Income Taxes

12 Months Ended

Dec. 31, 2011

Income Taxes

Income Taxes

(11) Income Taxes

        Income tax expense (benefit) from continuing operations consists of the following:

	Year Ended December 31,
	2011			2010			2009
	(In thousands)
Current:
Federal	$	(1,054	)	$	1,521		$	(436	)
State and local		250			450			380
Foreign		6,572			5,083			6,389
		5,768			7,054			6,333
Deferred:
Federal		22,713			(24,268	)		1,033
State and local		3,247			(5,248	)		226
Foreign		940			(927	)		(1,182	)
		26,900			(30,443	)		77
Income tax expense (benefit)	$	32,668		$	(23,389	)	$	6,410

        U.S. and foreign income (loss) from continuing operations before income taxes are as follows:

	Year Ended December 31,
	2011			2010			2009
	(In thousands)
United States	$	(50,841	)	$	(100,112	)	$	(46	)
Foreign		31,404			21,187			19,121
Income (loss) before income taxes	$	(19,437	)	$	(78,925	)	$	19,075

        U.S. and foreign income tax expense (benefit) are as follows:

	Year Ended December 31,
	2011		2010			2009
	(In thousands)
United States	$	25,156	$	(27,545	)	$	1,203
Foreign		7,512		4,156			5,207
Income tax expense (benefit)	$	32,668	$	(23,389	)	$	6,410

        Income tax expense (benefit) differs from the amounts computed by applying the statutory U.S. Federal income tax rate to income (loss) before income taxes as a result of the following:

	Year Ended December 31,
	2011			2010			2009
	(In thousands)
Income tax expense (benefit) at the federal statutory rate of 35%	$	(6,803	)	$	(27,624	)	$	6,676
Increase (decrease) resulting from:
State income taxes, net of federal income tax benefit		3,497			(3,119	)		394
Non-deductible other costs		1,489			1,410			1,197
Goodwill impairment		1,811			9,003			—
Federal research credit		—			—			(1,083	)
Valuation allowance—domestic		27,028			—			—
Foreign cash repatriation		10,500			—			—
Impact of foreign taxes		(3,478	)		(2,267	)		(1,485	)
Other		(1,376	)		(792	)		711
Income tax expense (benefit)	$	32,668		$	(23,389	)	$	6,410

        The components of the net deferred tax asset or liability are as follows:

	December 31,
	2011			2010
	(In thousands)
Deferred tax assets:
Accrued expenses	$	7,709		$	8,547
Federal tax credit carryforwards		6,600			6,707
U.S. net operating loss ("NOL") carryforwards		25,353			8,362
Foreign NOL carryforwards		8,873			9,114
Other		5,891			5,229
Total gross deferred tax assets		54,426			37,959
Less valuation allowance		(36,258	)		(7,721	)
Deferred tax assets, net		18,168			30,238
Deferred tax liabilities:
Intangible assets		(17,261	)		(23,215	)
Foreign cash repatriation		(12,000	)		—
Other		(3,645	)		(2,966	)
Total gross deferred tax liabilities		(32,906	)		(26,181	)
Net deferred tax asset (liability)	$	(14,738	)	$	4,057
Balance sheet classification of deferred taxes:
Deferred tax asset—current	$	3,302		$	11,373
Deferred tax liability—current		(2,578	)		(1,157	)
Deferred tax liability—long-term		(15,462	)		(6,159	)
Net deferred tax asset (liability)	$	(14,738	)	$	4,057

        Significant management judgment is required in determining the provision for income taxes, deferred tax assets and liabilities and any valuation allowance recorded against net deferred tax assets. We are required to estimate income taxes in each jurisdiction where we operate. This process involves estimating actual current tax exposure together with assessing temporary differences resulting from differing treatment of items. These differences result in deferred tax assets and liabilities, which are included in the Consolidated Balance Sheets. We assess the likelihood that our deferred tax assets will be recovered from future taxable income and to the extent recovery is believed unlikely, we establish a valuation allowance. Changes in the valuation allowance for deferred tax assets impact our income tax expense during the period.

