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Income Taxes
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3 Months Ended |
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Jun. 30, 2011
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| Income Taxes | |
| Income Taxes |
Note 10. Income Taxes The Company uses an estimated annual effective tax rate based on expected annual income to determine the quarterly provision for income taxes. The impact of discrete items is recorded in the quarter in which they occur. In assessing the realizability of the deferred tax assets, the Company considered whether it is more likely than not that some portion or all of the deferred tax assets will not be realized through the generation of future taxable income. In the fourth quarter of fiscal year 2011, after considering both the positive and negative evidence including improved financial performance, expected future taxable income, the exit of a three-year cumulative loss, and the then anticipated sale of certain assets and liabilities of its CNS business, the Company concluded that it was more likely than not that it would be able to utilize the majority of its deferred tax assets. During the first three quarters of fiscal year 2011, a full valuation allowance on deferred tax assets was recorded. The Company will continue to reassess realizability of the deferred tax assets going forward. In the quarter ended June 30, 2011, the Company recorded a tax expense of $13.7 million which resulted in an effective tax rate of 39.4%. The gain on the CNS sale transaction was treated as a discrete item and the provision related specifically to that item was $12.4 million. In the quarter ended June 30, 2010, the Company was under a full valuation allowance and recorded a $473,000 net tax benefit which included a $345,000 benefit related to a the reversal of a reserve for a contingent tax position, which the Company no longer needed because the statute of limitations related to the position expired during the quarter. The net benefit also included a $178,000 benefit related to the Company's ability to fully offset alternative minimum taxable income with alternative minimum net operating loss carryforwards that were generated in fiscal year 2008. The net benefit was offset, in part, by $50,000 of tax expense that was recorded using an effective tax rate of 1.2%. Tax expense resulted from foreign and state tax. The Company was able to utilize its reserved net operating loss carryforwards to offset federal taxable income and federal alternative minimum taxable income. |