12.

Income Taxes

At the end of each interim period, we are required to estimate our annual effective tax rate for the fiscal year and use that rate to provide for income taxes for the current year-to-date reporting period. Due to the effects of the deferred tax valuation allowance and changes in unrecognized tax benefits, our effective tax rates in 2012 and 2011 are not meaningful as the income tax benefit is not directly correlated to the amount of pretax income or loss. The income tax benefits of $0.6 million and $1.8 million during the three and nine months ended September 30, 2012, respectively, resulted primarily from the release of reserves attributable to the expiration of statute of limitations periods. The income tax benefits of $2.5 million and $8.1 million for the three and nine months ended September 30, 2011, respectively, resulted primarily from our 2011 second quarter settlement of various state income tax matters and our 2011 first quarter settlement with the IRS on the audit of our 2004 and 2005 federal income tax returns.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of the assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is recorded against a deferred tax asset if, based on the weight of available evidence, it is more-likely-than-not (a likelihood of more than 50%) that some portion, or all, of the deferred tax asset will not be realized. At September 30, 2012 and December 31, 2011, we had a full valuation allowance recorded against our net deferred tax asset. Future realization of our deferred tax assets ultimately depends upon the existence of sufficient taxable income in the carryforward periods under the tax laws. We will continue analyzing, in subsequent reporting periods, the positive and negative evidence in determining the expected realization of our deferred tax assets.

The components of our net deferred tax asset were as follows.


	September 30, 2012			December 31, 2011
	(Dollars in thousands)
Deferred tax assets:
Federal net operating loss carryforwards	$	133,796		$	133,454
State net operating loss carryforwards		52,576			53,350
Stock-based compensation expense		28,944			26,771
Accrued liabilities		26,391			29,600
Asset impairment charges		20,613			31,137
Alternative minimum tax and other tax credit carryforwards		10,726			10,296
Inventory, additional costs capitalized for tax		3,833			3,466
Unrealized loss on marketable securities		—			2,787
Other		1,606			1,522

Total deferred tax assets		278,485			292,383
Valuation allowance		(263,561	)		(281,178	)

Total deferred tax assets, net of valuation allowance		14,924			11,205

Deferred tax liabilities:
Property, equipment and other assets		4,440			706
Deferred revenue		3,445			5,589
Unrealized gain on marketable securities		1,426			—
Inventory, additional costs capitalized for financial statement purposes		482			542
Accrued liabilities		758			32
Other, net		4,373			4,336

Total deferred tax liabilities		14,924			11,205

Net deferred tax asset	$	—		$	—