        As a result of our cumulative domestic losses, effective April 1, 2011, we recorded a non-cash charge of $29.1 million to provide a valuation allowance for all of our domestic deferred tax assets. In addition, we haven't recorded any deferred tax benefit for our domestic tax operating losses incurred after April 1, 2011. Our cumulative valuation allowance recorded against all of our deferred tax assets at December 31, 2011, was approximately $36.3 million. The establishment of a valuation allowance does not impair our ability to use the deferred tax assets, such as net operating loss and tax credit carryforwards, upon achieving sufficient profitability. As we generate domestic taxable income in future periods, we do not expect to record significant related domestic income tax expense until the valuation allowance is significantly reduced. As we are able to determine that it is more likely than not that we will be able to utilize the deferred tax assets, we will reduce our valuation allowance. At December 31, 2011, we have federal net operating loss ("NOL") and federal tax credit carryforwards of approximately $68 million and $11 million, respectively. Of this total, $3 million of U.S. NOL carryforwards are subject to annual usage limitations under U.S. tax rules; however, they do not begin to expire until 2022. The remaining NOL carryforwards do not begin to expire until 2030. Our Federal tax credit carryforwards are subject to annual usage limits but do not begin to expire until 2025. At December 31, 2011, we also have approximately $34 million of foreign NOL carryforwards. We have recorded a valuation allowance for approximately 84% of the foreign NOL carryforwards, as we do not believe it is more likely than not that we will utilize them. Approximately 30% of the foreign NOL carryforwards may expire. The net change in the total valuation allowance for deferred tax assets was an increase of $28.6 million in 2011 and a decrease of $32,000 in 2010.

        In January 2012, we repatriated $30 million of foreign cash to the U.S. We have recorded a $12 million deferred tax liability at December 31, 2011, based on our current estimate of the U.S. tax impact from the repatriation. However, due to our currently available net operating losses and tax credit carryforwards, the repatriation does not have a material tax impact to the Company. The repatriation reduces the available deferred tax benefits available to offset future domestic profits. Except for the $30 million cash repatriation, we have not provided for any additional U.S. income taxes on the undistributed earnings of our foreign subsidiaries, as we consider these to be permanently reinvested in the operations of such subsidiaries. If future events, including material changes in estimates of cash, working capital and long-term investment requirements, necessitate that these earnings be distributed, an additional provision for income taxes may apply, which could materially affect our future tax expense. Absent the availability of net operating losses or tax credits, the possible tax consequences of any foreign cash repatriation could be significant. At December 31, 2011, we estimate the undistributed earnings and profits of our foreign subsidiaries that would be subject to U.S. taxes, totaled approximately $101 million. Quantification of the U.S. deferred tax liability associated with indefinitely reinvested earnings and profits is not practicable.

        A portion of the operations of our India subsidiary were not subject to taxes under a tax holiday that expired March 2011. The income tax benefit attributable to this tax holiday was approximately $0.3 million, $1.1 million and $0.5 million in 2011, 2010 and 2009, respectively.

        We account for uncertain tax positions by recognizing the financial statement effects of a tax position only when based upon the technical merits, it is "more-likely-than-not" that the tax position will be sustained upon examination. The changes in the balance of our unrecognized tax benefits were as follows:

	Unrecognized Tax Benefits
	(In thousands)
Balance at January 1, 2010	$	4,885
Increases related to current year tax positions		2,567
Lapse of statute of limitations		(44	)
Balance at December 31, 2010		7,408
Increases related to prior year tax positions		488
Lapse of statute of limitations		(1,368	)
Balance at December 31, 2011	$	6,528

        Our unrecognized tax benefits totaled $6.5 million at December 31, 2011. If recognized, $2.4 million of these benefits would affect our income tax expense. Our unrecognized tax benefits decreased by approximately $1.3 million as a result of the expiration of the statute of limitations on a domestic tax position. It is reasonably possible that the total of unrecognized tax benefits could decrease by $2.1 million in the next twelve months as a result of a tax settlement. Note that the amounts recorded for our unrecognized tax benefits represent management estimates, and actual results could differ which would affect our effective tax rate.

        We file a U.S. Federal income tax return and tax returns in nearly all U.S. states, as well as in numerous foreign jurisdictions. We are routinely subject to examination by various domestic and foreign tax authorities. The outcome of tax audits is always uncertain and could result in cash tax payments that could be material. Additionally, tax audits may take long periods of time to ultimately resolve. We do not believe the outcome of any tax audits at December 31, 2011, will have a material adverse effect on our consolidated financial position or results of operations. Our U.S. Federal income tax returns dating back to 2008 are open to possible examination. Our most significant foreign operations and the most recent year for which they are no longer subject to tax examination are as follows: Germany-2007; India-2007; Netherlands-2004; Norway-2001; and the UK-2009.