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Note 7 - Income Taxes | 12 Months Ended
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Dec. 31, 2016
Notes to Financial Statements |
Income Tax Disclosure [Text Block] |
( 7 ) | Income Taxes
The Company ’s income before income taxes from domestic and foreign operations (which include the United Kingdom, Canada, Ireland, Denmark and China), are as follows (in thousands):
|  | 2016 |  |  | 2015 |  |  | 2014 |
Domestic |  | $ | 9,733 |  |  | $ | 13,854 |  |  | $ | 12,973 |
Foreign |  |  | (4,424 | ) |  |  | 4,044 |  |  |  | 3,051 |
Total income before income taxes |  | $ | 5,309 |  |  | $ | 17,898 |  |  | $ | 16,024 |
The components of the provision for income taxes are as follows (in thousands):
|  | 2016 |  |  | 2015 |  |  | 2014 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 1,605 |  |  | $ | - |  |  | $ | - |
State |  |  | 237 |  |  |  | 24 |  |  |  | 304 |
Foreign |  |  | (231 | ) |  |  | 1,189 |  |  |  | 3,293 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | 1,902 |  |  |  | (9,697 | ) |  |  | - |
State |  |  | 1,230 |  |  |  | (1,308 | ) |  |  | 26 |
Foreign |  |  | (811 | ) |  |  | 345 |  |  |  | (1,961 | )
Income tax expense (benefit) |  | $ | 3,932 |  |  | $ | (9,447 | ) |  | $ | 1,662 |
A reconciliation between the statutory federal income tax rate and the effective income tax rate is as follows (in thousands):
|  |  |  | 2016 |  |  | 2015 |  |  | 2014 |
Income before income taxes |  | $ | 5,309 |  |  | $ | 17,898 |  |  | $ | 16,024 |
Statutory federal income tax rate |  |  | 34 | % |  |  | 34 | % |  |  | 34 | %
Income tax expense at statutory federal rate |  |  | 1,805 |  |  |  | 6,085 |  |  |  | 5,448 |
State income taxes, net of federal tax benefit |  |  | 968 |  |  |  | 371 |  |  |  | 310 |
Valuation allowance |  |  | 576 |  |  |  | (15,572 | ) |  |  | (5,415 | )
Effect of lower foreign taxes |  |  | 864 |  |  |  | (622 | ) |  |  | (372 | )
Adjustment for unrecognized tax positions |  |  | (77 | ) |  |  | 67 |  |  |  | 397 |
Other items, net |  |  | (204 | ) |  |  | 224 |  |  |  | 1,294 |
Income tax expense (benefit) |  | $ | 3,932 |  |  | $ | (9,447 | ) |  | $ | 1,662 |
Effective tax rate |  |  | 74.1 | % |  |  | (52.8 | )% |  |  | 10.4 | %
In fiscal 2016, the Company established a full valuation allowance of $0.6 million on its deferred tax assets in certain foreign jurisdictions due to cumulative losses and uncertainty about future earnings forecast. In fiscal 2011, the Company had established a full valuation allowance on its deferred tax assets in the United States due to significant losses and uncertainty about future earnings forecast. As of January 2, 2016, the Company recorded an income tax benefit of $9.4 million primarily due to the reduction in the valuation allowances in the U.S. The valuation allowance in the U.S. was reduced because the weight of evidence regarding the future realizability of the deferred tax assets had become predominately positive and realization of the deferred tax assets was more likely than not. The positive evidence considered in our assessment of the realizability of the deferred tax assets included the generation of significant positive cumulative income in the U.S., the implementation of tax planning strategies, and projections of future taxable income. Based on its earnings performance trend, expected continued profitability and improvements in the Company’s financial condition; management determined it was more likely than not that all of our U.S. deferred tax assets would be realized. The negative evidence considered included historical losses in certain prior years; however, the positive evidence outweighed this negative evidence. In fiscal 2014, the Company released approximately $4.4 million of U.S. related valuation allowance, consistent with the level of income generated. Additionally, in fiscal 2014, the Company recorded an income tax benefit of $1.1 million due to the full release of the valuation allowances in foreign jurisdictions, primarily the UK and Canada. Temporary differences that gave rise to deferred tax assets and liabilities are as follows (in thousands):
