NOTE 5 — INCOME TAXES

Income before income taxes attributable to U.S. (including its foreign branches) and foreign operations, tax provision, and effective tax rate for the three and nine months ended September 30, 2013 and 2012 are as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
Pre-tax (loss) income - U.S.	$	(9,110)		$	4,851		$	(10,998)		$	13,680
Pre-tax (loss) income - Foreign		(7,971)			(2,059)			782			3,855
Total	$	(17,081)		$	2,792		$	(10,216)		$	17,535
Tax provision	$	12,615		$	310		$	13,863		$	2,227
Effective tax rate		(74)	%		11	%		(136)	%		13	%

The Corporation’s income tax provision increased $12.3 million and $11.6 million for the three and nine months ended September 30, 2013, respectively, compared to the three and nine months ended September 30, 2012, respectively, primarily as a result of pre-tax losses in the U.S., the recording of a valuation allowance of approximately $11.0 million for the prior year deferred tax assets, the current period U.S. losses and foreign tax credits. The pre-tax losses in the U.S. increased primarily due to the increased operating loss and the increased interest incurred in the three and nine months ended September 30, 2013, related to the 2012 Credit Agreement and the Former SAE stockholders’ note discussed in Note 4.

The Corporation believes that it is more likely than not that the benefit from certain net operating losses (“NOL”) carryforwards and foreign tax credits will not be realized. In recognition of this risk, the Corporation during the third quarter has provided a valuation allowance of approximately $11.0 million on the deferred tax assets relating to these NOL carryforwards and foreign tax credits.