Income Taxes

12 Months Ended

Jan. 31, 2012

Income Taxes [Abstract]

INCOME TAXES

NOTE 16 – INCOME TAXES

The components of the Company’s income tax expense related to continuing operations for the years ended January 31, 2012 and 2011 are presented below:

	2012			2011
Current:
Federal	$	3,771,000		$	5,264,000
State		836,000			1,363,000
		4,607,000			6,627,000
Deferred:
Federal		41,000			365,000
State		(92,000	)		45,000
		(51,000	)		410,000
Income tax expense	$	4,556,000		$	7,037,000

The actual income tax expense amounts for the years ended January 31, 2012 and 2011 differed from the “expected” tax amounts computed by applying the U.S. Federal corporate income tax rate of 34% to income from continuing operations before income taxes as presented below:

	2012			2011
Computed “expected” income tax	$	4,068,000		$	5,795,000
Increase (decrease) resulting from:
State income taxes, net		460,000			944,000
Permanent differences		(138,000	)		(40,000	)
True-up and other adjustments		166,000			338,000
Income tax expense	$	4,556,000		$	7,037,000

For the year ended January 31, 2012, the favorable tax effect of permanent differences related primarily to the tax benefit of the domestic manufacturing deduction for the period.

With respect to permanent differences for the year ended January 31, 2011, the favorable income tax effect of the domestic manufacturing deduction for the year was substantially offset by compensation expense amounts not deductible for income tax reporting purposes. The Company also recorded unfavorable return-to-provision true-up adjustments during the year ended January 31, 2011 that related to income tax returns for various prior year periods.

As of January 31, 2012, other current assets included prepaid income taxes of approximately $1.6 million. As of January 31, 2011, accrued expenses included income tax amounts payable of approximately $4.4 million.

The Company’s consolidated balance sheets as of January 31, 2012 and 2011 included net deferred tax assets in the amounts of $1.5 million and $1.1 million, respectively, resulting from future deductible temporary differences. The Company’s ability to realize its deferred tax assets depends primarily upon the generation of sufficient future taxable income to allow for the utilization of the Company’s deductible temporary differences and tax planning strategies. If such estimates and assumptions change in the future, the Company may be required to record additional valuation allowances against some or all of the deferred tax assets resulting in additional income tax expense in the consolidated statement of operations. At this time, based substantially on the strong earnings performance of the Company’s power industry services business segment, management believes that it is more likely than not that the Company will realize benefit for its deferred tax assets.

The tax effects of temporary differences that gave rise to deferred tax assets and liabilities as of January 31, 2012 and 2011 are presented below:

	2012			2011
Assets:
Purchased intangibles	$	1,557,000		$	1,698,000
Accrued incentive compensation		190,000			78,000
Stock options		1,497,000			1,359,000
Other		733,000			124,000
		3,977,000			3,259,000
Liabilities:
Property and equipment		(453,000	)		(413,000	)
Purchased intangibles		(1,942,000	)		(1,661,000	)
Other		(53,000	)		(95,000	)
		(2,448,000	)		(2,169,000	)
Net deferred tax assets	$	1,529,000		$	1,090,000

The Company is subject to income taxes in the United States and in various state jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. With few exceptions, the Company is no longer subject to federal, state and local income tax examinations by tax authorities for its fiscal years ended on or before January 31, 2008. Tax penalties recorded during the years ended January 31, 2012 and 2011, and included in selling, general and administrative expenses for the years, were not material. Tax interest, if material, would be included in income tax expense.