Income Taxes

12 Months Ended

Dec. 31, 2012

Income Tax Disclosure [Abstract]

Income Taxes

11. Income Taxes

The provision for income taxes from continuing operations consists of the following:

	For the years ended December 31,
In thousands	2012		2011		2010
Current:
Federal	$	3,208	$	1,534	$	(1,422	)
State		265		15		(24	)
Foreign		2,352		3,623		1,921
Total Current		5,825		5,172		475
Deferred:
Federal	$	(2,031)	$	503	$	(1,209	)
State		(291)		108		666
Foreign		673		572		940
Total Deferred		(1,649)		1,183		397
Provision for income taxes	$	4,176	$	6,355	$	872

The following is a reconciliation of the difference between the actual provision for income taxes from continuing operations and the provision computed by applying the federal statutory tax rate on earnings:

	For the years ended December 31,
In thousands	2012		2011			2010
Statutory federal income tax rate		35.0%		34.0	%		34.0	%
State income taxes, including valuation allowances		—		1.9			20.7
Valuation allowances for deferred tax assets		(15.5)		2.2			87.8
Foreign dividends		0.9		1.7			30.8
Reserve for tax contingencies		0.1		0.6			(7.5	)
Manufacturing deduction		(2.4)		(1.3	)		—
France tax law change		1.0		1.8			5.9
IRC section 987 loss		—		—			(143.3	)
Other		0.8		0.4			3.1
Effective income tax rate		19.9%		41.3	%		31.5	%

The other line item above includes mainly non-deductible expenditures such as meals and entertainment and stock based compensation expense for incentive stock options and other non-taxable income and expense items.

The Company’s effective tax rate from continuing operations for 2012 was 19.9% compared to 41.3% in 2011 and 31.5% in 2010. For 2012, the difference between the Company’s effective tax rate from continuing operations and the statutory federal income tax rate was primarily caused by the release of valuation allowances against foreign tax credit carryovers of $3.9 million and state net operating loss carryovers, partially offset by additional valuation allowance against a foreign net deferred tax asset. The $3.9 million reversal of valuation allowances against foreign tax credit carryovers included $2.9 million of foreign tax credits to be used to offset 2012 U.S. federal income taxes and $1.0 million to benefit future periods. The Company’s state income taxes in 2012 were offset by the reversal of valuation allowances against state net operating loss carryovers of $0.5 million as the Company will use certain state net operating loss carryovers to offset 2012 and 2013 state income taxes. During 2012, the Company increased its valuation allowance against a foreign deferred tax asset in the Netherlands by $0.7 million as future realization of such tax benefit was not reasonably assured.

The Company maintains valuation allowances against certain deferred tax assets where realization is not reasonably assured. The Company evaluates the likelihood of the realization of deferred tax assets and reduces the carrying amount to the extent it believes a portion will not be realized. The Company’s effective tax rates in future periods could be affected by earnings being lower or higher than anticipated in countries where tax rates differ from the United States federal rate, the relative impact of permanent tax adjustments on higher or lower earnings from domestic operations, changes in net deferred tax asset valuation allowances, completion of acquisitions or divestitures, changes in tax rates or tax laws and the completion of tax audits.

For 2011, the difference between the Company’s effective tax rate from continuing operations and the statutory federal income tax rate was primarily caused by valuation allowances against foreign tax credit carryovers, a valuation allowance against a foreign net deferred tax asset, and dividends from a foreign subsidiary.

For 2010, the Company’s effective tax rate from continuing operations was significantly impacted by a tax benefit of $4.0 million associated with a change in assertion regarding unremitted foreign earnings related to its German branch. This was offset by valuation allowances against foreign tax credit carryovers and state net operating loss carryovers, as future realization was not reasonably assured, that generated tax expense of $3.0 million, and $0.9 million of tax expense associated with dividends from a foreign subsidiary. The impact of those items and a reduction in reserves for tax contingencies contributed to the Company’s effective tax rate from continuing operations differing from the statutory federal income tax rate in 2010.

