Income Taxes

6 Months Ended

Jun. 30, 2011

Income Taxes [Abstract]

Income Taxes

(10) Income Taxes

     The Company maintains a valuation allowance for a portion of its U.S. deferred tax assets. The valuation allowance is calculated in accordance with the provisions of ASC 740 “Income Taxes,” which requires that a valuation allowance be established or maintained when it is “more likely than not” that all or a portion of deferred tax assets will not be realized. In the event the Company’s expectations of future operating results change, the valuation allowance may need to be adjusted upward or downward. As of June 30, 2011, the Company’s unreserved U.S. deferred tax assets totaled $12.0 million. These existing unreserved deferred tax assets are currently considered to be “more likely than not” realized.

     The Company’s effective tax rates for the three months ended June 30, 2011 and 2010 were 27.6% and 59.8%, respectively. The decrease in the Company’s effective tax rate for the three months ended June 30, 2011 as compared to the corresponding period in 2010 was due to lower expected tax expense in certain foreign jurisdictions for 2011. The high effective rate in the three months ended June 30, 2010 was due to an update to the Company’s expectation of the distribution of earnings between U.S. and foreign jurisdictions resulting in a higher than usual estimated annual effective tax rate for that period. The Company’s effective tax rates for the six months ended June 30, 2011 and 2010 were 27.2% (provision on income) and 26.0% (provision on a loss), respectively. The increase in the Company’s effective tax rate for the six months ended June 30, 2011 was due primarily to changes in the distribution of earnings between U.S. and foreign jurisdictions.

     A reconciliation of the expected income tax expense (benefit) on income (loss) before income taxes using the statutory federal income tax rate of 35% for the six months ended June 30, 2011 and 2010 to income tax expense is as follows (in thousands):

	Six Months Ended
	June 30,
	2011			2010
Expected income tax expense (benefit) at 35%	$	1,587		$	(19,284	)
Foreign taxes (tax rate differential and foreign tax differences)		(333	)		2,075
Formation of INOVA Geophysical		—			10,507
Nondeductible financings		—			1,015
Nondeductible expenses and other		(22	)		(292	)
Deferred tax asset valuation allowance on formation of INOVA Geophysical		—			20,313
Total income tax expense	$	1,232		$	14,334

     The Company has no significant unrecognized tax benefits and does not expect to recognize significant increases in unrecognized tax benefits during the next twelve month period. Interest and penalties, if any, related to unrecognized tax benefits are recorded in income tax expense.

     The Company’s U.S. federal tax returns for 2007 and subsequent years remain subject to examination by tax authorities. The Company is no longer subject to IRS examination for periods prior to 2007, although carryforward attributes that were generated prior to 2007 may still be adjusted upon examination by the IRS if they either have been or will be used in an open year. In the Company’s foreign tax jurisdictions, tax returns for 2007 and subsequent years generally remain open to examination.