Income Taxes

12 Months Ended

Mar. 30, 2012

Income Taxes [Abstract]

Income Taxes

Note 8 — Income Taxes

The provision for income taxes includes the following:

	Fiscal Years Ended
	March 30, 2012			April 1, 2011			April 2, 2010
	(In thousands)
Current tax (benefit) provision
Federal	$	(4,761	)	$	433		$	(6,461	)
State		(482	)		3,178			(667	)
Foreign		(45	)		222			199
		(5,288	)		3,833			(6,929	)
Deferred tax (benefit) provision
Federal		(1,519	)		3,704			13,608
State		(6,334	)		(7,064	)		(1,191	)
Foreign		(510	)		(475	)		(50	)
		(8,363	)		(3,835	)		12,367
Total (benefit from) provision for income taxes	$	(13,651	)	$	(2	)	$	5,438

Significant components of the Company’s net deferred tax assets are as follows:

	As of
	March 30, 2012			April 1, 2011
	(In thousands)
Deferred tax assets:
Net operating loss carryforwards	$	163,548		$	79,930
Tax credit carryforwards		64,013			46,355
Warranty reserve		4,482			5,086
Accrued compensation		5,547			5,125
Deferred rent		3,390			2,673
Inventory reserve		6,069			4,899
Stock-based compensation		9,793			8,830
Contract accounting		768			1,415
Other		8,027			8,060
Valuation allowance		(14,695	)		(12,671	)
Total deferred tax assets		250,942			149,702
Deferred tax liabilities:
Property, equipment and satellites and intangible assets		(180,096	)		(87,254	)
Total deferred tax liabilities		(180,096	)		(87,254	)
Net deferred tax assets	$	70,846		$	62,448

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

	Fiscal Years Ended
	March 30, 2012			April 1, 2011			April 2, 2010
	(In thousands)
Tax (benefit) expense at federal statutory rate	$	(2,128	)	$	12,749		$	12,698
State tax provision, net of federal benefit		112			1,375			2,259
Tax credits, net of valuation allowance		(12,973	)		(15,615	)		(11,408	)
Manufacturing deduction		176			—			—
Non-deductible transaction costs		—			30			1,435
Non-deductible compensation		700			1,054			377
Non-deductible meals and entertainment		447			328			163
Other		15			77			(86	)
Total (benefit from) provision for income taxes	$	(13,651	)	$	(2	)	$	5,438

As of March 30, 2012, the Company had federal and state research credit carryforwards of approximately $52.2 million and $58.6 million, respectively, which begin to expire in fiscal year 2026 and fiscal year 2018, respectively, and federal and state net operating loss carryforwards of approximately $467.9 million and $347.4 million, respectively, which begin to expire in fiscal year 2020 and fiscal year 2012, respectively.

The Company recognizes excess tax benefits associated with share-based compensation to stockholders’ equity only when realized. When assessing whether excess tax benefits relating to share-based compensation have been realized, the Company follows the with-and-without approach excluding any indirect effects of the excess tax deductions. Under this approach, excess tax benefits related to share-based compensation are not deemed to be realized until after the utilization of all other tax benefits available to the Company. During fiscal year 2012, the Company did not realize any excess tax benefits. As of March 30, 2012, the Company had $17.3 million of unrealized excess tax benefits associated with share-based compensation. These tax benefits will be accounted for as a credit to additional paid-in capital if and when realized, rather than a reduction of the provision for income taxes.

In accordance with the authoritative guidance for income taxes (ASC 740), net deferred tax assets are reduced by a valuation allowance if, based on all the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. A valuation allowance of $14.7 million at March 30, 2012 and $12.7 million at April 1, 2011 has been established relating to state net operating loss carryforwards and research credit carryforwards that, based on management’s estimate of future taxable income attributable to certain states and generation of additional research credits, are considered more likely than not to expire unused.

If the Company has an “Ownership Change” as defined under Internal Revenue Code Section 382, it may have an annual limitation on the utilization of its net operating loss and tax credit carryforwards.

The following table summarizes the activity related to the Company’s unrecognized tax benefits:

	As of
	March 30, 2012			April 1, 2011			April 2, 2010
	(In thousands)
Balance, beginning of fiscal year	$	33,015		$	31,759		$	37,917
Increase (decrease) related to prior year tax positions		819			1,819			(2,058	)
Increases related to current year tax positions		3,148			4,740			3,031
Statute expirations		(3,426	)		(5,303	)		(3,452	)
Settlements		—			—			(3,679	)
Balance, end of fiscal year	$	33,556		$	33,015		$	31,759

Of the total unrecognized tax benefits at March 30, 2012, approximately $26.4 million would reduce the Company’s annual effective tax rate if recognized, subject to valuation allowance consideration.

Included in the balance at March 30, 2012 are $0.8 million of tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. Because of the impact of deferred tax accounting, other than interest and penalties, the disallowance of the shorter deductibility period would not affect the annual effective tax rate, but would accelerate the payment of cash to the taxing authority to an earlier period.

In the next twelve months it is reasonably possible that the amount of unrecognized tax benefits will decrease by approximately $2.5 million as a result of the expiration of the statute of limitations or settlements with tax authorities for previously filed tax returns.

The Company is subject to periodic audits by domestic and foreign tax authorities. The Internal Revenue Service (“IRS”) examination of the Company’s U.S. federal tax returns for fiscal years 2009 and 2010 was completed in the first quarter of fiscal 2012 and no changes were made. However, the statute of limitations on the Company’s U.S. federal tax returns remains open for fiscal years 2009 through 2011. Additionally, tax credit carryovers that were generated in prior years and utilized in these years may also be subject to examination by the IRS. With few exceptions, fiscal years 2008 to 2011 remain open to examination by state and foreign taxing jurisdictions. The Company believes that it has appropriate support for the income tax positions taken on its tax returns and its accruals for tax liabilities are adequate for all open years based on an assessment of many factors, including past experience and interpretations. The Company’s policy is to recognize interest expense and penalties related to income tax matters as a component of income tax expense. There were no accrued interest or penalties associated with uncertain tax positions as of March 30, 2012.