Income Taxes

3 Months Ended

Mar. 28, 2013

Income Taxes [Abstract]

Income Taxes

17. Income Taxes

The process for calculating our income tax expense involves estimating actual current taxes due plus assessing temporary differences arising from differing treatment for tax and accounting purposes that are recorded as deferred tax assets and liabilities. Deferred tax assets are periodically evaluated to determine their recoverability. The total net deferred tax assets at March 28, 2013and December 31, 2012 were $221.8 and $238.6, respectively. This decrease is primarily due to recognizing certain amounts of long-term contract forward losses not currently deductible for tax purposes in previous periods.

We file income tax returns in all jurisdictions in which we operate. We established reserves to provide for additional income taxes that may be due in future years as these previously filed tax returns are audited. These reserves have been established based on management's assessment as to the potential exposure attributable to permanent differences and associated interest. All tax reserves are analyzed quarterly and adjustments made as events occur that warrant modification.

In general, the Company records income tax expense each quarter based on its best estimate as to the full year's effective tax rate. Certain items, however, are given discrete period treatment and the taxeffects for such items are therefore reported in the quarter that an event arises. Events or items that give rise to discrete recognition include finalizing amounts in income tax returns filed, finalizing audit examinations for open tax years, and an expiring statute of limitations.

We continue to operate under a tax holiday in Malaysia effective through September 2024. Management continues to maintain a reserve for the potential uncertainty in meeting the tax holiday's conditional employment and investment thresholds. If those thresholds are met by the required date, we expect a $9.1 reduction in our unrecognized tax benefit liability.

The 30.5% effective tax rate for the three months ended March 28, 2013 differs from the 31.3% effective tax rate for the same period in 2012 primarily due to inclusion of the 2012 and 2013 U.S. Research Tax Credits, and an adjustment to the valuation allowance on certain state credits.

On January 2, 2013, the President signed legislation retroactively extending the U.S. Research Tax Credit for two years, from January 1, 2012 through December 21, 2013. Our income tax expense for 2013 reflects the entire benefit of the Research Tax Credit attributable to 2012, which is estimated at $5.4, and the benefit of the 2013 Research Tax Credit.

We are participating in the Internal Revenue Service's Compliance Assurance Process (“CAP”) program for our 2012 and 2013 tax years. Additionally, we have been selected for the Compliance Maintenance phase of the CAP program for the 2013 tax year. The CAP program's objective is to resolve issues in a timely, contemporaneous manner and eliminate the need for a lengthy post-filing examination. HM Revenue & Customs is currently examining our 2010 U.K. income tax return. While a change could result from the ongoing examinations, with the exception of the Malaysia issue mentioned above,the Company expects no material change in its recorded unrecognized tax benefit liability in the next 12 months.