Note 8 - Income Taxes

12 Months Ended

Dec. 31, 2013

Notes

Note 8 - Income Taxes

Note 8 - Income Taxes

The Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority.  The Company is subject to audit by the IRS and various states for tax years dating back to 2009.  The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense.

Income tax (provision) benefit for 2013 and 2012 consisted of $(97) and $69, respectively, of federal and state income taxes. The actual expense differs from the expected tax (provision) benefit as computed by applying the U.S. federal statutory income tax rate of 34 percent for 2013 and 2012, as follows:

	2013	2012
Tax (provision) benefit at U.S. federal statutory rate	$(432)	$798
State tax (provision) benefit  (net of federal income tax benefit)	(131)	186
Research and development and foreign tax credits	(630)	-
Change in cash surrender value of life insurance	-	(132)
Change in valuation allowance attributable to operations	2,123	(778)
Other, net	(1,027)	(5)
Tax (provision) benefit	$(97)	$69

The tax effects of temporary differences that give rise to significant portions of the deferred income tax assets and liabilities as of December 31, 2013 and 2012 are as follows:

	2013	2012
Deferred income tax assets:
Property and equipment, principally due to differences in depreciation	$966	$840
Inventory reserves and other inventory-related temporary basis differences	603	500
Warranty, vacation, deferred rent and other liabilities	858	849
Retirement liabilities	2,255	1,488
Net operating loss carryforwards	63,529	66,050
Credit carryforwards	825	1,428
Other	961	965
Total deferred income tax assets	69,997	72,120
Less valuation allowance	(69,997)	(72,120)
Net deferred income tax assets	-	-
Deferred income tax liabilities:
Total deferred income tax liabilities	-	-
Net deferred income tax assets and liabilities	-	-

Worldwide income (loss) before income taxes consisted of the following:

	2013	2012
United States	$1,270	$(2,348)
Foreign	-	-
Total	$1,270	$(2,348)

Income tax (provision) benefit consisted of the following:

	2013	2012
Current
U.S. federal	$(30)	-
State	(67)	69
Foreign	-	-
Total	$(97)	$69
Deferred
U.S. federal	$(1,172)	$652
State	(321)	126
Foreign	(630)	-
Total	(2,123)	778
Valuation allowance (increase) decrease	2,123	(778)
Total	-	-

E&S has total federal net operating loss carryforwards of approximately $165,300 which expire from 2019 through 2032.  Approximately $2,541 of federal net operating loss carryforwards expired in 2013.  The Company has various federal tax credit carryforwards of approximately $800, a portion of which expire between 2014 and 2016.  E&S also has state net operating loss carryforwards of approximately $144,600 that expire at various dates depending on the rules of the states to which the loss or credit is allocated.

During the years ended December 31, 2013 and 2012, the valuation allowance on deferred income tax assets decreased by $2,123 and increased by $778, respectively.  Valuation allowances were established according to the belief that it is more likely than not that these net deferred income tax assets will not be realized.