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Income Taxes
 6 Months Ended
Jul. 02, 2016
Income Taxes [Abstract]  
Income Taxes

6  Income Taxes

 

The four principal jurisdictions in which the Company manufactures are the U.S., Ireland, the United Kingdom and Singapore, where the marginal effective tax rates were approximately 37.5%, 12.5%, 20% and 0%, respectively, as of July 2, 2016. The Company has a contractual tax rate in Singapore of 0% through March 2021, based upon the achievement of certain contractual milestones, which the Company expects to continue to meet. The current statutory tax rate in Singapore is 17%. For the first half of 2016, the effect of applying the contractual tax rate in Singapore, as compared with applying the statutory tax rate, increased net income by $10 million and increased net income per diluted share by $0.12.

 

The Company's effective tax rate was 11.9% and 14.6% for the three months ended July 2, 2016 and July 4, 2015, respectively. The Company's effective tax rate was 11.8% and 14.9% for the six months ended July 2, 2016 and July 4, 2015, respectively. The decrease in the effective tax rates for the three and six months ended July 2, 2016 as compared to the three and six months ended July 4, 2015 can be attributed to the release of a valuation allowance on certain net operating loss carryforwards and to differences in the proportionate amounts of pre-tax income recognized in jurisdictions with different effective tax rates. The effective tax rate for the six months ended July 2, 2016 was also impacted by a tax benefit recorded in the first quarter of 2016 associated with modifications to certain stock compensation awards. In addition, the effective tax rate for the three and six months ended July 4, 2015 did not include the U.S. research and development tax credit as it was not enacted by the government or recognized by the Company until the fourth quarter of 2015.

The Company accounts for its uncertain tax return reporting positions in accordance with the accounting standards for income taxes, which require financial statement reporting of the expected future tax consequences of uncertain tax reporting positions on the presumption that all concerned tax authorities possess full knowledge of those tax reporting positions, as well as all of the pertinent facts and circumstances, but prohibit any discounting of unrecognized tax benefits associated with those reporting positions for the time value of money.

The following is a summary of the activity of the Company's unrecognized tax benefits for the six months ended July 2, 2016 and July 4, 2015 (in thousands):

   July 2, 2016 July 4, 2015
Balance at the beginning of the period $ 14,450 $ 19,596
 Net changes in uncertain tax benefits   (2,563)   57
Balance at the end of the period $ 11,887 $ 19,653

With limited exceptions, the Company is no longer subject to tax audit examinations in significant jurisdictions for the years ended on or before December 31, 2012. However, carryforward tax attributes that were generated in years beginning on or before January 1, 2013 may still be adjusted upon examination by tax authorities if the attributes are utilized. The Company continuously monitors the lapsing of statutes of limitations on potential tax assessments for related changes in the measurement of unrecognized tax benefits, related net interest and penalties, and deferred tax assets and liabilities. As of July 2, 2016, the Company expects to record additional reductions in the measurement of its unrecognized tax benefits and related net interest and penalties of approximately $5 million within the next twelve months due to potential tax audit settlements and the lapsing of statutes of limitations on potential tax assessments. The Company does not expect to record any other material reductions in the measurement of its unrecognized tax benefits within the next twelve months.