Income Taxes

For the three month and nine month periods ended October 1, 2011, we recorded an income tax provision of $1.0 million and $2.4 million, respectively, as compared to $0.1 million and $0.3 million for the comparable periods in 2010. The income tax provision recognized for the nine months ended October 1, 2011 resulted primarily from federal, foreign and state income taxes.

In accordance with FASB ASC Topic 740, Income Taxes (“ASC 740”), we had unrecognized tax benefits of $4.1 million as of December 31, 2010. We continue to recognize interest and penalties as a component of the income tax provision. If we are able to eventually recognize these uncertain tax positions, $4.1 million of our unrecognized benefit would reduce the effective tax rate. Over the next twelve months, we expect an immaterial decline in liabilities associated with our uncertain tax positions as a result of expiring statutes of limitations.

We currently have a full valuation allowance against our U.S. net deferred tax asset. We continue to monitor the relative weight of positive and negative evidence of future profitability in relevant jurisdictions. As of October 1, 2011, we have experienced historical profitability. However, as of October 1, 2011, we have determined that the following negative evidence outweighs the positive evidence such that it is not more likely than not that we will generate sufficient taxable income in the relevant jurisdictions to utilize our deferred tax assets and release the associated valuation allowance:


•	Recent movement of certain product manufacturing to Singapore, potentially resulting in reduced U.S. taxable income,


•	Inherent earnings volatility of our industry resulting in our inability to forecast long term earnings, and


•	NOL usage limitations resulting in a longer period being required to realize our deferred tax assets.

It is possible that sometime in the next 12 months the positive evidence will be sufficient to release a material amount of our valuation allowance; however there is no assurance that this will occur.

As a result of our analysis, we concluded that it is more likely than not that, as of October 1, 2011, our net deferred tax assets will not be realized, with the exception of those in Japan and Taiwan. Therefore, we continue to provide a full valuation allowance against net deferred tax assets outside of Japan and Taiwan. We closely monitor available evidence, and may release some or all of the valuation allowance in future periods.

We are subject to U.S. federal and state tax examinations for years 1994 forward and 1997 forward, respectively, by virtue of the tax attributes carrying forward from those years. We are also subject to audits in the foreign jurisdictions in which we operate for years 2004 and forward. There are no material income tax audits currently in progress as of October 1, 2011.