Note 8 - Income Taxes

12 Months Ended

Dec. 31, 2014

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 2010.  The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense.

Income tax (provision) benefit for 2014 and 2013 consisted of $23 and $97, respectively, of federal and state income taxes. The actual expense differs from the expected tax benefit (provision) as computed by applying the U.S. federal statutory income tax rate of 34 percent for 2014 and 2013, as follows:

	2014	2013
Income tax benefit (provision) at U.S. federal statutory rate	$436	$(432)
State tax benefit (provision) (net of federal income tax benefit)	42	(131)
Research and development and foreign tax credits	-	(630)
Change in cash surrender value of life insurance	-	-
Change in valuation allowance attributable to operations	(332)	2,123
Other, net	(169)	(1,027)
Income tax provision	$(23)	$(97)

The tax effects of temporary differences that give rise to significant portions of the deferred income tax assets and liabilities as of December 31, 2014 and 2013 are as follows:

	2014	2013
Deferred income tax assets:
Property and equipment, principally due to differences in depreciation	$845	$966
Inventory reserves and other inventory-related temporary basis differences	663	603
Warranty, vacation, deferred rent and other liabilities	1,114	858
Retirement liabilities	2,427	2,255
Net operating loss carryforwards	63,511	63,529
Credit carryforwards	825	825
Other	944	961
Total deferred income tax assets	70,329	69,997
Less valuation allowance	(70,329)	(69,997)
Net deferred income tax assets	$-	$-

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

	2014	2013
United States	$(1,282)	$1,270
International	-	-
Total	$(1,282)	$1,270

Income tax (provision) benefit consisted of the following:

	2014	2013
Current
U.S. federal	$-	$(30)
State	(23)	(67)
International	-	-
Total	$(23)	$(97)
Deferred
U.S. federal	$985	$(1,172)
State	(653)	(321)
International	-	(630)
Total	332	(2,123)
Valuation allowance (increase) decrease	(332)	2,123
Total	$-	$-

E&S has total federal net operating loss carryforwards of approximately $165,600 which expire from 2018 through 2032.  Approximately $0 and $2,541 of federal net operating loss carryforwards expired in 2014 and 2013, respectively.  The Company has various federal tax credit carryforwards of approximately $800, a portion of which expire between 2015 and 2016.  E&S also has state net operating loss carryforwards of approximately $142,200 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, 2014 and 2013, the valuation allowance on deferred income tax assets increased by $332 and decreased by $2,123, 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.