INCOME TAXES

12 Months Ended

Dec. 31, 2011

INCOME TAXES

INCOME TAXES

12. INCOME TAXES

Pre-tax income (loss) from continuing operations before income taxes was:

	Year Ended December 31,
	2011			2010			2009
U.S.	$	(31,711	)	$	(25,758	)	$	1,168
Foreign	5,123			7,619			(1,910		)
Total	$	(26,588	)	$	(18,139	)	$	(742	)

Significant components of the provision for income taxes from continuing operations were:

	Year Ended December 31,
	2011			2010			2009
Current:
Federal	$	—		$	(506	)	$	(7,408	)
State	(26		)	(66		)	(246		)
Foreign	3			848			101
Total current (benefit) expense	$	(23	)	$	276		$	(7,553	)
Deferred:
Federal	$	(8,765	)	$	(8,200	)	$	7,402
State	(1,228		)	(1,064		)	245
Foreign	(103		)	1,051			(845		)
Net change in valuation allowance	9,993			9,181			—
Total deferred (benefit) expense	$	(103	)	$	968		$	6,802
Income tax (benefit) expense	$	(126	)	$	1,244		$	(751	)

Significant components of deferred tax assets and deferred tax liabilities included in the accompanying Consolidated Balance Sheets as of December 31, 2011 and 2010 were:

	Year Ended December 31,
	2011			2010
Current deferred tax assets:
Accrued restructuring costs	$	193		$	111
Total current net deferred tax assets	$	193		$	111
Current deferred tax assets (liabilities):
Accrued restructuring costs	$	158		$	250
Other accrued liabilities	765			532
Derivative instruments	201			(366		)
Prepaid expenses	(352		)	(963		)
Cumulative translation adjustment	(1,505		)	(1,558		)
Other	—			37
Total current net deferred tax liabilities	$	(733	)	$	(2,068	)
Long-term deferred tax assets (liabilities):
Fixed assets	$	3,165		$	919
Accrued stock compensation	2,201			1,918
Accrued restructuring costs	149			301
Foreign tax credit carryforward	529			554
Work opportunity credit carryforward	4,988			4,498
Operating loss carryforward	11,642			5,298
Other	189			155
Net long-term deferred tax assets	$	22,863		$	13,643
Subtotal	$	22,323		$	11,686
Valuation allowance	(20,138		)	(9,541		)
Total net deferred tax asset	$	2,185		$	2,145

We consider all available evidence to determine whether it is more likely than not that some portion or all of the deferred tax assets will be realized.  The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become realizable.  Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods), and projected taxable income in assessing the realizability of deferred tax assets.  In making such judgments, significant weight is given to evidence that can be objectively verified.  Based on all available evidence, in particular our three-year historical cumulative losses, recent operating losses and a U.S. pre-tax loss for the fiscal year ending December 31, 2010, we recorded a valuation allowance against our U.S. net deferred tax assets, which decreased the tax benefit by $9,181 during the year ended December 31, 2010.  No valuation allowance was recorded as of December 31, 2009.  In order to fully realize the U.S. deferred tax assets, we will need to generate sufficient taxable income in future periods before the expiration of the deferred tax assets governed by the tax code.  As of December 31, 2011, $631 of our valuation allowance related to deferred tax assets for which subsequently recognized tax benefits will be credited directly to contributed capital.

As of December 31, 2011 and 2010, we had net current deferred tax assets in our foreign tax jurisdictions and as of December 31, 2009 we had net current deferred tax liabilities in the U.S.

Deferred taxes were not recognized on temporary differences from undistributed earnings of foreign subsidiaries of approximately $28,582 as these earnings are deemed to be permanently reinvested.  We have not provided for U.S. federal income and foreign withholding taxes on undistributed earnings from non-U.S. operations as of December 31, 2011 because we intend to reinvest such earnings indefinitely outside of the U.S.

Differences between U.S. federal statutory income tax rates and our effective tax rates for the years ended December 31, 2011, 2010 and 2009 for continuing operations were:

	Year Ended December 31,
	2011		2010		2009
U.S. statutory tax rate	35.0	%	35.0	%	35.0	%
Effect of state taxes (net of federal benefit)	2.7	%	1.2	%	-11.9	%
Effect of change in Canadian tax rate	0.0	%	-2.2	%	-14.0	%
Work opportunity tax credits	0.7	%	6.1	%	142.6	%
Other permanent differences (including meals and entertainment)	-0.2	%	0.2	%	-21.7	%
Stock based compensation	-0.5	%	-0.8	%	-35.8	%
Rate differential on foreign earnings	7.2	%	4.8	%	25.5	%
Foreign income taxed in the U.S.	-8.2	%	-4.1	%	-7.5	%
Valuation allowance	-37.5	%	-50.6	%	0.0	%
Other, net	1.3	%	3.5	%	-11.0	%
Total	0.5	%	-6.9	%	101.2	%

As of December 31, 2011, we had gross foreign tax credit carry forwards of $529, which expire as follows:  $4 in 2012, and $525 in 2013.  A full tax-basis valuation allowance was established against these carry forwards during 2006 due to the fact that it is more likely than not that these credits will not be used prior to their expiration date.  As of December 31, 2011, we had gross federal net operating loss carry forwards of $29,629, of which $11,060 expire in 2030 and $18,569 expire in 2031.  As of December 31, 2011, we had gross state net operating loss carry forwards of $34,048 which expire through 2031 as follows:

Year of Expiration	As of December 31, 2011
2013	$	248
2014	196
2015	1,339
2016	1,662
2019	443
2020	491
2021	21
2022	1,216
2023	1,410
2024	237
2025	653
2026	941
2027	950
2028	6,491
2029	384
2030	7,486
2031	9,880
	$	34,048

We have been granted “Tax Holidays” as an incentive to attract foreign investment by the governments of the Philippines, Costa Rica and Honduras. Generally, a Tax Holiday is an agreement between us and a foreign government under which we receive certain tax benefits in that country, such as exemption from taxation on profits derived from export-related activities. In the Philippines, we have been granted approval for a Tax Holiday, whereby we have an exemption from income tax until late 2012 after which time the tax rate will be 5%.  In Costa Rica, we have been granted approval for an exemption equal to 100% of income tax through 2018, and for 50% of income tax for the four years thereafter.  In Honduras, we have been granted approval for an indefinite exemption from income taxes.  The exemption could be lifted at any time if the Honduran government approves legislature to appeal the exemption.  The aggregate reduction in income tax expense for the years ended December 31, 2011, 2010 and 2009 was $922, $456 and $216, respectively, which had a favorable impact on net income of $0.06 per share, $0.03 per share and $0.01 per share, respectively.