|12 Months Ended|
Dec. 31, 2011
|Income Taxes [Abstract]|
The components of the Company's income tax provision for the three years ended December 31, 2011 were as follows:
The Company has U.S. federal net operating loss ("NOL") carryforwards for tax purposes, totaling $64,920 as of December 31, 2011, that are available to offset future taxable income. These carry forwards expire from 2023 to 2031. Management estimates that these losses will be fully utilized prior to the expiration date. No valuation allowance has been provided against the federal NOL. In addition, the Company's foreign subsidiaries have NOL carryforwards aggregating $2,083 which expire from 2027 to 2031. Management has recorded a valuation reserve of $71 against the deferred tax asset recorded for the foreign NOL benefit.
The Company has state net operating loss carryforwards with an aggregate tax benefit of $3,047 which expire from 2012 to 2031. Management estimates that the Company will not be able to fully absorb some of the loss carryforwards in certain states before they expire. A valuation allowance with a year-end balance of $296 has been recorded for these deferred tax assets. In 2011, the valuation allowance for state net operating loss carryforwards increased by $214. The increase was primarily a result of the increase in the related state net operating losses in the current year.
The Company has a federal capital loss carryforward of $1,593 as of December 31, 2011. This loss is available to offset future capital gains. This loss will expire from 2013 to 2014 if not utilized. Management has recorded a valuation allowance of $588 for this capital loss carryforward to fully offset the deferred tax asset in 2011. Management estimates that the utilization of this capital loss carryforward is uncertain due to the short carryforward period and the uncertainty of generating sufficient capital gains in the carryforward period. In 2011, the valuation allowance for the capital loss carryforward was decreased by $20 in the twelve month period. The decrease was attributed to utilization in the carryforward period. The Company has $187 of general business tax credit carryforwards which expire from 2012 to 2030. A valuation allowance of $143 has been established for these tax credits. The Company has $12 of foreign tax credit carryforwards which expire from 2020 to 2021. A valuation allowance of $12 has been established for these tax credits.
A deferred tax asset of $1,940 has been recorded for costs that were capitalized in connection with the Merger Transaction. Costs totaling $5,013 were capitalized in connection with the Merger Transaction including $1,138 of investment banking fees, $1,370 of consulting fees, $1,964 of legal and accounting fees, and $541 of other miscellaneous transaction costs. Certain of these capitalized costs are not amortized under the tax law and can only be recovered for tax purposes under certain circumstances. The Company has established a valuation allowance of $1,940 for the entire amount of the deferred tax asset related to these non-amortizable capitalized costs.
Deferred income taxes reflect the net 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.
The table below reflects the significant components of the Company's net deferred tax assets and liabilities at December 31, 2011 and 2010:
The valuation allowance at December 31, 2011 was $2,979. Effective for financial reporting periods beginning after December 15, 2008, any change in the valuation reserve is recorded as an adjustment to the tax provision in the period of change.
Realization of the net deferred tax assets is dependent on the reversal of deferred tax liabilities and generating sufficient taxable income prior to their expiration. Although realization is not assured, management estimates it is more likely than not that the net deferred tax assets will be realized. The amount of net deferred tax assets considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward periods are reduced.
Below is a reconciliation of statutory income tax rates to the effective income tax rates for the periods indicated:
The Company has recorded an $8 increase in the reserve for unrecognized tax benefits in the twelve month period ended December 31, 2011 related to a change in the effective state tax rate. The general tax reserve is shown in the financial statements as a reduction of the deferred tax asset for the Company's net operating loss carryforwards. A summary of the changes for the last three years follows:
The Company recognizes potential accrued interest and penalties related to unrecognized tax benefits in income tax expense. In conjunction with the adoption of Financial Accounting Standards Board ("FASB") Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" ("FIN 48"), an interpretation of FASB No. 109, "Accounting for Income Taxes", which was codified in ASC 740-10, the Company has not recognized any adjustment of interest or penalties in its consolidated financial statements due to its net operating loss position. The Company anticipates that total unrecognized tax benefits could decrease by $1,438 due to the settlement of audits and the expiration of statute of limitations prior to December 31, 2012.
The Company files a consolidated income tax return in the U.S. and numerous consolidated and separate income tax returns in various states and foreign jurisdictions. As of December 31, 2011, with a few exceptions, the Company is no longer subject to U.S. federal, state, and foreign tax examinations by tax authorities for the tax years prior to 2008. However, the IRS can make adjustments to losses carried forward by the Company from 2004 forward and utilized on its federal return.
The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.
Reference 1: http://www.xbrl.org/2003/role/presentationRef