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Income Taxes
9 Months Ended
Sep. 28, 2013
Income Taxes  
Income Taxes

13. 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 $3.3 million and $17.1 million for the three months ended September 28, 2013 and September 29, 2012, respectively, resulting in effective tax rates of 33.2% and 63.0%, respectively. Income tax expense was $9.1 million and $17.1 million for the nine months ended September 28, 2013 and September 29, 2012, respectively, resulting in effective tax rates of 18.9% and 27.6%, respectively. The effective tax rates for the three and nine months ended September 28, 2013 decreased from the prior periods, primarily due to the prior period tax charge related to the intercompany license of certain technology associated with the acquisition of Ember during 2012 and the recognition of the fiscal 2012 and fiscal 2013 federal research and development tax credits due to the enactment of the American Taxpayer Relief Act of 2012 (the “Act”) on January 2, 2013.  In the three months ended September 28, 2013, the decrease in the effective tax rate was partially offset by a reduction in the foreign tax rate benefit.  In the nine months ended September 28, 2013, the decrease in the effective tax rate was also partially offset by the release during the prior period of unrecognized tax benefits that were determined to be effectively settled during 2012.

 

At September 28, 2013, the Company had gross unrecognized tax benefits of $4.8 million, $4.7 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 believes it is reasonably possible that the gross unrecognized tax benefits will decrease by approximately $1.4 million in the next 12 months due to the lapse of the statute of limitations applicable to a tax deduction claimed on a prior year foreign tax return.

 

The tax years 2006 through 2013 remain open to examination by the major taxing jurisdictions to which the Company is subject. The examination of the Company’s 2009 through 2011 federal income tax returns by the U.S. Internal Revenue Service was completed during the third quarter of 2013 with no material impact on the Company’s financial statements.  The Company is not currently under audit in any other major taxing jurisdiction.