Annual report pursuant to Section 13 and 15(d)

Income Taxes

v2.4.0.8
Income Taxes
 12 Months Ended
Sep. 27, 2014
Income Tax Disclosure [Abstract]  
Income Taxes
INCOME TAXES
The provision for income taxes consists of the following (in thousands):
 
Period ended
 
September 27,
2014
 
September 28,
2013
 
June 29,
2013
 
June 30,
2012
Current:
 
 
 
 
 
 
 
Federal
$
—

 
$
—

 
$
40

 
$
(6,795
)
State
79

 
—

 
35

 
—

Foreign
158

 
44

 
145

 
157

Total current
$
237

 
$
44

 
$
220

 
$
(6,638
)
Deferred:
 
 
 
 
 
 
 
Federal
$
(5,807
)
 
$
(933
)
 
$
499

 
$
(284
)
State
(923
)
 
(156
)
 
3

 
(985
)
Total deferred
(6,730
)
 
(1,089
)
 
502

 
(1,269
)
(Benefit from) provision for income taxes
$
(6,493
)
 
$
(1,045
)
 
$
722

 
$
(7,907
)


For financial reporting purposes our (loss) income before (benefit from) provision for income taxes includes the following components (in thousands):
 
Period ended
 
September 27,
2014
 
September 28,
2013
 
June 29,
2013
 
June 30,
2012
United States
$
(16,832
)
 
$
(2,827
)
 
$
1,468

 
$
(21,660
)
Foreign
9,379

 
2,350

 
8,438

 
11,306

 
$
(7,453
)
 
$
(477
)
 
$
9,906

 
$
(10,354
)

A reconciliation between actual (benefit from) provision for income taxes and the provision for income taxes computed using the federal statutory income tax rate of 34.0% is as follows (in thousands):
 
Period ended
 
September 27,
2014
 
September 28,
2013
 
June 29,
2013
 
June 30,
2012
Income tax expense at the statutory rate
$
(2,533
)
 
$
(162
)
 
$
3,371

 
$
(3,520
)
State income tax expense, net of federal income tax effect
(893
)
 
(147
)
 
(11
)
 
(975
)
Rate difference and nondeductible items in foreign jurisdictions
(55
)
 
(15
)
 
(16
)
 
(47
)
Impact of foreign earnings in tax-free zone
(3,098
)
 
(756
)
 
(2,754
)
 
(3,683
)
Valuation allowance adjustments
4

 
—

 
75

 
14

Nondeductible compensation
—

 
—

 
—

 
193

Nondeductible amortization and other permanent differences
76

 
25

 
100

 
91

Other
6

 
10

 
(43
)
 
20

(Benefit from) provision for income taxes
$
(6,493
)
 
$
(1,045
)
 
$
722

 
$
(7,907
)

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 $55.6 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):
 
September 27,
2014
 
September 28,
2013
 
June 29,
2013
Deferred tax assets:
 
 
 
 
 
Federal net operating loss carryforwards
$
7,219

 
$
834

 
$
—

State net operating loss carryforwards
2,445

 
1,558

 
1,416

Charitable donation carryforward
28

 
66

 
50

Derivative — interest rate contracts
168

 
349

 
51

Alternative minimum tax credit carryforward
49

 
49

 
49

Currently nondeductible accruals
6,747

 
6,597

 
6,665

Gross deferred tax assets
16,656

 
9,453

 
8,231

Less valuation allowance — state net operating loss
(201
)
 
(197
)
 
(197
)
Net deferred tax assets
16,455

 
9,256

 
8,034

 
 
 
 
 
 
Deferred tax liabilities:
 
 
 
 
 
Depreciation
(2,792
)
 
(2,889
)
 
(3,164
)
Goodwill and intangibles
(4,793
)
 
(3,931
)
 
(3,762
)
Other
(117
)
 
(65
)
 
(123
)
Gross deferred tax liabilities
(7,702
)
 
(6,885
)
 
(7,049
)
Net deferred tax asset
8,753

 
2,371

 
985

Less non-current net deferred tax liabilities
3,399

 
3,610

 
3,571

Current deferred tax asset
$
12,152

 
$
5,981

 
$
4,556


As of September 27, 2014, and September 28, 2013, we had federal net operating loss carryforwards of approximately $21.2 million and $3.4 million, respectively. There was no federal net operating loss carryforward at June 29, 2013. The deferred tax asset resulting from federal net operating losses for September 27, 2014, and September 28, 2013, were $7.2 million and $0.8 million, respectively. There is no carryback opportunity for these losses and the carryforwards expire at various intervals from 2033 through 2034. We determined that no valuation allowance is required as we expect that all such carryforwards more likely than not will be realized within statutory periods of carryover and utilization.
As of September 27, 2014, September 28, 2013, and June 29, 2013, we had state net operating loss carryforwards of approximately $52.7 million, $36.1 million and $31.1 million, respectively. These carryforwards expire at various intervals from 2019 through 2034. 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 $4 thousand net increase in the total valuation allowance for the year ended September 27, 2014.
For both federal and state purposes, 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 or when the carryforwards are available.
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. Accrued interest and penalties related to unrecognized tax benefits would also be recorded. We did not have any material unrecognized tax benefits as of September 27, 2014, September 28, 2013, or June 29,2013. We also did not have any interest and penalties accrued related to unrecognized tax benefits as of September 27, 2014.
In the December quarter of fiscal year 2013, the Internal Revenue Service commenced an examination of our U.S. income tax returns for our fiscal year 2010 (tax year 2009). Upon filing the carryback of our net operating losses from fiscal year 2012 to our fiscal years 2011 and 2010 (tax years 2010 and 2009) and receiving a cash refund of the taxes previously paid, the Internal Revenue Service expanded the examination to include our U.S. income tax returns for our 2011 and 2012 fiscal years. This examination was concluded in January 2014, and no tax deficiency was found. Based on the conclusion of the audit, these returns are no longer subject to further examination by the Internal Revenue Service. However, net operating loss carryforwards remain subject to examination to the extent they are carried forward and impact a year that is open to examination by taxing authorities. The tax years 2010 to 2012 as well as the short tax year 2013, according to statute and with few exceptions, remain open to examination by various state, local and foreign jurisdictions. Tax years 2012 and the short tax year 2013 remain open for examination for federal purposes.