5. Income Taxes

The provision (benefit) for income taxes included in the accompanying consolidated financial statements represents federal, state and foreign income taxes. The components of income (loss) before income taxes and the provision (benefit) for income taxes consist of the following:

Years ended December 31	2011		2010			2009
			As adjusted			As adjusted
Income (loss) before income taxes:
Domestic	$	62,510	$	(4,405	)	$	(21,535	)
Foreign		9,132		16,429			(12,044	)
Total income (loss) before income taxes	$	71,642	$	12,024		$	(33,579	)

Provision (benefit) for income taxes:
Current:
Federal	$	-	$	-		$	9
State and foreign		2,167		1,147			2,188
Total current provision		2,167		1,147			2,197

Deferred:
Federal		23,443		1,188			(1,242	)
State and foreign		495		(1,657	)		(1,958	)
Total deferred provision (benefit)		23,938		(469	)		(3,200	)
Total provision (benefit) for income taxes	$	26,105	$	678		$	(1,003	)

A reconciliation of the Company’s effective income tax rate to the statutory federal tax rate is as follows:

Years ended December 31	2011			2010			2009
Statutory U.S. federal income tax rate		35.0	%		35.0	%		(35.0	)%
State income taxes, net of federal tax benefit		0.2			1.3			1.2
Tax credits		(1.4	)		(7.5	)		(2.8	)
Foreign rate differential		(1.4	)		(51.4	)		0.7
Change in income tax accruals		0.1			(0.1	)		(0.1	)
Tax on foreign dividends, net of foreign tax credits		1.1			39.0			24.2
Reduction of deferred taxes		0.3			7.4			2.3
Valuation allowances		0.5			(9.2	)		7.3
Non-deductible compensation		0.3			4.9			-
Other comprehensive income		-			(9.6	)		-
Other		1.7			(4.2	)		(0.8	)
Effective income tax rate		36.4	%		5.6	%		(3.0	)%

The Company recognized expense (benefit) for income taxes of $26,105, or 36.4% and $678, or 5.6% of pre-tax income and ($1,003), or (3.0%) of pre-tax loss, for federal, state and foreign income taxes for the years ended December 31, 2011, 2010 and 2009, respectively. The increase in tax expense for the year ended December 31, 2011 compared to the same period for 2010 was primarily attributable to the gain recognized on the remeasurement to fair market value of the previously held equity interest in PST. Excluding the tax on the PST gain, 2011 tax expense increased compared to 2010 due to improved performance of our European operations. In addition, 2010 tax expense included a tax benefit for the reversal of a deferred tax liability related to our UK operations that was previously included as a component of accumulated other comprehensive income (loss) within shareholders’ equity.

Unremitted earnings of foreign subsidiaries were $16,347, $11,111 and $2,590 as of December 31, 2011, 2010 and 2009, respectively. Because these earnings have been indefinitely reinvested in foreign operations, no provision has been made for U.S. income taxes. It is impracticable to determine the amount of unrecognized deferred taxes with respect to these earnings; however, foreign tax credits may be available to reduce U.S. income taxes in the event of a distribution.

Significant components of the Company’s deferred tax assets and liabilities are as follows:

As of December 31	2011			2010
				As adjusted
Deferred tax assets:
Inventories	$	3,338		$	1,670
Employee benefits		3,542			1,660
Insurance		759			1,095
Depreciation and amortization		14,448			21,057
Net operating loss carryforwards		44,094			40,714
General business credit carryforwards		10,987			9,545
Reserves not currently deductible		6,315			3,136
Gross deferred tax assets		83,483			78,877
Less: Valuation allowance		(78,211	)		(74,940	)
Deferred tax assets less valuation allowance		5,272			3,937

Deferred tax liabilities:
Depreciation and amortization		(37,234	)		(1,294	)
Basis difference - PST		(31,016	)		(9,463	)
Other		(1,600	)		(509	)
Gross deferred tax liabilities		(69,850	)		(11,266	)

Net deferred tax liability	$	(64,578	)	$	(7,329	)

The valuation allowance represents the amount of tax benefit related to U.S., state and foreign net operating losses, credits and other deferred tax assets that will more likely than not be unrealized. This valuation allowance has no impact on the Company’s ability to utilize the U.S. net operating losses and credits to offset future U.S. taxable income. The Company believes that it should ultimately generate sufficient U.S. taxable income during the remaining tax loss and credit carry forward periods in order to realize substantially all of the benefits of the net operating losses and credits before they expire.

