Income Taxes

12 Months Ended

Dec. 31, 2012

Income Taxes [Abstract]

INCOME TAXES

11. INCOME TAXES

Income tax provision (benefit) for the years ended December 31, 2012, 2011 and 2010 consists of the following (in thousands):

	Year Ended December 31,
	2012		2011			2010
Current income tax provision (benefit):
Federal	$	303	$	(2,738	)	$	(16	)
State		88		(32	)		(355	)
		391		(2,770	)		(371	)
Deferred income tax provision (benefit):
Federal		510		164			136
State		108		1			64
		618		165			200
Total income tax provision (benefit)	$	1,009	$	(2,605	)	$	(171	)

The income tax provision (benefit) differs from the amount of income tax determined by applying the U.S. federal statutory rate to income before taxes as a result of the following (in thousands):

	Year Ended December 31,
	2012			2011			2010
U.S. federal statutory taxes	$	1,305		$	(4,826	)	$	(3,502	)
State and local taxes, net of U.S. federal benefit		(418	)		(650	)		(1,971	)
Permanent items		198			96			(1	)
Federal credits		(54	)		(59	)		(66	)
Other		46			(275	)		(503	)
Increase (decrease) in valuation allowance		(68	)		3,109			5,872
Total income tax provision (benefit)	$	1,009		$	(2,605	)	$	(171	)

Deferred tax assets and liabilities as of December 31, 2012 and 2011 consist of the following (in thousands):

	As of December 31,
	2012			2011
Deferred tax assets:
Net operating losses	$	9,962		$	23,043
Warranty reserve		11,406			6,306
Stock-based compensation		2,654			3,254
Accruals not currently deductible and other		8,193			3,959
Inventories		5,008			4,137
State tax credit carryforwards		4,105			4,252
Gross deferred tax assets, before valuation allowance		41,328			44,951
Valuation allowance		(24,131	)		(24,199	)
Gross deferred tax assets, after valuation allowance		17,197			20,752
Deferred tax liabilities:
Debt discount		—			(2,103	)
Depreciation and other		(20,758	)		(21,592	)
Gross deferred tax liabilities		(20,758	)		(23,695	)
Net deferred tax asset (liability)	$	(3,561	)	$	(2,943	)

The valuation allowance as of December 31, 2012 of $24.1 million is primarily attributable to the uncertainty related to the realizability of the Company’s deferred tax assets. The Company has considered all available evidence, both positive and negative, in determining the need for a valuation allowance. Based upon this analysis, including a consideration of the Company’s cumulative loss history in the three-year period ended December 31, 2012, management determined that it is not more likely than not that its deferred tax assets will be realized. The Company’s future realization of its deferred tax assets ultimately depends on the existence of sufficient taxable income in the carry-forward periods under the tax laws. The Company will analyze its position in subsequent reporting periods, considering all available positive and negative evidence, in determining the expected realization of its deferred tax assets.

The Company has federal net operating losses of $40.9 million at December 31, 2012 which expire starting 2027.

As of December 31, 2012, the Company has effectively eliminated all unrecognized tax benefits. The following table illustrates changes to recorded unrecognized tax benefits for the years ended December 31, 2012, 2011 and 2010 (in thousands):

	Year Ended December 31,
	2012			2011			2010
Unrecognized tax benefits balance at January 1	$	60		$	3,126		$	3,752
Gross increases related to prior year tax positions		—			1			—
Gross decreases related to prior year tax positions		(36	)		(2,760	)		—
Settlements		(22	)		(245	)		(609	)
Lapse of statute of limitations		(2	)		(62	)		(17	)
Unrecognized tax benefits balance at December 31	$	—		$	60		$	3,126

The Company recognizes interest and penalties related to tax matters as a component of “Selling, general and administrative expenses” in the accompanying consolidated statements of comprehensive income. As of December 31, 2012 and December 31, 2011, the Company had no material amounts accrued for interest or penalties related to uncertain tax positions.

The Company operates in multiple tax jurisdictions and, in the normal course of business, its tax returns are subject to examination by various taxing authorities. Such examinations may result in future assessments by these taxing authorities and the Company has accrued a liability when it believes that it is not more likely than not that it will realize the benefits of tax positions that it has taken or for the amount of any tax benefit that exceeds the cumulative probability threshold in accordance with ASC 740. The Company believes that adequate provisions have been made for all tax returns subject to examination.