INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2012

Components of Company's income (loss) before income taxes

The components of the Company's income (loss) before income taxes are attributable to the following jurisdictions for the years ended December 31 (in thousands):

		2012			2011
United States	$	(778	)	$	(11,551	)
Foreign		478			(6,327	)
	$	(300	)	$	(17,878	)

Components of Company's income tax provision (benefit)

The components of the Company's income tax provision (benefit) for the years ended December 31 are as follows (in thousands):

Current provision (benefit):		2012			2011
Federal	$	(743	)	$	2,002
State		7			127
Foreign		1,437			1,197
		701			3,326
Deferred provision (benefit):
Federal		—			(347	)
State		—			18
Foreign		387			(216	)
		387			(545	)
	$	1,088		$	2,781

Reconciliation of effective income tax rate and United States federal statutory income tax rate

A reconciliation of the Company's effective income tax rate and the United States federal statutory income tax rate is summarized as follows, for the years ended December 31:

	2012			2011
Federal statutory income taxes		35.0	%		35.0	%
State income taxes, net of federal benefit		2.6			1.1
Difference in foreign and United States tax on foreign operations		(194.0	)		(6.7	)
Effect of changes in valuation allowance for net operating loss carryforwards		(106.2	)		(32.1	)
Effect of change in uncertain tax positions (net)		315.2			(10.5	)
Federal Sub-Part F Income from foreign operations		(170.2	)		(2.9	)
Research and experimentation income tax credits		0.0			0.0
Other		(245.5	)		0.5
		(363.1	)%		(15.6	)%

Components of deferred tax assets and liabilities

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets and liabilities consisted of the following at December 31 (in thousands):

	2012			2011
Deferred tax assets:
Current:
Deferred revenue	$	7		$	23
Inventory capitalization		429			837
Inventory reserves		457			451
Accrued expenses		935			2,643
Other		66			147
Total current deferred tax assets		1,894			4,101
Noncurrent:
Depreciation and amortization		1,508			1,539
Net operating loss(1)		6,255			5,731
Deferred royalty		119			482
Non-cash accounting charges related to stock options and warrants		491			684
Accrued expenses		409			79
Other		1,117			1,176
Total noncurrent deferred tax assets		9,899			9,691
Total deferred tax assets		11,793			13,792
Valuation allowance		(8,519	)		(9,503	)
Total deferred tax assets, net of valuation allowance	$	3,274		$	4,289
Deferred tax liabilities:
Current:
Prepaid expenses	$	576		$	528
Other		0			18
Total current deferred tax liabilities		576			546
Noncurrent:
Internally-developed software		37			740
Depreciation and amortization		2			—
Sub-Part F Income Deferred		1,830			1,320
Other		(53	)		161
Total noncurrent deferred tax liabilities		1,816			2,221
Total deferred tax liabilities	$	2,392		$	2,767

(1)	The Company's net operating loss will expire as follows (dollar amounts in thousands):

Jurisdiction	Gross NOL		Tax Effected NOL		Expiration Years
Denmark	$	3	$	1	Indefinite
Mexico		7,587		2,276	2020-2021
Norway		743		208	Indefinite
Singapore		59		10	Indefinite
Sweden		502		132	Indefinite
Switzerland		12,448		1,144	2016-2018
Taiwan		7,012		1,192	2016-2021
United States (federal)		1,837		643	2030-2031
United States (states)		25,960		649	2015-2031

Summary of valuation allowance

The valuation allowances presented below (in millions) at December 31, 2012 and 2011, represented a reserve against the Company's net deferred tax asset the Company believed the "more likely than not" criterion for recognition purposes could not be met.

Country	2012		2011
Mexico	$	2,276	$	1,889
Norway		208		198
Sweden		132		122
Switzerland		1,043		784
Taiwan		1,192		1,074
United States		3,668		5,436
Total	$	8,519	$	9,503

Deferred tax assets liabilities classified in Consolidated Balance Sheets

Deferred tax assets (liabilities) are classified in the accompanying Consolidated Balance Sheets of December 31 as follows (in thousands):

	2012			2011
Current deferred tax assets	$	561		$	936
Noncurrent deferred tax assets		502			772
Current deferred tax liabilities		(179	)		(185	)
Noncurrent deferred tax liabilities		(2	)		(1	)
Net deferred tax assets (liabilities)	$	882		$	1,522

Reconciliation of beginning and ending amount of unrecognized tax benefits

On January 1, 2007, the Company adopted FIN 48, which was codified into Topic 740, which prescribes a comprehensive model for how a company should recognize, measure, present, and disclose in its financial statements, uncertain tax positions that it has taken or expects to take on a tax return. Topic 740 requires that a company recognize in its financial statements the impact of tax positions that meet a "more likely than not" threshold, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. As of December 31, 2012, the Company recorded $2.8 million in current liabilities and $0.2 million in other long-term liabilities related to uncertain income tax positions and income tax reserves associated with various audits. At December 31, 2012, the Company had gross tax-affected unrecognized tax benefits of $3.0 million that, if recognized, would impact the effective tax rate. The Company recognizes penalties and interest charges related to unrecognized tax benefits in current tax expense. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows, for the years ended December 31, 2012 and 2011 (inthousands):

	2012			2011
Balance as of January 1	$	3,984		$	2,114
Additions for tax positions related to the current year		81			570
Additions for tax positions of prior years		58			1,300
Reductions of tax positions of prior years		(1,084	)		—
Balance as of December 31	$	3,039		$	3 ,984

Summary of income tax examinations

The Company files income tax returns in the United States federal jurisdiction and various state and foreign jurisdictions. As of December 31, 2012, the tax years that remained subject to examination by a major tax jurisdiction for the Company's most significant subsidiaries were as follows:

Jurisdiction		Open Years
Australia		2008-2012
Canada		2006-2012
Denmark		2009-2012
Japan		2007-2012
Mexico		2010-2012
Norway		2010-2012
Republic of Korea		2007-2012
Singapore		2009-2012
South Africa		2009-2012
Sweden		2010-2012
Switzerland		2009-2012
Taiwan		2007-2012
United Kingdom		2006-2012
United States		2006-2012

- Definition

Tabular disclosure of income tax examinations that an enterprise is currently subject to or that have been completed in the current period typically including a description of the examination, the jurisdiction conducting the examination, the tax year(s) under examination, the likelihood of an unfavorable settlement, the range of possible losses, the liability recorded, the increase or decrease in the liability from the prior period, and any penalties and interest that have been recorded.

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- Definition

Tabular disclosure of valuation allowances to reduce deferred tax assets to net realizable value, including identification of the deferred tax asset more likely than not will not be fully realized and the corresponding amount of the valuation allowance.

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