Income Taxes

6 Months Ended

Jun. 30, 2012

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 (benefit) was $(2.7) million and $3.2 million for the three months ended June 30, 2012 and July 2, 2011, respectively, resulting in effective tax rates of (15.3)% and 19.5%, respectively. Income tax expense was $0.1 million and $10.9 million for the six months ended June 30, 2012 and July 2, 2011, respectively, resulting in effective tax rates of 0.2% and 48.9%, respectively. The effective tax rate for the three months ended June 30, 2012 decreased from the prior period, primarily due to the release of prior year unrecognized tax benefits that were determined to be effectively settled during the current period, which was partially offset by the non-renewal of the federal research and development tax credit.  The effective tax rate for the six months ended June 30, 2012 decreased from the prior period, primarily due to the prior period tax charge related to the intercompany license of certain technology and other one-time nondeductible costs associated with the acquisition of Spectra Linear in 2011, along with the release of prior year unrecognized tax benefits that were determined to be effectively settled during the current period.  The impact of these items was partially offset by the non-renewal of the federal research and development tax credit.

At June 30, 2012, the Company had gross unrecognized tax benefits of $2.8 million, $2.6 million 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 Company had a gross decrease of $8.4 million to its prior year unrecognized tax benefits related to an uncertain tax position that was determined to be effectively settled in the three months ended June 30, 2012, a portion of which represented a foreign currency remeasurement adjustment and was recognized in other income (expense), net.

The tax years 2005 through 2012 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.