Note 14 - Income Taxes

12 Months Ended

Sep. 29, 2012

Income Tax Disclosure [Text Block]

14.  INCOME TAXES

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.  Significant components of our deferred tax liabilities and assets as of September 29, 2012 and October 1, 2011 are as follows:

	2012			2011
Deferred tax liabilities:
Depreciation	$	(439,000	)	$	(376,000	)
Amortization		(57,000	)		-
Total deferred tax liabilities		(496,000	)		(376,000	)
Deferred tax assets:
Deferred compensation		194,000			213,000
Accrued expenses		419,000			299,000
Inventory		185,000			160,000
Amortization		-			4,000
Other		18,000			7,000
Total deferred tax assets		816,000			683,000
Net deferred tax assets	$	320,000		$	307,000

We made cash income tax payments, net of refunds, of approximately $1,700,000, $1,514,000, and $2,592,000, in fiscal years 2012, 2011, and 2010, respectively.

Federal, state and foreign income tax provisions consist of the following:

	2012			2011		2010
Current:
Federal	$	2,037,000		$	1,576,000	$	1,803,000
State		46,000			55,000		80,000
Foreign		234,000			-		-
		2,317,000			1,631,000		1,883,000
Deferred:
Federal		(43,000	)		158,000		383,000
State		(4,000	)		6,000		14,000
Foreign		(19,000	)		-		-
		(66,000	)		164,000		397,000
Income tax expense	$	2,251,000		$	1,795,000	$	2,280,000

Income tax expense differs from the amounts computed by applying the statutory U.S. federal tax rate to income before income taxes as follows:

	2012			2011			2010
Computed tax at the U.S. statutory rate	$	2,538,000		$	1,882,000		$	2,306,000
Increases (decreases):
State income taxes, net of federal tax benefit		28,000			40,000			62,000
Differences between U.S. and foreign tax rates		(107,000	)		-			-
Officer's life insurance		(62,000	)		(11,000	)		(38,000	)
Domestic production deduction		(200,000	)		(156,000	)		(115,000	)
Other, net		54,000			40,000			65,000
Income tax expense	$	2,251,000		$	1,795,000		$	2,280,000

The Company has adopted the provisions under ASC Topic 740, “Income Taxes” (“ASC 740”) which require that a position taken or expected to be taken in a tax return be recognized in the financial statements when it is more likely than not (i.e., a likelihood of more than fifty percent) that the position would be sustained upon examination by tax authorities. A recognized tax position is then measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon settlement. The Company recognizes accrued interest and penalties related to uncertain tax positions as a component of income tax expense in its financial statements.  Management is not aware of any uncertain tax positions as of September 29, 2012 and October 1, 2011.  In the normal course of business, we are subject to examination by taxing authorities.  We do not expect to be subject to U.S. federal or state and local income tax examinations by tax authorities in filing jurisdictions for the years before tax year 2007 and Canadian tax examinations before the tax year 2011.

Span-America files income tax returns in the U.S. and various state and local jurisdictions.  Span-Canada files separate income tax returns in Canada on an annual basis.  The resulting foreign income taxes and any applicable U.S. or foreign tax implications of intercompany transactions will be accounted for within the consolidated financial reporting of income taxes, per the requirements of ASC Topic 740.

A provision has not been made for U.S. or additional foreign taxes on $734,000 of undistributed earnings of a foreign subsidiary.  Those earnings have been and will continue to be reinvested. These earnings could become subject to additional tax if they were remitted as dividends, if foreign earnings were lent to the Company or a U.S. affiliate, or if the Company should sell its stock in the subsidiaries.  It is not practicable to estimate the amount of additional tax that might be payable on the foreign earnings.