XML 82 R12.htm IDEA: XBRL DOCUMENT
v2.4.0.8

Income Taxes | 12 Months Ended
--- | ---
Sep. 30, 2013
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The components of income (loss) before income tax and income tax expense (benefit) are comprised of the following:
| For the Years Ended September 30,
| 2013 |  | 2012
| (Amounts in thousands)
Income (loss) before income tax: |  |  |
U.S. | $ | 809 |  |  | $ | 4,382 |
Foreign | (120 | ) |  | 487 |
| $ | 689 |  |  | $ | 4,869 |
Income tax expense (benefit): |  |  |  |  |
Current: |  |  |  |  |
Federal | $ | (308 | ) |  | $ | 1,088 |
State | 62 |  |  | 58 |
Foreign | (3 | ) |  | 40 |
| (249 | ) |  | 1,186 |
Deferred: |  |  |  |  |
Federal | 601 |  |  | (2,734 | )
State | (41 | ) |  | (274 | )
Foreign | 10 |  |  | 82 |
| 570 |  |  | (2,926 | )
| $ | 321 |  |  | $ | (1,740 | )
As of September 30, 2013, management assessed the positive and negative evidence in the U.S operations, and estimated we will have sufficient future taxable income to utilize the existing deferred tax assets. Significant objective positive evidence included the cumulative profits that we realized over the most recent years. This evidence enhances our ability to consider other subjective evidence such as our projections for future growth. Other factors we considered are the likelihood for continued royalty income in future years, and our expectation that the Service and Systems Integration segment will continue to be profitable in future years. On the basis of this evaluation, as of September 30, 2013, we have concluded that our US deferred tax asset is more likely than not to be realized. It should be noted however, that the amount of the deferred tax asset realized could be adjusted in future years, if estimates of taxable income during the carryforward periods are reduced, or if objective negative evidence in the form of cumulative losses is present. We realized a tax benefit for the year ended September 30, 2012, despite the fact that we had positive earnings before taxes for the year. This was because we reversed the U.S. valuation allowance of $3.0 million on our deferred tax assets, which had been accumulated over the past several years, resulting in this overall tax benefit. The recording and ultimate reversal of valuation allowances for our deferred tax asset requires significant judgment associated with past and projected performance. In assessing the realizability of deferred tax assets, we consider our taxable future earnings and the expected timing of the reversal of temporary differences. In prior years, we recorded a valuation allowance which reduced the gross deferred tax asset to an amount that we believed was more likely than not to be realized because our inability to project future profitability beyond fiscal year 2012 in the U.S. and cumulative losses incurred in recent years in the United Kingdom represented sufficient negative evidence to record a valuation allowance against certain deferred tax assets. We continue to maintain a full valuation allowance against our United Kingdom deferred tax assets as we have experienced cumulative losses and do not have any indication that the operation will be profitable in the future to an extent that will allow us to utilize much of our net operating loss carryforwards. To the extent that actual experience deviates from our assumptions, our projections would be affected and hence our assessment of realizability of our deferred tax assets may change. Reconciliation of “expected” income tax expense (benefit) to “actual” income tax expense (benefit) is as follows:
| For the Years Ended September 30,
| 2013 |  | 2012
| (Dollar amounts in thousands)
Computed “expected” tax expense | $ | 234 |  |  | 34.0 | % |  | $ | 1,656 |  |  | 34.0 | %
Increases (reductions) in taxes resulting from: |  |  |  |  |  |  |
State income taxes, net of federal tax benefit | 1 |  |  | 0.3 | % |  | (236 | ) |  | (4.9 | )%
Foreign operations | 40 |  |  | 5.8 | % |  | (176 | ) |  | (3.6 | )%
Change in valuation allowance | — |  |  | — | % |  | (2,762 | ) |  | (56.8 | )%
Permanent differences | (22 | ) |  | (3.2 | )% |  | (388 | ) |  | (8.0 | )%
Stock-based compensation | 158 |  |  | 22.9 | % |  | 4 |  |  | 0.1 | %
Foreign net operating loss | (15 | ) |  | (2.2 | )% |  | 107 |  |  | 2.2 | %
Uncertain tax liability adjustment | (61 | ) |  | (8.9 | )% |  | 37 |  |  | 0.8 | %
Research & Development Credit | (50 | ) |  | (7.3 | )% |  | — |  |  | — | %
Other items | 36 |  |  | 5.2 | % |  | 18 |  |  | 0.4 | %
Income tax expense (benefit) | $ | 321 |  |  | 46.6 | % |  | $ | (1,740 | ) |  | (35.8 | )%
