Note 5 - Income Taxes

12 Months Ended

Dec. 31, 2011

Income Tax Disclosure [Text Block]

(5)            Income Taxes

For the years ended December 31, 2011, 2010, and 2009, income before income taxes consists of the following:

	2011		2010		2009
U.S. Operations	$	16,017	$	11,353	$	11,497
Foreign Operations		2,143		1,962		1,620
	$	18,160	$	13,315	$	13,117

Income tax expense consisted of the following components:

	2011			2010		2009
Federal:
Current	$	4,018		$	3,450	$	2,433
Deferred		1,170			458		1,109
Total	$	5,188		$	3,908	$	3,542
Foreign:
Current	$	606		$	477	$	532
Deferred		(1	)		28		3
Total	$	605		$	505	$	535
State:
Current	$	609		$	275	$	(21	)
Deferred		194			128		570
Total	$	803		$	403	$	549
Total	$	6,596		$	4,816	$	4,626

The difference between the Company’s income tax expense as reported in the accompanying consolidated financial statements and the income tax expense that would be calculated applying the U.S. federal income tax rate of 35% for 2011 and 34% for 2010 and 2009 on pretax income was as follows:

	2011			2010			2009
Expected federal income taxes	$	6,356		$	4,527		$	4,460
Foreign tax rate differential		(145	)		(59	)		(16	)
US tax graduated rates		(99	)
State income taxes, net of federal benefit and state tax credits		522			257			362
Federal tax credits		(132	)		(110	)		(183	)
Uncertain tax positions		9			72			27
Deferred tax adjustment due to projected rates		--			138			--
Valuation allowance		--			2			18
Other		85			(11	)		(42	)
Total	$	6,596		$	4,816		$	4,626

Deferred tax assets and liabilities at December 31, 2011 and 2010, were comprised of the following:

	2011			2010
Deferred tax assets:
Allowance for doubtful accounts	$	108		$	129
Accrued expenses		345			298
Share based compensation		1,449			1,261
Capital loss carryforward		1,268			1,287
Net operating loss		719			1,376
Other		--			215
Gross deferred tax assets		3,889			4,566
Less Valuation Allowance		(1,352	)		(1,287	)
Deferred tax assets		2,537			3,279
Deferred tax liabilities:
Prepaid expenses		142			281
Property and equipment		2,505			2,169
Intangible assets		6,506			6,111
Other		184			--
Deferred tax liabilities		9,337			8,561
Net deferred tax liabilities	$	(6,800	)	$	(5,282	)

In assessing the realizablility of deferred tax assets, the Company considers whether it is more likely than not that some portion, or all, of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. The Company considers projected future taxable income, carry-back opportunities and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods which the deferred tax assets are deductible, the Company believes it is more likely than not that it will realize the benefits of these deductible differences, net of the valuation allowance recorded. The net impact on income tax expense related to changes in the valuation allowance for 2011, 2010 and 2009, were -0-, $2,000 and $18,000, respectively. The current year change related to increases to the valuation allowance for capital loss carryforwards that was recorded through goodwill.

The Company has domestic capital loss carryforwards of $3.2 million of which $47,000 expired in 2011.  A total of $3.2 million of the capital loss carryforwards relate to the pre-acquisition periods of acquired companies.  The remainder of the capital loss carryforwards are due to expire in 2012 and 2014 for $76,000 and $3.1 million, respectively.  The Company has provided a $1.3 million valuation allowance against the tax benefit associated with the capital loss carryforwards.  An additional $84,000 valuation allowance relates to OCS state NOL carryforwards.

The undistributed foreign earnings of the Company’s foreign subsidiary of approximately $7.1 million are considered to be indefinitely reinvested.  Accordingly, no provision for U.S. federal and state income taxes or foreign withholding taxes has been provided for such undistributed earnings.  It is impractical to determine the additional income tax liability, if any, associated with the repatriation of undistributed earnings.

The unrecognized tax benefit at December 31, 2011, was $266,000, excluding interest of $43,000 and no penalties.  The full unrecognized tax benefits, if recognized, would favorably impact the effective income tax rate.  The Company believes it is reasonably possible that the total amount of unrecognized tax benefits could continue to decrease during the next 12 months due to the expiration of the U.S. federal statute of limitations associated with certain other tax positions.  The Company accrues interest and penalties related to uncertain tax position in the statements of income as income tax expense.

The change in the unrecognized tax benefits for 2011 and 2010 is as follows:

	(In thousands)
Balance of unrecognized tax benefits at December 31, 2009	$	541
Additions based on tax positions of prior years		139
Additions based on tax positions related to the current year		23
Reductions for tax positions of prior tax years		(434	)
Balance of unrecognized tax benefits at December 31, 2010	$	269
Reductions due to lapse of applicable statue of limitations		(38	)
Additions based on tax positions of prior years		3
Additions based on tax positions related to the current year		32
Balance of unrecognized tax benefits at December 31, 2011	$	266

The Company files a U.S. federal income tax return, various state jurisdictions and a Canada federal and provincial income tax return. The 2008 to 2011 U.S. federal and state returns remain open to examination. The 2007 to 2011 Canada federal and provincial income tax returns remain open to examination.