Note 3 - Income Taxes
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6 Months Ended |
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Dec. 31, 2011
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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
December 31, 2011, the Company and certain of its
subsidiaries are currently under U.S. and Canada 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 December 31, 2011, the Company remains in a three year
cumulative loss and the full valuation allowance remains in
place with a balance of $23.9 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 31.6% and
35.9% for the three and six months ended December 31, 2011
respectively, and negative 68.7% and negative 29.7% for the
three and six months ended December 31, 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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