Income Taxes

12 Months Ended

Dec. 31, 2011

Income Taxes

Income Taxes

Note 16.  Income Taxes

        Income (loss) before income taxes are as follows:

	Years ended December 31,
	2011		2010			2009
	(in thousands)
United States	$	2,622	$	(21,526	)	$	(78,185	)
Foreign		4,849		4,265			4,820
Equity loss of SEN		—		—			(3,238	)
Income (loss) before income taxes	$	7,471	$	(17,261	)	$	(76,603	)

        Income taxes (credits) are as follows:

	Years ended December 31,
	2011		2010			2009
	(in thousands)
Current:
United States
Federal	$	—	$	—		$	5
State		163		309			99
Foreign		1,646		1,528			1,526
Total current		1,809		1,837			1,630
Deferred:
Foreign		585		(1,525	)		(765	)
Total deferred		585		(1,525	)		(765	)
Income taxes	$	2,394	$	312		$	865

        Reconciliations of income taxes at the United States Federal statutory rate to the effective income tax rate are as follows:

	Years ended December 31,
	2011			2010			2009
	(in thousands)
Income (credit) at the United States statutory rate	$	2,615		$	(6,041	)	$	(26,812	)
State income taxes		31			309			99
Unrecognized tax benefits		899			842			—
Unremitted earnings of foreign subsidiaries		—			—			705
Effect of change in valuation allowance		(3,160	)		6,550			(21,446	)
Foreign income tax rate differentials		(365	)		(1,490	)		(926	)
Restoration of foreign deferred tax assets		—			(1,329	)		—
Equity loss of SEN		—			—			1,133
Taxable gain on sale of investment in SEN		—			—			41,973
Deemed distribution from foreign subsidiaries		1,533			2,152			3,914
Other, net		841			(681	)		2,225
Income taxes	$	2,394		$	312		$	865

        Significant components of current and long-term deferred income taxes are as follows:

	As of December 31,
	2011						2010
	Current			Long Term			Current			Long Term
	(in thousands)
Federal net operating loss carryforwards	$	—		$	79,163		$	—		$	75,459
State net operating loss carryforwards		—			2,685			—			2,812
Foreign net operating loss carryforwards		—			1,821			—			1,723
Federal tax credit carryforwards		—			15,505			—			15,087
State tax credit carryforwards		—			9,051			—			9,205
Unremitted earnings of foreign subsidiaries		—			(10,370	)		—			(1,589	)
Intangible assets		—			803			82			898
Property, plant and equipment		—			5,589			—			6,627
Accrued compensation		541			—			1,642			—
Inventories		22,447			—			17,519			—
Stock compensation		—			3,970			—			4,038
Warranty		1,293			51			938			57
Other		1,243			(3,814	)		74			3,914
Deferred taxes, gross		25,524			104,454			20,255			118,231
Valuation allowance		(24,160	)		(102,814	)		(18,174	)		(116,723	)
Deferred taxes, net	$	1,364		$	1,640		$	2,081		$	1,508

        At December 31, 2011, the Company had $130.0 million of deferred tax assets relating to net operating loss carryforwards, tax credit carryforwards and other temporary differences, which are available to reduce income taxes in future years. A valuation allowance must be established when it is "more likely than not" that all or a portion of deferred tax assets will not be realized. A review of all available positive and negative evidence needs to be considered, including a company's performance, the market environment in which the company operates length of carryback and carryforward periods, existing sales backlog, and projections of future operating results. Where there are cumulative losses in recent years there is a strong presumption that a valuation allowance is needed. This presumption can be overcome in very limited circumstances.

        The Company is in a three year cumulative loss position in the United States. As a result, the Company maintains a 100% valuation allowance for entities in those tax jurisdictions to reduce the carrying value of deferred tax assets to zero. The Company will continue to maintain a full valuation allowance for those tax assets until sustainable future levels of profitability are evident.

        Changes in the valuation allowance in 2011 and 2010 were attributable to changes in the composition of temporary differences and changes in net operating loss carryforwards. In addition, during 2010 the Company performed an evaluation of the deferred tax assets of certain of its foreign subsidiaries. Based on the subsidiaries recent and expected ability to generate taxable income, the Company reduced the subsidiaries' corresponding valuation allowance and recognized a tax benefit of $1.3 million.

        At December 31, 2011, the Company has federal and state net operating loss carryforwards of approximately $227.9 million and foreign net operating loss carryforwards of approximately $4.5 million expiring principally between 2021 and 2030.

        The Company has research and development and other tax credit carryforwards of approximately $19.0 million at December 31, 2011 that can be used to reduce future federal and state income tax liabilities. These tax credit carryforwards expire principally between 2021 and 2031. In addition, the Company has foreign tax credit carryforwards of approximately $5.6 million at December 31, 2011 that are available to reduce future U.S. income tax liabilities subject to certain limitations. These foreign tax credit carryforwards expire between 2012 and 2016.

        It is Company policy to provide taxes for the total anticipated tax impact of the undistributed earnings of our wholly-owned foreign subsidiaries', as such earnings are not expected to be reinvested indefinitely. The Company anticipates that US tax resulting from remitting such earnings will be off-set by net operating loss or credit carryforwards to the extent available. In addition, the Company does not anticipate incurring a foreign withholding tax on remitting such earnings since it does not intend to remit the earnings as dividends.

        The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. The Company and most foreign subsidiaries are subject to income tax examinations by tax authorities for all years dating back to 2001. The Company's policy is to recognize interest related to unrecognized tax benefits as interest expense and penalties as operating expenses. The Company believes that it has appropriate support for the income tax positions taken and to be taken on its tax returns and that its accruals for tax liabilities are adequate for all open years based on an assessment of many factors including past experience and interpretations of tax law applied to the facts of each matter.

        At December 31, 2011, the Company had unrecognized tax benefits of approximately $8.0 million, of which approximately $4.8 million reduced the Company's deferred tax assets and the offsetting valuation allowance and $3.2 million was recorded in other long-term liabilities. The Company does not expect any significant changes in unrecognized tax benefits in 2012.

        A reconciliation of the beginning and ending balance of unrecognized tax benefits are as follows:

	2011		2010
	(in thousands)
Balance at beginning of year	$	6,965	$	5,934
Increases in unrecognized tax benefits as a result of tax positions taken during a prior period		1,124		189
Increases in unrecognized tax benefits as a result of tax positions taken during the current period		—		842
Balance at end of year	$	8,089	$	6,965
Recorded as other long-term liability	$	3,244	$	2,246
Recorded as a decrease in deferred tax assets and offsetting valuation allowance		4,845		4,719
	$	8,089	$	6,965