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Income Taxes | 12 Months Ended
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Dec. 31, 2011
Income Taxes [Abstract] |
Income Taxes |
10. | Income Taxes
Total income taxes for the years ended December 31, 2011, 2010 and 2009 were allocated as follows (in thousands):
|  | Year Ended December 31, |
|  | 2011 |  |  | 2010 |  |  | 2009 |
To income |  | $ | (9,503 | ) |  | $ | 7,893 |  |  | $ | 527 |
To stockholders' equity |  |  | 240 |  |  |  | 277 |  |  |  | 232 |
Total income taxes |  | $ | (9,263 | ) |  | $ | 8,170 |  |  | $ | 759 |
Income (loss) before taxes for the years ended December 31, 2011, 2010 and 2009 is comprised of the following (in thousands):
|  | Year Ended December 31, |
|  | 2011 |  |  | 2010 |  |  | 2009 |
Domestic |  | $ | (36,091 | ) |  | $ | (27,091 | ) |  | $ | 2,674 |
Foreign |  |  | 1,696 |  |  |  | 1,534 |  |  |  | 1,765 |
Income (loss) before taxes |  | $ | (34,395 | ) |  | $ | (25,557 | ) |  | $ | 4,439 |
The provision (benefit) for income taxes for the years ended December 31, 2011, 2010 and 2009 is comprised of the following (in thousands):
|  | Year Ended December 31, |
|  | 2011 |  |  | 2010 |  |  | 2009 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | (10,786 | ) |  | $ | (3,602 | ) |  | $ | 76 |
State |  |  | — |  |  |  | 11 |  |  |  | 288 |
Foreign |  |  | 84 |  |  |  | 43 |  |  |  | (9 | )
Total Current |  |  | (10,702 | ) |  |  | (3,548 | ) |  |  | 355 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | (114 | ) |  |  | 9,882 |  |  |  | (230 | )
State |  |  | — |  |  |  | 789 |  |  |  | 1,054 |
Foreign |  |  | 1,313 |  |  |  | 770 |  |  |  | (652 | )
Total Deferred |  |  | 1,199 |  |  |  | 11,441 |  |  |  | 172 |
Provision (benefit) for income taxes |  | $ | (9,503 | ) |  | $ | 7,893 |  |  | $ | 527 |
The Company's deferred tax assets consist of the following (in thousands):
|  | December 31, |
|  | 2011 |  |  | 2010 |
Deferred tax assets: |  |  |  |  |  |  |  |
Accrued expenses |  | $ | 4,941 |  |  | $ | 3,592 |
Inventory obsolescence provision |  |  | 1,647 |  |  |  | 2,510 |
Depreciation and amortization |  |  | 4,626 |  |  |  | 4,166 |
Deferred rent |  |  | 409 |  |  |  | 391 |
Net operating loss and tax credit carryforwards |  |  | 32,569 |  |  |  | 22,911 |
Stock-based compensation |  |  | 5,662 |  |  |  | 4,972 |
Unrecognized tax benefits |  |  | 439 |  |  |  | 1,181 |
Deferred tax assets |  |  | 50,293 |  |  |  | 39,723 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Amortization of acquired intangibles |  |  | (12,777 | ) |  |  | (15,619 | )
Net deferred tax assets |  |  | 37,516 |  |  |  | 24,104 |
Valuation allowance |  |  | (36,395 | ) |  |  | (21,783 | )
Net deferred tax assets |  | $ | 1,121 |  |  | $ | 2,321 |
The Company recognizes federal, state and foreign current tax liabilities or assets based on its estimate of taxes payable to or refundable by tax authorities in the current fiscal year. The Company also recognizes federal, state and foreign deferred tax liabilities or assets based on the Company's estimate of future tax effects attributable to temporary differences and carry forwards. The Company records a valuation allowance to reduce any deferred tax assets by the amount of any tax benefits that, based on available evidence and judgment, are not expected to be realized. The Company assesses whether a valuation allowance should be recorded against its deferred tax assets based on the consideration of all available evidence, using a "more likely than not" realization standard. The four sources of taxable income that must be considered in determining whether deferred tax assets will be realized are: (1) future reversals of existing taxable temporary differences (i.e., offset of gross deferred tax assets against gross deferred tax liabilities); (2) taxable income in prior carryback years, if carryback is permitted under the applicable tax law; (3) tax planning strategies; and (4) future taxable income exclusive of reversing temporary differences and carryforwards. After a review of the four sources of taxable income described above and after being in a three year cumulative loss position at the end of 2011, the Company recognized an increase in the valuation allowance related to its U.S.-based deferred taxes created in 2011 and its Canadian deferred taxes, with a corresponding charge to income tax expense, of $14.6 million. Related to the Company's acquisition of Enfora on November 30, 2010, the Company assumed U.S. -based net deferred tax liabilities of $3.9 million. This net deferred tax liability predominantly resulted from the estimated future tax impact of fair values assigned to intangible assets purchased upon acquisition of Enfora as offset by Enfora related estimated deferred tax assets resulting from net operating loss and research and development tax credit carry forwards generated prior to the acquisition of Enfora by the Company. Consistent with accounting guidance, the Company released $4.8 million of its U.S.-based valuation allowance in 2010 and increased its allowance by $0.9 million in 2011 related to the then existing 100% valuation allowance against the Company's U.S.-based deferred tax assets upon completion of its purchase price allocation. At December 31, 2011, the valuation allowance consisted of $32.1 million relating to the Company's domestic tax assets and $4.3 million related to the Company's Canadian deferred tax assets. At December 31, 2010, the valuation allowance consisted of $18.9 million relating to the Company's domestic tax assets and $2.9 million related to certain to the Company's Canadian deferred tax assets. The net unreserved portion of the Company's remaining deferred tax assets at December 31, 2011 primarily related to research and development tax credits associated with the Company's Canadian subsidiary. During the years ended December 31, 2011 and 2010, the Company recorded deferred income tax expense of $14.6 million and $17.9 million, respectively, related to the changes in the valuation allowances on deferred tax assets. During the year ended 2009, the Company recorded a deferred income tax expense of $1.2 million related to the changes in the valuation allowances on deferred tax assets. The provision (benefit) for income taxes reconciles to the amount computed by applying the statutory federal income tax rate of 34% in 2011, 2010 and 2009 to income before provision for income taxes as follows (in thousands):
