Income Taxes (Tables)

12 Months Ended

Dec. 31, 2012

Provision (benefit) for income taxes reflected in the accompanying consolidated statements of operations are comprised of the following (in thousands):

	2010			2011			2012
Federal	$	1,656		$	(12,674	)	$	97
State and local		3,290			(661	)		307
Foreign		7,915			4,590			3,467
Total Current		12,861			(8,745	)		3,871
APIC		(713	)		363			(114	)
Deferred		(9,455	)		(628	)		82,394
Total	$	2,693		$	(9,010	)	$	86,151

Components of Deferred Tax Assets (Liabilities)

The components of deferred tax assets/(liabilities) are as follows (in thousands):

	2011			2012
Net deferred tax assets/(liabilities):
Current:
Reserve for sales allowances and possible losses	$	2,184		$	1,124
Accrued expenses		3,127			3,908
Federal and state net operating loss carryforwards		9,035			―
Prepaid Royalties		18,338			18,155
Accrued Royalties		2,081			2,328
Inventory		5,480			6,591
State income taxes		(6,767	)		(7,429	)
Other		1,027			1,063
Gross current		34,505			25,740
Valuation allowance		―			(18,682	)
Net Current		34,505			7,058
Long Term:
Federal and state net operating loss carry fowards		―			17,305
Property and equipment		3,777			5,380
Original issue discount interest		(20,273	)		(19,095	)
Goodwill and intangibles		61,076			50,765
Share Based Compensation		2,588			2,467
Other		(87	)		6,009
Gross long-term		47,081			62,831
Valuation allowance		―			(73,011	)
Net long-term		―			(10,180	)
Total net deferred tax assets/(liabilities)	$	81,586		$	(3,122	)

Significant Differences in Tax at Statutory and Effective Rates

Provision (benefit) for income taxes varies from the U.S. federal statutory rate. The following reconciliation shows the significant differences in the tax at statutory and effective rates:

	2010			2011			2012
Federal income tax expense (benefit)		35.0	%		35.0	%		35.0	%
State income tax expense, net of federal tax effect		1.65			415.9			5.6
Effect of differences in U.S. and Foreign statutory rates		(14.55	)		1031.8			20.8
Uncertain tax positions		(10.39	)		54.2			2.1
Refund from IRS Exam		(8.03	)		―			―
State tax refund adjustment		—			180.0			―
Goodwill write-down		—			―			―
Foreign NOLs		—			―			―
Other		1.73			(46.2	)		(6.4	)
Foreign deemed dividend		—			—			(51.8	)
Foreign tax credit		—			—			24.4
Valuation Allowance		—			—			(491.7	)
		5.41	%		1670.7	%		(462.0)	%

Income (Loss) Before Provision (benefit) for Income Tax

The components of income (loss) before provision (benefit) for income taxes are as follows (in thousands):

	2010		2011			2012
Domestic	$	20,066	$	(30,577	)	$	(38,674	)
Foreign		29,676		30,039			20,025
	$	49,742	$	(538	)	$	(18,649	)

Effective Tax Rate

The following table provides further information of UTPs that would affect the effective tax rate, if recognized, as of December 31, 2012 (in millions):

Balance, January 1, 2010	$	16.8
Current year additions		1.8
Current year reduction due to lapse of applicable statute of limitations		(13.6	)
Balance, January 1, 2011		5.0
Current year additions		1.0
Current year reduction due to lapse of applicable statute of limitations		(1.0	)
Balance, January 1, 2012		5.0
Current year additions		0.6
Current year reduction due to lapse of applicable statute of limitations		(0.8	)
Balance, December 31, 2012	$	4.8