Income Tax Provision (Text Block)

12 Months Ended

Dec. 31, 2013

Income Tax Provision [Abstract]

Income Taxes [Text Block]

NOTE 11 – INCOME TAXES

Income before income taxes		2013		2012		2011
U.S.	$	(12,936)	$	(24,411)	$	(28,238)
Foreign		51,521		55,218		91,902
Total	$	38,585	$	30,807	$	63,664

The components of the income tax provision (benefit) are as follows for the years ended December 31:

		2013		2012		2011
Current tax provision (benefit)
Federal	$	1,315	$	1,424	$	14,049
Foreign		9,270		10,756		18,324
State		(187)		142		214
		10,398		12,322		32,587
Deferred tax provision (benefit)
Federal		(1,531)		(8,784)		(20,906)
Foreign		(2,197)		(3,247)		(1,165)
State		9		317		(466)
		(3,719)		(11,714)		(22,537)
Liability for unrecognized tax benefits		7,802		4,217		107
Total income tax provision	$	14,481	$	4,825	$	10,157

Effective Tax Rate Reconciliation

Reconciliation between the effective tax rate and the statutory tax rates for the years ended December 31, 2013, 2012 and 2011 is as follows:

		2013			2012			2011
			Percent			Percent			Percent
			of pretax			of pretax			of pretax
		Amount	earnings		Amount	earnings		Amount	earnings
Federal tax	$	13,505	35.0	$	10,783	35.0	$	22,282	35.0
State income taxes, net of federal tax provision (benefit)		29	0.1		213	0.7		(366)	(0.6)
Foreign income taxed at lower tax rates (1)		(8,363)	(21.7)		(15,515)	(50.4)		(6,356)	(10.0)
U.S. tax impact of foreign operations		911	2.4		496	1.6		1,115	1.8
Foreign tax credits, net of valuation allowance (2)		-	-		3,135	10.2		(5,843)	(9.2)
Goodwill impairment		904	2.3		-	-		-	-
Research and development		(2,294)	(5.9)		-	-		-	-
Liability for unrecognized tax benefits		7,802	20.2		4,217	13.7		107	0.2
U.S. provision-to-return adjustments		554	1.4		(102)	(0.3)		(167)	(0.3)
Other		1,433	3.7		1,598	5.2		(615)	(1.0)
Income tax provision	$	14,481	37.5	$	4,825	15.7	$	10,157	15.9

• The decrease in 2013 compared to 2012 in foreign income taxed at lower tax rates was primarily due to increased earnings in the U.S.
• The change in 2013 was due to the Company not claiming a foreign tax credit in 2013.

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:

	2013	2012
Balance at January 1,	$ 14,591	$ 10,177
Additions based on tax positions related to the current year	3,659	1,593
Additions for prior years tax positions	10,206	3,945
Reductions for prior years tax positions	(7,746)	(1,124)
Balance at December 31,	$ 20,710	$ 14,591

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. During the second quarter of 2013, the Internal Revenue Service (“IRS”) commenced an examination of the Company's U.S. federal income tax return for the 2010 tax year. The examination is ongoing, and the IRS has not proposed adjustments to any tax positions at this time.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 2006. 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 interest expense. The Company had an insignificant amount of accrued interest and penalties at December 31,2013, 2012 and 2011.

Deferred Taxes

       At December 31, 2013 and 2012, the Company's deferred tax assets and liabilities are comprised of the following items:

		2013		2012
Deferred tax assets, current
Inventory cost	$	6,113	$	6,158
Accrued expenses and accounts receivable		2,422		2,047
Share based compensation and others		1,978		1,790
Total deferred tax assets, current	$	10,513	$	9,995
Deferred tax assets, non-current
Foreign tax credits	$	20,911	$	20,537
Research and development tax credits		5,460		4,331
Net operating loss carryforwards		13,130		13,977
Accrued pension		17,110		10,089
Share based compensation and others		18,371		21,811
		74,982		70,745
Valuation allowances		(35,908)		(27,022)
Total deferred tax assets, non-current		39,074		43,723
Deferred tax liabilities, non-current
Plant, equipment and intangible assets		(10,837)		(6,904)
Total deferred tax liabilities, non-current		(10,837)		(6,904)
Net deferred tax assets, non-current	$	28,237	$	36,819

At December 31, 2013, the Company had federal and state tax credit carryforwards of approximately $27 million and $1million, respectively which are available to offset future income tax liabilities. The federal tax credit carryforwards begin to expire in 2014 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 $1 million, $4 million and $1 million during the years ended December 31, 2013, 2012 and 2011, respectively.  

At December 31, 2013, the Company had federal and state net operating loss (“NOL”) carryforwards of approximately $33 million and $17 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 2014. The Company determined that it is more likely than not that the state NOLcarryforwards 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, 2013.

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, 2013, the Company has undistributed earnings from its non-U.S. operations of approximately $430 million (including approximately $45 million of restricted earnings which are not available for dividends). Additional federal and state income taxes of approximately $101 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 $2million, $6million and $7million for the years ended December 31, 2013, 2012 and 2011, respectively. The benefit of the tax holidays on both basic and diluted earnings per share for the year ended December 31, 2013 was approximately $0.05. 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. 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%. In April 2013, the Company was notified by the China government that they had completed their tax audit and had concluded that the Company owed additional tax related to tax year 2011 in the amount of $5 million, which was paid during 2013. This subsidiary has been approved for its HNTE status for the tax years 2012-2014. The Company's other China manufacturing facility has been approved for its HNTE status for the tax years 2011-2013. For 2014 and future years, this facility no longer qualifies for the HNTE status and therefore all of its future and deferred income will be taxed at the statutory tax rate of 25%.