Note 8 - Taxes on Income (Tax Benefits)

12 Months Ended

Dec. 31, 2012

Income Tax Disclosure [Text Block]

8.      TAXES ON INCOME (TAX BENEFITS)

Income (loss) from continuing operations before taxes on income (tax benefits) was as follows for the years ended December 31 (in thousands):

	2012		2011			2010
Domestic	$	42,387	$	(381	)	$	40,941
Foreign		25,576		32,145			36,788
Total	$	67,963	$	31,764		$	77,729

Provisions (benefits) for taxes on income (tax benefit) from continuing operations consisted of the following components for the years ended December 31 (in thousands):

	2012			2011			2010
Current:
Federal	$	8,335		$	948		$	5,361
Foreign		9,704			8,878			8,051
State		635			316			1,435
Subtotal		18,674			10,142			14,847
Deferred:
Federal		(1,841	)		(1,700	)		6,768
Foreign		69			492			832
State		571			(1,369	)		593
Subtotal		(1,201	)		(2,577	)		8,193
Total tax provision	$	17,473		$	7,565		$	23,040

Income tax (benefit) expense differed from the amounts computed by applying the U.S. federal income tax rate of 35% to income (loss) before income taxes, equity in income (loss) of joint ventures and minority interests as a result of the following (in thousands):

	2012			2011			2010
Income taxes at U.S. federal statutory tax rate	$	23,787		$	11,117		$	27,205
Increase (decrease) in taxes resulting from:
Change in the balance of the valuation allowance for deferred tax assets allocated to income tax expense		3,714			477			1
State income taxes, net of federal income tax benefit		784			(639	)		1,369
Transaction costs		509			574			—
Meals and entertainment		962			570			531
Changes in taxes previously accrued		(2,424	)		158			(155	)
Foreign tax rate differences		(4,236	)		(3,412	)		(4,335	)
Recognition of uncertain tax positions		(800	)		(214	)		(453	)
Contingent consideration reversal		(2,869	)		—			—
Domestic Production Activities Deduction		(1,440	)		(52	)		(733	)
Other matters		(514	)		(1,014	)		(390	)
Total tax provision	$	17,473		$	7,565		$	23,040
Effective tax rate		25.7	%		23.8	%		29.6	%

Net deferred taxes consisted of the following at December 31 (in thousands):

	2012			2011
Deferred income tax assets:
Foreign tax credit carryforwards	$	88		$	483
Net operating loss carryforwards		17,225			14,366
Accrued expenses		10,443			11,015
Other		8,394			8,563
Total gross deferred income tax assets		36,150			34,427
Less valuation allowance		(6,574	)		(4,691	)
Net deferred income tax assets		29,576			29,736
Deferred income tax liabilities:
Property, plant and equipment		(14,051	)		(16,127	)
Intangible assets		(33,715	)		(27,088	)
Undistributed foreign earnings		(7,051	)		(7,051	)
Other		(8,579	)		(11,721	)
Total deferred income tax liabilities		(63,396	)		(61,987	)
Net deferred income tax liabilities	$	(33,820	)	$	(32,251	)

The Company’s tax assets and liabilities, netted by taxing location, are in the following captions in the balance sheets (in thousands):

	2012			2011
Current deferred income tax assets, net	$	3,975		$	3,728
Current deferred income tax liabilities, net		(5,994	)		(3,230	)
Noncurrent deferred income tax assets, net		7,989			5,418
Noncurrent deferred income tax liabilities, net		(39,790	)		(38,167	)
Net deferred income tax liabilities	$	(33,820	)	$	(32,251	)

The Company’s deferred tax assets at December 31, 2012 included $17.2 million in federal, state and foreign net operating loss (“NOL”) carryforwards. These NOLs include $7.8 million, which if not used will expire between the years 2013 and 2032, and $9.4 million that have no expiration dates. The Company also has foreign tax credit carryforwards of $0.1 million, of which $0.1 million has no expiration date.

For financial reporting purposes, a valuation allowance of $6.6 million has been recognized to reduce the deferred tax assets related to certain federal, state and foreign net operating loss carryforwards and other assets, for which it is more likely than not that the related tax benefits will not be realized, due to uncertainties as to the timing and amounts of future taxable income. The valuation allowance at December 31, 2011 was $4.7 million relating to the same items described above. Activity in the valuation allowance is summarized as follows for the years ended December 31 (in thousands):

	2012			2011			2010
Balance, at beginning of year	$	4,691		$	5,083		$	4,857
Additions		2,062			1,058			499
Reversals		(191	)		(1,352	)		(570	)
Other adjustments		12			(98	)		297
Balance, at end of year	$	6,574		$	4,691		$	5,083

The Company has recorded income tax expense at U.S. tax rates on all profits, except for undistributed profits of non-U.S. subsidiaries of approximately $261.3 million, which are considered indefinitely reinvested. Determination of the amount of unrecognized deferred tax liability related to the indefinitely reinvested profits is not feasible. A deferred tax asset is recognized only if we have definite plans to generate a U.S. tax benefit by repatriating earnings in the foreseeable future.

FASB ASC 740, Income Taxes (“FASB ASC 740”), prescribes a more-likely-than-not threshold for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FASC ASC 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods and disclosure of uncertain tax positions in financial statements.

A reconciliation of the beginning and ending balance of unrecognized tax benefits is as follows (in thousands):

	2012			2011			2010
Balance at January 1,	$	1,050		$	1,672		$	2,624
Additions for tax positions of prior years related to acquisitions		3,145			–			–
Additions for tax positions of prior years		111			41			77
Reductions for tax positions of prior years		–			(238	)		–
Lapse in statute of limitations		(1,162	)		(406	)		(1,076	)
Foreign currency translation		26			(19	)		47
Balance at December 31, total tax provision	$	3,170		$	1,050		$	1,672

The total amount of unrecognized tax benefits, if recognized, that would affect the effective tax rate was $1.0 million at December 31, 2012.

The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense. During the years ended December 31, 2012, 2011 and 2010, approximately $0.6 million, $0.1 million and $0.2 million, respectively, was accrued for interest.

The Company believes that it is reasonably possible that the total amount of unrecognized tax benefits will change in 2013. The Company has certain tax return years subject to statutes of limitation that will expire within twelve months. Unless challenged by tax authorities, the expiration of those statutes of limitation is expected to result in the recognition of uncertain tax positions in the amount of approximately $0.4 million.

The Company is subject to taxation in the United States, various states and foreign jurisdictions.  With few exceptions, the Company is no longer subject to U.S. federal, state, local or foreign examinations by tax authorities for years before 2008.