13. Income Taxes

12 Months Ended

Apr. 30, 2013

Income Tax Disclosure [Text Block]

Income Tax Disclosure [Text Block]

13.  Income Taxes

The income before benefit for income taxes consisted of (in thousands):

	Year Ended April 30,
	2013			2012
U.S.	$	7,028		$	7,426
Foreign		(1,942	)		(612	)
	$	5,086		$	6,814

The benefit for income taxes consists of the following (in thousands):

	2013			2012
Current:
Federal	$	1,680		$	2,534
Foreign		-			-
State		40			6
Current provision		1,720			2,540
Deferred:
Federal		(145	)		16
Foreign		(585	)		(49	)
State		(80	)		(10	)
Deferred benefit		(810	)		(43	)
Change in valuation allowance		490			(3,057	)
Total benefit	$	1,400		$	(560	)

The following table reconciles the reported income tax (benefit) expense with the amount computed using the federal statutory income tax rate (in thousands):

	2013			2012
Computed "expected" tax expense	$	1,729		$	2,316
State and local tax, net of federal benefit		(81	)		(3	)
Valuation allowance on deferred tax assets		490			(3,057	)
Nontaxable income from foreign subsidiaries		29			72
Nondeductible expenses		178			143
Nontaxable life insurance cash value increase		(168	)		(150	)
Write off benefit from equity investment losses		-			466
Tax credits		(299	)		(350	)
Other items, net, none of which individually exceeds 5% of federal taxes at statutory rates		(478	)		3
	$	1,400		$	(560	)

The components of deferred taxes are as follows (in thousands):

	2013			2012
Deferred tax assets:
Employee benefits	$	6,490		$	5,320
Inventory		1,980			2,055
Accounts receivable		470			525
Tax credits		990			1,140
Other liabilities		270			332
Net operating loss carryforwards		3,040			2,800
Total deferred tax asset		13,240			12,172
Deferred tax liabilities:
Marketable securities		540			243
Property, plant and equipment		1,310			1,630
Net deferred tax asset		11,390			10,299
Valuation allowance		(1,900	)		(1,455	)
Net deferred tax assets	$	9,490		$	8,844

Net deferred tax assets are comprised of the following (in thousands):

	2013			2012
Gross current assets	$	3,890		$	4,092
Valuation allowance		-			(697	)
Current liabilities		(720	)		(243	)
Net current deferred tax assets		3,170			3,152
Gross noncurrent assets		9,600			8,080
Valuation allowance		(1,900	)		(758	)
Noncurrent liabilities		(1,380	)		(1,630	)
Net noncurrent deferred tax assets		6,320			5,692
Net deferred tax assets	$	9,490		$	8,844

The total valuation allowance relates to deferred tax assets of both domestic and foreign subsidiaries.  For the year ended April 30, 2013, the change in valuation allowance was an increase of $445,000 which consists of the $490,000 deferred tax provision less a foreign exchange adjustment of $45,000.  The change in valuation allowance during the year ended April 30, 2012 was a decrease of $3.1 million, including foreign exchange adjustments of $58,000 and the $43,000 tax effect of unrealized gains on marketable securities.

During the fourth quarter of fiscal year 2012, the Company reduced its valuation allowance against deferred tax assets in the amounts of $3.1 million.  This recognition was the result of an evaluation of the Company’s net operating losses incurred in prior years, its recent history of three consecutive years of increasing profitability and recent contract bookings which increased the Company’s long-term backlog to a higher level.  Company management believed such contracts would enable the Company to continue to generate operating profits in fiscal year 2013 and beyond.  These adjustments were made in the fourth quarter of fiscal year 2012 as the Company waited until it had results for the full year to make final its determination, given the existence of a loss in recent years, that it met the accounting threshold for determination that the recovery of the deferred tax asset was more likely than not and to estimate the appropriate balance of the valuation allowance, based on all available information.  The amount of the non-cash valuation allowance reduction was based on management’s estimates of taxable income by reporting segment and taxing jurisdictions and the periods over which the Company believes deferred tax assets will be recoverable.

At April 30, 2013, the Company has available approximately $2.7 million in net operating losses available to offset future income of certain of its foreign subsidiaries.  These loss carryforwards have no expiration date.  As a result of the acquisition of FEI-Elcom, the Company has a federal net operating loss carryforward of $6.6 million which may be applied in annually limited amounts to offset future U.S.-sourced taxable income over the next 19 years.

The Company has evaluated its tax positions and has concluded that the tax positions meet the more-likely-than-not recognition threshold as specified under accounting standards.  It is difficult to predict what would occur to change the Company’s unrecognized tax benefits over the next twelve months.  The Company believes, however, that there should be no change during the next twelve months.  The Company's tax returns for April 30, 2006 and 2007 have been examined by the Internal Revenue Service, which resulted in no material adjustments.  The Company's tax years from April 30, 2005 through April 30, 2013 remain open to examination by state tax authorities and tax years from April 30, 2008 through April 30, 2013 remain open for examination by the Internal Revenue Service.