The Company has deferred tax assets for net operating loss carry forwards of $418, net of a valuation allowance of $43,676. The net operating losses relate to U.S. federal, state and foreign tax jurisdictions. The U.S. federal net operating losses begin to expire if unused by December 31, 2025, the state net operating losses expire at various times and the foreign net operating losses have indefinite expiration dates. The Company has a deferred tax asset for general business credit carry forwards of $582 net of a valuation allowance of $10,405. The carry forward for U.S. federal general business credits begins to expire if unused by December 31, 2021 and the state tax credits expire at various times. The Company is required to provide a deferred tax liability corresponding to the difference between the financial reporting basis (which was remeasured to fair value upon the acquisition of an additional 24% of PST) and the tax basis in the previously held 50% ownership interest in PST (the “outside” basis difference). This outside basis difference will generally remain fixed until (1) dividends from the subsidiary exceed the parent’s share of earnings subsequent to the date it became a subsidiary or (2) there is a transaction that affects the Company’s ownership of PST.

During the fourth quarter of 2010, the Company undertook a secondary offering. As a result of the secondary offering, a substantial change in the Company’s ownership occurred and the Company experienced an ownership change pursuant to Section 382 of the Internal Revenue Code of 1986, as revised. Due to the Company being in a full valuation allowance position with respect to our federal deferred tax assets, there was no impact to the balance sheet and income statement during 2011 or 2010.

The following is a reconciliation of the Company’s total gross unrecognized tax benefits:

	2011			2010			2009
Balance as of January 1	$	3,101		$	2,838		$	2,599

Tax positions related to the current year:
Additions		381			387			369
Tax positions related to prior years:
Additions		28
Reductions		-			(11	)		(26	)

Acquisition balance		268
Settlements		-			-			(104	)
Expiration of statutes of limitation		(58	)		(113	)		-

Balance as of December 31	$	3,720		$	3,101		$	2,838

The liability for uncertain tax benefits is classified as a non-current liability unless it is expected to be paid within one year. At December 31, 2011 the Company has classified $268 as a current liability and $2,701 as a reduction to non-current deferred income tax assets. Through a combination of anticipated state audit settlements and the expiration of certain statutes of limitation, the amount of unrecognized tax benefits could decrease by approximately $71 within the next 12 months. Management is currently unaware of issues under review that could result in a significant change or a material deviation in this estimate.

If the Company’s tax positions are sustained by the taxing authorities in favor of the Company, approximately $3,584 would affect the Company’s effective tax rate.

Consistent with historical financial reporting, the Company has elected to classify interest expense and, if applicable, penalties which could be assessed related to unrecognized tax benefits as a component of income tax expense. For the years ended December 31, 2011, 2010 and 2009, the Company recognized approximately $67, $45 and $104 of gross interest and penalties, respectively. The Company has accrued approximately $740 and $575 for the payment of interest and penalties at December 31, 2011 and 2010, respectively.

The Company conducts business globally and, as a result, files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. In the normal course of business the Company is subject to examination by taxing authorities throughout the world. The following table summarizes the open tax years for each important jurisdiction:

Jurisdiction		Open Tax Years
U.S. Federal		2008-2011
Brazil		2006-2011
France		2007-2011
Mexico		2006-2011
Spain		2007-2011
Sweden		2006-2011
United Kingdom		2007-2011