Note 12—Income Taxes

Significant components of the income tax provision (benefit) are as follows (in thousands):


	Year ended December 31,
	2011		2010			2009
Current:
Federal	$	4,550	$	(2,729	)	$	(9,196	)
State		1,211		137			273
Foreign		883		658			439

Total current		6,644		(1,934	)		(8,484	)

Deferred:
Federal		1,107		(3,499	)		10,474
State		111		(112	)		26

Total deferred		1,218		(3,611	)		10,500

Provision (benefit) for income taxes	$	7,862	$	(5,545	)	$	2,016

A reconciliation of the effective tax rate to the US federal statutory tax rate is as follows (in thousands):


	Year ended December 31,
	2011		2010		2009
Federal statutory tax rate		35.0 %		35.0 %		35.0 %
State income taxes, net of federal benefit		2.3		0.1		0.9
Change in valuation allowance		(8.5)		(8.4)		(38.6)
Warrant liability fair value adjustment		(8.5)		(15.3)		(0.1)
Other		(0.3)		(0.1)		(1.4)

Effective income tax rate		20.0 %		11.3 %		(4.2) %

Deferred income taxes reflect the tax effect of temporary differences between the carrying value of assets and liabilities for financial reporting purposes and the value reported for income tax purposes, at the enacted tax rates expected to be in effect when the differences reverse. The components of deferred tax assets and liabilities are as follows (in thousands):


	December 31,
	2011			2010
Deferred tax assets:
Net operating loss carryforwards	$	12,218		$	14,238
Allowance for doubtful accounts		212			37
Inventory valuation reserves		1,185			565
Equity compensation		1,769			414
Intangible assets and goodwill		15,228			18,266
Tax credit carryforwards		841			869
Other		32			7

Total gross deferred tax assets		31,485			34,396
Valuation allowance		(19,460	)		(22,940	)

Total deferred tax assets, net		12,025			11,456

Deferred tax liabilities:
Property, plant and equipment		(5,327	)		(2,422	)
Convertible debt, net of discount		(8,559	)		(9,480	)
Prepaid insurance and other		(78	)		(132	)

Total gross deferred tax liabilities		(13,964	)		(12,034	)

Net deferred tax liabilities	$	(1,939	)	$	(578	)

Deferred taxes are presented in the balance sheets as follows on financials:


	December 31,
	2011			2010
Current deferred tax assets	$	841		$	575
Non-current deferred tax assets		—			117
Current deferred tax liabilities		—			(117	)
Non-current deferred tax liabilities		(2,780	)		(1,153	)

Net deferred tax assets (liabilities)	$	(1,939	)	$	(578	)

As of December 31, 2011, the Company had estimated US net operating loss carryforwards of approximately $32.4 million, expiring in various amounts in 2021 through 2030. The ability to utilize net operating losses and other tax attributes could be subject to a significant limitation if the Company were to undergo an "ownership change" for purposes of Section 382 of the Tax Code.

The Company's corporate organizational structure requires the filing of two separate consolidated US

Federal income tax returns. As a result, taxable income of one group cannot be offset by tax attributes, including net operating losses of the other group. As of December 31, 2011, one group had a net operating loss carry forward and other net deferred tax assets of approximately $19.5 million. The Company has considered all available evidence, both positive and negative, to determine whether, a valuation allowance is necessary. Based upon the Company's assessment, a valuation allowance of $19.5 million was recorded because the deferred tax assets may not be realized.

The Company has not calculated US taxes on un-remitted earnings of certain non-US subsidiaries due to the Company's intent to reinvest the un-remitted earnings of the non-US subsidiaries. At December 31, 2011, the Company had approximately $3.2 million in unremitted earnings outside the US which were not included for US tax purposes. US income tax liability would be incurred if these funds were remitted to the US. It is not practicable to estimate the amount of the deferred tax liability on such un-remitted earnings.

The Company has performed an evaluation and concluded that there are no significant uncertain tax positions requiring recognition in the Company's financial statements. The evaluation was performed for the tax years which remain subject to examination by tax jurisdictions as of December 31, 2011 which are the years ended December 31, 2008 through December 31, 2011 for U.S federal taxes and years ended December 31, 2007 through December 31, 2011 for state tax jurisdictions. The Company's policy is to record penalties related to income tax matters as income tax expense.