Annual report pursuant to Section 13 and 15(d)

Income Taxes

v2.4.0.8
Income Taxes
 12 Months Ended
Jun. 29, 2013
Income Tax Disclosure [Abstract]  
Income Taxes
INCOME TAXES
The provision for income taxes consists of the following (in thousands):
 
Year ended
 
June 29,
2013
 
June 30,
2012
 
July 2,
2011
Current:
 
 
 
 
 
Federal
$
40

 
$
(6,795
)
 
$
3,936

State
35

 
—

 
315

Foreign
145

 
157

 
167

Total current
$
220

 
$
(6,638
)
 
$
4,418

Deferred:
 
 
 
 
 
Federal
$
499

 
$
(284
)
 
$
562

State
3

 
(985
)
 
373

Total deferred
502

 
(1,269
)
 
935

Provision for (benefit from) income taxes
$
722

 
$
(7,907
)
 
$
5,353


For financial reporting purposes, income (loss) before provision for (benefit from) income taxes includes the following components (in thousands):
 
Year ended
 
June 29,
2013
 
June 30,
2012
 
July 2,
2011
United States
$
1,468

 
$
(21,660
)
 
$
12,814

Foreign
8,438

 
11,306

 
9,866

 
$
9,906

 
$
(10,354
)
 
$
22,680


In fiscal year 2012, we generated federal net operating losses of $20.0 million. These net operating losses were classified in income tax receivable at June 30, 2012 as we fully intended to carry these losses back to prior years where we had the taxable income. When we filed our fiscal year 2012 tax return, we carried back the net operating losses against the taxable income from fiscal years 2011 and 2010. The remaining $0.9 million in net operating loss carryforwards is classified in the income tax receivable at June 29, 2013 as it will be applied against our fiscal year 2013 taxable income.
A reconciliation between actual provision for (benefit from) income taxes and the provision for income taxes computed using the federal statutory income tax rate of 34.0% is as follows (in thousands):
 
Year ended
 
June 29,
2013
 
June 30,
2012
 
July 2,
2011
Income tax expense at the statutory rate
$
3,371

 
$
(3,520
)
 
$
7,712

State income tax expense, net of federal income tax effect
(11
)
 
(975
)
 
561

Rate difference and nondeductible items in foreign jurisdictions
(16
)
 
(47
)
 
(20
)
Impact of foreign earnings in tax-free zone
(2,754
)
 
(3,683
)
 
(3,223
)
Valuation allowance adjustments
75

 
14

 
—

Nondeductible compensation
—

 
193

 
157

Nondeductible amortization and other permanent differences
100

 
91

 
86

Other
(43
)
 
20

 
80

Provision for (benefit from) income taxes
$
722

 
$
(7,907
)
 
$
5,353


Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and amounts used for income tax purposes. We have not provided deferred taxes on the $44.1 million of undistributed earnings of our foreign subsidiaries where the earnings are considered to be permanently reinvested. The undistributed earnings would become taxable in the United States if we decided to repatriate earnings for business, tax or foreign exchange reasons. If we made that decision, U.S. income taxes would be provided for net of foreign taxes already paid. The determination of the unrecognized deferred tax liability associated with these unremitted earnings is not practical at this time.
Significant components of our deferred tax assets and liabilities are as follows (in thousands):
 
June 29,
2013
 
June 30,
2012
Deferred tax assets:
 
 
 
State net operating loss carryforwards
$
1,416

 
$
1,406

Charitable donation carryforward
50

 
373

Derivative — interest rate contracts
51

 
81

Alternative minimum tax credit carryforward
49

 
—

Currently nondeductible accruals
6,665

 
5,555

Gross deferred tax assets
8,231

 
7,415

Less valuation allowance — state net operating loss
(197
)
 
(122
)
Net deferred tax assets
8,034

 
7,293

 
 
 
 
Deferred tax liabilities:
 
 
 
Depreciation
(3,164
)
 
(2,704
)
Goodwill and intangibles
(3,762
)
 
(3,319
)
Other
(123
)
 
(109
)
Gross deferred tax liabilities
(7,049
)
 
(6,132
)
Net deferred tax asset
985

 
1,161

Less non-current net deferred tax liabilities
3,571

 
3,803

Current deferred tax asset
$
4,556

 
$
4,964


As of June 29, 2013, and June 30, 2012, we had operating loss carryforwards of approximately $31.6 million and $31.1 million, respectively, for state purposes, resulting in deferred tax assets of $1.4 million and $1.4 million, respectively. These carryforwards expire at various intervals through 2032. Our deferred tax asset related to state net operating loss carryforwards is reduced by a valuation allowance to result in deferred tax assets we consider more likely than not to be realized. There was a $75 thousand net change in the total valuation allowance for the year ended June 29, 2013. The ultimate realization of deferred tax assets depends upon the generation of future taxable income during the periods in which those temporary differences become deductible.
FASB Codification No. 740, Income Taxes (“ASC 740”) requires that a position taken or expected to be taken in a tax return be recognized in the financial statements when it is more likely than not (i.e., a likelihood of more than fifty percent) that the position would be sustained upon examination by tax authorities. A recognized tax position is then measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. Upon adoption of ASC 740, we did not have any material unrecognized tax benefits, nor did we have any material unrecognized tax benefits as of June 29, 2013. We recognize accrued interest and penalties related to unrecognized tax benefits as components of our income tax provision. We did not have any interest and penalties accrued related to unrecognized tax benefits as of June 29, 2013.
In the second quarter of fiscal year 2013, the Internal Revenue Service commenced an examination of our U.S. income tax returns for our fiscal year 2010. Upon filing the carryback of our net operating losses from fiscal year 2012 to our fiscal years 2011 and 2010 and receiving a cash refund of the taxes previously paid, the Internal Revenue Service expanded the examination to included our U.S. income tax returns for our 2011 and 2012 fiscal years. This examination is anticipated to be completed during the first half of fiscal year 2014. As of June 29, 2013, the Internal Revenue Service has not proposed any significant adjustments to any tax positions. The tax years 2009 to 2012, according to statute, remain open to examination by the major taxing jurisdictions to which we are subject.