INCOME TAXES

The Company estimates its annual effective tax rate at the end of each quarter. In making these estimates, the Company considers, among other things, annual pre-tax income, the geographic mix of pre-tax income and the application and interpretations of tax laws, treaties and judicial developments, in collaboration with its tax advisors, and possible outcomes of audits.

The following table presents the provision for income taxes and the effective tax rates:



	Three Months Ended						Six Months Ended
	June 30, 2013			June 30, 2012			June 30, 2013			June 30, 2012
	(in thousands, except for percentages)
Income (loss) before income taxes	$	18,655		$	4,479		$	(43,373	)	$	29,211
(Provision for) benefit from income taxes	(5,679		)	(3,725		)	8,682			(8,070		)
Effective tax rate	30.44		%	83.17		%	20.02		%	27.63		%

For the three and six months ended June 30, 2013, the Company recorded an income tax provision of $5.7 million and an income tax benefit of $8.7 million, respectively. For the three months ended June 30, 2013, the significant components of the tax provision were from operations in jurisdictions with operating profits. For the six months ended June 30, 2013, the tax benefit included discrete benefits from restructuring cost incurred in various jurisdictions, settlement charges and the federal research and development tax credit which was reinstated on January 2, 2013 for two years, partially offset by a discrete charge from gain recognized on the sale of the serial flash product line. The Company's effective tax rate for the six months ended June 30, 2013 was lower than the statutory federal income tax rate of 35%, primarily due to income recognized in lower tax jurisdictions.

For the three and six months ended June 30, 2012, the Company recorded an income tax provision of $3.7 million and $8.1 million, respectively. The Company's effective tax rate for the three months ended June 30, 2012 was higher than the statutory federal income tax rate of 35%, primarily due to a significant decrease in pre-tax income. The Company's effective tax rate for the six months ended June 30, 2012 was lower than the statutory federal income tax rate of 35%, primarily due to income recognized in lower tax rate jurisdictions.

The Company files U.S., state, and foreign income tax returns in jurisdictions with varying statutes of limitations. The 2002 through 2012 tax years generally remain subject to examination by federal and most state tax authorities. For significant foreign jurisdictions, the 2002 through 2012 tax years generally remain subject to examination by their respective tax authorities.

Currently, the Company has tax audits in progress in various non-U.S. jurisdictions. To the extent the final tax liabilities are different from the amounts originally accrued, the increases or decreases are recorded as income tax expense or benefit in the consolidated statements of operations. While the Company believes that the resolution of these audits will not have a material adverse impact on the Company's results of operations, the outcome is subject to uncertainty.

At June 30, 2013 and December 31, 2012, the Company had $42.6 million and $27.2 million of unrecognized tax benefits, respectively, which, if recognized, would affect the effective tax rate. Also at June 30, 2013 and December 31, 2012, the Company had $42.2 million and $45.5 million of unrecognized tax benefits, respectively, which, if recognized, would result in adjustments to other tax accounts, primarily deferred tax assets. The change in unrecognized tax benefits during the six months ended June 30, 2013 is primarily due to transfer pricing reserves.

Increases or decreases in unrecognizable tax benefits could occur over the next 12 months due to tax law changes, unrecognized tax benefits established in the normal course of business, or the conclusion of ongoing tax audits in various jurisdictions around the world. The Company believes that before June 30, 2014, it is reasonably possible that either certain audits will conclude or the statutes of limitations relating to certain income tax examination periods will expire, or both. If the Company reaches settlement with the tax authorities and/or such statutes of limitation expire, the Company expects to record a corresponding adjustment to the applicable unrecognized tax benefits. Given the uncertainty as to settlement terms, the timing of payments and the impact of such settlements on other uncertain tax positions, the Company estimates that the range of potential decreases in underlying uncertain tax positions may be between $10.0 million and $30.0 million over the next 12 months, although those estimates are subject to various factors beyond the Company's control. The calculation of unrecognized tax benefits involves dealing with uncertainties in the application of complex global tax regulations. The Company regularly assesses its tax positions in light of legislative, bilateral tax treaty, regulatory and judicial developments in the countries in which the Company does business.