TAXES

The sources of income (loss) before income taxes for the years ended December 31, 2012, 2011 and 2010 are presented as follows:



	Year Ended December 31,
(in thousands)	2012			2011			2010
Income (loss) before taxes:
United States	$	(3,002	)	$	(9,300	)	$	(13,149	)
Foreign	50,336			72,092			(1,869		)
Total income (loss) before income taxes	$	47,334		$	62,792		$	(13,796	)

The Company's income tax expense for the years ended December 31, 2012, 2011 and 2010 consisted of the following:



	Year Ended December 31,
(in thousands)	2012			2011			2010
Current tax expense (benefit):
U.S.	$	6,363		$	1,367		$	(55	)
Foreign	26,579			23,679			26,632
Total current	32,942			25,046			26,577
Deferred tax expense (benefit):
U.S.	369			1,206			780
Foreign	(6,374		)	(1,548		)	(4,458		)
Total deferred	(6,005		)	(342		)	(3,678		)
Total tax expense	$	26,937		$	24,704		$	22,899

The following is a reconciliation of the federal statutory income tax rate of 35% to the effective income tax rate for 2012, 2011 and 2010:



	Year Ended December 31,
(dollar amounts in thousands)	2012			2011			2010
U.S. federal income tax expense (benefit) at applicable statutory rate	$	16,567		$	21,977		$	(5,256	)
Tax effect of:
State income tax expense at statutory rates	1,514			238			555
Non-deductible expenses	426			2,838			4,785
Share-based compensation	(89		)	(76		)	(220		)
Other permanent differences	1,096			(1,771		)	(1,798		)
Difference between U.S. federal and foreign tax rates	(8,407		)	(5,140		)	(4,484		)
Provision in excess of statutory rates	(965		)	1,285			(600		)
Change in federal and foreign valuation allowance	6,882			5,900			11,319
Impairment of goodwill and acquired intangible assets	8,149			—			20,246
Other	1,764			(547		)	(1,648		)
Total income tax expense (benefit)	$	26,937		$	24,704		$	22,899
Effective tax rate	56.9		%	39.3		%	(152.5		)%

The tax effect of temporary differences and carryforwards that give rise to deferred tax assets and liabilities from continuing operations are as follows:



	As of December 31,
(in thousands)	2012			2011
Deferred tax assets:
Tax loss carryforwards	$	28,285		$	49,146
Share-based compensation	6,344			7,168
Accrued expenses	7,109			4,568
Property and equipment	5,221			5,473
Goodwill and intangible amortization	37,265			41,665
Intercompany notes	9,532			13,386
Other	14,945			8,614
Gross deferred tax assets	108,701			130,020
Valuation allowance	(89,863		)	(84,624		)
Net deferred tax assets	18,838			45,396
Deferred tax liabilities:
Intangibles related to purchase accounting	(11,365		)	(14,616		)
Goodwill and intangible amortization	(4,735		)	(6,604		)
Accrued expenses	(7,004		)	(4,538		)
Intercompany notes	(915		)	(2,022		)
Accrued interest	(703		)	(30,194		)
Capitalized research and development	(1,863		)	(1,276		)
Property and equipment	(2,632		)	(2,433		)
Other	(5,899		)	(6,620		)
Total deferred tax liabilities	(35,116		)	(68,303		)
Net deferred tax liabilities	$	(16,278	)	$	(22,907	)

Subsequently recognized tax benefits relating to the valuation allowance for deferred tax assets as of December 31, 2012 are expected to be allocated to income taxes in the Consolidated Statements of Operations with the following exception. The tax benefit of net operating losses generated from share-based compensation have been excluded from the amounts disclosed for tax loss carryforwards and valuation allowance to the extent the benefit will be recognized in equity if realized. The excluded tax benefit of $20.2 million will be allocated to additional paid-in capital when utilized to offset taxable income.

As of December 31, 2012, and 2011, the Company's U.S. federal and foreign tax loss carryforwards were $152.1 million and $211.3 million, respectively, and U.S. state tax loss carryforwards were $50.3 million and $66.3 million, respectively.

In assessing the Company's ability to realize deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not the Company will only realize the benefits of these deductible differences, net of the existing valuation allowances, at December 31, 2012.

At December 31, 2012, the Company had U.S. federal and foreign tax net operating loss carryforwards of $152.1 million, which will expire as follows:



(in thousands)	Gross		Tax Effected
Year ending December 31,
2013	$	4,650	$	894
2014	3,790		865
2015	8,385		1,711
2016	7,678		1,727
2017	7,663		1,637
Thereafter	104,930		34,196
Unlimited	14,990		2,895
Total	$	152,086	$	43,925

In addition, the Company's state tax net operating loss carryforwards of $50.3 million will expire periodically from 2014 through 2032.

No provision has been made in the accounts as of December 31, 2012 for U.S. federal and state income taxes which would be payable if the gross undistributed earnings of the foreign subsidiaries were distributed to the Company since management has determined that the earnings are permanently reinvested. Gross undistributed earnings reinvested indefinitely in foreign subsidiaries aggregated $404.5 million as of December 31, 2012. The determination of the amount of unrecognized deferred U.S. income tax liabilities and foreign tax credits, if any, is not practicable to calculate at this time.

Accounting for uncertainty in income taxes

A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31, 2012 and 2011 is as follows:



	Year Ended December 31,
(in thousands)	2012			2011
Beginning balance	$	12,045		$	8,473
Additions based on tax positions related to the current year	1,293			3,193
Additions for tax positions of prior years	355			735
Reductions for tax positions of prior years	(1,208		)	(356		)
Settlements	(1,115		)	—
Ending balance	$	11,370		$	12,045

As of December 31, 2012 and 2011, approximately $5.7 million and $6.5 million, respectively, of the unrecognized tax benefits would impact the Company's provision for income taxes and effective income tax rate, if recognized. Total estimated accrued interest and penalties related to the underpayment of income taxes was $2.4 million and $1.8 million as of December 31, 2012 and 2011, respectively. The following income tax years remain open in the Company's major jurisdictions as of December 31, 2012:



U.S. (Federal)	2000 through 2002, 2004 through 2006, and 2009 through 2012
Poland	2007 through 2012
Spain	2005 through 2012
Australia	2007 through 2012
U.K.	2008 through 2012
Germany	2007 through 2012

The application of ASC 740-10-25 and -30 requires significant judgment in assessing the outcome of future income tax examinations and their potential impact on the Company's estimated effective income tax rate and the value of deferred tax assets, such as those related to the Company's net operating loss carryforwards. It is reasonably possible that a realization of at least $2.2 million of unrecognized tax benefits could occur within the next twelve months, resulting from the resolution of audit examinations and expirations of certain statutes of limitations.