XML 58 R18.htm IDEA: XBRL DOCUMENT
v2.4.0.6

INCOME TAXES | 12 Months Ended
--- | ---
Dec. 31, 2012
INCOME TAXES [Abstract] |
INCOME TAXES | 9. INCOME TAXES At December 31, 2012 and 2011, the Company has approximately $2.7 million and $4.1 million, respectively, of liabilities for uncertain tax positions ($0.6 million and $0, respectively, included in income taxes payable and $2.1 million and $4.1 million, respectively, included in liability for uncertain tax positions) all of which, if recognized, would reduce the Company's effective tax rate. The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. The Company is no longer subject to U.S. federal examinations by tax authorities for years before 2010 and for state examinations before 2007. Regarding foreign subsidiaries, the Company is no longer subject to examination by tax authorities for years before 2004 in Asia and generally 2006 in Europe. During September 2010 and April 2011, the Company was notified of an Internal Revenue Service ("IRS") tax audit for the years ended December 31, 2004 through 2009. The Company settled the domestic and international audits with the IRS for an amount due to the IRS of $0.1 million, net of interest income paid by the IRS to the Company. Additionally, the Company's wholly-owned subsidiary in Germany was subject to a tax audit for the tax years 2008 through 2010. This audit has been completed and resulted in a minimal tax assessment. As a result of the expiration of the statute of limitations for specific jurisdictions, it is reasonably possible that the related unrecognized benefits for tax positions taken regarding previously filed tax returns may change materially from those recorded as liabilities for uncertain tax positions in the Company's consolidated financial statements at December 31, 2012. A total of $0.6 million of previously recorded liabilities for uncertain tax positions relates principally to the 2007 tax year. The statute of limitations related to these liabilities is scheduled to expire on September 15, 2013. Additionally, a total of $2.6 million of previously recorded liabilities for uncertain tax positions, interest, and penalties relating to the 2007 through 2009 tax years were reversed during 2012, as these years have been settled with the IRS and are no longer under audit. This has been offset in part by an increase in the liability for uncertain tax positions in the amount of $1.2 million during 2012. A reconciliation of the beginning and ending amount of the liability for uncertain tax positions is as follows (dollars in thousands):
|  | 2012 |  |  | 2011 |  |  | 2010 |
Liability for uncertain tax positions - January 1 |  | $ | 4,132 |  |  | $ | 3,835 |  |  | $ | 4,722 |
Additions based on tax positions |  |  |  |  |  |  |  |  |  |  |  |
related to the current year |  |  | 1,221 |  |  |  | 297 |  |  |  | 948 |
Settlement/expiration of statutes of limitations |  |  | (2,642 | ) |  |  | - |  |  |  | (1,835 | )
Liability for uncertain tax positions - December 31 |  | $ | 2,711 |  |  | $ | 4,132 |  |  | $ | 3,835 |
The Company's policy is to recognize interest and penalties related to unrecognized tax benefits arising from uncertain tax positions as a component of the current provision for income taxes. During the years ended December 31, 2012, 2011 and 2010, the Company (reversed) recognized approximately ($0.5) million, $0.2 million and $0.2 million, respectively, of such interest and penalties in the consolidated statements of operations. The Company has approximately $0.2 million and $0.7 million accrued for the payment of interest and penalties at December 31, 2012 and 2011, respectively, which is included in both income taxes payable and liability for uncertain tax positions in the Company's consolidated balance sheets. The Company's total earnings (loss) before provision for income taxes included earnings from domestic operations of $0.4 million, $9.6 million and $3.6 million for 2012, 2011 and 2010, respectively, and earnings (loss) from foreign operations of $0.6 million, ($1.7) million and $12.0 million for 2012, 2011 and 2010, respectively. The (benefit) provision for income taxes consists of the following (dollars in thousands):
