v2.4.0.6
Income Taxes
 12 Months Ended
Dec. 30, 2011
Income Taxes [Abstract]  
INCOME TAXES

13. INCOME TAXES

 

The U.S. and international components of income (loss) before provision (benefit) for income taxes were as follows (in thousands):

  Year Ended
  December 30, December 31, January 1,
  2011 2010 2010
 U.S.$ 43,610 $ 46,217 $ (15,285)
 International  4,782   3,108   (2,892)
  $ 48,392 $ 49,325 $ (18,177)

 The provision (benefit) for income taxes was comprised of the following (in thousands):
           
   Year Ended
   December 30, December 31, January 1,
   2011 2010 2010
 Current:        
  Federal$ 5,150 $ (671) $ 827
  State  (40)   179   (177)
  International  1,384   1,260   294
     6,494   768   944
 Deferred:        
  Federal  8,028   15,409   (9,256)
  State  599   300   (153)
  International  149   (290)   (711)
     8,776   15,419   (10,120)
   $ 15,270 $ 16,187 $ (9,176)

 The provision (benefit) for income taxes differs from the U.S. statutory rate due to the following: 
  Year Ended
  December 30, December 31, January 1,
  2011 2010 2010
 Statutory rate 35.0%  35.0%  (35.0)%
 Federal tax credits (3.7)   (2.6)   (5.5) 
 Foreign rate differential 0.3   (0.8)   1.9 
 Uncertain tax positions (1.3)   (1.3)   (7.8) 
 State taxes, net of federal benefit 0.3   (0.3)   (1.2) 
 Valuation allowance 0.1   1.7   (0.1) 
 Other 0.9   1.1   (2.8) 
 Effective tax rate 31.6%  32.8%  (50.5)%

In its budget submission to Congress in February 2012, the Obama administration proposed changes to the manner in which the U.S. would tax the international income of U.S. based companies. While it is uncertain how the U.S. Congress will address U.S. tax policy in the future, reform of U.S. taxation, including taxation of international income, continues to be a topic of discussion for Congress. A significant change to the U.S. tax system, including changes to the taxation of international income, could have a material effect on the Company's effective tax rate.

 Deferred tax assets (liabilities) consist of the following (in thousands):
       
  At
  December 30, December 31,
  2011 2010
 Tax credits$ 7,362 $ 5,896
 Net operating loss carryforwards  11,106   4,617
 Inventories  4,441   4,575
 Accrued expenses  2,961   2,563
 Stock-based compensation  6,378   5,358
 Other  1,052   507
 Gross deferred tax assets  33,300   23,516
 Less valuation allowance  (7,775)   (6,482)
 Net deferred tax assets  25,525   17,034
 Property, plant and equipment  (2,572)   (713)
 Intangible assets  (54,874)   (40,082)
 Convertible subordinated notes  (33,849)   (31,218)
 Gross deferred tax liabilities  (91,295)   (72,013)
 Net deferred tax liability$ (65,770) $ (54,979)
       
 Presented as follows:     
 Current deferred tax asset$ 7,828 $ 7,398
 Current deferred tax liability  (845)   (514)
 Noncurrent deferred tax asset  2,450   2,427
 Noncurrent deferred tax liability  (75,203)   (64,290)
  $ (65,770) $ (54,979)

As of December 30, 2011, the Company has the following carryforwards available:

   Tax  AmountBegin to
 Jurisdiction Attribute  (in millions)Expire
 U.S. Net Operating Loss $19.2(1)2025
 Switzerland Net Operating Loss  12.3(1)2012
 State Net Operating Loss  29.1(1)Various
 U.S. and State R&D Credit  1.9(1)Various
 State Investment Tax Credit  5.3Various

  • These tax attributes were acquired primarily as part of the Micro Power acquisition in 2011 and Precimed acquisition in 2008. The utilization of certain net operating losses and credits is subject to an annual limitation under Internal Revenue Code Section 382.

 

Certain federal tax credits reported on filed income tax returns included uncertain tax positions taken in prior years. Due to the application of the accounting for uncertain tax positions, the actual tax attributes are larger than the tax credits for which a deferred tax asset is recognized for financial statement purposes.

 

In assessing the realizability of deferred tax assets, management considers, within each taxing jurisdiction, whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based on the consideration of the weight of both positive and negative evidence, management has determined that a portion of the deferred tax assets as of December 30, 2011 and December 31, 2010 related to certain state investment tax credits and net operating losses will not be realized.

 

The Company files annual income tax returns in the U.S., various state and local jurisdictions, and in various foreign jurisdictions. A number of years may elapse before an uncertain tax position, for which the Company has unrecognized tax benefits, is examined and finally settled. While it is often difficult to predict the final outcome or the timing of resolution of any particular uncertain tax position, the Company believes that its unrecognized tax benefits reflect the most probable outcome. The Company adjusts these unrecognized tax benefits, as well as the related interest, in light of changing facts and circumstances. The resolution of a matter could be recognized as an adjustment to the provision for income taxes and the effective tax rate in the period of resolution.

 Below is a summary of changes to the unrecognized tax benefit (in thousands):
          
  Year Ended
  December 30, December 31, January 1,
  2011 2010 2010
 Balance, beginning of year$ 2,756 $ 3,418 $ 5,686
 Additions based upon tax positions related to the current year  300   300   396
 Additions recorded as part of business combinations  260   -   -
 Additions (reductions) related to prior period tax positions  -   222   (1,185)
 Reductions relating to settlements with tax authorities  -   -   (700)
 Reductions as a result of a lapse of applicable        
 statute of limitations  (1,736)   (1,184)   (779)
 Balance, end of year$ 1,580 $ 2,756 $ 3,418

The tax years that remain open and subject to tax audits varies depending on the tax jurisdiction. The consolidated Federal 2009 and 2010 tax returns are currently under audit. The 2008 Federal tax return remains open for examination. The Company is also under audit in France for 2009 and 2010.

 

 

It is reasonably possible that a reduction of approximately $0.8 million of the balance of unrecognized tax benefits may occur within the next 12 months as a result of the lapse of the statute of limitations and potential audit settlements. As of December 30, 2011, approximately $1.5 million of unrecognized tax benefits would favorably impact the effective tax rate (net of federal benefit on state issues), if recognized.