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Income Taxes
9 Months Ended
Jun. 25, 2011
Income Taxes [Abstract]  
Income Taxes
NOTE 3. Income Taxes
During the three and nine month periods ended June 25, 2011, the Company recorded an income tax provision based on its expected effective tax rate for the year, adjusted by an unutilized federal research credit from the 2010 fiscal year. Recent tax legislation has extended the federal research credit, which was retroactive to January 1, 2010. For purposes of determining the Company’s provision for income taxes, this federal research credit was considered fully utilized during the quarter ended December 25, 2010, resulting in a tax benefit. The Company revised its effective tax rate to 37% during the three months ended June 25, 2011 based on a revision of the full year pre-tax forecast in the third fiscal quarter of 2011.
Deferred tax assets consist of tax credits, inventory differences and other temporary differences. The Company’s valuation allowance is related to the temporary differences associated with its inventory. The Company has determined that the tax benefit related to its obsolete inventory will not likely be realized, and therefore has provided a full valuation allowance against the related deferred tax asset. It is the Company’s intention to maintain the related inventory items for the foreseeable future to support equipment in the field, and therefore cannot determine when that the tax benefit, if any, will be realized.
During the three and nine months ended June 26, 2010, the Company recorded an income tax provision based on its expected effective tax rate for the year. The Company revised its effective tax rate to 25% during the three months ended June 26, 2010 based on a revision of the full year pre-tax forecast in the third quarter of fiscal 2010 as well as the reversal of the remaining portion of the valuation allowance not associated with inventory. In addition, during the quarter ended December 26, 2009, the valuation allowance against deferred tax assets related to the remaining net operating loss carryforwards and tax credit carryforwards was reversed due to the determination by the Company that the benefits of these deferred tax assets will more likely than not be realized in future years, which contributed to the effective tax rate for the first fiscal quarter of 2010.