Note 13 - Income Taxes

12 Months Ended

Dec. 31, 2012

Income Tax Disclosure [Text Block]

(13)  INCOME TAXES

We are subject to Federal and certain state income taxes. In addition, we are taxed in certain foreign countries. As of December 31, 2012 and 2011, there were no cumulative undistributed earnings of our foreign subsidiaries for which U.S. income taxes have not been provided.

Earnings before income taxes was as follows:

	Years Ended December 31,
	2012		2011
Domestic	$	2,580	$	6,722
Foreign		473		937
	$	3,053	$	7,659

Income tax expense (benefit) was as follows:

	Years Ended December 31,
	2012			2011
Current
Domestic -- Federal	$	362		$	148
Domestic -- state		62			133
Foreign		30			(20	)
		454			261
Deferred
Domestic -- Federal		396			(1,676	)
Domestic -- state		(126	)		(193	)
Foreign		173			(596	)
		443			(2,465	)
Income tax expense (benefit)	$	897		$	(2,204	)

Deferred income taxes reflect the net tax effect of net operating loss and credit carryforwards as well as temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The following is a summary of the significant components of our deferred tax assets and liabilities as of December 31, 2012 and 2011:

	December 31,
Deferred tax assets:	2012			2011
Net operating loss ("NOL") (state and foreign)	$	1,182		$	1,159
Depreciation of property and equipment		793			815
Tax credit carryforwards (foreign, research and AMT)		440			963
Accrued vacation pay and stock-based compensation		182			162
Inventories		177			209
Intangibles		86			35
Allowance for doubtful accounts		56			56
Acquisition costs		39			-
Accrued warranty		22			25
Other		68			6
		3,045			3,430
Valuation allowance		(573	)		(484	)
Deferred tax assets		2,472			2,946
Deferred tax liabilities:
Net intangible assets		(307	)		(358	)
Unremitted earnings of foreign subsidiaries		(127	)		(107	)
Deferred tax liabilities		(434	)		(465	)
Net deferred tax asset	$	2,038		$	2,481

The valuation allowance for deferred tax assets as of the beginning of 2012 and 2011 was $484 and $5,153, respectively. The net change in the valuation allowance for the years ended December 31, 2012 and 2011 was an increase of $89 and a decrease of $4,669, respectively. In assessing the ability to realize the deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during periods in which those temporary differences become deductible. We consider the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. In order to fully realize the total deferred tax assets, we will need to generate future taxable income prior to the expiration of net operating loss and credit carryforwards which expire in various years through 2032.

Several years ago, due to our history of operating losses in both our domestic and certain of our foreign operations, we had recorded a full valuation allowance against the deferred tax assets of these operations, including net operating loss carryforwards, where we believed it was more likely than not that we would not have sufficient taxable income to utilize these assets before they expire. During 2011, we reversed $3,110 of the valuation allowance which had been recorded against the deferred tax assets of these operations. The reversal of this amount of the valuation allowance was based on our assessment that it is now more likely than not that we will be able to fully utilize these assets in the near future. Some of the key factors we considered in making our assessment included our profitability in recent years and our level of certainty with regard to our forecasts of near term future profitability for the operations to which these assets relate.

An analysis of the effective tax rate for the years ended December 31, 2012 and 2011 and a reconciliation from the expected statutory rate of 34% is as follows:

	Years Ended December 31,
	2012			2011
Expected income tax provision at U.S. statutory rate	$	1,038		$	2,604
Increase (decrease) in tax from:
Current year tax credits (foreign and research)		(523	)		(349	)
Foreign income tax rate differences		(36	)		94
Changes in valuation allowance		89			(3,110	)
Deemed dividend from foreign subsidiaries		212			90
Domestic tax expense, net of Federal benefit		72			260
Nondeductible expenses		20			48
Effects of NOL carryforwards		103			(1,803	)
Other		(78	)		(38	)
Income tax expense (benefit)	$	897		$	(2,204	)

In accounting for income taxes, we follow the guidance in ASC Topic 740 (Income Taxes) regarding the recognition and measurement of uncertain tax positions in our financial statements. Recognition involves a determination of whether it is more likely than not that a tax position will be sustained upon examination with the presumption that the tax position will be examined by the appropriate taxing authority having full knowledge of all relevant information. Our policy is to record interest and penalties associated with unrecognized tax benefits as additional income taxes in the statement of operations. As of December 31, 2012 and 2011, we did not have an accrual for uncertain tax positions.

We file U.S. income tax returns and multiple state and foreign income tax returns. With few exceptions, the U.S. and state income tax returns filed for the tax years ending on December 31, 2009 and thereafter are subject to examination by the relevant taxing authorities.