Note 5 - Income Taxes

12 Months Ended

Dec. 31, 2012

Income Tax Disclosure [Text Block]

(5)           Income Taxes

For the years ended December 31, 2012, 2011, and 2010, income before income taxes consists of the following:

	2012		2011		2010
U.S. Operations	$	19,836	$	16,017	$	11,353
Foreign Operations		2,371		2,143		1,962
	$	22,207	$	18,160	$	13,315

Income tax expense consisted of the following components:

	2012			2011			2010
Federal:
Current	$	5,488		$	4,018		$	3,450
Deferred		1,140			1,170			458
Total	$	6,628		$	5,188		$	3,908
Foreign:
Current	$	684		$	606		$	477
Deferred		(6	)		(1	)		28
Total	$	678		$	605		$	505
State:
Current	$	787		$	609		$	275
Deferred		(954	)		194			128
Total	$	(167	)	$	803		$	403
Total	$	7,139		$	6,596		$	4,816

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 2012 and 2011 and 34% for 2010 on pretax income was as follows:

	2012			2011			2010
Expected federal income taxes	$	7,772		$	6,356		$	4,527
Foreign tax rate differential		(203	)		(145	)		(59	)
U.S. tax graduated rates		11			(99	)		--
State income taxes, net of federal benefit and state tax credits		552			522			257
Federal tax credits		(282	)		(132	)		(110	)
Uncertain tax positions		(73	)		9			72
Deferred tax adjustment due to change in state tax law		(661	)		--			138
Other		23			85			(9	)
Total	$	7,139		$	6,596		$	4,816

Deferred tax assets and liabilities at December 31, 2012 and 2011, were comprised of the following:

	2012			2011
Deferred tax assets:
Allowance for doubtful accounts	$	86		$	108
Accrued expenses		356			345
Share based compensation		859			1,449
Capital loss carryforward		1,132			1,268
Net operating loss		170			719
Tax credit carryforward		319			--
Gross deferred tax assets		2,922			3,889
Less Valuation Allowance		(1,138	)		(1,352	)
Deferred tax assets		1,784			2,537
Deferred tax liabilities:
Prepaid expenses		324			142
Property and equipment		1,790			2,505
Intangible assets		6,415			6,506
Other		235			184
Deferred tax liabilities		8,764			9,337
Net deferred tax liabilities	$	(6,980	)	$	(6,800	)

At December 31, 2012 and 2011, net deferred tax assets of $547,000 and $789,000 respectively were included in current deferred income taxes.  At December 31, 2012 and 2011, net deferred tax liabilities of $7.5 million and $7.6 million, respectively were included in long term deferred income taxes.  In assessing the realizability 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 2012, 2011, and 2010, were $214,000, $0 and $2,000, respectively.

The Company has domestic capital loss carryforwards of $3.1 million at December 31, 2012.  An additional $76,000 of carryforwards expired in 2012.  The total $3.1 million of the capital loss carryforwards relate to the pre-acquisition periods of acquired companies and are due to expire in 2014.  The Company has provided a $1.1 million valuation allowance against the tax benefit associated with the capital loss carryforwards.

The undistributed foreign earnings of the Company’s foreign subsidiary of approximately $8.8 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.  The Company estimated at December 31, 2012, that an additional tax liability of $732,000 would become due if repatriation of undistributed earnings would occur.

The unrecognized tax benefit at December 31, 2012, was $224,000, excluding interest of $11,000 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 2012 and 2011 is as follows:

	(In thousands)
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
Reductions due to lapse of applicable statue of limitations		(117	)
Additions based on tax positions of prior years		84
Reductions based on tax positions of prior years		(9	)
Additions based on tax positions related to the current year		--
Balance of unrecognized tax benefits at December 31, 2012	$	224

The Company files a U.S. federal income tax return, various state jurisdictions and a Canada federal and provincial income tax return.  The 2009 to 2012 U.S. federal and state returns remain open to examination.  The 2008 to 2012 Canada federal and provincial income tax returns remain open to examination.