Income Taxes

6 Months Ended

Jul. 02, 2011

Income Taxes

Income Taxes

12. Income Taxes

The Company's effective income tax rate is generally less than the amounts computed by applying the U.S. federal income tax rate of 34% due to a portion of earnings being earned in Canada, where the Company's effective rate is much lower than the rate in the U.S. due to research-related tax benefits.  The three- and six-month periods ended July 2, 2011 each reflect a net tax benefit from the loss before income taxes.  The rate of the benefit is less than U.S. statutory rate since tax benefits for certain loss jurisdictions have not been recognized and certain merger-related costs may not be deductible for income tax purposes.  The rate in both periods in 2010 is higher than it otherwise would have been since tax benefits for certain loss jurisdictions had not been recognized and the estimated rate used for U.S. taxable income was higher in 2010 since certain key provisions of the U.S. tax law, including the research and development credit, had not been extended to be in effect for tax year 2010 until the fourth quarter of 2010.

The Company is currently undergoing audits at the federal level in the U.S. for tax year 2009, in Canada for the years 2006 and 2007 and in Germany for the years 2006 through 2008. The Company expects the audits to be completed in the next twelve months.  Any related unrecognized tax benefits could be adjusted based on the results of the audits.  The Company cannot estimate the range of the change that is reasonably possible at this time.