Note 7 - Income taxes:

The components of pre-tax income, the provision for income taxes, the difference between the provision for income taxes and the amount that would be expected using the U.S. federal statutory income tax rate of 35%, and the comprehensive provision for income taxes are presented below.


	Years ended December 31,
	2009			2010			2011
	(In thousands)
Components of pre-tax income (loss):
United States	$	(3,063	)	$	4,135		$	5,088
Non-U.S.		(1,988	)		4,661			10,005


Total	$	(5,051	)	$	8,796		$	15,093


Provision (benefit) for income taxes:
Currently payable (refundable):
U.S. federal and state	$	(271	)	$	4,889		$	2,892
Foreign		(694	)		1,611			2,547


		(965	)		6,500			5,439

Deferred income taxes (benefit):
U.S. federal and state		(1,992	)		(717	)		1,995
Foreign		(101	)		(39	)		(14	)

		(2,093	)		(756	)		1,981

Total	$	(3,058	)	$	5,744		$	7,420


Expected tax expense (benefit), at the U.S. federal statutory income tax rate of 35%	$	(1,768	)	$	3,079		$	5,282
Non-U.S. tax rates		74			(424	)		(994	)
Incremental U.S. tax on earnings of foreign subsidiaries		(1,092	)		3,439			2,799
State income taxes and other, net		3			218			391
Impact of tax rate changes		(76	)		(46	)		43
Tax credits		(199	)		(522	)		(442	)
Valuation allowance		—			—			341


Total	$	(3,058	)	$	5,744		$	7,420

In the first quarter of 2011, we recognized a $2.1 million provision for deferred income taxes related to the undistributed earnings of our Canadian subsidiary attributable to the $7.5 million patent litigation settlement gain discussed in Note 13.

Under GAAP, we are required to recognize a deferred income tax liability with respect to the incremental U.S. (federal and state) and foreign withholding taxes that would be incurred when undistributed earnings of a foreign subsidiary are subsequently repatriated, unless management has determined that those undistributed earnings are permanently reinvested for the foreseeable future. Prior to March 31, 2010, we had not recognized a deferred income tax liability related to incremental income taxes on the pre-2005 undistributed earnings of our Taiwanese subsidiary, as those earnings were deemed to be permanently reinvested. We are required to reassess the permanent reinvestment conclusion on an ongoing basis to determine if our intentions have changed. At the end of March 2010, and based primarily upon changes in our cash management plans, we determined that all of the undistributed earnings of our Taiwanese subsidiary could no longer be considered to be permanently reinvested in Taiwan. Accordingly, in the first quarter of 2010 we recognized an aggregate $1.9 million provision for deferred income taxes on the pre-2005 undistributed earnings of our Taiwanese subsidiary. Consequently, all of the undistributed earnings of our non-U.S. operations are now considered to be not permanently reinvested.

The components of net deferred tax assets (liabilities) are summarized below.


	December 31,
	2010			2011
	(In thousands)
Tax effect of temporary differences related to:
Inventories	$	1,303		$	932
Tax on unremitted earnings of non-U.S. subsidiaries		(5,198	)		(7,671	)
Property and equipment		(4,916	)		(3,971	)
Accrued liabilities and other deductible differences		171			164
Accrued employee benefits		893			1,412
Tax loss and credit carryforwards		472			494
Goodwill		(1,958	)		(2,179	)
Other taxable differences		(277	)		(511	)
Valuation allowance		-			(341	)


Total	$	(9,510	)	$	(11,671	)


Net current deferred tax assets		2,366			2,495
Net noncurrent deferred tax liabilities		(11,876	)		(14,166	)


Total	$	(9,510	)	$	(11,671	)

Our tax loss carryforwards at December 31, 2010 and 2011 relates to carryforwards in various U.S. state jurisdictions. At December 31, 2011, we had approximately $5.7 million of such state net operating loss carryforwards with expiration dates ranging from 2016 to 2031. At December 31, 2011, we have concluded that a portion of our U.S. state net operating losses do not meet the more-likely-than-not recognition criteria, accordingly we have recognized a deferred income tax asset valuation allowance of $341,000 with respect to such carryforwards.

We file income tax returns in various U.S. federal, state and local jurisdictions. We also file income tax returns in various foreign jurisdictions, principally in Canada and Taiwan. Our domestic income tax returns prior to 2008 are generally considered closed to examination by applicable tax authorities. Our foreign income tax returns are generally considered closed to examination for years prior to 2006 for Taiwan, and 2007 for Canada.