Note 7 – Income Taxes

Income tax expense consists of the following:


	Six Months Ended
	June 30,
	2011			2010
Federal – Current	$	184		$	1,278
Foreign – Current		(117	)		4,570
State – Current		121			251
Deferred		1,025			(1,047	)
	$	1,213		$	5,052

In 2011, income tax expense differs from the amount computed by applying the U.S. federal statutory income tax rate to income before income tax primarily due to the impact of tax incentives and tax holidays in foreign locations, including a $0.6 million discrete tax benefit as a result of a 2010 tax rate incentive received by a subsidiary in China during the first quarter of 2011, state income taxes (net of federal benefit), and adjustments to valuation allowances on deferred tax assets in the U.S.

The Company may determine it will be able to realize all or a portion of its deferred tax assets in the U.S. in the foreseeable future. Upon such determination an adjustment to the valuation allowance related to its deferred tax assets could cause a material increase to net income in the period such determination is made. Significant management judgment is required in determining the period in which the reversal of a valuation allowance should occur. The Company considers all available evidence, both positive and negative, in making this determination, including historical income, projected future income, the expected timing of the reversals of existing temporary differences and the implementation of tax-planning strategies.

The Company considers earnings from foreign subsidiaries to be indefinitely reinvested and, accordingly, no provision for U.S. federal and state income taxes has been made for these earnings. Upon distribution of foreign subsidiary earnings in the form of dividends or otherwise, such distributed earnings would be reportable for U.S. income tax purposes (subject to adjustment for foreign tax credits). Determination of the amount of any unrecognized deferred tax liability on these undistributed earnings is not practical.

The Company has been granted certain tax incentives, including tax holidays, for its subsidiaries in China, Malaysia and Thailand. These tax incentives, including tax holidays, expire on various dates through 2015 and are subject to certain conditions with which the Company expects to comply. The impact of these tax incentives was to lower income tax expense for the six month periods ended June 30, 2011 and 2010 by approximately $5.5 million (approximately $0.09 per diluted share) and $4.1 million (approximately $0.07 per diluted share), respectively.

As of June 30, 2011, the total amount of the reserve for uncertain tax benefits including interest and penalties is $18.2 million. The reserve is classified as a long-term liability in the consolidated balance sheet unless cash settlement is expected in the next 12 months. The amount of accrued potential interest and penalties on unrecognized tax benefits included in the reserve as of June 30, 2011 is $1.8 million and $1.6 million, respectively. No material changes affected the reserve during the three and six months ended June 30, 2011.

The Company and its subsidiaries in Brazil, China, Ireland, Luxembourg, Malaysia, Mexico, the Netherlands, Romania, Singapore, Thailand and the United States remain open to examination by the various local taxing authorities, in total or in part, for fiscal years 2004 to 2010. The Company's subsidiary in Thailand has filed for a refund of $7.8 million of previously paid income taxes, which is included in prepaid expenses and other assets. The Thailand tax authorities are currently conducting an examination of the applicable filings.

The Company is subject to examination by tax authorities for varying periods in various U.S. and foreign tax jurisdictions. During the course of such examinations disputes occur as to matters of fact and/or law. In most tax jurisdictions the passage of time without examination will result in the expiration of applicable statutes of limitations, thereby precluding the taxing authority from conducting an examination of the tax period(s) for which such statute of limitation has expired. The Company believes that it has adequately provided for its tax liabilities.