13. Income Taxes

(a) Income Taxes

The Company’s effective tax rate differs from the statutory tax rate and varies from year to year primarily as a result of numerous permanent differences, investment and other tax credits, the provision for income taxes at different rates in foreign and other provincial jurisdictions, enacted statutory tax rate increases or reductions in the year, changes due to foreign exchange, changes in the Company’s valuation allowance based on the Company’s recoverability assessments of deferred tax assets, and favorable or unfavorable resolution of various tax examinations. During the last quarter of 2010, the Company released a valuation allowance of $54.8 million relating to the future utilization of deductible temporary differences, tax credits, and certain net operating loss carryforwards. During the six months ended June 30, 2011, there was no change in the Company’s estimates of the recoverability of its deferred tax assets based on an analysis of both positive and negative evidence including projected future earnings.

As at June 30, 2011, the Company had net deferred income tax assets after valuation allowance of $56.2 million (December 31, 2010 — $57.1 million). As at June 30, 2011, the Company had a gross deferred income tax asset before valuation allowance of $64.1 million (December 31, 2010 — $65.1 million), against which the Company is carrying a $7.9 million valuation allowance (December 31, 2010 — $7.9 million).

As at June 30, 2011 and December 31, 2010, the Company had total unrecognized tax benefits (including interest and penalties) of $4.7 million and $4.4 million, respectively, for international withholding taxes. All of the unrecognized tax benefits could impact the Company’s effective tax rate if recognized. While the Company believes it has adequately provided for all tax positions, amounts asserted by taxing authorities could differ from the Company’s accrued position. Accordingly, additional provisions on federal, state, provincial and foreign tax-related matters could be recorded in the future as revised estimates are made or the underlying matters are settled or otherwise resolved.

Consistent with its historical financial reporting, the Company has elected to classify interest and penalties related to income tax liabilities, when applicable, as part of the interest expense in its condensed consolidated statement of operations rather than income tax expense. The Company recognized approximately less than $0.1 million and $0.1 million in potential interest and penalties associated with unrecognized tax benefits for the three and six months ended June 30, 2011, respectively (2010 — $0.1 million and $0.1 million, respectively).

(b) Income Tax Effect on Comprehensive Income

The income tax expenses related to the following items included in other comprehensive income are:


	Three Months					Six Months
	Ended June 30,					Ended June 30,
	2011			2010		2011			2010
Amortization of actuarial gain on defined benefit plan	$	(11	)	$	—	$	(27	)	$	—
Unrealized change in market value of available-for-sale investment		61			—		61			—
Unrealized hedging gain		(12	)		—		(96	)		—
Realization of hedging gains upon settlement		126			—		198			—

	$	164		$	—	$	136		$	—