Income Tax Provision (Text Block)

12 Months Ended

Dec. 31, 2012

Income Tax Provision [Abstract]

Income Taxes [Text Block]

NOTE 11 – INCOME TAXES

Income before income taxes		2012		2011		2010
U.S.	$	(24,411)	$	(28,238)	$	(32,260)
Foreign		55,218		91,902		130,363
Total	$	30,807	$	63,664	$	98,103

The components of the income tax provision (benefit) are as follows:

		2012		2011		2010
Current tax provision (benefit)
Federal	$	1,424	$	14,049	$	330
Foreign		10,756		18,324		23,211
State		142		214		25
		12,322		32,587		23,566
Deferred tax provision (benefit)
Federal		(8,784)		(20,906)		243
Foreign		(3,247)		(1,165)		(7,079)
State		317		(466)		-
		(11,714)		(22,537)		(6,836)
Liability for unrecognized tax benefits		4,217		107		1,109
Total income tax provision	$	4,825	$	10,157	$	17,839

Effective Tax Rate Reconciliation

Reconciliation between the effective tax rate and the statutory tax rates for the years ended December 31, 2012, 2011 and 2010 is as follows:

		2012			2011			2010
			Percent			Percent			Percent
			of pretax			of pretax			of pretax
		Amount	earnings		Amount	earnings		Amount	earnings
Federal tax	$	10,783	35.0	$	22,282	35.0	$	34,336	35.0
State income taxes, net of federal tax provision (benefit)		213	0.7		(366)	(0.6)		293	0.3
Foreign income taxed at lower tax rates (1)		(15,515)	(50.4)		(6,356)	(10.0)		(5,050)	(5.2)
Subpart F income and foreign dividends		496	1.6		1,115	1.8		1,786	1.8
Foreign tax credits, net of valuation allowance (2)		3,135	10.2		(5,843)	(9.2)		(6,503)	(6.6)
Liability for unrecognized tax benefits		4,217	13.7		107	0.2		1,109	1.1
U.S. provision-to-return adjustments		(102)	(0.3)		(167)	(0.3)		(2,345)	(2.4)
Valuation allowance - net operating loss carryforwards		521	1.7		-	-		(5,820)	(5.9)
Other		1,077	3.5		(615)	(1.0)		33	0.1
Income tax provision	$	4,825	15.7	$	10,157	15.9	$	17,839	18.2

• The increase in 2012 compared to 2011 and 2010 in foreign income taxed at lower tax rates was primarily due to decreased earnings in the U.K.
• The change in 2012 to expense rather than a benefit as in 2011 and 2010 was primarily due to decreased earnings in the U.K. and a correction of the 2011 valuation allowance recorded in 2012.

Uncertain Tax Positions

In accordance with the provisions related to accounting for uncertainty in income taxes, the Company recognizes the benefit of a tax position if the position is “more likely than not” to prevail upon examination by the relevant tax authority. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

	2012	2011
Balance at January 1,	$ 10,177	$ 9,173
Additions based on tax positions related to the current year	1,593	2,233
Additions for prior years tax positions	3,945	-
Reductions for prior years tax positions	(1,124)	(1,229)
Balance at December 31,	$ 14,591	$ 10,177

It is reasonably possible that the amount of the unrecognized benefit with respect to certain of the Company's unrecognized tax positions will significantly increase or decrease within the next 12 months. These changes may be the result of settlements of ongoing audits or competent authority proceedings. At this time, an estimate of the range of the reasonably possible outcomes cannot be made.

The Company files income tax returns in the U.S. federal jurisdiction and in various state and foreign jurisdictions. The Company is no longer subject to U.S. federal income tax examinations by tax authorities for tax years before 2007. With respect to state and local jurisdictions and countries outside of the U.S., with limited exceptions, the Company is no longer subject to income tax audits for years before 2009. Although the outcome of tax audits is always uncertain, the Company believes that adequate amounts of tax, interest and penalties, if any, have been provided for in the Company's reserve for any adjustments that may result from future tax audits. The Company recognizes accrued interest and penalties, if any, related to unrecognized tax benefits in income tax expense. The Company had an insignificant amount of accrued interest and penalties at December 31,2012, 2011 and 2010.