|  | 2016 |  |  | 2015 |
Deferred tax assets: |  |  |  |  |  |  |  |
Deferred revenue |  | $ | 5,004 |  |  | $ | 5,129 |
Accrued rents |  |  | 1,907 |  |  |  | 1,704 |
Net operating loss carryforwards |  |  | 1,194 |  |  |  | 306 |
Intangible assets |  |  | 1,040 |  |  |  | 1,349 |
Deferred compensation |  |  | 1,739 |  |  |  | 1,022 |
Accrued compensation |  |  | 620 |  |  |  | 1,545 |
Carryforward of tax credits |  |  | 880 |  |  |  | 928 |
Receivable write-offs |  |  | 604 |  |  |  | 1,317 |
Inventories |  |  | 1,994 |  |  |  | 656 |
Other |  |  | 1,209 |  |  |  | 3,306 |
Total gross deferred tax assets |  |  | 16,191 |  |  |  | 17,262 |
Less: Valuation allowance |  |  | 576 |  |  |  | — |
Total deferred tax assets, net of valuation allowance |  |  | 15,615 |  |  |  | 17,262 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Depreciation |  |  | (3,909 | ) |  |  | (3,494 | )
Deferred expense |  |  | (3,318 | ) |  |  | (2,505 | )
Other |  |  | (132 | ) |  |  | (399 | )
Total deferred tax liabilities |  |  | (7,359 | ) |  |  | (6,398 | )
Net deferred tax assets |  | $ | 8,256 |  |  | $ | 10,864 |
Income taxes and remittance taxes have not been recorded on approximately $ 6.3 million of undistributed earnings of foreign operations of the Company, because the Company intends to reinvest those earnings indefinitely. It is not practicable to estimate the income tax liability that might be incurred if such earnings were remitted to the U.S . As of December 31, 2016, the Company had total unrecognized tax benefits of $ 1.0 million, of which approximately $0.4 million would favorably impact the Company’s provision for income taxes if recognized. As of January 2, 2016, the Company had total unrecognized tax benefits of $0.7 million, of which approximately $0.2 million would favorably impact the Company’s provision for income taxes if recognized . The Company reviews its uncertain tax positions periodically and accrues interest and penalties accordingly. Accrued interest and penalties included in other liabilities in the Consolidated Balance Sheets were $0.1 million and $0.4 million as of December 31, 2016, and January 2, 2016, respectively. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as a component of the provision for income taxes within the Consolidated Statements of Income. For the year ended December 31, 2016, the Company recognized a benefit of $0.3 million for interest and penalties. For the year ended January 2, 2016, the Company recognized expense of $0.1 million for interest and penalties. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
Balance as of January 3, 2015 |  | $ | 719 |
Addition to reserve |  |  | — |
Audit settlement release |  |  | — |
Lapse of statute |  |  | — |
Balance as of January 2, 2016 |  |  | 719 |
Increases for prior year tax positions |  |  | 248 |
Decrease for prior year tax positions |  |  | (25 | )
Increases for current year tax positions |  |  | 26 |
Audit settlement release |  |  | (7 | )
Lapse of statute of limitations |  |  | — |
Balance as of December 31, 2016 |  | $ | 961 |
Management estimates it is reasonably possible that the amount of unrecognized tax benefits c ould decrease by as much as $0.9 million in the next twelve months as a result of the resolution of audits currently in progress involving issues common to multinational corporations and the lapsing of the statute of limitations. The following tax years remain open in the Company ’s major taxing jurisdictions as of December 31, 2016:
United States (Federal) |  | 2013 through 2016
United Kingdom |  | 2009 through 2016

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- 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 Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 2: 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=65882285&loc=d3e32559-109319 Reference 3: 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=65882285&loc=d3e32718-109319 Reference 4: 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=65882285&loc=d3e32639-109319 Reference 5: 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=65882285&loc=d3e32537-109319 + Details
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