realized. Accordingly, as of December 30, 2011, the Company has maintained a valuation allowance of $39.4 million. This valuation allowance is comprised of $26.1 million related to U.S. state tax credits and $13.3 million related to the Company's foreign deferred tax assets of which $11.6 million were acquired from SiGe in fiscal 2011.
Realization of benefits from the Company's deferred tax assets, net of valuation allowance, is dependent upon generating United States source taxable income in the future. The existing valuation allowance could be reversed in the future to the extent that the related deferred tax assets no longer require a valuation allowance under the provisions of ASC 740 - Income Taxes ("ASC 740").
The Company will continue to evaluate its valuation allowance in future periods and depending upon the outcome of that assessment, additional amounts could be reversed or recorded and recognized as an adjustment to income tax benefit or expense. Such adjustments could cause the Company's effective income tax rate to vary in future periods. The Company will need to generate $231.1 million of United States federal taxable income in future years to utilize all of the Company's net operating loss carryforwards, research and experimentation tax credit carryforwards, and deferred income tax temporary differences, net of valuation allowance, as of December 30, 2011.
During the three months ended December 30, 2011, the Company increased its gross unrecognized tax benefits by $3.9 million to $36.0 million. Of the total unrecognized tax benefits at December 30, 2011, $23.9 million would impact the effective tax rate, if recognized. The remaining unrecognized tax benefits would not impact the effective tax rate, if recognized, due to the Company's valuation allowance and certain positions which were required to be deferred. There are no positions that the Company anticipates could change within the next twelve months. The Company incurred $0.1 million of interest related to unrecognized tax benefits during the three months ended December 30, 2011. The Company's policy is to recognize accrued interest and penalties, if incurred, on any unrecognized tax benefits as a component of income tax expense.