Income Taxes

The Company recorded tax benefit of $3,087 and expense of $9,589 for the three and nine months ended October 1, 2011, respectively, and tax benefit of $73,367 and $69,872 for the three and nine months ended October 2, 2010, respectively. The net tax benefit for the three months ended October 1, 2011 is primarily the result of the release of certain liabilities due to the expiration of the statute of limitations and the recognition of additional tax credits related to Research and Experimental ("R&E") spending for 2010. Prior to the third quarter of 2011, the Company did not have sufficient documentation in place to support these additional tax credits on a more-likely-than-not basis. These benefits were partially offset by United States ("U.S.") federal and state taxes. For the nine months ended October 1, 2011 net tax expense primarily resulted from U.S. federal and state taxes offset by the release of certain liabilities due to the expiration of the statute of limitations and the recognition of additional R&E tax credits. The Company is still in the process of reviewing open tax years which may result in future material benefits from R&E tax credits. The benefit for the three and nine months ended October 2, 2010 primarily resulted from the release of the valuation allowance which was recorded against the deferred tax assets and the release of certain liabilities due to the expiration of the statute of limitations. For the nine months ended October 2, 2010, this benefit was offset by the U.S. federal tax expense because of the “with-and-without” approach for excess share-based deductions recognized in the net operating loss.

No provision has been made for U.S., state or additional foreign income taxes related to approximately $108,700 of undistributed earnings of foreign subsidiaries which have been, or are intended to be permanently reinvested outside of the U.S. It is not practicable to determine the U.S. federal income tax liability, if any, which would be payable if such earnings were not permanently reinvested outside of the U.S. In the event the foreign subsidiaries repatriate these earnings, the earnings may be subject to U.S. federal and state income taxes.

Subject to meeting certain employment and investment requirements at its Costa Rican facility, the Company was granted a 100% Costa Rica income tax exemption through March 2017. Also, during the nine months ended October 1, 2011, the Company was granted an eight-year tax holiday in Singapore effective January 1, 2012.

Deferred Income Taxes

As of October 1, 2011, deferred tax assets of $63,925, net of a $12,055 valuation allowance, were recorded on the balance sheets. As of December 31, 2010, the Company recorded deferred tax assets of $74,982, net of a valuation allowance of $11,391.

The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more-likely-than-not to be realized. Due to strong financial results and increased confidence that it will continue to generate taxable income into the foreseeable future, the Company released a majority of the valuation allowance on the deferred tax assets during the nine months ended October 2, 2010. The Company continues to maintain a valuation allowance against the tax effect of all capital loss carryforwards and certain state net operating loss carryforwards, as management does not believe it is more likely than not that these benefits will be realized in future periods.

Unrecognized Tax Benefits

In the nine months ended October 1, 2011, net unrecognized tax benefits decreased $5,167 primarily as a result of the release of certain previously recorded tax liabilities due to the expiration of statutes of limitations. The Company's additional unrecognized tax benefits anticipated to be released due to the expiration of statutes of limitations on or before December 31, 2011 total $2,009. Interest and penalties associated with unrecognized tax benefits are accrued and classified as a component of tax expense on the statement of income. No other changes to the unrecognized tax benefits are anticipated within the next twelve months.

Net unrecognized tax benefits at October 1, 2011 and December 31, 2010 were as follows:



	October 1, 2011		December 31, 2010
Net unrecognized tax benefits	$	2,183	$	7,350