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Income Taxes | 12 Months Ended
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Dec. 31, 2012
Income Taxes [Abstract] |
Income Taxes | 5. Income Taxes A summary of the income tax expense is as follows (in thousands):
|  |  | Year Ended December 31, |
|  |  | 2012 |  |  |  | 2011 |  |  |  | 2010 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 50 |  |  | $ | (6,844 | ) |  | $ | 3,071 |
State |  |  | (440 | ) |  |  | 190 |  |  |  | 652 |
Foreign |  |  | 156 |  |  |  | 311 |  |  |  | 54 |
Total current |  |  | (234 | ) |  |  | (6,343 | ) |  |  | 3,777 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | - |  |  |  | (873 | ) |  |  | 943 |
State |  |  | - |  |  |  | 1,713 |  |  |  | (82 | )
Excess tax benefits related to stock based compensation |  |  | - |  |  |  | - |  |  |  | 1,543 |
Tax deficiencies related to restricted stock expense |  |  | - |  |  |  | (426 | ) |  |  | (15 | )
Other adjustments |  |  | - |  |  |  | - |  |  |  | (1 | )
Total deferred |  |  | - |  |  |  | 414 |  |  |  | 2,388 |
Total provision |  | $ | (234 | ) |  | $ | (5,929 | ) |  | $ | 6,165 |
A reconciliation of the provision for income taxes to the amount of income tax expense that would result from applying the federal statutory rate to the profit before income taxes is as follows:
|  |  | Year Ended December 31, |
|  |  | 2012 |  |  |  | 2011 |  |  |  | 2010 |
Federal statutory rate |  |  | 35 | % |  |  | 35 | % |  |  | 35 | %
State tax, net of federal benefit |  |  | 3 |  |  |  | 4 |  |  |  | 5 |
Equity compensation |  |  | (2 | ) |  |  | - |  |  |  | 3 |
R&D tax credit |  |  | - |  |  |  | - |  |  |  | (5 | )
Goodwill impairment |  |  | - |  |  |  | (5 | ) |  |  | - |
Other |  |  | (4 | ) |  |  | - |  |  |  | (5 | )
Change in valuation allowance |  |  | (31 | ) |  |  | (30 | ) |  |  | - |
|  |  | 1 | % |  |  | 4 | % |  |  | 33 | %
The major components of the Company’s deferred tax assets and liabilities are as follows (in thousands):
|  |  | Year Ended December 31, |
|  | 2012 |  |  | 2011 |
Current |  |  |  |  |  |  |  |
Various reserves |  | $ | 199 |  |  | $ | 369 |
Nondeductible accruals |  |  | 1,352 |  |  |  | 1,661 |
Prepaid expenses |  |  | (95 | ) |  |  | (96 | )
Other |  |  | 43 |  |  |  | 25 |
Valuation allowance |  |  | (1,410 | ) |  |  | (1,951 | )
Total Current |  | $ | 89 |  |  | $ | 8 |
Non-current |  |  |  |  |  |  |  |
Credit carryforwards |  |  | 3,708 |  |  |  | 4,223 |
Net operating loss carryforwards |  |  | 23,808 |  |  |  | 11,286 |
Fixed assets |  |  | 1,299 |  |  |  | 1,695 |
Amortization |  |  | 31,483 |  |  |  | 35,252 |
Identifiable intangibles acquired |  |  | (2,239 | ) |  |  | (2,288 | )
Equity based compensation |  |  | 934 |  |  |  | 978 |
Other |  |  | 24 |  |  |  | 83 |
Valuation allowance |  |  | (59,108 | ) |  |  | (51,239 | )
Total Non-current |  | $ | (91 | ) |  | $ | (10 | )
The Company has federal and state net operating loss carryforwards of approximately $55.0 million and $83.4 million, respectively, at December 31, 2012, to reduce future cash payments for income taxes. Of the $55.0 million of NOL carryforwards at December 31, 2012, $0.5 million relates to the excess tax benefits from employee restricted stock. Equity will be increased by $0.5 million if and when such excess tax benefits are ultimately realized. These federal net operating loss carryforwards will expire from 2024 through 2031 and state net operating loss carryforwards will expire 2015 through 2031. The Company also had $0.5 million of AMT credit carryforwards with an indefinite life, available to offset regular federal income tax requirements. The Company has federal and state tax credit carryforwards of approximately $3.4 million and $0.7 million, respectively, at December 31, 2012. These tax credits will begin to expire in 2027. At December 31, 2012 and 2011, respectively, the Company had unrecognized tax benefits of approximately $0.6 million and $0.3 million, including interest and penalties, respectively. 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. In assessing whether a valuation allowance is required, significant weight is to be given to evidence that can be objectively verified. A significant factor in the Company’s assessment is that the Company was in a three-year historical cumulative loss as of the end of fiscal 2011. This fact, combined with uncertain near-term market and economic conditions, reduced the Company’s ability to rely on projections of future taxable income in assessing the realizability of its deferred tax assets. After a review of the four sources of taxable income as of December 31, 2011 (as described above), and after consideration of the Company’s three-year cumulative loss position as of December 31, 2011, the Company recorded a valuation allowance related to its U.S.