|  | Years Ended December 31, |
|  | 2012 |  |  | 2011 |  |  | 2010 |
Current: |  |  |  |  |  |  |  |  |
Federal |  | $ | (459 | ) |  | $ | 2,585 |  |  | $ | 221 |
Foreign |  |  | 241 |  |  |  | 478 |  |  |  | 803 |
State |  |  | 76 |  |  |  | 362 |  |  |  | 182 |
|  |  | (142 | ) |  |  | 3,425 |  |  |  | 1,206 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | (807 | ) |  |  | 599 |  |  |  | (133 | )
State |  |  | (58 | ) |  |  | 102 |  |  |  | 189 |
Foreign |  |  | (357 | ) |  |  | (18 | ) |  |  | 669 |
|  |  | (1,222 | ) |  |  | 683 |  |  |  | 725 |
|  | $ | (1,364 | ) |  | $ | 4,108 |  |  | $ | 1,931 |
A reconciliation of taxes on income computed at the U.S. federal statutory rate to amounts provided is as follows (dollars in thousands):
|  | Years Ended December 31, |
|  | 2012 |  |  | 2011 |  |  | 2010 |
|  | $ |  |  | % |  |  | $ |  |  | % |  |  | $ |  |  | % |
Tax provision computed at the |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
federal statutory rate |  | $ | 353 |  |  |  | 34 | % |  | $ | 2,676 |  |  |  | 34 | % |  | $ | 5,297 |  |  |  | 34 | %
Increase (decrease) in taxes resulting from: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Different tax rates and permanent differences |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
applicable to foreign operations |  |  | (306 | ) |  |  | -29 | % |  |  | 1,526 |  |  |  | 19 | % |  |  | (2,377 | ) |  |  | -15 | %
Increase in (reversal of) liability for uncertain |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
tax positions - net |  |  | (1,421 | ) |  |  | -137 | % |  |  | 297 |  |  |  | 4 | % |  |  | (887 | ) |  |  | -6 | %
Utilization of research and development and foreign |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
tax credits |  |  | - |  |  |  | 0 | % |  |  | (762 | ) |  |  | -10 | % |  |  | (549 | ) |  |  | -4 | %
State taxes, net of federal benefit |  |  | - |  |  |  | 0 | % |  |  | 341 |  |  |  | 4 | % |  |  | 309 |  |  |  | 2 | %
Current year valuation allowance - U.S. segment |  |  | 298 |  |  |  | 29 | % |  |  | - |  |  |  | 0 | % |  |  | - |  |  |  | 0 | %
Permanent differences applicable to U.S. operations |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
including qualified production activity credits, |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
SERP/COLI income, unrealized foreign exchange gains |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
and amortization of purchase accounting intangibles |  |  | (260 | ) |  |  | -25 | % |  |  | 44 |  |  |  | 1 | % |  |  | (73 | ) |  |  | 0 | %
Other |  |  | (28 | ) |  |  | -3 | % |  |  | (14 | ) |  |  | 0 | % |  |  | 211 |  |  |  | 1 | %
Tax (benefit) provision computed at the Company's |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
effective tax rate |  | $ | (1,364 | ) |  |  | -131 | % |  | $ | 4,108 |  |  |  | 52 | % |  | $ | 1,931 |  |  |  | 12 | %
As of December 31, 2012, the Company has gross foreign income tax net operating losses ("NOL") of $3.4 million and capital loss carryforwards of $0.2 million. The Company has established valuation allowances of $0.5 million and $0.1 million, respectively, against these deferred tax assets. In addition, the Company has gross state income tax NOLs of $1.7 million, capital loss carryforwards of $2.7 million and tax credit carryforwards of $1.2 million. The Company has established valuation allowances of $0.2 million, $0.4 million and $0.7 million, respectively, against these deferred tax assets. The foreign NOL's can be carried forward indefinitely and the state NOL's expire at various times during 2013 - 2029. Upon the acquisition of Fibreco, Fibreco had a deferred tax liability in the amount of $0.1 million arising from various timing differences. In connection with the 2012 Acquisitions, the Company was required to complete a preliminary fair market value report of property, plant and equipment and intangibles. As a result of that report, the Company established deferred tax liabilities at the date of acquisition in the amounts of $1.7 million and $0.6 million, respectively