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Income Taxes
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9 Months Ended |
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Sep. 29, 2012
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| Income Tax Disclosure [Abstract] | |
| Income Taxes |
Note 13 – Income Taxes
The Company recognized an income tax provision for the three months ended September 29, 2012 of $10.5 million, which included a net charge of $2.2 million primarily related to the reassessment of tax reserves. The Company recognized an income tax provision for the nine months ended September 29, 2012 of $31.0 million, which included a net tax charge of $0.5 million associated with the reassessment of tax reserves and unfavorable valuation allowance adjustments primarily related to stock-based compensation, partially offset by the benefit of the release of valuation allowances for entities that were no longer in a cumulative three-year loss position.
The Company recognized an immaterial income tax provision during the three months ended October 1, 2011 and an income tax provision of $30.8 million for the nine months ended October 1, 2011. The three month and nine month tax provision includes a net charge of $0.5 million and a net benefit of $1.6 million, respectively, primarily related to the reassessment of tax reserves.
In certain jurisdictions, the Company continues to be in a cumulative loss position over the last three years for book purposes and therefore the realization of certain deferred tax assets remains uncertain. As a result, the Company continues to adjust its valuation allowances related to these jurisdictions as deferred tax assets increase or decrease, resulting in effectively no recorded tax benefit for those jurisdictions with operating losses, or no tax expense for those jurisdictions with operating income and loss carryforwards. However, an income tax provision or benefit is still recorded in jurisdictions where entities are not in a cumulative loss position. The effective tax rate, which is calculated as the income tax provision as a percentage of pretax income, for the three months and nine months ended September 29, 2012 was 84.0 percent and 19.8 percent, respectively. The effective tax rate for the three months and nine months ended October 1, 2011 was less than one percent and 23.3 percent, respectively.
As of September 29, 2012 and December 31, 2011, the Company had $27.9 million and $26.9 million of gross unrecognized tax benefits, including interest, respectively. The Company believes it is reasonably possible that the total amount of gross unrecognized tax benefits, as of September 29, 2012, could decrease by approximately $18.8 million in the next 12 months due to settlements with taxing authorities or lapses in the statute of limitations. Due to the various jurisdictions in which the Company files tax returns and the uncertainty regarding the timing of the settlement of tax audits, it is possible that there could be other significant changes in the amount of unrecognized tax benefits in 2012, but the amount cannot be estimated.
The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense. As of September 29, 2012 and December 31, 2011, the Company had approximately $3.1 million and $2.5 million accrued for the payment of interest, respectively. There were no amounts accrued for penalties at September 29, 2012 and December 31, 2011.
The Company is regularly audited by federal, state and foreign tax authorities. The Company’s taxable years 2006 through 2011 are currently open for examination by the Internal Revenue Service (IRS). The IRS has completed its field examination and has issued its Revenue Agent’s Report for 2006 through 2009, and all open issues have been resolved. Primarily as a result of filing amended tax returns, which were generated by the closing of federal income tax audits, the Company is still open to state and local tax audits in major tax jurisdictions dating back to the 2004 taxable year. With the exception of Germany, where the Company received the final Tax Auditor's Report in the first quarter of 2012 for taxable years 1998 through 2001, and is currently under audit for taxable years 2002 through 2007, the Company is no longer subject to income tax examinations by any other major foreign tax jurisdiction for years prior to 2007.
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