expense consists primarily of the interest associated with outstanding long-term debt obligations, including the amortization of debt issuance costs, as well as interest on our lease financing obligations.

Interest expense for the year ended December 31, 2013 consists primarily of $26.1 million of interest on our notes. The increase in interest expense for the year ended December 31, 2013 as compared the year ended December 31, 2012 is due to the higher aggregate principal of interest bearing notes outstanding, partially offset by the lower interest rate. 

Interest expense was relatively flat as compared to the prior year. Interest expense in 2012 consists primarily of $17.0 million of interest due on our 8.50% Notes.



Interest and Other Income (Expense)

Interest and other income (expense) consists primarily of interest earned on cash, cash equivalents and short-term investments and foreign exchange gains and losses on foreign currency denominated balances.

Interest and other income (expense) decreased due to increased foreign exchange losses on foreign currency denominated balances. The foreign exchange losses were $8.4 million and $4.0 million for the years ended December 31, 2013 and 2012, respectively.

Interest and other income (expense)

Interest and other income (expense) decreased due to increased foreign exchange losses on foreign currency denominated balances. The foreign exchange loss was $4.0 million for the year ended December 31, 2012 and were immaterial for the year ended December 31, 2011.

Extinguishment of Debt

In connection with the redemption of the outstanding $200.0 million aggregate principal amount of the 8.50% Notes, we recognized a loss on extinguishment of debt of $25.1 million in the year ended December 31, 2013, which consisted of expenses associated with the redemption, including a $19.4 million premium payment pursuant to the make-whole provision in the indenture governing the 8.50% Notes.

Provision for Income Taxes

In 2013, the difference between our effective tax rate and the federal statutory rate of 35% was $1.2 million primarily due to the Federal and California research and development ("R&D") credits partially offset by state income taxes and nondeductible expenses. The decrease in our effective tax rate for the year ended December 31, 2013 as compared to the year ended December 31, 2012 was primarily attributable to the retroactive reinstatement of the 2012 Federal R&D credit in January 2013.

On January 2, 2013, the American Taxpayer Relief Act of 2012 (H.R. 8) was signed into law which retroactively extended the Federal R&D credit from January 1, 2012 through December 31, 2013. As a result, we recognized the retroactive benefit of the 2012 Federal R&D credit of approximately $3.1 million as a discrete item in the first quarter of 2013, the period in which the legislation was enacted.

In 2012, the difference between our effective tax rate and the federal statutory rate of 35% was $2.7 million primarily due to state income taxes and nondeductible expenses partially offset by the California R&D credit. The increase in our effective tax rate for the year ended December 31, 2012 as compared to