INCOME TAXES (Tables)

12 Months Ended

Mar. 31, 2013

Income before Income Tax Expense

Income before income tax expense consisted of the following (in thousands):

	Year Ended March 31,
	2013			2012		2011
Domestic	$	66,735		$	49,525	$	53,008
Foreign		(2,999	)		1,393		3,285
	$	63,736		$	50,918	$	56,293

Components of Income Tax Expense

The components of the income tax expense are as follows (in thousands):

	Year Ended March 31,
	2013			2012			2011
Current income tax expense:
Federal	$	15,826		$	10,585		$	13,197
State		2,266			1,421			1,268
Foreign		1,035			1,032			1,104
		19,127			13,038			15,569
Deferred income tax expense (benefit):
Federal		5,161			5,603			2,967
State		320			44			492
Foreign		(1,481	)		(195	)		0
		4,000			5,452			3,459
	$	23,127		$	18,490		$	19,028

Federal Statutory Income Tax Rate

The income tax expense computed using the federal statutory income tax rate differs from NetScout’s effective tax rate primarily due to the following:

	Year Ended March 31,
	2013			2012			2011
Statutory U.S. federal tax rate		35.0	%		35.0	%		35.0	%
State taxes, net of federal tax effect		3.6			3.2			3.0
Research and development tax credits		(2.1	)		(2.1	)		(2.1	)
Tax rate differential of foreign operations		0.7			0.1			(0.2	)
Domestic production activities deduction		(2.9	)		(2.4	)		(3.0	)
Transaction costs		0.7			1.5			0
Other		1.3			1.0			1.1
		36.3	%		36.3	%		33.8	%

Components of Net Deferred Tax Assets

The components of net deferred tax assets are as follows (in thousands):

	Year Ended March 31,
	2013			2012
Assets:
Accrued expenses	$	5,290		$	3,841
Depreciation		0			1,333
Deferred revenue		6,752			5,743
Reserves		1,325			892
Net operating loss carryforwards		26,096			22,622
Tax credit carryforwards		2,284			1,994
Share-based compensation		1,550			760
Auction rate securities temporary impairment		0			73
Other		352			264
		43,649			37,522
Liabilities:
Intangible assets		(21,934	)		(13,274	)
Valuation allowance		(3,795	)		(3,529	)
Depreciation		(113	)		0
	$	17,807		$	20,719

Unrecognized Tax Benefits

A reconciliation of the beginning and ending amount of unrecognized tax benefits for the fiscal years ended March 31, 2013, 2012 and 2011 is as follows (in thousands):

	Year Ended March 31,
	2013		2012			2011
Balance at April 1,	$	335	$	383		$	349
Additions based on tax positions related to the current year		35		34			34
Release of tax positions of prior years		0		0			0
Decrease relating to settlements with taxing authorities		0		(82	)		0
Reductions as a result of lapses of statute of limitations		0		0			0
Balance at March 31,	$	370	$	335		$	383