Income Taxes

6 Months Ended

Jul. 02, 2011

Income Taxes

Income Taxes

11. Income Taxes

     Provision for income taxes includes both domestic and foreign income taxes at the applicable statutory rates adjusted for non-deductible expenses, research and development tax credits and other permanent differences.  Income tax expense was $3.2 million and $9.6 million for the three months ended July 2, 2011 and July 3, 2010, respectively, resulting in effective tax rates of 19.5% and 31.4%, respectively. Income tax expense was $10.9 million and $14.6 million for the six months ended July 2, 2011 and July 3, 2010, respectively, resulting in effective tax rates of 48.9% and 25.7%, respectively. The effective tax rate for the three months ended July 2, 2011 decreased from the prior period, primarily due to the prior period tax charge related to the intercompany license of certain technology obtained in the acquisition of Silicon Clocks and the non-renewal of the federal research and development tax credit reflected in the prior period effective tax rate, partially offset by a decrease in the foreign tax rate benefit. The effective tax rate for the six months ended July 2, 2011 increased from the prior period, primarily due to the tax charge related to the intercompany license of certain technology obtained in the acquisition of Spectra Linear and other one-time nondeductible costs associated with the acquisition of Spectra Linear recorded in the first quarter of 2011, along with a decrease in the foreign tax rate benefit.

     At July 2, 2011, the Company had gross unrecognized tax benefits of $12.1 million, all of which would affect the effective tax rate if recognized. The Company recognizes interest and penalties related to unrecognized tax benefits in the provision for income taxes.

     The tax years 2004 through 2011 remain open to examination by the major taxing jurisdictions to which the Company is subject. The Company is not currently under audit in any major taxing jurisdiction.