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Income Taxes
 12 Months Ended
Dec. 28, 2012
Income Tax Disclosure [Abstract]  
Income Tax Disclosure [Text Block]

Note 11 — Income Taxes

 

The provision for income taxes consists of the following (in thousands):

 

    2012     2011     2010  
Current tax provision:                        
U.S. federal   $ —     $ —     $ —  
State     11       13       13  
Foreign     1,125       1,012       602  
Total current provision     1,136       1,025       615  
Deferred tax provision:                        
U.S. federal and state     —       —       —  
Foreign     108       331       (183 )
Total deferred provision     108       331       (183 )
Provision for income taxes   $ 1,244     $ 1,356     $ 432  

 

As of December 28, 2012, the Company had $122.5 million of federal net operating loss carryforwards available to reduce future income taxes. The net operating loss carryforwards expire in varying amounts between 2020 and 2032.

 

The Company had accrued income taxes payable of $1,034,000 and accrued income taxes receivable of $10,000 at December 28, 2012 and December 30, 2011, respectively, primarily due to taxes from foreign jurisdictions.

 

The provision (benefit) for income before taxes differs from the amount computed by applying the statutory federal income tax rate to income before taxes as follows (in thousands):

 

    2012     2011     2010  
Computed provision for taxes based on income at statutory rate     34.0 %   $ (176 )     34.0 %   $ 919       34.0 %   $ (1,252 )
Increase (decrease) in taxes resulting from:                                                
Permanent differences     (7.9 )     41       1.4       37       (0.9 )     33  
State minimum taxes, net of federal income tax benefit     (1.4 )     8       0.3       9       (0.2 )     9  
Stock options     (56.0 )     290       —       —       —       —  
State tax benefit     9.2       (48 )     (4.3 )     (116 )     5.6       (207 )
Tax rate difference due to foreign statutory rate     (43.8 )     227       (19.7 )     (529 )     5.7       (208 )
Foreign tax benefit     3.1       (16 )     11.6       312       3.7       (137 )
Foreign earnings not permanently reinvested     (223.4 )     1,158       29.1       788       —       —  
Foreign dividend withholding     (22.1 )     114       5.5       147       (12.0 )     440  
FAS 123R     —       —       —       —       (23.7 )     873  
Expiration of charitable contribution carryover     (16.1 )     83       —       —       (0.2 )     6  
Other     1.1       (6 )     1.4       37       0.4       (13 )
Valuation allowance     83.2       (431 )     (9.2 )     (248 )     (24.1 )     888  
Effective tax provision rate     (240.1 )%   $ 1,244       50.1 %   $ 1,356       (11.7 )%   $ 432  

 

Included in the state tax provision is an increase to the state deferred tax asset and corresponding increase to the valuation allowance of $48,000, $118,000, and $207,000, for 2012, 2011 and 2010 respectively.  This results in a total state tax provision of $11,000 for 2012, $13,000 for 2011, and $13,000 for 2010.

 

For 2012, included in the foreign tax provision is an increase to the foreign deferred tax asset and corresponding increase to the valuation allowance of $16,000. For 2011, there was a decrease to the foreign deferred tax asset and corresponding decrease to the valuation allowance of $312,000. For 2010, there was an increase to the foreign deferred tax asset and corresponding increase to the valuation allowance of $137,000, respectively. This results in a foreign tax provision of $1,233,000 for 2012, $1,343,000 for 2011, and $419,000 for 2010.

 

All earnings from the Company’s subsidiaries are not considered to be permanently reinvested.  Accordingly, the Company provides withholding and U.S. taxes on all unremitted foreign earnings.  During 2012 and 2011 there were no withholding taxes paid to foreign jurisdictions and there were no earnings repatriated from foreign subsidiaries.

 

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets (liabilities) as of December 28, 2012 and December 30, 2011 are as follows (in thousands):

  

    2012     2011  
Current deferred tax assets (liabilities):                
Allowance for doubtful accounts and sales returns   $ 89     $ 90  
Inventories     190       270  
Accrued vacation     534       490  
Other     (111 )     (110 )
State taxes     3       3  
Accrued legal judgment and other accrued expenses     187       211  
Valuation allowance     (1,331 )     (1,426 )
Total current deferred tax liabilities   $ (439 )   $ (472 )
Non-current deferred tax assets (liabilities):                
Net operating loss carryforwards     51,533       51,334  
Stock-based payments     1,602       1,311  
Business, foreign and AMT credit carryforwards     844       788  
Capitalized R&D     605       597  
Contributions     58       160  
Pensions     877       812  
Depreciation and amortization     202       54  
Foreign tax withholding     (885 )     (711 )
Foreign earnings not permanently reinvested     (5,783 )     (4,789 )
Other     11       33  
Valuation allowance     (49,762 )     (50,145 )
Total non-current deferred tax liabilities   $ (698 )   $ (556 )

 

ASC 740 requires that a valuation allowance be established when it is more likely than not that all or a portion of a deferred tax asset may not be realized. Cumulative losses weigh heavily in the assessment of the need for a valuation allowance.  Due to the Company’s recent history of losses, the valuation allowance fully offsets the value of U.S. deferred tax assets on the Company’s balance sheet as of December 28, 2012. Further, under Federal Tax Law Internal Revenue Code Section 382, significant changes in ownership may restrict the future utilization of these tax loss carry forwards. 

 

Included in deferred tax assets and liabilities are net non-current deferred tax assets of $187,000 and $152,000 for 2012 and 2011 respectively for Staar AG. Due to Staar AG’s history of profits, the deferred tax assets are considered fully realizable.

 

The following tax years remain subject to examination:

 

Significant Jurisdictions   Open Years
U.S. Federal   2009 – 2011
California   2008 – 2011
Switzerland   2010 – 2011
Japan   2008 – 2011

 

Income (loss) from continuing operations before provision for income taxes is as follows (in thousands):

 

    2012     2011     2010  
Domestic   $ (2,967 )   $ (2,145 )   $ (4,732 )
Foreign     2,448       4,849       1,051  
    $ (519 )   $ 2,704     $ (3,681 )