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Income Tax
12 Months Ended
Dec. 31, 2013
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes

Loss from continuing operations before income taxes consisted of the following:
 
(Dollars in thousands)
 
Year Ended December 31,
 
2013
 
2012
 
2011
United States
$
(6,255
)
 
$
(36,808
)
 
$
(5,380
)
Canada
(867
)
 
(9,290
)
 
(976
)
 
$
(7,122
)
 
$
(46,098
)
 
$
(6,356
)


Provision (benefit) for income taxes from continuing operations for the years ended December 31, consisted of the following:
 
(Dollars in thousands)
 
Year Ended December 31,
 
2013
 
2012
 
2011
Current income tax expense (benefit):
 
 
 
 
 
U.S. Federal
$
(864
)
 
$
(740
)
 
$
384

U.S. state
84

 
215

 
295

Canada
639

 
1,016

 
(190
)
Total
$
(141
)
 
$
491

 
$
489

Deferred income tax expense (benefit):
 
 
 
 
 
U.S. Federal
$

 
$
16,159

 
$
(2,187
)
U.S. state

 
1,160

 
(155
)
Canada

 
125

 
86

Total
$

 
$
17,444

 
$
(2,256
)
Total income tax expense (benefit):
 
 
 
 
 
U.S. Federal
$
(864
)
 
$
15,419

 
$
(1,803
)
U.S. state
84

 
1,375

 
140

Canada
639

 
1,141

 
(104
)
Total
$
(141
)
 
$
17,935

 
$
(1,767
)


The reconciliation between the effective income tax rate and the statutory federal rate for continuing operations was as follows:
 
Year Ended December 31,
 
2013
 
2012
 
2011
Statutory Federal rate
35.0
 %
 
35.0
 %
 
35.0
 %
Increase (decrease) resulting from:
 
 
 
 
 
Change in valuation allowance
(30.3
)
 
(72.4
)
 
(1.5
)
Change in uncertain tax positions
(9.8
)
 
(4.4
)
 
(1.6
)
Executive life insurance
5.1

 
0.8

 
(0.9
)
State and local taxes, net
3.2

 
2.6

 
(1.3
)
Meals & entertainment
(1.9
)
 
(0.3
)
 
(2.8
)
Provision to return differences
1.5

 
0.9

 
(0.3
)
Deferred tax expense

 

 
1.0

Other items, net
(0.8
)
 
(1.1
)
 
0.2

Provision for income taxes
2.0
 %
 
(38.9
)%
 
27.8
 %


Income taxes paid for the years ended December 31, 2013, 2012, and 2011 amounted to $0.2 million, $0.2 million and $2.6 million, respectively. In 2013, 2012 and 2011, the Company received $0.7 million, $3.4 million and $3.3 million, respectively, in income tax refunds primarily related to the carryback of net operating losses and recovery of income tax overpayments in prior years.

At December 31, 2013, the Company had $46.5 million of U.S. Federal net operating loss carryforwards which are subject to expiration beginning in 2030 and $0.5 million of foreign tax credit carryforwards which are subject to expiration beginning in 2020. In addition, the Company had $44.9 million of state net operating loss carryforwards which expire at varying dates through 2031.

Primarily due to the cumulative losses incurred in recent years, management determined that it was more likely than not that the Company will not be able to utilize its deferred tax assets to offset future taxable income. Therefore, in 2013 and 2012 the Company increased its deferred tax valuation allowance by $1.6 million and $33.3 million, respectively. The tax valuation allowance will remain until the Company can establish that the recoverability of its deferred tax assets is more certain.

Deferred income tax assets and liabilities contain the following temporary differences:
 
(Dollars in thousands)
 
December 31,
 
2013
 
2012
Deferred tax assets:
 
 
 
Compensation and benefits
$
10,883

 
$
14,101

Net operating loss carryforward
18,453

 
12,710

Inventory reserve
2,734

 
3,654

Accounts receivable reserve
353

 
657

Other
4,113

 
4,694

Total deferred tax assets
36,536

 
35,816

Deferred tax liabilities:
 
 
 
Property, plant and equipment
53

 
738

Other
590

 
728

Total deferred liabilities
643

 
1,466

Net deferred tax assets before valuation allowance
35,893

 
34,350

Valuation allowance
(35,834
)
 
(34,278
)
Net deferred tax assets
$
59

 
$
72

 
 
 
 
Net deferred tax assets:
 
 
 
Net current deferred tax assets
$
5

 
$
17

Net noncurrent deferred tax assets
54

 
55

Net deferred tax assets
$
59

 
$
72



A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
 
(Dollars in thousands)
 
December 31,
 
2013
 
2012
Balance at beginning of year
$
2,096

 
$
92

Additions for tax positions of current year
585

 
1,261

Additions for tax positions of prior years
114

 
835

Reductions for tax positions of prior years

 
(92
)
Balance at end of year
$
2,795

 
$
2,096



The recognition of the unrecognized tax benefits would have a favorable effect on the effective tax rate. Due to the uncertainty of both timing and resolution of income tax examinations, the Company is unable to determine whether any amounts included in the December 31, 2013 balance of unrecognized tax benefits represent tax positions that could significantly change during the next twelve months.

The Company and its subsidiaries are subject to U.S. Federal income tax as well as income tax of multiple state and foreign jurisdictions. As of December 31, 2013, the Company was subject to income tax examinations in various jurisdictions for the tax years 2006 through 2012. During 2013, the Company completed U.S. Federal income tax examinations through tax year 2009. The Company is currently under examination by the Canada Revenue Authority ("CRA") for the years 2006 through 2010. The CRA examination was completed during May 2013 and resulted in proposed adjustments which amount to $1.3 million of additional tax for the 2008 and 2009 tax years. The Company is not in agreement with these adjustments and filed a request with Competent Authority programs in both the U.S. and Canada in October, 2013. The Competent Authority program assists taxpayers with respect to matters covered in the mutual agreement procedure provisions of tax treaties. Management has not recorded a reserve and is confident that the Company will prevail in this matter. The Company is unable to establish an estimated time frame in which this issue will be resolved through Competent Authority.