Note 14 - Income Taxes

12 Months Ended

Dec. 31, 2011

Income Tax Disclosure [Text Block]

Note 14.     Income Taxes

The components of loss from continuing operations before benefit from (provision for) income taxes for all periods presented are as follows:

				Nine-Month
	Fiscal Year			Transition			Fiscal Year
	Ended			Period Ended			Ended
	December 31,			December 31,			March 31,
	2011			2010			2010
	(in thousands)
Loss from continuing operations before income taxes:
Domestic	$	(3,016	)	$	(12,220	)	$	(21,500	)
Foreign		2,559			2,436			1,420
	$	(457	)	$	(9,784	)	$	(20,080	)

The components of the benefit from (provision) for income taxes from continuing operations for all periods presented are as follows:

				Nine-Month
	Fiscal Year			Transition			Fiscal Year
	Ended			Period Ended			Ended
	December 31,			December 31,			March 31,
	2011			2010			2010
	(in thousands)
Federal:
Current	$	(2,666	)	$	76		$	1,341
Deferred		-			-			-
		(2,666	)		76			1,341
Foreign:
Current		1,979			(7,961	)		535
Deferred		921			276			1,018
		2,900			(7,685	)		1,553
State
Current		(8	)		7			(46	)
Deferred		-			-			-
		(8	)		7			(46	)
Benefit from (provision for) income taxes	$	226		$	(7,602	)	$	2,848

The Company’s effective tax rate differed from the federal statutory rate for all periods presented as follows:

				Nine-Month
	Fiscal Year			Transition			Fiscal Year
	Ended			Period Ended			Ended
	December 31,			December 31,			March 31,
	2011			2010			2010
Federal statutory rate		35.0	%		35.0	%		35.0	%
State taxes, net of federal benefit		-1.9	%		0.0	%		-0.2	%
Foreign losses not benefited		-19.6	%		1.2	%		-1.8	%
Changes in tax reserves		640.3	%		-78.2	%		2.2	%
Change in valuation allowance		5852.1	%		-33.6	%		8.3	%
Distributions from foreign subsidiaries		-6599.8	%		-3.8	%		-36.3	%
Benefit from NOL carryback		0.0	%		0.0	%		6.7	%
Other permanent differences		143.2	%		1.7	%		0.3	%
		49.3	%		-77.7	%		14.2	%

The Company recorded a benefit from income taxes of $0.2 million for the fiscal year ended December 31, 2011, primarily due to the reversal of reserves for foreign taxes as a result of a favorable settlement in Singapore. During fiscal 2011, the Company made significant changes to its historic investment portfolio to move to primarily low-risk interest-bearing government securities. These changes were significant enough, in the Company’s judgment, to consider the legacy portfolio to have been disposed of for the purpose of tracking a disproportionate tax effect that arose in fiscal 2008. Fiscal 2011 also included the Company realizing certain currency translation gains due to substantial liquidation of certain of its foreign subsidiaries and the receipt of dividends from foreign subsidiaries. These taxes were partially offset by income tax benefits from losses incurred in the Company’s foreign jurisdictions and the reversal of reserves for certain foreign taxes.

In the Transition Period and fiscal 2010, the Company’s tax benefit (provision) were associated with losses incurred from continuing operations being offset by income and taxes in discontinued operations. Further, these were offset by state minimum taxes and taxes related to foreign subsidiaries. In the Transition Period, the Company’s tax provision included tax expenses of $7.9 million primarily due to changes in judgment related to the ongoing audits in its foreign jurisdictions.

In fiscal 2010, the Company’s tax benefit included tax benefits of $1.3 million related to additional tax refunds that became available to the Company during 2010 due to the enactment of the Worker, Homeownership and Business Act of 2009, which allowed for an extension of the NOL carryback period from two to five years for United States tax purposes. Additionally, the Company also recorded tax benefits of $4.4 million primarily due to reaching final settlement with the German tax authorities for fiscal years 2001 and 2004 and the Singapore tax authorities for fiscal year 2001, reflecting the reversal of previously accrued liabilities and refunded tax amounts. This was partially offset by tax expense of $3.6 million primarily due to changes in judgment related to the ongoing audits in foreign jurisdictions.

The significant components of the Company’s deferred tax assets and liabilities at December 31, 2011 and 2010 are as follows:

	December 31,
	2011			2010
	(in thousands)
Deferred tax assets:
Intangible assets	$	3		$	234
NOL carryover		58,870			86,124
Research and development credits		29,659			29,659
Capitalized research and development		-			5,644
Compensatory and other accruals		688			689
Restructuring charges		-			480
Foreign tax credits		10,035			10,035
Fixed assets accrual		155			1,825
Other, net		2,690			3,710
Gross deferred tax assets		102,100			138,400
Deferred tax liabilities:
Unremitted earnings		(30,667	)		(66,666	)
Unrealized loss on investments		(229	)		(540	)
Other, net		(30	)
Gross deferred tax liabilities		(30,926	)		(67,206	)
Valuation allowance		(69,508	)		(70,449	)
Deferred tax assets, net	$	1,666		$	745

