Income Taxes

3 Months Ended

Dec. 29, 2012

Income Taxes

NOTE 3. Income Taxes

During the three months ended December 29, 2012 and December 24, 2011, the Company recorded an income tax benefit based on its expected effective tax rate for its fiscal year. The effective tax rate for fiscal year 2013 has not taken any benefit for the federal research credit as the extension of this credit was approved subsequent to December 29, 2012. The Company expects this credit to have a positive effect on its effective tax rate in future periods. The effective tax rate for the first quarter of fiscal year 2013 was 40.8% as compared to 25.4% for the same period of fiscal 2012, primarily because estimates made as of the end of the quarter for fiscal 2013 did not take into account any benefit for the federal research credit.

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 the tax benefit, if any, will be realized.