Note 14 - Income Taxes

12 Months Ended

Dec. 31, 2011

14. Income Taxes

Domestic and foreign income (loss) before income taxes is as follows (in thousands):

	2011		2010		2009
Domestic	$	25,206	$	15,956	$	(10,865	)
Foreign		89,895		91,723		21,702
Income before income taxes	$	115,101	$	107,679	$	10,837

Federal, state, and foreign income tax (benefit) expense consists of the following (in thousands):

Current:
Federal	$	6,663		$	2,917	$	(2,618	)
State		1,647			586		330
Foreign		21,130			17,729		6,619
Subtotal		29,440			21,232		4,331
Deferred:
Federal and State		(700	)		6,919		(2,100	)
Foreign		(663	)		865		(805	)
Subtotal		(1,363	)		7,784		(2,905	)
Provision for income taxes	$	28,077		$	29,016	$	1,426

A reconciliation between income taxes computed on income before income taxes at the federal statutory rate and the provision for income taxes is provided below (in thousands):

	2011			2010			2009
Tax expense at statutory rate of 35%	$	40,284		$	37,688		$	3,793
State and local taxes, net of federal tax benefit		1,484			420			492
Foreign income tax rate differential		(13,052	)		(10,554	)		(1,741	)
Tax on unremitted earnings		(254	)		1,267			904
Uncertain tax positions		—			—			(2,629	)
Other, net		(385	)		195			607
Provision for income taxes	$	28,077		$	29,016		$	1,426

Deferred income taxes are provided for the tax effects of temporary differences between the financial reporting bases and the tax bases of the company’s assets and liabilities. Significant components of the company’s deferred tax assets and liabilities at December 31, 2011 and January 1, 2011, are as follows (in thousands):

	2011			2010
DEFERRED TAX ASSETS:
Accrued expenses	$	15,764		$	15,012
Foreign tax credit carryforwards		9,627			13,009
R&D credit carryforwards		1,013			867
AMT credit carryforwards		1,318			1,318
Accrued restructuring		300			671
Domestic and foreign net operating loss carryforwards		1,608			3,411
Gross deferred tax assets		29,630			34,288
Less: Valuation allowance		(708	)		(708	)
Total deferred tax assets		28,922			33,580

DEFERRED TAX LIABILITIES:
Tax depreciation and amortization in excess of book		10,919			17,549
Other		1,917			2,171
Total deferred tax liabilities		12,836			19,720

NET DEFERRED TAX ASSETS	$	16,086		$	13,860

The deferred tax asset valuation allowance is related to certain deferred tax assets from foreign net operating losses. The remaining domestic and foreign net operating losses either have no expiration date or are expected to be utilized prior to expiration. The foreign tax credit carryforwards begin to expire in 2018. The company paid income taxes of approximately $27.1 million, $6.4 million and $9.9 million in 2011, 2010 and 2009, respectively. U.S. income taxes were not provided for on a cumulative total of approximately $158.0 million of undistributed earnings for certain non-U.S. subsidiaries as of December 31, 2011, and accordingly, no deferred tax liability has been established relative to these earnings. The determination of the deferred tax liability associated with the distribution of these earnings is not practicable. The company has one subsidiary in China and one subsidiary in the Philippines on “tax holidays.” The “tax holidays” expire in China in three years and within the next one to three years in the Philippines.

A reconciliation of the beginning and ending amount of unrecognized tax benefits as of December 31, 2011, January 1, 2011 and January 2, 2010 is as follows (in thousands):

Balance at December 27, 2008	$	2,755
Additions for tax positions of prior years		204
Additions for tax positions of current year		62
Settlements		(668	)
Reductions based on lapse of statue		(1,857	)
Balance at January 2, 2010		496
Additions for tax positions of prior years		233
Settlements		(617	)
Balance at January 1, 2011 and December 31, 2011	$	112

The amount of unrecognized tax benefits at December 31, 2011 was approximately $0.1 million. Of this total, approximately $0.1 million represents the amount of tax benefits that, if recognized, would favorably affect the effective income tax rate in future periods. The company does not reasonably expect a decrease in unrecognized tax benefits in the next 12 months. None of the positions included in unrecognized tax benefits are related to tax positions for which the ultimate deductibility is highly certain, but for which there is uncertainty about the timing of such deductibility. The U.S. federal statute of limitations remains open for 2009 onward. Foreign and U.S. state statute of limitations generally range from three to six years. The company is currently under examination in Singapore for tax years 2008 and 2009 and in the Philippines for the 2008 tax year. The company does not expect to recognize a significant amount of additional tax expense as a result of concluding either audit.

The company recognizes accrued interest and penalties associated with uncertain tax positions as part of income tax expense.