The significant components of the Company’s deferred tax assets and liabilities at December 31, 2011 and 2010 were classified in the Consolidated Balance Sheets as follows:

	December 31,
	2011			2010
	(in thousands)
Deferred tax assets:
Other current assets	$	-		$	986
Other long-term assets		1,711			745
Total deferred tax assets		1,711			1,731
Deferred tax liabilities:
Other current liabilities		(15	)		-
Other long-term liabilities		(30	)		(986	)
Total deferred tax liabilities		(45	)		(986	)
	$	1,666		$	745

The Company continues to provide United States deferred income taxes and foreign withholding taxes on its undistributed earnings. At December 31, 2011 and 2010, the Company recorded a deferred tax liability of $30.7 million and $66.7 million, respectively related to the foreign undistributed earnings, which was offset by a reduction in the Company’s valuation allowance against its deferred tax assets.

The Company continuously monitors the circumstances impacting the expected realization of its deferred tax assets on a jurisdiction by jurisdiction basis. At December 31, 2011 and 2010, the Company’s analysis of its deferred tax assets demonstrated that it was more likely than not that all of its net U.S. deferred tax assets will not be realized, resulting in a valuation allowance for deferred tax assets of $69.5 million and $70.4 million, which included immaterial out-of-period adjustments that had no impact to net loss, respectively. This resulted in a decrease to the valuation allowance by $0.9 million in the fiscal year ended December 31, 2011 and by $10.8 million during the nine-month Transition Period ended December 31, 2010. Factors that led to this conclusion included, but were not limited to, the Company’s past operating results, cumulative tax losses in the United States and uncertain future income on a jurisdiction by jurisdiction basis.

The Company continues to monitor the status of its NOLs, which may be used to offset future taxable income. If the Company underwent an ownership change, the NOLs would be subject to an annual limit on the amount of the taxable income that may be offset by its NOLs generated prior to the ownership change and additionally, the Company may be unable to use a significant portion of its NOLs to offset taxable income. At December 31, 2011, the Company had net operating loss carryforwards of $208.7 million for federal and $154.3 million for state purposes that expire in various years beginning in 2019 for federal and 2011 for state purposes. At December 31, 2011, the Company had research and development credits of $30.3 million for federal purposes that expire in various years beginning in 2019 and credits of $17.7 million for state purposes that carry forward indefinitely until fully exhausted. At December 31, 2011, the Company had foreign tax credits of $2.8 million that expire in various years beginning in 2010. Of the federal net operating loss carryforwards, $9.1 million were related to stock option deductions, the tax benefit of which will be credited to additional paid-in capital when realized.

Uncertainty in Income Taxes

The Company recognizes interest and/or penalties related to uncertain tax positions within “Benefit from (provision for) income taxes” in its Consolidated Statements of Operations. To the extent that accrued interest and penalties do not ultimately become payable, amounts accrued will be reduced and reflected as a reduction of the overall income tax provision in the period that such determination is made. The amount of interest and penalties accrued during fiscal year 2011, the Transition Period and fiscal year 2010 was immaterial.

A reconciliation of the changes to the Company’s gross unrecognized tax benefits for all periods presented is as follows:

				Nine-Month
	Fiscal Year			Transition		Fiscal Year
	Ended			Period Ended		Ended
	December 31,			December 31,		March 31,
	2011			2010		2010
	(in thousands)
Balance at beginning of period	$	31,818		$	23,925	$	27,779
Tax positions related to current year:
Additions		-			84		430
Tax positions related to prior years:
Additions		951			7,809		423
Reductions		-					(271	)
Settlements		(2,866	)				(4,436	)
Balance at end of period	$	29,903		$	31,818	$	23,925

As of December 31, 2011, the Company’s total gross unrecognized tax benefits were $29.9 million, of which $9.2 million, if recognized, would affect the effective tax rate. There was an overall decrease of $1.9 million in the Company’s gross unrealized tax benefits from the Transition Period to fiscal 2011, primarily due to the reversal of reserves for foreign taxes as a result of a favorable settlement with the Singapore taxing authorities for the tax assessment years of 2003 and 2004.

The Company is subject to U.S. federal income tax as well as income taxes in many U.S. states and foreign jurisdictions in which the Company operates or formerly operated. As of December 31, 2011, fiscal years 2004 onward remained open to examination by the U.S. taxing authorities and fiscal years 1999 onward remained open to examination in various foreign jurisdictions. U.S. tax attributes generated in fiscal years 1999 onward also remain subject to adjustment in subsequent audits when they are utilized.

The calculation of unrecognized tax benefits involves dealing with uncertainties in the application of complex global tax regulations. Management regularly assesses the Company’s tax positions in light of legislative, bilateral tax treaty, regulatory and judicial developments in the countries in which the Company conducts or formerly conducted business. Management believes that it is not reasonably possible that the gross unrecognized tax benefits will change significantly within the next 12 months; however, tax audits remain open and the outcome of any tax audits are inherently uncertain, which could change this judgment in any given quarter.