Annual report pursuant to Section 13 and 15(d)

Note 12. Income Taxes (Tables)

 v2.3.0.11
Note 12. Income Taxes (Tables)
 12 Months Ended
Jun. 30, 2011
Income Tax Disclosure [Abstract]  
Schedule of Income before Income Taxes, Domestic and Foreign
The components of income (loss) before income taxes are as follows: 
 
Year ended June 30,
(In thousands)
2011
 
2010
 
2009
Domestic income (loss) before income taxes
$
752,163

 
$
122,219

 
$
(534,439
)
Foreign income (loss) before income taxes
357,903

 
168,962

 
(68,092
)
Total income (loss) before income taxes
$
1,110,066

 
$
291,181

 
$
(602,531
)
Schedule of Components of Income Tax Expense (Benefit)
The provision for (benefit from) income taxes is comprised of the following: 
(In thousands)
Year ended June 30,
2011
 
2010
 
2009
Current:
 
 
 
 
 
Federal
$
225,192

 
$
63,687

 
$
(136,906
)
State
2,095

 
8,799

 
(3,545
)
Foreign
31,578

 
30,225

 
32,647

 
$
258,865

 
$
102,711

 
$
(107,804
)
Deferred:
 
 
 
 
 
Federal
$
40,908

 
$
(9,258
)
 
$
43,194

State
26,458

 
(3,689
)
 
31,577

Foreign
(10,653
)
 
(10,883
)
 
(46,130
)
 
56,713

 
(23,830
)
 
28,641

Provision for (benefit from) income taxes
$
315,578

 
$
78,881

 
$
(79,163
)
Schedule of Deferred Tax Assets and Liabilities
The significant components of deferred income tax assets and liabilities are as follows:
 
(In thousands)
As of June 30,
2011
 
2010
Deferred tax assets:
 
 
 
Tax credits and net operating losses
$
62,173

 
$
83,480

Employee benefits accrual
86,741

 
70,845

Stock-based compensation
66,638

 
88,078

Capitalized R&D expenses
84,283

 
110,286

Inventory reserves
55,451

 
67,141

Non-deductible reserves
50,304

 
54,038

Deferred profit
95,157

 
83,700

Unearned revenue
27,723

 
19,648

Other
36,853

 
43,352

Gross deferred tax assets
565,323

 
620,568

Valuation allowance
(30,722
)
 
(44,184
)
Net deferred tax assets
$
534,601

 
$
576,384

Deferred tax liabilities:
 
 
 
Unremitted earnings of foreign subsidiaries not permanently reinvested
$
(25,293
)
 
$
(19,863
)
Depreciation and amortization
(21,047
)
 
(6,148
)
Unrealized gain on investments
(2,215
)
 
(1,409
)
Total deferred tax liabilities
(48,555
)
 
(27,420
)
Total net deferred tax assets
$
486,046

 
$
548,964

Schedule of Effective Income Tax Rate Reconciliation
The reconciliation of the United States federal statutory income tax rate to KLA-Tencor’s effective income tax rate is as follows:
 
 
Year ended June 30,
 
2011
 
2010
 
2009
Federal statutory rate
35.0
 %
 
35.0
 %
 
35.0
 %
State income taxes, net of federal benefit
3.2
 %
 
0.7
 %
 
(0.1
)%
Effect of foreign operations taxed at various rates
(9.0
)%
 
(9.6
)%
 
(1.5
)%
Research and development tax credit
(1.2
)%
 
(1.2
)%
 
1.8
 %
Net change in tax reserves
2.1
 %
 
0.5
 %
 
2.2
 %
Domestic manufacturing benefit
(1.9
)%
 
(1.7
)%
 
(0.2
)%
Change in valuation allowance
(0.7
)%
 
(0.1
)%
 
(6.4
)%
Non-deductible impairment of goodwill
—
 %
 
—
 %
 
(16.0
)%
Effect of stock-based compensation
1.4
 %
 
4.0
 %
 
(0.5
)%
Other
(0.5
)%
 
(0.5
)%
 
(1.2
)%
Effective income tax rate
28.4
 %
 
27.1
 %
 
13.1
 %
Summary of Income Tax Contingencies
A reconciliation of the gross unrecognized tax benefit is as follows: 
 
Year ended June 30,
(In thousands)
2011
 
2010
 
2009
Unrecognized tax benefits at the beginning of the period
$
53,492

 
$
49,738

 
$
64,602

Increases for tax positions taken in prior years
5,228

 
6,553

 
231

Decreases for tax positions taken in prior years
—

 
(1,897
)
 
(11,037
)
Increases for tax positions taken in current year
32,152

 
10,912

 
4,832

Decreases for settlements with taxing authorities
(11,786
)
 
—

 
(968
)
Decreases for lapsing of the statute of limitations
(749
)
 
(11,814
)
 
(7,922
)
Unrecognized tax benefits at the end of the period
$
78,337

 
$
53,492

 
$
49,738