INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2012

Reconciliation of beginning and ending amount of liability for uncertain tax positions

A reconciliation of the beginning and ending amount of the liability for uncertain tax positions is as follows (dollars in thousands):

	2012			2011		2010
Liability for uncertain tax positions - January 1	$	4,132		$	3,835	$	4,722
Additions based on tax positions
related to the current year		1,221			297		948
Settlement/expiration of statutes of limitations		(2,642	)		-		(1,835	)
Liability for uncertain tax positions - December 31	$	2,711		$	4,132	$	3,835

Provision (benefit) for income taxes

The (benefit) provision for income taxes consists of the following (dollars in thousands):

	Years Ended December 31,
	2012			2011			2010
Current:
Federal	$	(459	)	$	2,585		$	221
Foreign		241			478			803
State		76			362			182
		(142	)		3,425			1,206
Deferred:
Federal		(807	)		599			(133	)
State		(58	)		102			189
Foreign		(357	)		(18	)		669
		(1,222	)		683			725

	$	(1,364	)	$	4,108		$	1,931

Reconciliation of taxes on income computed at the federal statutory rate

A reconciliation of taxes on income computed at the U.S. federal statutory rate to amounts provided is as follows (dollars in thousands):

	Years Ended December 31,
	2012						2011						2010
	$			%			$			%			$			%
Tax provision computed at the
federal statutory rate	$	353			34	%	$	2,676			34	%	$	5,297			34	%
Increase (decrease) in taxes resulting from:
Different tax rates and permanent differences
applicable to foreign operations		(306	)		-29	%		1,526			19	%		(2,377	)		-15	%

Increase in (reversal of) liability for uncertain
tax positions - net		(1,421	)		-137	%		297			4	%		(887	)		-6	%

Utilization of research and development and foreign
tax credits		-			0	%		(762	)		-10	%		(549	)		-4	%

State taxes, net of federal benefit		-			0	%		341			4	%		309			2	%

Current year valuation allowance - U.S. segment		298			29	%		-			0	%		-			0	%

Permanent differences applicable to U.S. operations
including qualified production activity credits,
SERP/COLI income, unrealized foreign exchange gains
and amortization of purchase accounting intangibles		(260	)		-25	%		44			1	%		(73	)		0	%

Other		(28	)		-3	%		(14	)		0	%		211			1	%
Tax (benefit) provision computed at the Company's
effective tax rate	$	(1,364	)		-131	%	$	4,108			52	%	$	1,931			12	%

As of December 31, 2012, the Company has gross foreign income tax net operating losses ("NOL") of $3.4 million and capital loss carryforwards of $0.2 million. The Company has established valuation allowances of $0.5 million and $0.1 million, respectively, against these deferred tax assets. In addition, the Company has gross state income tax NOLs of $1.7 million, capital loss carryforwards of $2.7 million and tax credit carryforwards of $1.2 million. The Company has established valuation allowances of $0.2 million, $0.4 million and $0.7 million, respectively, against these deferred tax assets. The foreign NOL's can be carried forward indefinitely and the state NOL's expire at various times during 2013 - 2029.

Upon the acquisition of Fibreco, Fibreco had a deferred tax liability in the amount of $0.1 million arising from various timing differences. In connection with the 2012 Acquisitions, the Company was required to complete a preliminary fair market value report of property, plant and equipment and intangibles. As a result of that report, the Company established deferred tax liabilities at the date of acquisition in the amounts of $1.7 million and $0.6 million, respectively for the Fibreco and Gigacom acquisitions. At December 31, 2012, a deferred tax liability of $2.3 million remains on the consolidated balance sheet. At December 31, 2012, the Company had no additional deferred tax amounts relating to the Powerbox acquisition as the fair market value report has not been completed. The Company has made elections under IRC Section 338(g) to step-up the tax basis of the 2012 Acquisitions to fair value. The elections made under Section 338(g) only affect the U.S. income taxes (not those of the foreign countries where the acquired entities were incorporated).

Components of deferred income tax assets

Components of deferred income tax assets are as follows (dollars in thousands).

	December 31,
	2012			2011
	Tax Effect			Tax Effect
Deferred Tax Assets - current:
State tax credits	$	845		$	766
Reserves and accruals		1,334			1,195
Valuation allowance		(745	)		(666	)
	$	1,434		$	1,295

Deferred Tax Assets - noncurrent:
Unfunded pension liability	$	1,150		$	941
Depreciation		(426	)		(369	)
Amortization		(2,063	)		243
Federal, state and foreign net operating loss
and credit carryforwards		1,114			566
Restructuring expenses		319			-
Other accruals		2,438			1,999
Valuation allowances		(1,129	)		(566	)
	$	1,403		$	2,814