Note 11 - Income Taxes

The Company’s quarterly provision for income taxes is determined by estimating an annual effective tax rate. This estimate may fluctuate throughout the year as new information becomes available affecting its underlying assumptions.

The $1.6 million income tax benefit recorded during the first quarter of 2016 was largely attributable to the Company’s net operating losses in its foreign operations and a reduction in its foreign withholding taxes in connection with the dissolution of one of its foreign subsidiaries effective April 1, 2016. The Company recorded an income tax benefit of $28,000 for the three months ended April 3, 2015 primarily due to pre-tax losses generated in certain foreign jurisdictions the Company consolidates for Swiss income tax purposes. There are no unrecognized tax benefits related to uncertain tax positions taken by the Company.

The first quarter 2016 foreign operating losses and the resulting tax benefits were principally due to an allocation of the stock-based compensation recorded during the quarter resulting from the immediate vesting of all unvested equity grants outstanding under the Company’s Equity Incentive Plan as of February 11, 2016.

All earnings from the Company’s subsidiaries are not considered to be permanently reinvested. Accordingly, the Company provides withholding and U.S. taxes on all unremitted foreign earnings. The Company reduced its deferred tax liability related to withholding taxes from unremitted foreign earnings by the accumulated deficit of one of its foreign subsidiaries dissolved as of April 1, 2016.

The Company considers these two transactions to be nonrecurring due to the significant and unusual nature of the transaction and, in accordance with Accounting Standards Codification (“ASC 740”), has reported their tax benefits as discrete events.