XML 58 R15.htm IDEA: XBRL DOCUMENT v2.4.0.8
Income Taxes
9 Months Ended
Sep. 28, 2013
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes:

For the three months ended September 28, 2013 and September 29, 2012, we recorded an income tax provision of approximately $0.4 million and $1.9 million, respectively. For the nine months ended September 28, 2013 and September 29, 2012, we recorded an income tax provision of approximately $3.0 million and $20.3 million, respectively. The income tax provision for the three and nine months ended September 28, 2013 represents tax at the federal, state and foreign statutory tax rates adjusted for non-deductible stock compensation, withholding taxes, changes in uncertain tax positions as well as other non-deductible items in foreign jurisdictions. The difference between the U.S. federal statutory tax rate of 35% and our effective tax rate is primarily due to income earned in lower tax rate jurisdictions, for which no U.S. income tax has been provided, as we intend to permanently reinvest these earnings outside of the United States.

On December 31, 2011, we began to implement a global tax structure to more effectively align our corporate structure with the geographic business operations including responsibility for sales and manufacturing activities. As part of this tax restructuring, we created new and realigned existing legal entities, completed intercompany sales of rights to intellectual property, inventory and fixed assets across different tax jurisdictions, and implemented cost-sharing and intellectual property licensing and royalty agreements between our U.S. and foreign entities.

The global tax structure was completed during the first quarter of 2012 upon the intercompany sale of inventory and fixed assets. During 2012, this inventory was sold to end customers in the ordinary course of business resulting in income before taxes in the United States and a loss before taxes in certain foreign jurisdictions. Because these foreign jurisdictions have 0% income tax rates, we received no tax benefit associated with the losses resulting in a significant foreign rate differential. Taxes were applied to the U.S. income resulting from the intercompany sale based on U.S. statutory rates, offset by deferred tax assets. This resulted in an increase to the effective tax rate and a net income tax provision of $1.9 million and $20.3 million during the three and nine months ended September 29, 2012, respectively.

We are subject to federal income tax as well as income tax of multiple state and foreign jurisdictions. We are no longer subject to federal, state and local, or foreign income tax examinations for years before 2010, 2008 and 2007, respectively. However, "NOL" and credit carryforwards from all years are subject to examination and adjustments for at least three years following the year in which the attributes are used. Our 2011 federal income tax return is currently under examination. We are not under examination in any other tax jurisdictions.

We believe that it is reasonably possible that $0.3 million of unrecognized tax benefits and $0.3 million of associated interest and penalties could be recognized during the next twelve months. The $0.6 million potential change would represent a decrease in unrecognized tax benefits, comprised of items related to state income tax credits claimed and foreign tax filings for years that will no longer be subject to examination under expiring statutes of limitations.

We have federal net operating loss carryforwards that expire at various dates between 2023 and 2032. We have state net operating loss carryforwards that expire at various dates from 2013 through 2032. We also have federal and state credit carryforwards, some of which do not expire, with the remainder expiring at various dates from 2013 through 2032.

We are paying foreign income taxes, which are reflected in the Provision for income taxes in our Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) and are primarily related to the cost of operating offshore subsidiaries. We are not currently paying federal income taxes and do not expect to pay such taxes until our tax net operating loss and credit carryforwards are fully utilized. We expect to pay a nominal amount of state income tax. We accrue interest and penalties related to uncertain tax positions in the Provision for income taxes.

The American Taxpayer Relief Act of 2012, which reinstated the U.S. federal research and development tax credit retroactively from January 1, 2012 through December 31, 2013, was enacted into law during the three months ended March 30, 2013. The tax benefit resulting from the reinstatement of the federal research and development tax credit was offset by a valuation allowance and therefore did not impact our annual effective tax rate.