Income Taxes (Tables)

12 Months Ended

Dec. 31, 2012

Income tax expense (benefit), net of valuation allowance

The Company recorded net income tax expense in 2012 and 2010 and a net tax benefit in 2011. Income tax expense (benefit), net of valuation allowance, consisted of the following:

	Year Ended December 31,
	2012			2011			2010
United States - Federal tax:
Current	$	2,752		$	246		$	3,232
Deferred		(1,572	)		(5,495	)		1,394

United States - State tax:
Current		315			-			457
Deferred		(2,074	)		(243	)		61

Israel:
Current		4,034			3,487			580
Deferred		(50	)		(17	)		563

United Kingdom: (Restated)
Current		-			-			-
Deferred		1,033			-			-

Income tax expense (benefit)	$	4,438		$	(2,022	)	$	6,287

Reconciliation of the effective tax rate

A reconciliation of the effective tax rate with a hypothetical overall rate of 40.5% follows. The overall rate is comprised of a Federal rate of 34% and a blended State rate of 6.5%. The hypothetical rate of 40.5% is merely an expectational or notional rate, and not necessarily the rate that applies to the group in any given instance. There is no material effect from U.K. operations in 2011 through Photo Therapeutics Limited that were part of Pre-merged PhotoMedex.

	Year Ended December 31,
	2012			2011			2010
Net income before tax:
U.S	$	3,152		$	(16,309	)	$	12,386
Israel		20,414			13,980			5,502
U.K.		3,365			-			-
Total		26,931			(2,329	)		17,888
Tax rate		40.5	%		40.5	%		40.5	%


Theoretical Federal and State expense (benefit)	$	10,907		$	( 943	)	$	7,244
Decrease in taxes resulting from differences in tax rates, net		(5,539	)		(4,249	)		(869	)
Increase in taxes from permanent differences in stock-based compensation		737			3,109			158
Decrease in tax position from prior years		(2,325	)		-			-
Other*		658			61			(246	)

Income tax expense (benefit)	$	4,438		$	( 2,022	)	$	6,287

* Resulting mainly in 2011 and 2010 from the changes in the exchange rate of Israeli currency relative to the US dollar. Resulting in 2012, substantially from the use of loss carryforwards.

Deferred tax assets (liabilities)

Deferred tax assets (liabilities) are comprised of the following.

	December 31,
	2012			2011
	(Restated)			(Restated)

Loss carryforwards	$	20,122		$	28,167
AMT credits:		1,495			203
Foreign tax credits:		446			-
Temporary differences
Accrued employment expenses		718			597
Amortization and write-offs		10,557			(5,744	)
Deferred R&D costs		3,670			3,786
Deferred revenues		301			211
Depreciation		5,537			3,760
Doubtful accounts		2,121			1,086
Other accruals and reserves		617			2,050
Return allowances		4,118			2,181

Gross deferred tax asset		49,702			36,297

Less: valuation allowance		(10,075	)		-

Net deferred tax asset	$	39,627		$	36,297

Among current assets	$	19,441		$	10,860
Among other non-current assets		20,186			25,437

Reconciliation of the beginning and ending amount of unrecognized tax benefits

Reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:


Balance at January 1, 2010	$	2,700
Additions / Reductions during 2010		-
Balance December 31, 2010		2,700
Additions/ Reductions during 2011		-
Balance at December 31, 2011		2,700
Additions / Reductions during 2012		(2,325	)
Balance at December 31, 2012	$	375