Income Taxes

9 Months Ended

Dec. 31, 2011

Income Taxes [Abstract]

Income Taxes

Note 7 - Income Taxes

The benefit from income taxes for the three months ended December 31, 2011 was $703,000 on loss before tax of $607,000 at the effective tax benefit rate of 116% compared to a provision for income taxes of $726,000 on income before tax of $3,586,000 at the effective tax rate of 20% in the third quarter of the prior fiscal year. The year-over-year quarterly change in estimated tax rate was primarily due to a pre-tax loss compared to a pre-tax profit last year and changes in where the Company expects its income and losses to be generated this year between its US and Hong Kong entities which have different tax rates.

The provision for income taxes for the nine months ended December 31, 2011 was $303,000 on income before tax of $3,779,000 at the effective tax rate of 8% compared to $4,861,000 on income before tax of $15,651,000 at the effective tax rate of 31% for the same period in the prior fiscal year. The year-over-year decrease in estimated tax rate for the nine-month period was primarily due to changes in where the Company expects its income and losses to be generated this year between its US and Hong Kong entities which have different tax rates and reductions in state taxes, partially offset by the company's inability to claim the U.S.  manufacturing tax deduction due to a limitation in income.

The income tax provision for interim periods reflects the Company's computed estimated annual effective tax rate and differs from the taxes computed at the federal and state statutory rates primarily due to the effects of foreign rate differentials, R&D tax credits, non-deductible stock-based compensation expense, tax exempt interest income and tax contingencies.

During the nine months ended December 31, 2011, the liability for uncertain income tax positions excluding accrued interest and penalties decreased from $4,052,000 to $4,044,000. Of the total $4,044,000 of unrecognized tax benefits, $3,169,000 represents the amount that, if recognized, would favorably affect the Company's effective income tax rate in a future period. The Company cannot conclude on the range of cash payments that will be made within the next twelve months associated with its uncertain tax positions.

The Company records interest and penalties related to unrecognized tax benefits in income tax expense. On December 31, 2011, the Company had approximately $562,000 accrued for estimated interest and $414,000 for estimated penalties related to uncertain tax positions. For the nine months ended December 31, 2011, the Company recorded estimated interest of $89,000 and estimated penalties of $5,000.

The balance of unrecognized income tax benefits, including accrued interest and accrued penalties on December 31, 2011, was approximately $1,259,000 related to tax positions for which it is reasonably possible that the statute of limitations will expire in various jurisdictions within the next twelve months.

The Company's major tax jurisdictions are the United States federal, State of California and Hong Kong and the Company's income tax returns are no longer subject to examination by these taxing authorities for fiscal years before 2002.