|6 Months Ended|
Sep. 30, 2011
|Income Taxes [Abstract]|
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 CNS asset sale, the Company concluded that it was more likely than not that it would be able to utilize the majority of its deferred tax assets. The Company therefore released substantially all of the valuation allowance recorded against tax assets in the fourth quarter of fiscal year 2011. During the first three quarters of fiscal year 2011, a full valuation allowance on deferred tax assets has been recorded and was released against earnings quarterly. The Company will continue to reassess realizability of the deferred tax assets going forward.
In the three and six months ended September 30, 2011, the Company recorded a tax benefit of $1.2 million and tax expense of $12.5 million. These tax provisions resulted from an effective tax rate of 39.1% for the fiscal year with a separate addition of discrete items. For the three and six months ended September 30, 2011, the Company recorded a discrete tax benefit of $2.1 million for a reduction in an uncertain tax position that became effectively settled during the period. For the six months ended September 30, 2011, the gain on the CNS asset sale was treated as a discrete item and the provision related specifically to that that item was $12.5 million.
In the three and six months ended September 30, 2010, the Company was under a full valuation allowance and recorded an expense of $138,000 for the three months ended September 30, 2010, and recorded a net tax benefit of $335,000 in the six month period ended September 30, 2010. The net tax benefit included a $345,000 benefit related to the reversal of a reserve against an uncertain tax position because the statute of limitations related to the position had expired. The net tax benefit also included a $178,000 benefit related to the Company's ability to fully offset alternative minimum taxable income with alternative minimum tax net operating loss carryforwards that were generated in prior years. The net tax benefit was offset, in part, by $188,000 of tax expense that was recorded using an effective tax rate of 2.1% for the fiscal year. Tax expense resulted from foreign and state tax. The Company was able to utilize its net operating loss carryforwards to offset federal taxable income and federal alternative minimum taxable income generated for the three and six months ended September 30, 2010.
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.
Reference 1: http://www.xbrl.org/2003/role/presentationRef