Income Taxes

12 Months Ended

Dec. 31, 2012

Income Tax Disclosure [Text Block]

Income Taxes

The provision for income tax expense (benefit) consists of (in thousands):

	2012	2011	2010
Current:
Federal	$  434	$ 32	$ (5,605)
State	211	(31)	27
Total current	645	1	(5,578)
Deferred:
Federal			1,476
State			139
Total deferred			1,615
Income tax expense (benefit)	$  645	$   1	$ (3,963)

A reconciliation of the difference between the federal statutory income tax rate and the effective income tax rate follows:

	2012	2011	2010
Federal statutory rate	35.0%	(35.0)%	(35.0)%
State tax, net of federal benefit	2.0	(3.4)	(1.4)
State tax credits and adjustments	.5	.6	(.7)
Increase in cash surrender value of life insurance policies	(2.2)	(12.3)	(1.2)
Tax-exempt interest		.7
Valuation allowance (decrease) increase	(33.7)	46.7	23.3
Goodwill impairment			6.7
Other, net	.5	2.7
Effective income tax rate	2.1%	0.0%	(8.3)%

The income tax effects of temporary differences that comprise deferred tax assets and liabilities at December 31 follow (in thousands):

	2012	2011
Current deferred tax assets:
Accounts receivable	$      243	$     402
Employee benefits	978	1,324
Other accrued expenses	278	257
Gross current deferred tax asset	1,499	1,983
Less valuation allowance	(537)	(1,464)
Net current deferred tax asset	$      962	$     519
Noncurrent deferred tax assets (liabilities)
Property, plant and equipment	$  (6,211)	$ (4,829)
Employee benefits	3,377	3,188
Other noncurrent assets	142	154
AMT credit	649	211
Net Operating Loss	4,131	13,117
Gross non-current deferred tax assets (liabilities)	2,088	11,841
Less valuation allowance	(3,050)	(12,360)
Net noncurrent deferred tax assets (liabilities)	$     (962)	$    (519)

  We have U.S. federal and state net operating loss carry-forwards of approximately $10.5 million which are available to reduce future taxable income.  The federal net operating loss will begin expiring in 2031 and the state net operating losses will expire at various times beginning in 2026.

During 2012, we recorded a non-cash credit to our valuation allowance of $10.2 million against our December 31, 2012 deferred tax assets.  The primary assets which are covered by this valuation allowance are employee benefits and net operating losses in excess of the amounts which can be carried back to prior periods. The valuation allowance was calculated in accordance with the provisions of ASC 740, Income Taxes, which requires an assessment of both positive and negative evidence when measuring the need for a valuation allowance.  Our results over the most recent three-year period were heavily affected by our business restructuring activities. Our cumulative loss, excluding income from the Continued Dumping and Subsidy Offset Act, in the most recent three-year period, in our view, represented sufficient negative evidence to require a valuation allowance.  We intend to maintain a valuation allowance until sufficient positive evidence exists to support its reversal. Although realization is not assured, we have concluded that the remaining net deferred tax asset in the amount of $962,000 will be realized based on the reversal of existing deferred tax liabilities. The amount of the deferred tax assets actually realized, however, could vary if there are differences in the timing or amount of future reversals of existing deferred tax liabilities. Should we determine that we will not be able to realize all or part of our deferred tax asset in the future, an adjustment to the deferred tax asset will be charged to income in the period such determination is made.  

The unrecognized tax benefits activity for the year ended December 31 follow (in thousands):

	2012	2011
Unrecognized tax benefits balance at January 1	$  650	$  722
Gross increases for tax positions of prior years	81	560
Gross decreases for tax positions of prior years	(53)	(632)
Unrecognized tax benefits balance at December 31	$  678	$  650

As of December 31, 2012 and 2011, we had approximately $253,000 and $361,000 of accrued interest related to uncertain tax positions, respectively.

Total amount of unrecognized tax benefits that would affect our effective tax rate if recognized is $510,000 at December 31, 2012 and $489,000 at December 31, 2011. The 2009, 2010 and 2011 tax years remain open to examination by major taxing jurisdictions.