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Income Taxes
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9 Months Ended |
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Sep. 28, 2013
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| Income Tax Disclosure [Abstract] | |
| Income Taxes |
Note 14 – Income Taxes
The Company recognized an income tax benefit from continuing operations for the three months ended September 28, 2013 of $2.2 million, which included a net benefit of $4.3 million mainly associated with the reassessment of tax reserves as well as unfavorable valuation allowance adjustments primarily related to stock-based compensation. The Company recognized an income tax provision from continuing operations for the nine months ended September 28, 2013 of $31.6 million, which included a net charge of $9.0 million mainly associated with unfavorable 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 $9.2 million for the three months ended September 29, 2012, which included a charge of $2.3 million primarily related to the reassessment of tax reserves. The Company recognized an income tax provision from continuing operations of $30.0 million for the nine months ended September 29, 2012, which included a net tax charge of $0.1 million. The net tax charge included 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. 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 nine months ended September 28, 2013 was (4.0) percent and 14.2 percent, respectively. The effective tax rate from continuing operations for the three months and nine months ended September 29, 2012 was 29.0 percent and 15.5 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 nine months of 2013, thereby requiring the Company to continue to maintain full valuation allowances for certain entities in the third quarter of 2013. The Company will continue to evaluate the need to maintain these valuation reserves against the deferred tax assets. To the extent positive evidence trends continue and the Company's final plans for 2014 and future long-term forecasts show sustained profitability, the Company's conclusion regarding the need for full valuation allowances could change, making it possible that a significant portion of the Company's $723.4 million of deferred tax asset valuation allowance balances as of September 28, 2013 could be reversed by the end of 2013.
As of September 28, 2013 and December 31, 2012, the Company had $10.6 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 September 28, 2013, could decrease by approximately $5.3 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 September 28, 2013 and December 31, 2012, the Company had approximately $0.7 million and $3.1 million accrued for the payment of interest, respectively. There were no amounts accrued for penalties at September 28, 2013 and December 31, 2012.
The Company is regularly audited by federal, state and foreign tax authorities. The Company's taxable years 2010 through 2012 are currently open for examination by the Internal Revenue Service (IRS). The federal statute of limitations has expired for the taxable years 2006 through 2009. 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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