Note 12 - Income Taxes

12 Months Ended

Dec. 31, 2012

Income Tax Disclosure [Text Block]

(12)            Income Taxes

The components of the benefit for income taxes for the period for the years ended December 31, 2010, 2011 and 2012 were as follows (in thousands):

	December 31,
	2010			2011			2012
Current:
Federal	$	1,913		$	422		$	6,719
State		285			352			2,547
Foreign		724			1,508			3,949
		2,922			2,282			13,215
Deferred:
Federal		(4,120	)		(5,189	)		(13,285	)
State		(616	)		(916	)		(2,857	)
Foreign		(670	)		(259	)		(5,059	)
Total		(5,406	)		(6,364	)		(21,201	)
Benefit for income taxes	$	(2,484	)	$	(4,082	)	$	(7,987	)

Deferred taxes result from temporary differences between the bases of assets and liabilities for financial reporting purposes and such amounts as measured by tax laws and regulations. The sources of the temporary differences and their effect on deferred tax assets and liabilities as of December 31, 2011 and 2012 were as follows (in thousands):

	December 31,
	2011						2012
	Current			Noncurrent			Current			Noncurrent
Deferred tax assets:
Allowance for doubtful accounts	$	2,578		$	—		$	2,415		$	—
Loss on interest rate swap		—			131			40			—
Net operating loss carryforwards		1,224			—			—			144
Shared-based compensation		—			3,565			—			8,112
Tax credits		—			2,407			—			—
Foreign currency translation		—			960			—			60
Other deferred tax assets		329			1,115			440			1,303
Total deferred tax assets		4,131			8,178			2,895			9,619
Deferred tax liabilities:
Basis difference of intangible assets		—			(4,308	)		—			(1,606	)
Basis difference of property and equipment		—			(1,168	)		—			(1,364	)
Cash to accrual adjustments		(2,154	)		(4,758	)		(2,363	)		(2,467	)
Other deferred tax liabilities		(337	)		(103	)		(516	)		(9	)
Total deferred tax liabilities		(2,491	)		(10,337	)		(2,879	)		(5,446	)
Net deferred tax assets (liabilities)	$	1,640		$	(2,159	)	$	16		$	4,173

The reconciliation of income tax computed at the U.S. federal statutory rate to income tax benefit for the years ended December 31, 2010, 2011 and 2012 were as follows (in thousands):

	December 31,
	2010		2011		2012
Expected tax benefit	$	(2,897)	$	(4,221)	$	(8,024)
Increase (decrease) in income taxes resulting from:
State income taxes, net of federal benefit		(297)		(274)		(770)
Non-deductible items		636		668		274
Tax rate international		(14)		(533)		551
Other		88		278		(18)
Income tax benefit	$	(2,484)	$	(4,082)	$	(7,987)

The Company generated $5.2 million of U.S. federal taxable income in the year ended December 31, 2010, fully utilizing its U.S. federal net operating losses (“NOLs”) from 2009.  

In 2011, in conjunction with the MES acquisition, the Company acquired $23.3 million of NOLs. These NOLs were subject to annual limitations resulting from the change in control provisions in section 382 of the Internal Revenue Code (“IRC Section 382”). The Company generated $18.7 million of U.S. federal taxable income in the year ended December 31, 2011 and utilized $18.7 million of the NOLs in 2011 to offset against this U.S. federal taxable income. As of December 31, 2011, the Company had $4.6 million in NOLs to offset against future U.S. federal taxable income. Additionally, in conjunction with the MES acquisition, the Company acquired alternative minimum tax ("AMT") credit carryforwards of $171,000 which may be used to offset future U.S. federal tax liabilities.  As of December 31, 2011 the Company had $894,000 in foreign tax credits related to income taxes payable at certain of its businesses located in the U.K. which may be used to offset against future U.S. federal tax liabilities.

For the year ended December 31, 2012, the Company generated an estimated $35.3 million of U.S. federal taxable income and fully utilized $4.6 million in NOLs from the 2011 year.  For the year ended December 31, 2012 the Company utilized AMT credits of $171,000 to offset its U.S. federal tax liabilities. During the year ended December 31, 2012, the Company generated an additional estimated $2.5 million in foreign tax credits related to income taxes payable at certain of its businesses located in the U.K. and Australia and utilized $3.4 million in foreign tax credits to offset its current tax liability.  Additionally, in 2012 we utilized $7.9 million of option related tax benefits, reducing its income taxes payable by $2.9 million, the benefit of which was recorded to additional paid in capital.  Management believes that it is more likely than not that the recorded deferred tax assets will be realized.

The Company applies the provisions of ASC 740 as it relates to uncertain tax positions. This interpretation prescribes a comprehensive model for how a company should recognize, measure, present and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on a tax return. ASC 740 states that a tax benefit from an uncertain tax position may be recognized only if it is “more likely than not” that the position is sustainable, based on its technical merits. The tax benefit of a qualifying position is the largest amount of tax benefit that is greater than 50% likely of being realized upon settlement with a taxing authority having full knowledge of all relevant information.

As of December 31, 2010, the liability related to unrecognized tax benefits was approximately $176,000. The Company recorded an additional liability of $132,000 and $19,000 in the years ended December 31, 2011 and 2012, respectively, related to acquired liabilities for unrecognized tax benefits and interest and penalties on prior year tax positions. The Company recognizes interest and penalties accrued related to unrecognized tax benefits in income tax expense.

The following table summarizes the activity related to the unrecognized tax benefits for the years ended December 31, 2011 and 2012 (in thousands):

Balance at January 1, 2011	$	176
Increase to prior year tax positions		132
Increase to current year tax positions		—
Expiration of the statute of limitations for the assessment of taxes		—
Decrease related to settlements		—
Balance at December 31, 2011		308
Increase to prior year tax positions		19
Increase to current year tax positions		—
Expiration of the statute of limitations for the assessment of taxes		—
Decrease related to settlements		—
Balance at December 31, 2012	$	327

The Company is no longer subject to U.S. federal income or state tax return examinations by tax authorities for tax years before 2008 and 2007, respectively, which periods relate to certain acquired businesses. The Internal Revenue Service (“IRS”) commenced an examination of the Company’s U.S. income tax returns for 2009 during the second quarter of 2011, and in January 2012, the Company received a closure letter from the IRS stating that no adjustments were identified. The Company operates in multiple taxing jurisdictions and faces audits from various tax authorities. The Company remains subject to examination until the statute of limitations expires for the respective tax jurisdiction. The Company does not anticipate that the amount of the unrecognized benefit will significantly increase or decrease within the next 12 months.

Undistributed earnings of the Company’s foreign subsidiaries are considered indefinitely reinvested and, accordingly, no provision for U.S. federal income taxes has been recorded. Deferred taxes are provided for earnings outside the United States when those earnings are not considered indefinitely reinvested.