Income Taxes

6 Months Ended

Jun. 30, 2012

Income Taxes [Abstract]

Income Taxes

Note 14. Income Taxes

The Company accounts for income taxes under the provisions of ASC 740, Accounting for Income Taxes. The Company’s tax benefit of approximately $0.5 million for the three month period ended June 30, 2012 is primarily the result of a $1.4 million discrete benefit for deferred tax assets recorded as a result of Internal Revenue Service (IRS) approval of certain tax elections in the second quarter. The Company’s estimated annual effective tax rate without discrete items will be 39%, which is higher than the statutory U.S. federal income tax rate, primarily due to state taxes and non-deductible share-based compensation expense, partially offset by the domestic manufacturing deduction benefit. The Company’s income tax benefit for the three month period ended June 30, 2012 was $0.5 million and the tax provision for the six month period ended June 30, 2012 was $1.5 million. The Company’s income tax provisions for the three month and six month periods ended July 2, 2011 were $5.7 million and $11.4 million, respectively.

The Company’s actual effective tax rate for the six month period ended June 30, 2012 was less than the statutory U.S. federal income tax rate primarily due to the discrete benefit from deferred taxes recorded as a result of IRS approval of certain tax elections in the second quarter. The actual effective tax rate for the six month period ended July 2, 2011 was substantially equivalent to the statutory U.S. federal income tax rate primarily due to state income taxes and subpart F income, which were offset by the domestic manufacturing deduction benefit and federal income tax rates in excess of foreign tax rates.

As of June 30, 2012, the Company continued to maintain a valuation allowance against certain net deferred tax assets as a result of uncertainties regarding the realization of the asset balance due to cumulative losses and uncertainty of future taxable income in various tax jurisdictions. In the event that the Company determines that the deferred tax assets are realizable, an adjustment to the valuation allowance will be reflected in the tax provision for the period such determination is made.

The Company is subject to taxation in the United States and various states including California, and foreign jurisdictions including South Korea, Japan, China, Germany, France and the United Kingdom. Due to tax attribute carry-forwards, the Company is subject to examination by the IRS for tax years beginning from the 2003 tax year for U.S. tax purposes. The Company is also subject to examination in various states for tax years beginning from the 2002 tax year. The Company is also subject to examination in various foreign jurisdictions beginning from the 2006 tax year. The Company accrues interest and penalties related to unrecognized tax benefits in its provision for income taxes. The total amount of accrued penalties and interest is not material for the six month period ended June 30, 2012. The Company believes it may recognize up to $0.2 million of its existing unrecognized tax benefits within the next twelve months as a result of the lapse of the applicable statutes of limitations.