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Income Taxes
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6 Months Ended |
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Jul. 02, 2011
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| Income Taxes | |
| Income Taxes |
NOTE 7. Income Taxes The Company recorded an income tax provision of $3 million in the second quarter of 2011 and an income tax benefit of $5 million in the second quarter of 2010. For the six months ended July 2, 2011, the Company recorded an income tax provision of $5 million. For the six months ended June 26, 2010, the Company recorded an income tax benefit of $5 million. In the second quarter of 2011, the income tax provision of $3 million was primarily due to foreign taxes in profitable locations. In the second quarter of 2010, the income tax benefit of $5 million was due to the reversal of $8 million of unrecognized tax benefits offset by foreign taxes in profitable locations. The income tax provision of $5 million recorded in the first six months of 2011 was primarily due to foreign taxes in profitable locations of $7 million offset by $2 million of U.S. tax benefits from the monetization of U.S. tax credits. The income tax benefit of $5 million recorded in the first six months of 2010 was primarily due to the reversal of $8 million of unrecognized tax benefits and $2 million of U.S. tax benefits offset by $5 million of foreign taxes in profitable locations. As of July 2, 2011, substantially all of the Company's U.S. deferred tax assets, net of deferred tax liabilities, continued to be subject to a valuation allowance. The realization of these assets is dependent on substantial future taxable income which at July 2, 2011, in management's estimate, is not more likely than not to be achieved. The Company's gross unrecognized tax benefits increased by $32 million during the second quarter of 2011 due to changes in unrecognized tax benefits based on filing amended tax returns. The total gross unrecognized tax benefits as of July 2, 2011 were approximately $78 million. The Company has now recognized $12 million of liabilities for unrecognized tax benefits as of July 2, 2011. The net impact on the effective tax rate for the increase in gross unrecognized tax benefits in the second quarter of 2011 was an increase of $1 million. There were no material changes to penalties or interest in the second quarter of 2011. During the 12 months beginning July 3, 2011, the Company believes that it is reasonably possible that it will reduce its unrecognized tax benefits by approximately $5 million as a result of the expiration of certain statutes of limitation and other potential audit resolutions. The Company does not believe it is reasonably possible that other unrecognized tax benefits will materially change in the next 12 months. However, the resolution and/or closure of open audits are highly uncertain.
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