|  | Year Ended December 31, |
|  | 2011 |  |  | 2010 |  |  | 2009 |
Federal tax provision, at statutory rate |  | $ | (11,694 | ) |  | $ | (8,690 | ) |  | $ | 1,509 |
State tax, net of federal benefit |  |  | (733 | ) |  |  | (509 | ) |  |  | 87 |
Change in valuation allowance—current year |  |  | 14,612 |  |  |  | 7,888 |  |  |  | 1,152 |
Change in valuation allowance—prior year deferreds |  |  | — |  |  |  | 14,840 |  |  |  | — |
Tax expense (benefit) from business combination |  |  | 909 |  |  |  | (4,838 | ) |  |  | — |
Research and development credits |  |  | (1,731 | ) |  |  | (2,044 | ) |  |  | (3,073 | )
Share-based compensation |  |  | 526 |  |  |  | 917 |  |  |  | 1,106 |
Merger fees |  |  | — |  |  |  | 674 |  |  |  | — |
Uncertain tax positions |  |  | (11,809 | ) |  |  | 322 |  |  |  | (528 | )
Goodwill impairment |  |  | 596 |  |  |  |  |  |  |  |  |
Other |  |  | (179 | ) |  |  | (667 | ) |  |  | 274 |
|  | $ | (9,503 | ) |  | $ | 7,893 |  |  | $ | 527 |
At December 31, 2011, the Company has U.S. federal net operating loss carryforwards of approximately $63.0 million. Federal net operating loss carryforwards expire at various dates from 2026 through 2032. The Company has California net operating loss carryforwards of approximately $24.4 million, which expire at various dates from 2014 through 2032. The Company has California research and development tax credit carryforwards of approximately $5.0 million. The California tax credits have no expiration date. The Company also has federal research and development tax credit carryforwards of approximately $3.0 million. The federal tax credits expire at various dates from 2027 through 2031. It is the Company's intention to reinvest undistributed earnings of its foreign subsidiaries and thereby indefinitely postpone their remittance. Accordingly, no provision has been made for foreign withholding taxes on United States income taxes which may become payable if undistributed earnings of the foreign subsidiary were paid as dividends to the Company. The Company follows the accounting guidance related to financial statement recognition, measurement and disclosure of uncertain tax positions. The Company recognizes the impact of an uncertain income tax position on an income tax return at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. During the year ended December 31, 2011, the Company recognized approximately $9.5 million of income tax benefit plus $2.3 million of associated interest due to expiration of the applicable statutes of limitations for certain tax years. As of December 31, 2011 and 2010, the total liability for unrecognized tax benefits was $0.4 million and $12.0 million, respectively, and is included in other long-term liabilities. A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows (in thousands):
|  | Amount |
Unrecognized tax benefits balance at December 31, 2008 |  | $ | 41,435 |
Increases related to current and prior year tax positions |  |  | 2,590 |
Settlements and lapses in statutes of limitations |  |  | (2,890 | )
Unrecognized tax benefits balance at December 31, 2009 |  |  | 41,135 |
Increases related to current and prior year tax positions |  |  | 251 |
Settlements and lapses in statutes of limitations |  |  | — |
Unrecognized tax benefits balance at December 31, 2010 |  |  | 41,386 |
Increases related to current and prior year tax positions |  |  | 899 |
Settlements and lapses in statutes of limitations |  |  | (9,490 | )
Unrecognized tax benefits balance at December 31, 2011 |  | $ | 32,795 |
Included in the balances of unrecognized tax benefits at December 31, 2011 are $0.2 million of tax benefits that, if recognized, would affect the effective tax rate. The Company recognizes interest and penalties related to unrecognized tax benefits in the provision for income taxes. As of December 31, 2011 and 2010, the Company recorded approximately $0.2 million and $2.3 million, respectively, of accrued interest related to uncertain tax positions. In the third quarter of 2012, the Company may release $50,000 of its liability for unrecognized tax benefits due to the expiration of the statute of limitations applicable to the 2007 taxable year. The Company and its subsidiaries file U.S., state, and foreign income tax returns in jurisdictions with various statutes of limitations. The California Franchise Tax Board is currently conducting an examination of the Company's California income tax returns for 2006 and 2007. The State of Texas is currently conducting an examination of the Company's 2007 Texas franchise tax return. The Company is also subject to various federal income tax examinations for the 2003 through 2010 calendar years due to the availability of net operating loss carryforwards. The Company believes appropriate provisions for all outstanding issues have been made for all jurisdictions and all open years. However, because audit outcomes and the timing of audit settlements are subject to significant uncertainty, the Company's current estimate of the total amounts of unrecognized tax benefits could increase or decrease for all open years.

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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 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 136, 172 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 43, 44, 45, 46, 47, 48, 49 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 5: 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 Reference 6: 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 7: 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 8: 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=6881521&loc=d3e23780-122690 + Details
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