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INCOME TAXES | 12 Months Ended
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Dec. 31, 2013
Income Tax Disclosure [Abstract] |
INCOME TAXES | 11. INCOME TAXES
| a. | Income Before Income Taxes
The consolidated income before income taxes for 2013, 2012 and 2011 consists of the following (in thousands):
|  | 2013 |  | 2012 |  | 2011 |
Domestic |  | $ | 77,465 |  | $ | 48,533 |  | $ | 15,213 |
Foreign |  |  | 158 |  |  | 130 |  |  | - |
Total income before income taxes |  | $ | 77,623 |  | $ | 48,663 |  | $ | 15,213 |
| b. | Income Tax Expense
The consolidated income tax expense for 2013, 2012 and 2011 consists of the following components (in thousands):
|  | 2013 |  | 2012 |  | 2011 |
Current |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 197 |  | $ | - |  | $ | 14 |
State |  |  | 717 |  |  | 174 |  |  | 157 |
Foreign |  |  | 130 |  |  | 141 |  |  | - |
|  | $ | 1,044 |  | $ | 315 |  | $ | 171 |
Deferred |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 26,753 |  | $ | (46,378) |  | $ | - |
State |  |  | 3,412 |  |  | (10,871) |  |  | - |
Foreign |  |  | (115) |  |  | (34) |  |  | - |
|  | $ | 30,050 |  | $ | (57,283) |  | $ | - |
Total consolidated expense (benefit) |  | $ | 31,094 |  | $ | (56,968) |  | $ | 171 |
The Company’s following table provides a reconciliation of differences from the U.S. Federal statutory rate of 35% as follows (in thousands):
|  | 2013 |  | 2012 |  | 2011 |
Pretax book income |  | $ | 77,623 |  | $ | 48,663 |  | $ | 15,213 |
Federal tax expense at 35% statutory rate |  |  | 27,168 |  |  | 17,032 |  |  | 5,325 |
State and local income taxes |  |  | 3,870 |  |  | 2,619 |  |  | 917 |
Foreign tax rate differential |  |  | (41) |  |  | (14) |  |  | - |
Reversal of income tax valuation allowance against net deferred tax assets |  |  | - |  |  | (59,887) |  |  | - |
(Utilization of) Provisions for valuation allowance for net operating losses and credit carrryforwards - U.S. and states |  |  | - |  |  | (19,528) |  |  | (6,060) |
Other |  |  | 97 |  |  | 2,810 |  |  | (11) |
Total income tax expense (benefit) |  | $ | 31,094 |  | $ | (56,968) |  | $ | 171 |
| c. | Deferred Taxes
The Company’s deferred income taxes are primarily due to temporary differences between financial and income tax reporting for the depreciation of property, plant and equipment, amortization of intangibles, compensation adjustments, inventory adjustments, other accrued liabilities and tax credits and losses carried forward. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. During 2012 and 2011, the Company utilized previously recognized net valuation allowances primarily due to accumulation of pretax income. Companies are required to assess whether valuation allowances should be established against their deferred tax assets based on the consideration of all available evidence, both positive and negative, using a “more likely than not” standard. In making such judgments, significant weight is given to evidence that can be objectively verified. The Company assesses, on a quarterly basis, the realizability of its deferred tax assets by evaluating all available evidence, both positive and negative, including: (1) the cumulative results of operations in recent years, (2) the nature of recent losses, (3) estimates of future taxable income, (4) the length of operating loss carryforward periods and (5) the uncertainty associated with a possible change in ownership, which imposes an annual limitation on the use of these carryforwards. As of December 31, 2011, the Company had been in a cumulative three-year pre-tax loss position since the quarter ended December 31, 2009. The cumulative three-year loss is considered significant negative evidence which is objective and verifiable. Positive evidence considered by the Company in its assessment included lengthy operating loss carryforward periods, a lack of unused expired operating loss carryforwards in the Company’s history and estimates of future taxable income. However, there was uncertainty as to the Company’s ability to meet its estimates of future taxable income in order to recover its deferred tax assets in the United States. After considering both the positive and negative evidence management determined that it was not more-likely-than-not that it would realize the value of its deferred tax assets. As a result, the Company continued to record a full valuation allowance against its net deferred tax assets as of December 31, 2011. By the end of 2012, management concluded that profitability in recent years and a business outlook showing continued profitability combined with a lengthy operating loss carryforward period, provided assurance that the future tax benefits more likely than not will be realized. Accordingly, during the fourth quarter of 2012, the Company released $59.9 million of valuation allowance against its net deferred tax assets, resulting in a benefit in the provision for income taxes. As of December 31, 2013 and 2012, the Company retained a valuation allowance against $1.4 and $1.9 million, respectively, of deferred tax assets related to various state and local operating loss carryforwards that are subject to restrictive rules for future utilization. As of December 31, 2013, the Company has U.S. federal tax net operating loss carryforwards (“NOLs”) of approximately $28 million, which will expire beginning in 2029, if unused, and which may be subject to other limitations under Internal Revenue Service (the “IRS”) rules. The