|12 Months Ended|
Dec. 31, 2012
(8) INCOME TAXES
The provisions for income tax expense (benefit) were as follows (in thousands):
Income taxes differ from the statutory tax rates as applied to earnings (loss) before income taxes as follows (in thousands):
The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities at December 31, 2012 and 2011 are presented below (in thousands):
Management believes it is more likely than not that the results of future operations will generate sufficient taxable income to realize the net deferred tax assets.
Consolidated U.S. income (loss) before income taxes was $(27.4) million, $(162.0) million and $127.7 million for the years ended December 31, 2012, 2011 and 2010, respectively. The corresponding income before income taxes for non-U.S. based operations was $37.9 million, $31.0 million and $68.9 million for the years ended December 31, 2012, 2011 and 2010, respectively.
The U.S. net operating loss for the year ended December 31, 2011 was carried back to offset federal taxable income for 2009 and 2010, generating tax refunds of approximately $52.0 million in the first quarter of 2012. The U.S. net operating loss for the year ended December 31, 2012, along with the remaining unused net operating loss carryback from December 31, 2011, can be carried forward to reduce future taxable income. These net operating losses can be carried forward for 20 years and do not begin to expire until 2032. As of December 31, 2012 and 2011, no valuation allowance against the related deferred tax asset has been set up for these loss carry-forwards as it is believed the loss carry-forwards will be fully utilized in reducing future taxable income.
As of December 31, 2012 and 2011, the Company had combined foreign operating loss carry-forwards available to reduce future taxable income of approximately $52.1 million and $38.9 million, respectively. Some of these net operating losses expire beginning in 2014; however others can be carried forward indefinitely. As of December 31, 2012 and 2011, a valuation allowance against deferred tax assets of $14.6 million and $11.1 million, respectively, had been set up for those loss carry-forwards that are not more likely than not to be fully utilized in reducing future taxable income.
As of December 31, 2012, withholding and U.S. taxes have not been provided on approximately $171.2 million of cumulative undistributed earnings of the Company’s non-U.S. subsidiaries because the Company intends to indefinitely reinvest these earnings in its non-U.S. subsidiaries.
The balance of unrecognized tax benefits included in net prepaid expenses in the consolidated balance sheets decreased by $0.7 million during the year. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
If recognized, $9.9 million of unrecognized tax benefits would be recorded as a reduction in income tax expense.
Estimated interest and penalties related to the underpayment of income taxes are classified as a component of income tax expense and totaled $0.2 million for the year ended December 31, 2012, $0.6 million for the year ended December 31, 2011, and less than $0.1 million for year ended December 31, 2010. Accrued interest and penalties were $1.6 million and $1.6 million as of December 31, 2012 and 2011, respectively.
The amount of income taxes the Company pays is subject to ongoing audits by taxing jurisdictions around the world. The Company’s estimate of the potential outcome of any uncertain tax position is subject to management’s assessment of relevant risks, facts, and circumstances existing at that time. The Company believes that it has adequately provided for these matters. However, the Company’s future results may include favorable or unfavorable adjustments to its estimates in the period the audits are resolved, which may impact the Company’s effective tax rate.
As of December 31, 2012, the Company’s tax filings are generally subject to examination in the U.S. and several Asian and European tax jurisdictions for years ending on or after December 31, 2007. During the year, the Company reduced the balance of 2012 and prior year unrecognized tax benefits by $0.9 million as a result of expiring statutes. It is reasonably possible that the statute of limitations will lapse for federal and state jurisdictions during 2013, which would reduce the balance of 2012 and prior year unrecognized tax benefits by $1.0 million.
The Company is currently under examination by the IRS for the 2008 and 2009 tax years. The Company is also under examination by a number of states. During the year ended December 31, 2012, settlements were reached with certain state tax jurisdictions which reduced the balance of 2012 and prior year unrecognized tax benefits by $0.3 million. It is reasonably possible that certain federal and state examinations could be settled during the next twelve months which would reduce the balance of 2012 and prior year unrecognized tax benefits by $2.8 million.
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