Quarterly report pursuant to Section 13 or 15(d)

Income Taxes

Income Taxes
9 Months Ended
Oct. 01, 2011
Income Taxes  
Income Taxes

11.          Income Taxes


For the three and nine months ended October 1, 2011, we recorded a provision for income taxes of $1,000 and $1,292, respectively.  At January 1, 2011, we recorded a full valuation allowance against our U.S. net deferred tax assets due to the uncertainty of their realization.  We regularly evaluate both positive and negative evidence related to retaining a valuation allowance against our deferred tax assets.  The realization of deferred tax assets is dependent upon sufficient future taxable income during the periods when deductible temporary differences and carryforwards are expected to be available to reduce taxable income.  During the second quarter of 2011, we concluded, based on the assessment of all available evidence, including previous three-year cumulative income before infrequent and unusual items, a history of generating income before taxes for six consecutive quarters and estimates of future profitability, that it is more-likely-than-not that we will be able to realize a portion of our deferred tax assets in the future and recorded a $917 non-cash reversal of our deferred tax asset valuation allowance.   As a result of generating taxable income for the nine months ended October 1, 2011, the Company recorded a provision for income taxes of $2,209 at an effective tax rate of 38.5% that was partially offset by the reversal of the deferred tax asset valuation allowance.  During the first quarter of 2011, we recognized $36 of windfall tax benefits from share-based compensation, which was recorded to Common Stock on the consolidated balance sheets.


We recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position.  For tax positions meeting the more-likely-than-not threshold, the amount recognized in the consolidated financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority.  As of October 1, 2011 and January 1, 2011, we did not have any material uncertain tax positions.


It is our practice to recognize interest related to income tax matters as a component of interest expense and penalties as a component of selling, general and administrative expense.  As of October 1, 2011 and January 1, 2011, we had an immaterial amount of accrued interest and penalties.


We are subject to income taxes in the U.S. federal jurisdiction, foreign jurisdictions and various state jurisdictions.  Tax regulations from each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply.  With few exceptions, we are no longer subject to U.S. federal, foreign, state or local income tax examinations by tax authorities for the years before 2007.  We are not currently under examination by any taxing jurisdiction.


We had no significant unrecognized tax benefits as of October 1, 2011 and January 1, 2011 that would reasonably be expected to affect our effective tax rate during the next twelve months.