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Income Taxes
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6 Months Ended |
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Jun. 29, 2013
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| Income Tax Disclosure [Abstract] | |
| Income Taxes |
Note 14 – Income Taxes
The Company recognized an income tax provision from continuing operations for the three months ended June 29, 2013 of $11.9 million, which included a net charge of $2.2 million mainly associated with the reassessment of tax reserves and valuation allowance adjustments primarily related to stock-based compensation. The Company recognized an income tax provision from continuing operations for the six months ended June 29, 2013 of $33.8 million, which included a net charge of $13.3 million mainly associated with valuation allowance adjustments primarily related to stock-based compensation and the reassessment of tax reserves. The Company recognized an income tax provision from continuing operations of $9.9 million for the three months ended June 30, 2012, which included a benefit of $3.2 million primarily related to the release of valuation allowances for entities that were no longer in a cumulative three-year loss position. The Company recognized an income tax provision from continuing operations of $20.8 million for the six months ended June 30, 2012, which included a net tax benefit of $2.2 million. The net tax benefit included the release of valuation allowances during the second quarter, partially offset by unfavorable valuation allowance adjustments primarily related to stock-based compensation. The effective tax rate from continuing operations, which is calculated as the income tax benefit or provision as a percentage of pretax income, for the three months and six months ended June 29, 2013 was 13.0 percent and 20.1 percent, respectively. The effective tax rate from continuing operations for the three months and six months ended June 30, 2012 was 9.5 percent and 12.9 percent, respectively.
The Company continues to adjust its valuation allowances as deferred tax assets increase or decrease, resulting in effectively no recorded tax benefit for those jurisdictions with operating losses. In those jurisdictions with operating income and loss or credit carryforwards, the Company is recording minimal or no tax expense. However, an income tax provision or benefit is still recorded for those entities that are not in a cumulative loss position.
In certain jurisdictions, the Company is either in or just emerging from a cumulative three-year loss position, which is significant negative evidence when evaluating the realizability of its deferred tax assets. In the Company's judgment, this and other negative evidence continues to outweigh the positive evidence of profitability in 2011, 2012 and the first six months of 2013, thereby requiring the Company to continue to maintain full valuation allowances for certain entities in the second quarter of 2013. The Company will continue to evaluate the need to maintain these valuation reserves against the deferred tax assets as certain entities transition to or increase their cumulative three year income position through the remainder of 2013. It is possible that a significant portion of the Company's June 29, 2013 valuation allowance balances could be reversed by the end of 2013.
As of June 29, 2013 and December 31, 2012, the Company had $24.9 million and $27.8 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 June 29, 2013, could decrease by approximately $16.3 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 2013, but the amount cannot be estimated.
The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense. As of June 29, 2013 and December 31, 2012, the Company had approximately $3.2 million and $3.1 million accrued for the payment of interest, respectively. As of June 29, 2013 the Company had approximately $0.2 million accrued for payment of penalties. There were no amounts accrued for penalties at December 31, 2012.
The Company is regularly audited by federal, state and foreign tax authorities. The Company's taxable years 2009 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 Agents Report for 2006 through 2009 and all open issues have been resolved. Primarily as a result of filing amended 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 2002 through 2007 tax audit has been completed and final tax assessments are pending, 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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