Income Taxes

9 Months Ended

Oct. 01, 2011

Income Taxes [Abstract]

Income Taxes

8. Income Taxes

Provision for Income Tax

Under Accounting ASC topic 270-740, Interim Reporting-Income Taxes, we are required to make our best estimate of the annual effective tax rate for the full fiscal year and use that rate to provide for income taxes on a current year-to-date basis. The Company recorded a provision for income tax of $307 thousand and $165 thousand for the nine months ended October 1, 2011 and October 2, 2010, respectively. The Company's estimated annual effective tax rate was 14.85% and 10.15%, for the nine months ended October 1, 2011 and October 2, 2010, respectively. The increase in our annual effective tax rate was associated primarily with the federal income tax which resulted from the limitation of utilizing federal research & development credit and the state taxes due to the decrease in available state net operating losses to offset the Company's taxable income.

Deferred Income Taxes

The Company accounts for income taxes in accordance with ASC topic 740, Income Taxes ("ASC 740"), which requires that deferred tax assets and liabilities be recognized using enacted tax rates for the effect of temporary differences between the book and tax bases of recorded assets and liabilities. ASC 740 also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some or all of the deferred tax assets will not be realized. As of January 1, 2011, the Company had deferred tax assets of approximately $12.1 million which is fully offset by a valuation allowance. When realized, the asset will be reflected on the Company's balance sheet and the reversal of the corresponding valuation allowance will result in a tax benefit being recorded in the statement of operations in the respective period.

Uncertain Tax Positions

The Company accounts for its uncertain tax positions in accordance with ASC 740. If the balance of $865 thousand of unrecognized tax benefits at January 1, 2011 were recognized; $55 thousand of the recognition would affect the income tax rate. The unrecognized tax benefits may change during the next year for items that arise in the ordinary course of business.

The Company has recorded an uncertain tax position of $157 thousand related to the 2010 tax return during the current quarter. The Company is not aware of any other uncertain tax positions that could result in significant additional payments, accruals, or other material deviation in this estimate during the fiscal year.

The Company files U.S. federal and state returns as well as foreign returns in France and the UK. The tax years 2001 to 2010 remain open in several jurisdictions, none of which have individual significance.