18. INCOME TAXES

12 Months Ended

Dec. 31, 2011

Income Tax Disclosure [Text Block]

18. INCOME TAXES

The components of income (loss) from continuing operations before expense (benefit) for income taxes for 2011, 2010 and 2009 are as follows (in thousands):

	2011		2010			2009
United States	$	1,633	$	(12,510	)	$	18,130
Foreign		23,841		23,016			20,028
Total	$	25,474	$	10,506		$	38,158

Income tax expense (benefit) from continuing operations for 2011, 2010 and 2009 is as follows (in thousands):

	2011			2010			2009
Current:
Federal	$	(810	)	$	(458	)	$	5,265
State		984			229			124
International		5,598			5,217			5,831
Total current		5,772			4,988			11,220
Deferred:
Federal		2,515			(2,798	)		3,689
State		1,575			(1,000	)		184
International		(1,276	)		350			(2,693	)
Total deferred		2,814			(3,448	)		1,180
Income tax expense	$	8,586		$	1,540		$	12,400

The difference between the statutory federal income tax rate and our effective income tax rate applied to income before income taxes from continuing operations for 2011, 2010 and 2009 is as follows (in thousands):

	2011			2010			2009
Federal rate	$	8,917		$	3,677		$	13,356
State taxes, net of federal benefit		2,205			(490	)		472
Foreign taxes		(4,582	)		(827	)		(2,282	)
Change in valuation allowance		97			115			423
Research and development credits		117			(600	)		(600	)
Non-deductible employee compensation		395			878			1,410
Deferred true-up		873			—			—
Other, net		263			(274	)		(371	)
Uncertain tax matters		301			(939	)		(8	)
Income taxes at our effective rate	$	8,586		$	1,540		$	12,400

Excess tax (deficiencies) benefits of approximately ($0.5) million, ($0.6) million, and $1.6 million in 2011, 2010 and 2009, respectively, are associated with restricted stock award releases and non-qualified stock option exercises, the impact of which was recorded directly to additional paid-in capital.

Differences between the financial accounting and tax basis of assets and liabilities giving rise to deferred tax assets and liabilities are as follows at December 31, 2011 and 2010 (in thousands):

	2011			2010
Deferred tax assets:
Net operating loss carryforwards	$	24,259		$	19,110
Capital loss carryforwards		15,425			25,622
Restructuring costs		1,105			2,286
Accrued expenses		2,165			3,285
Other assets		4,285			—
Other tax credits		8,543			5,426
Gross deferred tax assets		55,782			55,729
Valuation allowance		(24,145	)		(33,665	)
Total deferred tax assets		31,637			22,064
Deferred tax liabilities:
Property and equipment		(18,101	)		(22,708	)
Intangible assets		(9,381	)		(2,199	)
Other liabilities		(1,760	)		(201	)
Total deferred tax liabilities		(29,242	)		(25,108	)
Deferred income taxes, net	$	2,395		$	(3,044	)

At December 31, 2011, we had federal income tax net operating loss carryforwards of approximately $41.8 million expiring in 2012 through 2030. The utilization of some of our net operating losses is subject to Internal Revenue Code of 1986, as amended, Section 382 limitations related to one of our previous acquisitions. We had federal capital loss carryforwards of approximately $42.6 million expiring in 2014 and 2015. We also had foreign income tax net operating loss carryforwards of approximately $9.7 million, some of which have expiration years beginning in 2015 and some of which are unlimited. If certain substantial changes to our ownership occur, there could be additional annual limitations on the amount of the carryforwards that can be utilized.

