Income Taxes

9 Months Ended

Oct. 02, 2011

Income Taxes [Abstract]

Income Taxes

11. Income Taxes

The income tax provision for the three and nine months ended October 2, 2011 was $6.2 million, or an effective tax rate of 18.8 percent, and $22.1 million, or an effective tax rate of 24.4 percent, respectively. The tax provision for the three and nine months ended October 3, 2010 was $8.4 million or an effective tax rate of 39.2 percent and $28.9 million or an effective tax rate of 43.6 percent, respectively. The decrease in income tax expense and effective tax rate for the three and nine month period ended October 2, 2011 compared to the same periods in the prior year was primarily caused by higher forecasted pre-tax earnings in foreign jurisdictions with tax rates lower than the U.S. federal rate and the tax benefit from the reversal of tax accruals for uncertain tax positions from various tax jurisdictions where the statutes of limitation have closed. Additionally, the tax provision for the nine months ended October 2, 2011 was further reduced by discrete tax benefits recorded for the exercise of employee stock options during the period.

The higher tax expense and effective tax rate for the three months and nine months ended October 3, 2010, was caused by a loss incurred in a country where such loss provided no tax benefit. Accordingly, tax was accrued ratably on the profitable operations based on the income earned during that period while no tax benefit was accrued on the loss. The Company is subject to income taxes in the U.S. and numerous foreign jurisdictions. The Company's future foreign tax rate could be affected by changes in the composition in earnings in countries with tax rates differing from the U.S. federal rate.

The Company has recorded its liability for uncertain tax positions as part of its long-term liability as payments are not anticipated over the next 12 months. The existing tax positions of the Company continue to generate an increase in the liability for uncertain tax positions. The liability for uncertain tax positions may be reduced for liabilities that are settled with taxing authorities or on which the statute of limitations could expire without assessment from tax authorities. The possible reduction in liabilities for uncertain tax positions in multiple jurisdictions in the next 12 months is approximately $0.7 million, excluding the interest, penalties and the effect of any related deferred tax assets or liabilities.