NOTE 14 – Income Taxes

CTS has identified, evaluated, and measured the amount of income tax benefits to be recognized for all of our income tax positions. CTS earns a significant amount of its operating income outside of the U.S., which is considered to be permanently reinvested in foreign jurisdictions.

As of September 28, 2014, CTS’ intent is to permanently reinvest funds outside the U.S. Any repatriation may not result in significant cash income tax payments as the taxable event would likely be offset by the utilization of the then available net operating losses and tax credits. CTS does not provide for U.S. income taxes on undistributed earnings of its foreign subsidiaries that are intended to be permanently reinvested.


	Three Months Ended						Nine Months Ended
	September 28, 2014			September 29, 2013			September 28, 2014			September 29, 2013
Effective tax rate		31.9	%		33.3	%		36.1	%		118.6	%

The 2014 effective tax rate reflects higher profits, primarily from a change in the mix of earnings by jurisdiction, and the effect of tax adjustments decreased the rate by 3.3% in the third quarter of 2014. Tax adjustments recorded in the nine month period ended September 28, 2014 increased the rate by 0.4%. Tax expense during the nine months ended September 29, 2013 includes a discrete period tax expense of $10,800,000 related to cash repatriation that was recorded in the second quarter of 2013.

CTS’ continuing practice is to recognize interest and/or penalties related to income tax matters as part of income tax expense. For the nine months ended September 28, 2014 and September 29, 2013, CTS did not accrue any interest or penalties into income tax expense.

The repatriation to the U.S. of approximately $30,000,000 during the second quarter of 2013 resulted from a reduction in the amount of earnings required to remain permanently reinvested in Singapore that was made possible by the June 2013 restructuring plan. No deferred income taxes had been previously recorded for unremitted earnings from Singapore due to previous conclusions that the earnings were permanently reinvested.