for the Fibreco and Gigacom acquisitions. At December 31, 2012, a deferred tax liability of $2.3 million remains on the consolidated balance sheet. At December 31, 2012, the Company had no additional deferred tax amounts relating to the Powerbox acquisition as the fair market value report has not been completed. The Company has made elections under IRC Section 338(g) to step-up the tax basis of the 2012 Acquisitions to fair value. The elections made under Section 338(g) only affect the U.S. income taxes (not those of the foreign countries where the acquired entities were incorporated). Management's intention is to permanently reinvest the majority of the earnings of foreign subsidiaries in the expansion of its foreign operations. Unrepatriated earnings, upon which U.S. income taxes have not been accrued, are approximately $93.7 million at December 31, 2012. Such unrepatriated earnings are deemed by management to be permanently reinvested. The estimated federal income tax liability (net of estimated foreign tax credits) related to unrepatriated foreign earnings is $20.9 million under the current tax law. The Company repatriated $0.5 million during 2011. On January 2, 2013, President Obama signed the "American Taxpayer Relief Act" ("ATRA"). Among other things, ATRA extends the Research and Experimentation credit ("R&E") which expired at the end of 2011, through 2013 and 2014, respectively. Under ASC 740, Income Taxes, the effects of the new legislation are recognized upon enactment, which is when the President signs a tax bill into law. Although the extenders are effective retroactively for 2012, the Company can only consider currently enacted tax law as of the balance sheet date in determining current and deferred taxes. The Company will recognize these retroactive tax effects for 2012 R&E and the tax effect for 2013 R&E in the 2013 consolidated financial statements. The impact of the ATRA on the consolidated statement of operations for the year ended December 31, 2012 resulted in a decrease in the income tax benefit of approximately $0.4 million. There is no material effect on the Company's financial position, liquidity or capital resources. During the quarter ended March 31, 2013, the Company will recognize the $0.4 million R&E credit from 2012 as a reduction in the March 31, 2013 quarterly provision for income taxes. The Company continues to monitor proposed legislation affecting the taxation of transfers of U.S. intangible property and other potential tax law changes. Components of deferred income tax assets are as follows (dollars in thousands).
|  | December 31, |
|  | 2012 |  |  | 2011 |
|  | Tax Effect |  |  | Tax Effect |
Deferred Tax Assets - current: |  |  |  |  |  |
State tax credits |  | $ | 845 |  |  | $ | 766 |
Reserves and accruals |  |  | 1,334 |  |  |  | 1,195 |
Valuation allowance |  |  | (745 | ) |  |  | (666 | )
|  | $ | 1,434 |  |  | $ | 1,295 |
Deferred Tax Assets - noncurrent: |  |  |  |  |  |  |  |
Unfunded pension liability |  | $ | 1,150 |  |  | $ | 941 |
Depreciation |  |  | (426 | ) |  |  | (369 | )
Amortization |  |  | (2,063 | ) |  |  | 243 |
Federal, state and foreign net operating loss |  |  |  |  |  |  |  |
and credit carryforwards |  |  | 1,114 |  |  |  | 566 |
Restructuring expenses |  |  | 319 |  |  |  | - |
Other accruals |  |  | 2,438 |  |  |  | 1,999 |
Valuation allowances |  |  | (1,129 | ) |  |  | (566 | )
|  | $ | 1,403 |  |  | $ | 2,814 |
The Company holds an offshore business license from the government of Macao. With this license, a Macao offshore company named Bel Fuse (Macao Commercial Offshore) Limited has been established to handle all of the Company's sales to third-party customers in Asia. Sales by this company consist of products manufactured in the People's Republic of China ("PRC"). This company is not subject to Macao corporate profit taxes which are imposed at a tax rate of 12%.

X
- Details
Name: | us-gaap_IncomeTaxDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 136, 172 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 43, 44, 45, 46, 47, 48, 49 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration