INCOME TAXES FROM CONTINUING OPERATIONS

3 Months Ended

Mar. 31, 2013

INCOME TAXES FROM CONTINUING OPERATIONS

INCOME TAXES FROM CONTINUING OPERATIONS

NOTE 9—INCOME TAXES FROM CONTINUING OPERATIONS

During the three months ended March 31, 2013, the Company recorded an income tax benefit of $1,844, resulting in an effective tax rate of 30.5%.  The tax provision reflects discrete items in the quarter primarily relating to disallowed foreign losses resulting in a $1,150 expense in the quarter. The projected annual effective tax rate excluding these discrete items is a benefit of 49.5% as compared to the U.S. federal statutory rate of 35.0%. The annual effective tax rate is principally driven by the Company’s expected mix of geographic earnings.

During the three months ended March 31, 2012, the Company recorded an income tax benefit of $975, resulting in an effective tax rate of 1.2%.  The tax provision reflects discrete items in the quarter relating to the goodwill impairment for which no tax benefit was recorded and settlement of income tax audits resulting in a $1,000 benefit in the quarter. The projected annual effective tax rate excluding these discrete items was a benefit of 15.3% as compared to the U.S. federal statutory rate of 35.0%. The lower projected annual effective tax rate was principally driven by the Company’s decision to permanently reinvest its Malaysia subsidiary’s earnings locally, eligibility for the United States Tax Code Section 199 Domestic Manufacturing Deduction and the mix of expected geographic earnings.

A shift in the mix of the Company’s expected geographic earnings, primarily in Malaysia, could cause its expected effective tax rate to change significantly.

On March 7, 2012, the Internal Revenue Service (“IRS”) issued Revenue Procedures 2012—19 and 2012—20 (“Revenue Procedures”) that provide a procedure for a taxpayer to follow in order to obtain automatic consent of the Commissioner to change its methods of accounting. The Revenue Procedures were issued to comply with the tangible property temporary regulations that were issued on December 23, 2011. The Revenue Procedures allow taxpayers to change their method of accounting for tax years beginning on or after January 1, 2012. The Company is assessing the impact of the Revenue Procedures and whether any change to its method of accounting will be warranted.