The undistributed earnings of our foreign subsidiaries are not subject to U.S. federal and state income taxes unless such earnings are distributed in the form of dividends or otherwise to the extent of current and accumulated earnings and profits. Upon distribution, we would be subject to both U.S. income taxes, net of foreign tax credits, and withholding taxes payable to the various foreign countries. The undistributed earnings of our foreign subsidiaries are permanently reinvested to the extent the earnings cannot be distributed free of U.S. income taxes or are not subject to a loan payable held by the foreign subsidiary to a U.S. affiliate. The undistributed earnings of our foreign subsidiaries that are considered permanently reinvested and have not been remitted to the United States totaled $71.4 million and $73.2 million as of December 31, 2011 and 2010, respectively. We made the determination of permanent reinvestment on the basis of sufficient evidence that demonstrates that we will invest the undistributed earnings overseas indefinitely for use in working capital as well as foreign acquisitions and expansion. The determination of the amount of the unrecognized deferred U.S. income tax liability related to the undistributed earnings is not practicable; however, unrecognized foreign income tax credits would be available to reduce a portion of this liability.

A reconciliation of unrecognized tax benefits at the beginning and end of the years presented is as follows (in thousands):

	2011			2010			2009
Balance at January 1,	$	3,719		$	5,707		$	5,391
Additions for tax positions for the current year		91			478			213
Additions for tax positions for prior years		1,186			249			128
Reductions for tax positions for prior years		(230	)		(948	)		(73	)
Settlements with taxing authorities		(1,200	)		(141	)		(30	)
Expiration of the statute of limitations		(119	)		(1,626	)		78
Balance at December 31,	$	3,447		$	3,719		$	5,707

Upon resolution, unrecognized tax benefits of $2.5 million and $2.3 million as of December 31, 2011 and 2010, respectively, would affect our annual effective tax rate. The unrecognized tax benefits at December 31, 2011 are included in “Other assets,” and “Accrued expenses” under “Long-Term Liabilities” in our consolidated balance sheets. We do not anticipate any significant changes in unrecognized tax benefits over the next 12 months.

We recognize interest and penalties related to uncertain tax positions in “Interest expense” and “Operating expenses,” respectively, in our consolidated statements of operations. During the years ended December 31, 2011, 2010 and 2009, we recognized interest and penalties expense (benefit) of $0.8 million, ($0.1) million, and ($0.1) million, respectively. As of December 31, 2011 and 2010, we had accrued interest and penalties of approximately $2.4 million and $1.6 million, respectively, related to uncertain tax positions. As interest and penalties are classified as “Interest expense” and “Operating expenses,” respectively, the accrual or recognition of interest and penalties from the associated uncertain tax positions will not affect our annual effective tax rate.

In the normal course of business, we are subject to inquiries and routine income tax audits from U.S. and non-U.S. tax authorities with respect to income taxes. In major tax jurisdictions, tax years 2000 to 2011 remain subject to income tax examinations by tax authorities. These inquiries may result in adjustments to the timing or amount of taxable income and deductions or the allocation of income among tax jurisdictions.

An analysis of our deferred tax asset valuation allowances is as follows (in thousands):

Balance as of December 31, 2008,	$   12,631
Additions	4,526
Deductions	—
Balance as of December 31, 2009,	17,157
Additions	17,699
Deductions	(1,191)
Balance as of December 31, 2010	33,665
Additions	—
Deductions	(9,520)
Balance at December 31, 2011	$   24,145

Our valuation allowance at December 31, 2011 primarily relates to certain foreign and state net operating loss and capital loss carryforwards that, in the opinion of management, are more likely than not to expire unutilized. During the year ended December 31, 2011, our valuation allowance decreased by approximately $9.5 million primarily as a result of a change in purchase price allocation that affected capital loss carryforwards related to our PGiSend sale.

During the year ended December 31, 2010, our valuation allowance increased by approximately $16.5 million, primarily as a result of an increase in the valuation reserves placed on the capital loss carryforwards related to our PGiSend sale.

During the year ended December 31, 2009, our valuation allowance increased by approximately $4.5 million, primarily as a result of establishing an accounting valuation allowance against deferred tax assets for certain foreign subsidiaries.