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Table of Contents
of cost method investment recognized in the year ended December 31, 2012, as compared to no gains recognized during the year ended December 31,
2013. For details of our hedging program and related foreign currency contracts, refer to Note 5, Derivative Financial Instruments
, in Notes to
Consolidated Financial Statements in Item 8 of Part II of this Annual Report on Form 10-K for further discussion.
2012 vs 2011
Interest income increased $21,000, or 4.4%, to $498,000 for the year ended December 31, 2012, from $477,000 for the year ended December 31,
2011. The increase in interest income was primarily attributable to an increase in our average balance of cash, cash equivalents, and short-term
investments during the year ended December 31, 2012, as compared to the year ended December 31, 2011, which was partially offset by falling interest
rates.
Other income and expense, net, increased $3.8 million to income of $2.7 million for the year ended December 31, 2012, from expense of $1.1
million for year ended December 31, 2011. The increase was primarily attributable to the $3.1 million gain on the sale of a cost method investment. In
addition, our foreign currency hedging program reduced volatility associated with hedged currency exchange rate movements during the year ended
December 31, 2012.
Provision for Income Taxes
2013 vs 2012
Provision for income taxes decreased by $5.0 million , resulting in a provision of $37.8 million for the year ended December 31, 2013
, compared
to a provision of $42.7 million for the year ended December 31, 2012 . The effective tax rate increased to 40.6% for the year ended
December 31, 2013
from 33.1% for the year ended December 31, 2012
. The decrease in tax was mainly due to lower consolidated pretax income. The effective tax rate for
both periods differed from the statutory rate of 35% due to earnings from foreign jurisdictions, state taxes, tax credits and non-
deductible expenses. For
the year ended December 31, 2013, tax on earnings from foreign operations increased the effective tax rate by 3.9 percentage points compared to a
decrease of 4.8 percentage points for 2012. The increase in the effective tax rate from earnings of foreign operations in 2013 compared to 2012 resulted
from the tax effect of non-
deductible losses in foreign jurisdictions where no benefit can be claimed as well as increases in accruals for uncertain tax
positions in foreign jurisdictions. The tax rate increase was partially offset by the recognition of a tax benefit for the 2012 U.S. federal research credit.
On January 2, 2013 the American Taxpayer Relief Act of 2012 reinstated the research credit, retroactive to January 1, 2012. Accordingly, the entire
benefit for the 2012 research credit of approximately $822,000 was recognized in 2013.
2012 vs 2011
Provision for income taxes increased $9.9 million, resulting in a provision of $42.7 million for the year ended December 31, 2012, compared to a
provision of $32.8 million for the year ended December 31, 2011. The effective tax rate increased to 33.1% for the year ended December 31, 2012 from
26.4% for the year ended December 31, 2011. The effective tax rate for both periods differed from the statutory rate of 35% due to earnings from
foreign jurisdictions, state taxes and other non-deductible expenses. Non-
deductible expenses in the year ended December 31, 2012 included certain
stock based compensation. For the year ended December 31, 2012, tax on earnings from foreign operations reduced the effective tax rate by 4.8
percentage points compared to 9.5 percentage points for 2011. The increase in the effective tax rate from earnings of foreign operations in 2012
compared to 2011 resulted from a decrease in the profitability of international operations located in tax jurisdictions with rates below 35%. Additionally,
the effective tax rate was higher due to the expiration of tax laws providing for the US federal research credit for the year ended December 31, 2012.
Tax rate increases were partially offset by a reduction in accruals for uncertain tax positions as a result of the completion of a tax audit by the US
Internal Revenue Service.
Net Income
2013 vs 2012
Net income decreased $31.3 million to $55.2 million for the year ended December 31, 2013 , from $86.5 million for the year ended
December 31,
2012
. This decrease was primarily due to a decrease of $3.2 million in other income, and an increase in operating expenses of $43.1 million, primarily
attributable to acquisition-
related activity and increased investments in research and development. These changes were partially offset by an increase of
$10.1 million in gross profits and a decrease in the provision for income taxes of $5.0 million.
48