Income Taxes

9 Months Ended

Oct. 01, 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 $3.0 million and $1.2 million for the three months ended October 1, 2011 and October 2, 2010, respectively, resulting in effective tax rates of 20.9% and 6.4%, respectively. Income tax expense was $13.9 million and $15.8 million for the nine months ended October 1, 2011 and October 2, 2010, respectively, resulting in effective tax rates of 38.0% and 20.7%, respectively. The effective tax rate for the three months ended October 1, 2011 increased from the prior period, primarily due to non-recurring benefits reflected in the prior period effective tax rate, including a reduction to the liability for unrecognized tax benefits and related interest accrual as well as tax return adjustments, partially offset by an increase in the research and development tax credit in the current period. The effective tax rate for the nine months ended October 1, 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, as well as a decrease in the foreign tax rate benefit. These decreases were partially offset by an increase in the research and development tax credit.

At October 1, 2011, the Company had gross unrecognized tax benefits of $11.6 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.