8. Income Taxes

12 Months Ended

Dec. 31, 2014

Notes

8. Income Taxes

8. INCOME TAXES

Income tax expense consisted of the following:

	2014	2013
	(in thousands)
Federal Income Tax:
Current	$ 5,674	$4,273
Deferred	(9)	(39)
State Income Tax:
Current	550	329
Deferred	4	(2)
Foreign Income Tax:
Current	625	--
Deferred	150	330
Income Tax Expense	$6,994	$4,891

Pre-tax income included foreign income of $3,474,000 and $1,375,000 in 2014 and 2013, respectively.  During the year, the company paid a dividend out of its U.K. subsidiary, resulting in incremental U.S. taxes of $296,000.  As of December 31, 2014, the Company has $1,561,000 of unremitted earnings at its foreign subsidiaries.  The Company has not provided deferred taxes on these amounts, as the Company considers these balances to be indefinitely invested in the operations of the foreign subsidiary.  The incremental U.S. tax that would be paid if these earnings were remitted is $178,000.

Total income tax expense differed from statutory income tax expense, computed by applying the U.S. federal income tax rate of 35% to earnings before income tax, as follows:

	2014	2013
	(in thousands)
Computed Statutory Income Tax Expense	$7,159	$5,101
State Income Tax, Net of Federal Tax Benefit	318	220
Foreign Tax Rate Differential	(469)	(149)
Manufacturing Deduction	(381)	(299)
Impact of Foreign Dividend	296	---
Increase/(Reduction) in Tax Uncertainties	3	(19)
Other - Net	68	37
Income Tax Expense	$ 6,994	$ 4,891

                A deferred income tax (expense) benefit results from temporary timing differences in the recognition of income and expense for income tax and financial reporting purposes.  The components of and changes in the net deferred tax assets (liabilities) which give rise to this deferred income tax (expense) benefit for the years ended December 31, 2014 and 2013 are as follows:

	December 31,
	2014	2013
	(in thousands)
Deferred Tax Assets:
Compensation Assets	$124	$ 117
Inventory Valuation	453	516
Accounts Receivable Valuation	261	267
Deferred Litigation Costs	51	57
Foreign Net Operating Losses	---	154
Other	301	335
Compensation Liabilities	537	347
Total Deferred Assets	$1,727	$1,793
Deferred Tax Liabilities:
Prepaid Expenses	(527)	(386)
Depreciation and Amortization	(1,501)	(1,568)
Total Deferred Liabilities	($2,028)	($1,954)
Total Deferred Tax Liability	($301)	($161)

Management believes it is more likely than not that the Company will have sufficient taxable income when these timing differences reverse and that the deferred tax assets will be realized and, accordingly, no valuation allowance is deemed necessary.

The Company is currently subject to audit by the Internal Revenue Service for the calendar years ended 2011 through 2013.  The Company and its Subsidiaries’ state income tax returns are subject to audit for the calendar years ended 2010 through 2013.

As of December 31, 2013, the Company had provided a liability of $100,000 for unrecognized tax benefits related to various federal and state income tax matters, which is included in Other Long Term Liabilities.  Of this amount, the amount that would impact the Company’s effective tax rate, if recognized, was $65,000.  The difference between the total amount of unrecognized tax benefits and the amount that would impact the effective tax rate consists of items that are offset by the federal tax benefit of state income tax items of $35,000.  The liability at December 31, 2014 was $105,000.

The following is a tabular reconciliation of the total amounts of unrecognized tax benefits for the year:

	2014	2013
Beginning Unrecognized Tax Benefits –	$100	$119
Current Year – Increases	---	---
Current Year – Decreases	---	---
Current Year – Interest/Penalties	5	5
Expired Statutes	---	(24)
Ending Unrecognized Tax Benefits –	$105	$100