Income Taxes

The Company recognized a benefit for income taxes of $9.3 million for the year ended December 31, 2013, primarily as a result of a reversal in the fourth quarter of 2013 of $7.2 million of reserves for foreign taxes upon the expiration of the statute of limitations. In addition, in 2013 the Company reversed a portion of its valuation allowance for deferred tax assets as a result of deferred tax liabilities recognized in connection with unrealized gains on marketable securities included as a component of other comprehensive income. The Company recognized a benefit for income taxes of $15.7 million for the year ended December 31, 2012, primarily from a reversal of a portion of its valuation allowance for deferred tax assets as a result of deferred tax liabilities recognized on the identifiable intangible assets acquired in connection with the acquisition of Sun Well.

The components of the benefit from income taxes were as follows:



	Fiscal Year Ended December 31,
	2013			2012			2011
	(in thousands)
Federal:
Current	$	14		$	34		$	(2,666	)
Deferred	3,402			15,066			—
	3,416			15,100			(2,666		)

Foreign:
Current	7,281			1,373			1,979
Deferred	(1,696		)	—			921
	5,585			1,373			2,900

State:
Current	509			(979		)	(8		)
Deferred	(168		)	218			—
	341			(761		)	(8		)

	$	9,342		$	15,712		$	226

The components of income (loss) from continuing operations before income taxes were as follows:



	Fiscal Year Ended December 31,
	2013		2012		2011
	(in thousands)

Domestic	$	6,990	$	6,326	$	(2,717	)
Foreign	59		141		2,559
	$	7,049	$	6,467	$	(158	)

The benefit for income taxes varied from the Federal statutory income tax rate due to the following:



	Fiscal Year Ended December 31,
	2013		2012		2011

Federal statutory rate	35.0	%	35.0	%	35.0	%
State taxes, net of federal benefit	(8.1	)%	15.1	%	(1.9	)%
Foreign losses not benefited	(0.3	)%	(0.6	)%	(19.6	)%
Changes in tax reserves	(78.6	)%	(53.9	)%	640.3	%
Change in valuation allowance	(78.7	)%	(263.2	)%	(654.0	)%
Permanent differences	(1.8	)%	24.6	%	143.2	%
	(132.5	)%	(243.0	)%	143.0	%

The components of the deferred tax assets and liabilities were as follows:



	December 31,
	2013			2012
	(in thousands)
Deferred tax assets
Net operating loss carryforward	$	61,212		$	40,771
Research and development credits	33,484			29,659
Compensatory and other accruals	1,800			1,200
Foreign tax credits	—			7,528
Other, net	1,785			2,901
Gross deferred tax assets	98,281			82,059

Deferred tax liabilities:
Unremitted foreign earnings	7,001			29,425
Unrealized gains on investments	3,704			321
Intangible assets	6,525			8,886
Fixed assets	13,354			4,403
Gross deferred tax liabilities	30,584			43,035

Net deferred tax asset before valuation allowance	67,697			39,024
Valuation Allowance	(69,753		)	(37,173		)

Net deferred tax asset (liability)	$	(2,056	)	$	1,851

The components of the Company's deferred tax assets and deferred tax liabilities were classified in the consolidated balance sheets as follows:



	December 31,
	2013			2012
	(in thousands)

Deferred income tax assets - current	$	—		$	188
Deferred income tax assets - non-current	1,556			1,696
Total deferred income tax assets	1,556			1,884

Deferred income tax liabilities - current	3,612			—
Deferred income tax liabilities - non-current	—			33
Total deferred income tax liabilities	3,612			33

Net deferred income tax asset (liability)	$	(2,056	)	$	1,851

At December 31, 2013, the Company had Federal net operating loss carryforwards of approximately $146.4 million that expire in 2021 through 2031, and domestic state net operating loss carryforwards of approximately $164.4 million that expire in 2014 through 2031. The Company also had Federal research and development credit carryforwards of approximately $30.3 million that expire in 2018 through 2029, and domestic state research and development credit carryforwards of approximately $17.7 million that do not expire. Of the total Federal net operating loss carryforwards, approximately $10.4 million related to deductions for stock-based compensation, the tax benefit of which will be credited to additional paid-in capital when realized. The Company's ability to utilize its net operating loss and other credit carryforwards would be subject to limitation upon a change in control. Federal income taxes and foreign withholding taxes associated with the repatriation of earnings of foreign subsidiaries have been fully provided.

The Company established a valuation allowance to reserve its net deferred tax assets at December 31, 2013 and 2012, based on its assessment that it is more likely than not that such benefit will not be fully realized. This assessment was based on, but not limited to, the Company’s operating results for the past three years, uncertainty in the Company’s projections of taxable income, uncertainty in general economic conditions in general and in the oil and gas industry in particular, and the effects of multiple acquisitions and the Company’s ability to effectively integrate the acquired entities.

The changes in unrecognized tax positions were as follows:



	Fiscal Year Ended December 31,
	2013			2012			2011
	(in thousands)

Balance at beginning of period	$	26,419		$	29,903		$	31,818
Tax positions related to prior year:
Additions	—			—			951
Expiration of statute of limitations	(7,298		)	—			—
Settlements	—			(3,484		)	(2,866		)
Balance at ending of period	$	19,121		$	26,419		$	29,903

As of December 31, 2013, the Company’s total gross unrecognized tax benefits were $19.1 million, of which $0.1 million, if recognized, would affect the provision for income taxes. In 2013, the Company reversed approximately $7.3 million of reserves for foreign taxes upon the expiration of the statute of limitations. The Company recognizes interest and penalties related to uncertain tax positions as a component of “Benefit from income taxes” in its consolidated statements of operations. For the years ended December 31, 2013. 2012, and 2011, the amount of such interest and penalties recognized was immaterial.

The Company is subject to Federal income tax as well as income taxes in many domestic states and foreign jurisdictions in which the Company operates or formerly operated. As of December 31, 2013, fiscal years from 1999 onward remain open to examination by the United States taxing authorities and fiscal years 2009 onward remain open to examination in Singapore.