Annual report pursuant to Section 13 and 15(d)

Income Taxes (Tables)

v3.5.0.2
Income Taxes (Tables)
 12 Months Ended
Jun. 30, 2016
Income Tax Disclosure [Abstract]  
Schedule of Income before Income Taxes, Domestic and Foreign
The components of income before income taxes are as follows: 
 
Year ended June 30,
(In thousands)
2016
 
2015
 
2014
Domestic income before income taxes
$
417,803

 
$
157,251

 
$
434,336

Foreign income before income taxes
440,389

 
276,880

 
300,125

Total income before income taxes
$
858,192

 
$
434,131

 
$
734,461

Schedule of Components of Income Tax Expense (Benefit)
The provision for income taxes is comprised of the following: 
(In thousands)
Year ended June 30,
2016
 
2015
 
2014
Current:
 
 
 
 
 
Federal
$
94,088

 
$
63,123

 
$
98,937

State
6,123

 
3,655

 
8,580

Foreign
37,680

 
25,438

 
27,867

 
137,891

 
92,216

 
135,384

Deferred:
 
 
 
 
 
Federal
15,645

 
(22,390
)
 
22,904

State
3,583

 
409

 
(334
)
Foreign
(3,349
)
 
(2,262
)
 
(6,248
)
 
15,879

 
(24,243
)
 
16,322

Provision for income taxes
$
153,770

 
$
67,973

 
$
151,706

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,
2016
 
2015
Deferred tax assets:
 
 
 
Tax credits and net operating losses
$
116,277

 
$
108,615

Employee benefits accrual
109,524

 
99,472

Stock-based compensation
13,607

 
18,722

Inventory reserves
94,783

 
92,649

Non-deductible reserves
34,484

 
47,176

Depreciation and amortization
15,857

 
13,267

Unearned revenue
14,375

 
16,150

Other
26,877

 
28,831

Gross deferred tax assets
425,784

 
424,882

Valuation allowance
(104,968
)
 
(91,350
)
Net deferred tax assets
$
320,816

 
$
333,532

Deferred tax liabilities:
 
 
 
Unremitted earnings of foreign subsidiaries not indefinitely reinvested
$
(11,571
)
 
$
(12,775
)
Deferred profit
(10,346
)
 
(7,372
)
Unrealized gain on investments
(604
)
 
(2,673
)
Total deferred tax liabilities
(22,521
)
 
(22,820
)
Total net deferred tax assets
$
298,295

 
$
310,712

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,
 
2016
 
2015
 
2014
Federal statutory rate
35.0
 %
 
35.0
 %
 
35.0
 %
State income taxes, net of federal benefit
0.9
 %
 
0.7
 %
 
0.7
 %
Effect of foreign operations taxed at various rates
(13.0
)%
 
(15.3
)%
 
(11.5
)%
Research and development tax credit
(1.9
)%
 
(3.7
)%
 
(1.5
)%
Net change in tax reserves
(2.2
)%
 
1.5
 %
 
0.3
 %
Domestic manufacturing benefit
(1.5
)%
 
(2.1
)%
 
(1.4
)%
Effect of stock-based compensation
0.3
 %
 
0.8
 %
 
0.4
 %
Other
0.3
 %
 
(1.2
)%
 
(1.3
)%
Effective income tax rate
17.9
 %
 
15.7
 %
 
20.7
 %
Summary of Income Tax Contingencies
A reconciliation of gross unrecognized tax benefits is as follows: 
 
Year ended June 30,
(In thousands)
2016
 
2015
 
2014
Unrecognized tax benefits at the beginning of the year
$
69,018

 
$
59,575

 
$
59,494

Increases for tax positions taken in prior years
4,245

 
1,245

 
551

Decreases for tax positions taken in prior years
(1,209
)
 
(7
)
 
(764
)
Increases for tax positions taken in current year
13,636

 
11,634

 
11,585

Decreases for settlements with taxing authorities
(8,762
)
 
—

 
(3,601
)
Decreases for lapsing of statutes of limitations
(26,563
)
 
(3,429
)
 
(7,690
)
Unrecognized tax benefits at the end of the year
$
50,365

 
$
69,018

 
$
59,575