XML 65 R21.htm IDEA: XBRL DOCUMENT v2.4.0.8
Income Taxes
6 Months Ended
Jun. 30, 2014
Income Tax Disclosure [Abstract]  
INCOME TAXES
INCOME TAXES

The income tax provision for the three and six months ended June 30, 2014, as a percentage of income before taxes was 35.4% and 33.9%, respectively.

The income tax provision for the three months and six months ended June 30, 2013, as a percentage of income before taxes, was 19.1% and 12.2%, respectively. The income tax provision for the three months ended June 30, 2013 included income tax benefits totaling $0.4 million pertaining to 2012 from the filing of 2012 foreign tax returns during the period. For the six months ended June 30, 2013, the income tax provision also included a $1.4 million benefit for 2012 research tax credits as a tax law was enacted on January 2, 2013 to retroactively reinstate the federal research and development tax credit to January 1, 2012.

As of June 30, 2014, the amount of unrecognized tax benefits for uncertain tax positions was $13.6 million and the net amount, reduced for the federal effects of potential state tax exposures, was $9.8 million. If these uncertain tax positions are sustained upon tax authority audit, or otherwise become certain, a net $3.9 million would favorably affect the Company’s tax provision in such future periods. The remaining $5.9 million would increase deferred tax assets on which a valuation allowance is placed and would be expected to also increase by a corresponding amount. The $3.9 million liability is comprised of $3.8 million included in long-term taxes payable and $0.1 million included in income taxes payable. The Company does not anticipate a significant change to unrecognized tax benefits for uncertain income tax positions within the next 12 months.

The Company continues to recognize interest and penalties related to income tax matters as part of the income tax provision. As of June 30, 2014 and December 31, 2013, the Company had $0.4 million and $0.4 million, respectively, accrued for interest and none accrued for penalties in both periods. These accruals are included as a component of long-term income taxes payable.

The Company is required to file U.S. federal income tax returns as well as income tax returns in various states and foreign jurisdictions. The Company may be subject to examination by the Internal Revenue Service (“IRS”) for calendar years 2010 and forward. Significant state tax jurisdictions include California, Massachusetts and Texas, and generally, the Company is subject to routine examination for years 2006 and forward in these jurisdictions. In addition, any research and development credit carryforwards that were generated in prior years and utilized in these years may also be subject to examination by respective state taxing authorities. Generally, the Company is subject to routine examination for years 2005 and forward in various foreign tax jurisdictions in which it operates.

Deferred tax assets and liabilities result primarily from temporary differences between book and tax bases of assets and liabilities and state research and development credit carryforwards. The Company had net current deferred tax assets of $24.1 million and net long-term deferred tax assets of $1.5 million as of June 30, 2014. The Company must regularly assess the likelihood that future taxable income levels will be sufficient to ultimately realize the tax benefits of these deferred tax assets. The Company currently believes that future taxable income levels will be sufficient to realize the tax benefits of these deferred tax assets. Therefore, the Company has not established a valuation allowance except for a valuation allowance of $9.7 million and $9.0 million that was established against state deferred tax assets as of June 30, 2014 and December 31, 2013, respectively, due to California tax law changes in 2012 which require mandatory single sales factor apportionment in California for most multi-state taxpayers for tax years beginning on or after January 1, 2013. Should the Company determine that future realization of these tax benefits is not more likely than not, additional valuation allowances would be established which would increase the Company's tax provision in the period of such determination.

Included in net deferred tax assets are credit carryforwards. The Company has available state research and development credit carryforwards of approximately $23.5 million, of which approximately $2.3 million represents pre-ownership change carryforwards subject to Section 382 annual limitation. The state research credit carryforwards are not subject to expiration and may be carried forward indefinitely until utilized.