Deferred Taxes

       At December 31, 2012 and 2011, the Company's deferred tax assets and liabilities are comprised of the following items:

		2012		2011
Deferred tax assets, current
Inventory cost	$	6,158	$	2,158
Accrued expenses and accounts receivable		2,047		1,754
Share based compensation and others		1,790		1,538
Total deferred tax assets, current	$	9,995	$	5,450
Deferred tax assets, non-current
Plant, equipment and intangible assets	$	(3,775)	$	(1,818)
Foreign tax credits		22,391		19,354
Research and development tax credits		4,331		4,098
Net operating loss carryforwards		13,977		1,600
Accrued pension		10,089		11,750
Share based compensation and others		21,646		23,945
		68,659		58,929
Valuation allowances		(28,876)		(28,099)
Total deferred tax assets, non-current		39,783		30,830
Deferred tax liabilities, non-current
Step up in basis - acquisition		(2,964)		(3,967)
Total deferred tax liabilities, non-current		(2,964)		(3,967)
Net deferred tax assets, non-current	$	36,819	$	26,863

At December 31, 2012, the Company had federal and state tax credit carryforwards of approximately $24 million and $1million, respectively which are available to offset future income tax liabilities. The federal tax credit carryforwards begin to expire in 2013 and the state tax credit carryforwards will begin to expire in 2020. The Company determined that it is more likely than not that a portion of its federal foreign tax credit and research credit carryforwards will expire before they are utilized. Accordingly, the Company recorded valuation allowances of $4 million, $1 million and $2 million during the years ended December 31, 2012, 2011 and 2010, respectively.  

At December 31, 2012, the Company had federal and state net operating loss (“NOL”) carryforwards of approximately $36 million and $13 million, respectively, which are available to offset future taxable income. The federal NOL carryforwards will begin to expire in 2018. The Company determined that it is more likely than not that the federal NOL carryforwards will be utilized; thus, no valuation allowance has been recorded. The state NOL carryforwards will begin to expire in 2013. The Company determined that it is more likely than not that the state NOL carryforwards will expire before they are fully utilized and recorded a full valuation allowance on the state NOL carryforwards in prior years. The Company maintained this full valuation allowance for the year ended December 31, 2012.

Supplemental Information

Funds repatriated from foreign subsidiaries to the U.S. may be subject to federal and state income taxes. The Company intends to permanently reinvest overseas all of its earnings from its foreign subsidiaries; accordingly, U.S. taxes are not being recorded on undistributed foreign earnings. As of December 31, 2012, the Company has undistributed earnings from its non-U.S. operations of approximately $311 million (including approximately $38 million of restricted earnings which are not available for dividends). Additional federal and state income taxes of approximately $58 million would be required should such earnings be repatriated to the U.S.

The impact of tax holidays decreased the Company's tax expense by approximately $6million, $7million and $8million for the years ended December 31, 2012, 2011 and 2010, respectively. The benefit of the tax holidays on basic and diluted earnings per share for the year ended December 31, 2012 was approximately $0.14 and $0.13, respectively. The benefit of the tax holidays on both basic and diluted earnings per share for the year ended December 31, 2011was approximately $0.15. The benefit of the tax holidays on basic and diluted earnings per share for the year ended December 31, 2010 was approximately $0.19 and $0.18, respectively. During 2012, the China government began an audit of the Company's High and New Technology Enterprise status for its largest Chinese subsidiary for 2009-2011 as part of an overall evaluation of the reduced tax rates provided to many high tech companies. This subsidiary has a reduced tax rate of 15%.

During 2012, the Company realized a tax benefit of $2million related to exercises of non-qualified stock options and to disqualified dispositions of incentive stock options. The Company credited additional paid-in capital to record this benefit.