The following schedule presents net current and net long-term deferred tax assets and liabilities by tax jurisdiction as of December 31, 2012 and 2011:

	2012				2011
	Deferred Tax Assets				Deferred Tax Assets
In thousands	Current		Long-term		Current		Long-term
Federal	$	3,862	$	—	$	1,832	$	—
State		348		—		58		—
Foreign		289		474		288		798
Totals	$	4,499	$	474	$	2,178	$	798

	2012				2011
	Deferred Tax Liabilities				Deferred Tax Liabilities
In thousands	Current		Long-term		Current		Long-term
Federal	$	—	$	2,935	$	—	$	4,491
State		—		205		—		406
Foreign		26		762		32		343
Totals	$	26	$	3,902	$	32	$	5,240

Net deferred tax assets (liabilities) consist of the following as of December 31, 2012 and 2011:

	December 31,
In thousands	2012		2011
Deferred tax assets:
Accounts receivable	$	108	$	106
Inventories		591		733
Net operating loss carryforwards		4,268		4,429
Other accrued liabilities		1,679		1,619
Pension		9,454		8,048
Tax Credits		3,442		6,061
Total deferred tax assets		19,542		20,996
Deferred tax liabilities:
Domestic liability of foreign assets	$	448	$	766
Intangible assets		6,121		6,015
Property, plant and equipment		8,341		9,379
Total deferred tax liabilities		14,910		16,160
Valuation allowance		3,587		7,132
Net deferred tax assets (liabilities)	$	1,045	$	(2,296	)

For the years ended December 31, 2012, 2011 and 2010, income from continuing operations before income taxes was derived from the following sources:

	For the years ended December 31,
In thousands	2012		2011		2010
United States	$	14,573	$	4,767	$	(4,906	)
Foreign		6,409		10,635		7,677
Total income from continuing operations before income taxes	$	20,982	$	15,402	$	2,771

At December 31, 2012, the Company had approximately $4.7 million of foreign net operating loss carryovers in France and $7.5 million of net operating loss carryovers in the Netherlands. The French net operating loss carryforwards have no expiration. The Company concluded it was more likely than not that the French net operating loss carryforwards will be fully realized and no valuation allowance was necessary as of December 31, 2012. The Netherlands’ net operating losses expire between the years 2015 and 2019. The Company has recorded a valuation allowance against the net deferred tax asset in the Netherlands. The Company will continue to monitor the realization criteria based on future operating results.

At December 31, 2012, the Company had approximately $13.5 million of state net operating loss carryforwards which expire between 2014 and 2032. In addition, at December 31, 2012, the Company had $1.4 million of foreign tax credit carryforwards that expire between 2020 and 2021 and $3.2 million of state tax credit carryforwards that expire between 2013 and 2027. As of December 31, 2012, the Company had provided a valuation reserve against the majority of its state net operating loss carryforwards and all of its state tax credit carryforwards. The valuation allowance related to all of these deferred tax assets was required as the Company determined that future realization was not reasonably assured. The Company evaluates and weighs the positive and negative evidence present at each period. In arriving at a conclusion, the Company has given significant weight to future projected earnings and historical earnings.

United States income taxes have not been provided on undistributed earnings of international subsidiaries. It is not practicable to estimate the amount of tax that might be payable. The Company’s intention is to reinvest these earnings permanently or to repatriate the earnings only when it is tax effective to do so.

The Company and its subsidiaries file a consolidated federal income tax return, as well as returns required by various state and foreign jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities, including such major jurisdictions as the United States, France, Germany and the Netherlands. Within the next fiscal year, the Company expects to conclude certain U.S. federal income tax matters through the year ended December 31, 2009 and it is reasonably expected that net unrecognized benefits of $0.5 million may be recognized. The total amount of net unrecognized tax benefits that would affect the effective tax rate if recognized was $0.7 million as of December 31, 2012. With few exceptions, the Company is no longer subject to U.S. federal examinations for years before 2006, state and local examinations for years before 2002, and non-U.S. income tax examinations for years before 2003.

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows:

In thousands	2012		2011
Unrecognized tax benefits at beginning of year	$	870	$	822
Increases relating to positions taken in prior periods		336		194
Increases (decreases) relating to current period		14		(48	)
Decreases due to settlements with tax authorities		(106)		—
Decreases due to lapse of statute of limitations		(85)		(98	)
Unrecognized tax benefits at end of year	$	1,029	$	870

The Company recognizes the interest accrued and the penalties related to unrecognized tax benefits as a component of tax expense. The total amount of accrued interest and penalties as of December 31, 2012 was $0.1 million.