Company has various, multistate income tax net operating loss carryforwards, which have been recorded as a deferred income tax asset, of approximately $8 million, before valuation allowances. The Company also has various U.S. federal income tax credit carryforwards, which will expire beginning in 2023, if unused. The Company’s NOLs, including any future NOLs that may arise, are subject to limitations on use under the IRS rules, including Section 382 of the Internal Revenue Code of 1986 (“Section 382”), as revised. Section 382 limits the ability of a company to utilize NOLs in the event of an ownership change. The Company would undergo an ownership change if, among other things, the stockholders, or group of stockholders, who own or have owned, directly or indirectly, 5% or more of the value of the Company’s stock or are otherwise treated as 5% stockholders under Section 382 and the regulations promulgated thereunder increase their aggregate percentage ownership of the Company’s stock by more than 50 percentage points over the lowest percentage of its stock owned by these stockholders at any time during the testing period, which is generally the three-year period preceding the potential ownership change. In the event of an ownership change, Section 382 imposes an annual limitation on the amount of post-ownership change taxable income a corporation may offset with pre-ownership change NOLs and certain recognized built-in losses. The limitation imposed by Section 382 for any post-change year would be determined by multiplying the value of our stock immediately before the ownership change (subject to certain adjustments) by the applicable long-term tax-exempt rate in effect at the time of the ownership change. Any unused annual limitation may be carried over to later years, and the limitation may under certain circumstances be increased by built-in gains that may be present in assets held by us at the time of the ownership change that are recognized in the five-year period after the ownership change. It is expected that any loss of the Company’s NOLs would cause its effective tax rate to go up significantly if the Company sustains its profitability, excluding impacts of valuation allowance. On May 28, 2010 a change of ownership did occur resulting from the issuance of 11,750,000 shares of common stock, which invoked a limitation on the utilization of pre-ownership change U.S. Federal NOLs under Section 382. Pre-ownership change U.S. Federal NOLs at December 31, 2013 are $19 million. Management has estimated the annual U.S. Federal NOL limitations under IRC Section 382 are $19 million for 2014. To the extent the annual limitation is not reached, any remaining limitation can be carried forward to future years. Post-ownership change U.S. Federal NOLs at December 31, 2013 are $9 million, which is currently not subject to utilization limits. The components of deferred tax assets and deferred tax liabilities as of December 31, 2013 and 2012 were as follows (in thousands):
|  | 2013 |  | 2012 |
Deferred tax assets |  |  |  |  |  |  |
Tax credits and loss carryforwards |  | $ | 18,779 |  | $ | 51,811 |
Accrued liabilities |  |  | 6,964 |  |  | 6,816 |
Incentive compensation |  |  | 16,621 |  |  | 12,913 |
Other |  |  | 4,736 |  |  | 6,897 |
|  | $ | 47,100 |  | $ | 78,437 |
Deferred tax liabilities |  |  |  |  |  |  |
Property, plant and equipment |  |  | (295) |  |  | (163) |
Intangibles |  |  | (4,993) |  |  | (4,026) |
Prepaid assets |  |  | (690) |  |  | (1,160) |
Convertible note discount |  |  | (6,585) |  |  | (7,846) |
Other |  |  | (29) |  |  | (231) |
|  | $ | (12,592) |  | $ | (13,426) |
Net deferred tax asset before valuation allowances and reserves |  | $ | 34,508 |  | $ | 65,011 |
Valuation allowances |  |  | (1,438) |  |  | (1,852) |
Net deferred tax asset |  | $ | 33,070 |  | $ | 63,159 |
| d. | Tax Reserves
The Company’s policy with respect to interest and penalties associated with reserves or allowances for uncertain tax positions is to classify such interest and penalties in income tax expense in the Statements of Operations. As of December 31, 2013 and 2012, the total amount of unrecognized income tax benefits was approximately $11.0 million for each period, respectively, all of which, if recognized, would impact the effective income tax rate of the Company. As of December 31, 2013 and 2012, the Company had recorded a total of $0.4 million for each period respectively of accrued interest and penalties related to uncertain tax positions. The Company foresees no significant changes to the facts and circumstances underlying its reserves and allowances for uncertain income tax positions as reasonably possible during the next 12 months. As of December 31, 2013, the Company is subject to unexpired statutes of limitation for U.S. federal income taxes for the years 2002 through 2013. The Company is also subject to unexpired statutes of limitation for Indiana state income taxes for the years 2002 through 2013. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands) and all balances as of December 31, 2013 are included in Other Noncurrent Liabilities in the Company’s consolidated Balance Sheet:
Balance at January 1, 2012 |  | $ | 10,095 |
Increase in prior year tax positions |  |  | 885 |
Balance at December 31, 2012 |  | $ | 10,980 |
Decrease in prior year tax positions |  |  | (9) |
Balance at December 31, 2013 |  | $ | 10,971 |

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 + Details
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