INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2013

The components of the Company’s income (loss) before income taxes are attributable to the following jurisdictions for the years ended December 31 (in thousands):

	2013		2012
United States	$	702	$	(778	)
Foreign		2,107		478
	$	2,809	$	(300	)

Income tax provision (benefit)

The components of the Company’s income tax provision (benefit) for the years ended December 31 are as follows (in thousands):

Current provision (benefit):	2013			2012
Federal	$	124		$	(743	)
State		144			7
Foreign		1,434			1,437
		1,702			701
Deferred provision (benefit):
Federal		(1,883	)		—
State		—			—
Foreign		(184	)		387
		(2,067	)		387
	$	(365	)	$	1,088

Reconciliation of effective income tax rate and United States federal statutory income tax rate

A reconciliation of the Company’s effective income tax rate and the United States federal statutory income tax rate is summarized as follows, for the years ended December 31:

	2013			2012
Federal statutory income taxes		35.0	%		35.0	%
State income taxes, net of federal benefit		1.3			2.6
Difference in foreign and United States tax on foreign operations		(11.6	)		(194.0	)
Effect of changes in valuation allowance for net operating loss carryforwards		(55.9	)		(106.2	)
Effect of change in uncertain tax positions (net)		(17.0	)		315.2
Federal Sub-Part F Income from foreign operations		11.8			(170.2	)
Other		23.4			(245.5	)
		(13.0	)%		(363.1	)%

Deferred tax assets and liabilities

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 the Company’s deferred tax assets and liabilities consisted of the following at December 31 (in thousands):

Deferred tax assets:	2013			2012
Current:
Deferred revenue	$	(26	)	$	7
Inventory capitalization		228			429
Inventory reserves		644			457
Accrued expenses		917			935
Other		108			66
Total current deferred tax assets		1,871			1,894
Noncurrent:
Depreciation and amortization		1,834			1,508
Net operating loss⁽¹⁾		5,078			6,255
Deferred royalty		39			119
Non-cash accounting charges related to stock options and warrants		520			491
Accrued expenses		366			409
Other		843			1,117
Total noncurrent deferred tax assets		8,680			9,899
Total deferred tax assets		10,551			11,793
Valuation allowance		(5,264	)		(8,519	)
Total deferred tax assets, net of valuation allowance	$	5,287		$	3,274
Deferred tax liabilities:
Current:
Prepaid expenses	$	396		$	576
Other		5			0
Total current deferred tax liabilities		401			576
Noncurrent:
Internally-developed software		15			37
Depreciation and amortization		2			2
Sub-Part F Income Deferred		2,163			1,830
Other		(52	)		(53	)
Total noncurrent deferred tax liabilities		2,128			1,816
Total deferred tax liabilities	$	2,529		$	2,392

⁽¹⁾	The Company’s net operating loss will expire as follows (dollar amounts in thousands):

Jurisdiction	Gross NOL		Tax Effected NOL		Expiration Years
Canada	$	20		5	2043
Cyprus		25		3	2018
Denmark		2		0	Indefinite
Mexico		9,003		2,701	2020-2023
Norway		743		184	Indefinite
Singapore		54		9	Indefinite
Sweden		576		127	Indefinite
Switzerland		1,490		137	2016-2020
Taiwan		7,268		1,236	2016-2023
Ukraine		725		138	Indefinite
United States (states)		21,499		537	2015-2032

Summary of valuation allowance

The valuation allowances presented below (in millions) at December 31, 2013 and 2012, represented a reserve against the Company’s net deferred tax asset the Company believed the “more likely than not” criterion for recognition purposes could not be met.

Country	2013		2012
Mexico	$	2,701	$	2,276
Norway		184		208
Sweden		127		132
Switzerland		38		1,043
Taiwan		1,237		1,192
Ukraine		138		—
United States		839		3,668
Total	$	5,264	$	8,519

Deferred tax assets (liabilities) classified in Consolidated Balance Sheets

Deferred tax assets (liabilities) are classified in the accompanying Consolidated Balance Sheets of December 31 as follows (in thousands):

	2013			2012
Current deferred tax assets	$	1,578		$	561
Noncurrent deferred tax assets		1,303			502
Current deferred tax liabilities		(114	)		(179	)
Other long-term liabilities		(9	)		(2	)
Net deferred tax assets	$	2,758		$	882

Unrecognized tax benefits

The Company recognizes penalties and interest charges related to unrecognized tax benefits in current tax expense. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows, for the years ended December 31, 2013 and 2012 (in thousands):

	2013			2012
Balance as of January 1	$	3,039		$	3,984
Additions for tax positions related to the current year		436			81
Additions for tax positions of prior years		292			58
Reductions of tax positions of prior years		(3,029	)		(1,084	)
Balance as of December 31	$	738		$	3,039

Tax years subject to examinations

The Company files income tax returns in the United States federal jurisdiction and various state and foreign jurisdictions. As of December 31, 2013, the tax years that remained subject to examination by a major tax jurisdiction for the Company’s most significant subsidiaries were as follows:

Jurisdiction		Open Years
Australia		2009-2013
Canada		2007-2013
Denmark		2010-2013
Japan		2008-2013
Mexico		2011-2013
Norway		2011-2013
Republic of Korea		2008-2013
Singapore		2010-2013
South Africa		2010-2013
Sweden		2011-2013
Switzerland		2010-2013
Taiwan		2008-2013
United Kingdom		2007-2013
United States		2007-2013