Note 3 - Income Taxes |
3 Months Ended |
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Sep. 30, 2011 | |
Income Tax Disclosure [Text Block] |
(3) Income
Taxes
The
Company reviews its expected annual effective income tax
rates and makes changes on a quarterly basis as necessary
based on certain factors such as changes in forecasted annual
operating income; changes to actual or forecasted permanent
book to tax differences; impacts from future tax audits with
state, federal or foreign tax authorities; impacts from tax
law changes; or change in judgment as to the realizability of
deferred tax assets. The Company identifies items which are
not normal and are non-recurring in nature and treats these
as discrete events. The tax effect of discrete items is
recorded in the quarter in which the discrete events occur.
Due to the volatility of these factors, the Company's
consolidated effective income tax rate can change
significantly on a quarterly basis.
The
Company conducts business globally and, as a result, the
Company or one or more of its subsidiaries files income tax
returns in the U.S., various state, and foreign
jurisdictions. In the normal course of business, the
Company is subject to examination by the taxing authorities
in such major jurisdictions as the U.S., Canada, and
Mexico. As of September 30, 2011, the Company and certain
of its subsidiaries are currently under U.S. audit from
2001 through 2010. It is reasonably possible that some of
these audits may be completed during the next twelve
months. It is reasonable to expect that various issues
relating to uncertain tax benefits will be resolved within
the next twelve months as exams are completed or as
statutes expire and will impact the effective tax
rate.
Due
to the challenging economic times, financial losses in
fiscal 2009 and 2010 resulting in a three year cumulative
loss, and after considering both positive and negative
evidence, management’s assessment is that realization
of tax assets is not reasonably assured due to a lack of
available objective positive evidence. As a result the
Company established a full valuation allowance as of June
30, 2010. At September 30, 2011, the Company remains in a
three year cumulative loss and the full valuation allowance
remains in place with a balance of $24.2 million compared
with $23.5 million at June 30, 2011. Management will
continue to assess the realizability of the tax assets
based on actual and forecasted operating results on a
quarterly basis, which will likely cause volatility in the
effective tax rate of the Company.
The
Company’s consolidated effective tax rate was 40.3% and
31.5% for the three months ended September 30, 2011 and 2010
respectively. The current quarter effective tax rate includes
tax expense on the current quarter’s net income,
interest expense on uncertain tax positions, and the impact
of maintaining valuation allowances on deferred tax assets
which also affected the income tax expense in both periods.
The prior period effective tax rate benefitted from the
utilization of certain deferred tax assets.
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