-based deferred tax amounts, with a corresponding charge to income tax expense, of $53.2 million during the year ended December 31, 2011. We account for income taxes as required FASB ASC Topic No. 740, Income Taxes. This Topic clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Topic also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Topic requires an entity to recognize the financial statement impact of a tax position when it is more likely than not that the position will be sustained upon examination. The amount recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. In addition, the Topic permits an entity to recognize interest and penalties related to tax uncertainties either as income tax expense or operating expenses. The Company has chosen to recognize interest and penalties related to tax uncertainties as operating expense. In 2007, the Company adopted FASB ASC Topic 740, “Income Taxes,” which clarifies the accounting for income taxes by prescribing a minimum recognition threshold that a tax position is required to meet before being recognized in the financial statements. Management determined based on its evaluation of the Company’s income tax positions that it has uncertain tax positions relating to research and development (“R&D”) tax credits of $0.6 million at December 31, 2012 and $0.3 million at December 31, 2011 for which the Company has not yet recognized an income tax benefit for financial reporting purposes. Assuming these tax benefits had been recognized as of December 31, 2012, such benefit would have been fully negated by a corresponding increase in the deferred income tax valuation allowance because the Company has recorded a full valuation allowance against its recognized R&D tax credits of $3.0 million due to uncertainty as to future realization. The Company’s gross unrecognized tax benefits as of December 31, 2012 and the changes in those balances are as follows (in thousands):
|  |  | Year Ended December 31, |  |  |
|  |  | 2012 |  |  |  | 2011 |  |  |
Beginning Balance |  | $ | 324 |  |  | $ | - |  |  |
Increases for tax positions for current year |  |  | - |  |  |  | 162 |  |  |
Increases/(Decreases) in tax positions for the prior year |  |  | 268 |  |  |  | 162 |  |  |
Lapse in statute of limitations |  |  | - |  |  |  | - |  |  |
Settlements |  |  | - |  |  |  | - |  |  |
Other |  |  | - |  |  |  | - |  |  |
Change in valuation allowance |  |  | - |  |  |  | - |  |  |
Gross Unrecognized tax benefits, ending balance |  | $ | 592 |  |  | $ | 324 |  |  |
We recognized interest and penalties accrued related to unrecognized tax benefits in tax expense. During the fiscal year 2012, we recognized approximately $38,000 in interest and penalties. We did not recognize any interest and penalties in fiscal year 2011. The Company is subject to U.S. federal income tax as well as to income tax of multiple state jurisdictions. Federal income tax returns of the Company are subject to IRS examination for the 2009 through 2011 tax years. State income tax returns are subject to examination for a period of three to four years after filing. The Company closed an examination by the Internal Revenue Service (“IRS”) for the 2008 tax year in 2012 with no changes. As of December 31, 2012, the Company has been notified of audits with Illinois, New York, and Texas. These audits are anticipated to begin in 2013. The outcome of tax audits cannot be predicted with certainty. If any issues addressed in the Company’s tax audits are resolved in a manner not consistent with management’s expectations, the Company could be required to adjust its provision for income tax in the period such resolution occurs. As of December 31, 2012, a current estimate of the range of changes that may occur within the next twelve months cannot be made due to the uncertainty regarding the timing of these events.

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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 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 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=6881521&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 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 5: 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 6: 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 7: 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 8: 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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