Income Taxes

12 Months Ended

May 31, 2012

Income Taxes [Abstract]

Income Taxes

Note 6: Income Taxes

Accounting guidance for accounting for uncertain tax positions prescribes a recognition threshold required to meet before being recognized in the financial statements and provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition issues.

During the second quarter of fiscal 2011 we effectively settled our remaining uncertain tax positions. The derecognition of $4,515 of previously recognized uncertain tax positions, and the related deferred tax asset, had no impact on our effective tax rate. However, the derecognition of $1,396 for interest and penalties previously recognized reduced our tax provision by a corresponding amount for fiscal 2011. This derecognition reduced our effective tax rate from 40.0% to 36.3% for fiscal 2011.

We recognize interest and penalties accrued with respect to uncertain tax positions as components of our income tax provision. At May 31, 2012 and 2011, we did not have any accrual for interest and penalties.

The reconciliation of our unrecognized tax benefits is as follows for the fiscal years ended May 31:

	2012		2011			2010
Balance as of June 1	$	—	$	4,691		$	3,943
Increase/(decrease) related to prior year tax positions		—		(4,691	)		748
Balance as of May 31	$	—	$	—		$	4,691

We are subject to taxation in the U.S., as well as various states and foreign jurisdictions. We have substantially settled all income tax matters for the United States federal jurisdiction for years through fiscal 2009. Major state jurisdictions have been examined through fiscal 2004 and 2005, and foreign jurisdictions have not been examined for their respective maximum statutory periods. For financial reporting purposes, income before income taxes comprised the following as of May 31:
	2012			2011			2010
Domestic	$	40,364		$	36,817		$	20,184
Foreign		(359	)		472			(152	)
	$	40,005		$	37,289		$	20,032
The provision for income taxes consisted of the following for the fiscal years ended May 31:
	2012			2011			2010
Current
Federal	$	1,057		$	(5,583	)	$	8,117
State		1,523			2,028			1,698
Foreign		538			(521	)		1,427
Deferred
Federal		10,541			17,083			(2,476	)
State		559			540			(330	)
Foreign		15			(14	)		(1	)
	$	14,233		$	13,533		$	8,435

The following reconciles the statutory federal income tax rate to the effective tax rate for the fiscal years ended May 31:

	2012			2011			2010
Statutory federal rate		35.0	%		35.0	%		35.0	%
State taxes, net of federal benefit		3.4			4.5			4.6
Changes in reserves due to changes in tax estimates		—			—			1.4
Derecognition of uncertain tax positions		—			(3.4	)		—
Bargain purchase gain		(3.0	)		(0.2	)		(1.1	)
Foreign tax refund		(0.4	)		—			—
Permanent differences resulting from valuation allowances		0.7			0.3			1.1
Interest inclusion		—			—			1.0
Other		(0.1	)		0.1			0.1
Effective tax rate		35.6	%		36.3	%		42.1	%

Our effective tax rate in fiscal 2012, 2011 and 2010 was 35.6%, 36.3% and 42.1%, respectively. The lower effective rate in fiscal 2012 was due to the bargain purchase gain on EMT and state tax credits offset by an increase in the foreign valuation allowance. The lower effective rate in fiscal 2011 was due to our effective settlement of our remaining uncertain tax positions and the resulting derecognition of $1,396 for interest and penalties previously recognized in our income tax provision. Tax advantaged investments reduced expense by $0, $2 and $52 for fiscal 2012, 2011 and 2010, respectively.

The tax effects of temporary differences that gave rise to significant portions of the net deferred tax liabilities consisted of the following at May 31:

	2012			2011
Deferred tax assets:
Goodwill and intangible assets	$	300		$	1,194
Allowance for doubtful accounts		206			238
Deferred compensation and benefits		2,813			1,734
Net operating losses		871			1,364
Valuation allowance		(871	)		(593	)
Other		1,390			1,400
		4,709			5,337
Deferred tax liabilities:
Accumulated depreciation		(56,532	)		(45,800	)
Deferred taxes on bargain purchase		(2,548	)		(541	)
Net deferred tax liabilities	$	(54,371	)	$	(41,004	)

We determined that a valuation allowance was required in fiscal 2012 and 2011 of $871 and $593, respectively, for our deferred tax asset related to certain foreign net operating loss carry forwards and other related timing differences, which, if unused, will expire between fiscal 2014 and 2017. As of May 31, 2012, 2011 and 2010, U.S. income taxes had not been assessed on approximately $1,599, $1,425 and $853, respectively, of undistributed earnings of foreign subsidiaries because we consider these earnings to be invested indefinitely.