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Income Taxes
9 Months Ended
Sep. 30, 2012
Income Tax Disclosure [Abstract]  
Income Taxes
INCOME TAXES
The Company’s income tax (benefit) was $(298,000) and $(550,000) and the effective income tax rate was 3.8% and 2.2% for the three and nine months ended September 30, 2012, respectively, as compared to an income tax expense of $52,000 and $132,000 and an effective income tax rate of (1.2)% and (0.2)% for the three and nine months ended September 30, 2011, respectively. The increase in the income tax benefit primarily relates to the expected reversal of deferred tax liabilities assumed in connection with the Sonar acquisition, offset by additional foreign income taxes. The Company’s effective tax rate differs from the statutory rate primarily due to the amortization of deferred tax liabilities assumed as part of the Sonar acquisition, the change in the valuation allowance on the Company’s deferred tax assets and foreign income taxes.
The Company recorded valuation allowances on the net deferred tax assets of the Company’s U.S. operations and certain foreign jurisdictions and does not anticipate recording an income tax benefit related to these deferred tax assets. The Company will reassess the realization of deferred tax assets each reporting period and will be able to reduce the valuation allowance to the extent that the financial results of these operations improve and it becomes more likely than not that the deferred tax assets are realizable.
As a result of the acquisition of Sonar, on April 5, 2012, the Company recorded net deferred tax liabilities of $1.8 million, primarily related to timing differences for the amortization of intangible assets. These New Zealand based deferred tax liabilities are not available to offset the Company’s other net deferred tax assets in other tax jurisdictions.
The Company is subject to U.S. federal income tax, state income tax and various foreign income taxes. The Company is subject to examination for years after 2008 and 2007 for its U.S. federal income tax returns and state income tax returns, respectively. The Company is subject to examination by various foreign jurisdictions for years after 2007. The Company believes it has adequately reserved for its uncertain tax positions; however, there is no assurance that taxing authorities will not propose adjustments that are more or less than the Company's expected outcome. It is not expected that the amount of unrecognized tax benefits will be recognized in the next twelve months. In addition, the Company does not expect the change in uncertain tax positions to have a material impact on its financial position, results of operations or liquidity.