Income Taxes (Tables)

12 Months Ended

Dec. 31, 2012

Income tax provision (benefit) for the fiscal years 2012, 2011 and 2010 is as follows:


	Years Ended December 31,
	2012			2011			2010
	(in thousands)
Income tax provision from continuing operations	$	3,665		$	5,582		$	3,021
Income tax (benefit) from discontinued operations		(570	)		(5,051	)		(3,351	)

Total income tax provision (benefit)	$	3,095		$	531		$	(330	)

Income from Continuing Operations Before Provision for Income Taxes

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


	Years Ended December 31,
	2012		2011		2010
	(in thousands)
Domestic	$	10,820	$	15,304	$	8,073
Foreign		2,202		3,113		4,730

Income from continuing operations before income taxes	$	13,022	$	18,417	$	12,803

Provision for Income Taxes from Continuing Operations

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


	Years Ended December 31,
	2012			2011		2010
	(in thousands)
Current:
Federal	$	2,544		$	2,307	$	(2,317	)
Foreign		719			897		3,343
State		(116	)		202		1,306
Deferred:
Federal		577			1,824		4,058
Foreign		89			203		(2,031	)
State		(148	)		149		(1,338	)

Income tax provision from continuing operations	$	3,665		$	5,582	$	3,021

Deferred Tax Assets and Liabilities

Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2012 and December 31, 2011 are as follows:


	December 31,
	2012			2011
	(in thousands)
Deferred tax assets related to continuing operations:
Deferred compensation	$	924		$	998
Inventory valuation		664			661
Tax loss carryforward		1,587			1,913
Foreign tax credit carryforward		—			17
R&D tax credit carryforward		1,047			876
Accrued expenses		508			520
Warranty		414			514
Vacation and bonus expense		1,330			1,775
Other		537			342
Less valuation allowances		(415	)		(417	)

Deferred tax assets related to continuing operations		6,596			7,199

Deferred tax liabilities related to continuing operations:
Accelerated depreciation and amortization		2,676			2,866

Net deferred tax assets related to continuing operations		3,920			4,333

Net deferred tax assets related to discontinued operations		9,214			8,981

Net deferred tax assets	$	13,134		$	13,314

Reconciliation of Income Tax Expense (Benefit) Related to Continuing Operations Applicable Federal Statutory Rate and Effective Rates from Continuing Operations

The following is a reconciliation of income tax expense (benefit) related to continuing operations at the applicable federal statutory rate and the effective rates from continuing operations:


	Years Ended December 31,
	2012			2011			2010
Statutory rate		35	%		35	% ⁽¹⁾		34	%
Tax rate differential on domestic manufacturing deduction benefit		(2	)		(1	)		(1	)
State income taxes, net of federal income tax		1			2			1
Foreign operations		(2	)		(2	)		(2	)
Research and development credits		(4	)		(4	)		(5	)
Other		—			—			(3	)

Effective tax rate		28	%		30	%		24	%

⁽¹⁾	During 2011, the Company’s federal statutory tax rate increased from 34% to 35% due to the increase in the Company’s earnings.

Reconciliation of Beginning and Ending Balances of Total Amounts of Gross Unrecognized Tax Benefits Excluding Interest and Penalties

A reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits, excluding interest and penalties, is as follows:


	December 31,
	2012			2011			2010
Gross unrecognized tax benefits, beginning of year	$	722,000		$	2,358,000		$	2,526,000
Increases in tax positions taken in the current year		65,000			217,000			660,000
Increases in tax positions taken in prior years		60,000			57,000			31,000
Decreases in tax positions taken in prior years		—			(932,000	)⁽¹⁾		(138,000	)
Decreases in tax positions related to settlement with tax authorities		(96,000	)		(564,000	)		(289,000	)
Statute of limitations expired		(156,000	)		(414,000	)		(432,000	)

Gross unrecognized tax benefits, end of year	$	595,000		$	722,000		$	2,358,000

⁽¹⁾

The Company determined that in one state its credit carry-forward in that state was more-likely-than-not not going to be realized. As a result, the Company reclassified such position in the amount of $373,000 from an unrecognized tax position to a valuation allowance as a reduction to the deferred tax asset. In addition, in 2010 the Company established an unrecognized tax position for its method of accounting for an accrual on its tax return for all open tax years. During 2011, the uncertain tax position was released in the amount of $559,000 and a deferred tax liability was established for the repayment of the underpaid tax.