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Income Taxes
3 Months Ended
Mar. 31, 2017
Income Tax Disclosure [Abstract]  
INCOME TAXES
INCOME TAXES
The income tax provision for interim periods is determined using an estimate of the annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter, the estimate of the annual effective tax rate is updated, and if the estimated effective tax rate changes, a cumulative adjustment is made. There is a potential for volatility of the effective tax rate due to several factors, including discrete items, changes in the mix and amount of pre-tax income and the jurisdictions to which it relates, changes in tax laws and foreign tax holidays, business reorganizations, settlements with taxing authorities and foreign currency fluctuations.
The Company’s worldwide effective tax rate for the first quarter of 2017 was a negative 3.4% on $4.2 million of losses before the provision for income taxes compared to 0.8% on $12.8 million of losses before the benefit for income taxes for the same period in 2016. The effective tax rate for the first quarter of 2017 reflects $0.9 million of discrete tax expense items, including $0.6 million related, in part, to stock based compensation expense in accordance with new guidance under Accounting Standards Update (“ASU”) 2016-09. The difference between the Company’s effective tax rate and the U.S. federal statutory income tax rate in the current year is primarily attributable to the Company’s overall lower effective tax rate in the foreign jurisdictions in which it operates and where its foreign earnings are derived, including Switzerland, Mexico, Germany, Uruguay, and Ireland. In addition, the Company currently has a tax holiday in Malaysia through April 2018, with a potential extension through April 2023 if certain conditions are met.
As of March 31, 2017, the balance of unrecognized tax benefits is approximately $10.9 million. It is reasonably possible that a reduction of up to $0.1 million of the balance of unrecognized tax benefits may occur within the next twelve months as a result of potential audit settlements. Approximately $10.1 million of the balance of unrecognized tax benefits would favorably impact the effective tax rate, net of federal benefit on state issues, if recognized.