For the years ended September 30, 2013 and 2012, temporary differences, which give rise to deferred tax assets (liabilities), are as follows:
| September 30, 2013 |  | September 30, 2012
| (Amounts in thousands)
Deferred tax assets: |  |  |
Pension | $ | 1,539 |  |  | $ | 1,911 |
Goodwill | 606 |  |  | 723 |
Other reserves and accruals | 498 |  |  | 625 |
Inventory reserves and other | 703 |  |  | 713 |
State credits, net of federal benefit | 34 |  |  | 79 |
Federal and state net operating loss carryforwards | 45 |  |  | 30 |
Foreign net operating loss carryforwards | 1,804 |  |  | 1,815 |
Foreign tax credits | 7 |  |  | 7 |
Depreciation and amortization | 109 |  |  | 61 |
Gross deferred tax assets | 5,345 |  |  | 5,964 |
Less: valuation allowance | (2,261 | ) |  | (2,307 | )
Realizable deferred tax asset | 3,084 |  |  | 3,657 |
Gross deferred tax liabilities | — |  |  | — |
Net deferred tax assets | $ | 3,084 |  |  | $ | 3,657 |
The deferred tax valuation allowance decreased by approximately $50 thousand, as shown above. In assessing the realizability of deferred tax assets, the Company considers its taxable future earnings and the expected timing of the reversal of temporary differences. Accordingly, the Company has recorded a valuation allowance which reduces the gross deferred tax asset to an amount which management believes will more likely than not be realized. The valuation allowance was determined by assessing both positive and negative evidence whether it is more likely than not that deferred tax assets are realizable. Such assessment is done on a jurisdiction-by-jurisdiction basis. The Company's inability to project future profitability beyond fiscal year 2013 and the cumulative losses incurred in recent years in the U.K. represent sufficient negative evidence to record a valuation allowance against certain deferred tax assets. As of September 30, 2013 and 2012, the Company had U.S. net operating loss carryforwards for state tax purposes of approximately $1.2 million which are available to offset future taxable income through 2030. As of September 30, 2013, the Company had U.K. net operating loss carryforwards of approximately $8.9 million that have an indefinite life with no expiration. Undistributed earnings of the Company's foreign subsidiaries amounted to approximately $3.3 million and $3.4 million at September 30, 2013 and 2012, respectively. The Company's policy is that its undistributed foreign earnings are indefinitely reinvested and, accordingly, no U.S. federal and state deferred tax liabilities have been recorded. In addition, the calculation of the Company's tax liabilities involves dealing with uncertainties in the application of complex tax regulations in a multitude of jurisdictions. The Company records liabilities for estimated tax obligations in the U.S. and other tax jurisdictions. These estimated tax liabilities include the provision for taxes that may become payable in the future. As of September 30, 2013, the total amount of uncertain tax liabilities was $0.6 million, all of which would affect our effective tax rate if recognized. We recognize interest and potential penalties accrued related to unrecognized tax benefits in our provision for income taxes. A reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits is as follows:
| For the Year Ended September 30, 2013 |  | For the Year Ended September 30, 2012
| (Amounts in thousands)
Balance, beginning of year | $ | 611 |  |  | $ | 472 |
Increases in tax positions in the current year | 39 |  |  | 104 |
Settlements | (105 | ) |  | — |
Lapse in statute of limitations | — |  |  | (2 | )
Accrued penalties and interest | 44 |  |  | 37 |
Balance, end of period | $ | 589 |  |  | $ | 611 |
We file income tax returns in the U.S. federal jurisdictions and various state and foreign jurisdictions. The Company has reviewed the tax positions taken on returns filed domestically and in its foreign jurisdictions for all open years, generally fiscal 2010 through 2013, and believes that tax adjustments in any audited year will not be material, except for the uncertain tax position described above.

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 Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 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 9 -URI http://asc.fasb.org/extlink&oid=6907707&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=6907707&loc=d3e32537-109319 Reference 6: 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 Reference 7: 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 8: 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. + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration