Income Taxes

9 Months Ended

Mar. 31, 2014

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

Note 15: Income Taxes

	Three Months Ended March 31,											Nine Months Ended March 31,
	2014					2013						2014					2013
	Amount		Tax Rate %			Amount			Tax Rate %			Amount		Tax Rate %			Amount		Tax Rate %
Income tax expense (benefit)	$	1,331		41	%	$	(504	)		-79	%	$	4,871		37	%	$	2,602		37	%

Income tax expense for the nine months ended March 31, 2014 resulted in an annual effective tax rate of 37%, similar to the annualized effective tax rate for the prior year, after giving effect to the prior year adjustments described below. The current year income tax calculation includes estimated United States federal research and development credits for the first six months of the year. The federal research and development credit expired on December 31, 2013, and 0 research and development credits are included in the tax calculation for the three months ended March 31, 2014. The prior year tax calculation for the three and nine months ended March 31, 2013 included estimated research and development credits for the nine month period. The research and development credit had expired at December 31, 2012 and was renewed on January 1, 2013 for a one year period.

The Company is subject to U.S. federal income tax, as well as income tax in multiple state and foreign jurisdictions. The Company is subject to U.S. federal income tax audit or tax adjustments for years ended June 30, 2000 and later because there are net operating losses (“NOL”) and credit carryforwards attributable to those years. Those years are subject to audit at the time the NOLs or credits available from those years are utilized. The Company is no longer subject to state and foreign income tax audit or tax adjustments for years prior to June 30, 2006.

In the normal course of business, we analyze for uncertain tax positions and adjust unrecognized tax benefits or liabilities accordingly. For the three and nine months ended March 31, 2014, we recognized additional liabilities for uncertain tax positions of $39 and $231, respectively. We are not aware of any tax positions that would create a material adjustment to unrecognized tax benefits during the next twelve months.

As previously reported, the Company has been undergoing a review of its tax accounts using third party advisors. As a result of that review, the Company reported that subsequent to the issuance of the financial information for the third fiscal quarter ended March 31, 2013, the Company’s management identified the following errors within the Company’s accounting for income taxes, which the Company determined to be immaterial to the financial information previously reported:

(1) An overstatement in recorded tax expense related to certain transactions with foreign subsidiaries, partially offset by an understatement in tax expense recorded in a reduction of reserves against uncertain tax positions related to transfer pricing. The Company’s deferred tax assets were understated for tax benefits that had not historically been captured from transactions between the Company and its foreign subsidiaries, primarily related to its German subsidiary ZygoLot. For the three and nine months ended March 31, 2013, correction of the two errors aggregated to an increase in income tax expense of $174 and a decrease in income tax expense of $569, respectively, with a corresponding change in deferred tax assets.

(2) An overstatement of recorded state research and development tax credits, which are available for use to offset future state taxes on capital. The Company had incorrectly recorded these State credits in its tax accounts for States where we pay tax on capital, not on income. To correct that overstatement, the previously recorded deferred tax assets related to these credits was reversed. For the three and nine months ended March 31, 2013, correction of the error resulted in an increase to income tax expense of $212 and $634, respectively, with a corresponding decrease to deferred tax assets.

(3) An error in accounting for the tax basis of fixed assets acquired in the Company’s acquisition of the Richmond, California operations in November 2010. The tax basis of the fixed assets acquired that was used in the calculation of the deferred tax accounts since the acquisition date was overstated, and as a result the associated deferred tax liability was understated. The calculated tax basis did not include a basis adjustment for a future discount liability recorded as part of the original acquisition. For the nine months ended March 31, 2013, the correction of the error resulted in an increase in income tax expense of $1,670 with a corresponding decrease in deferred tax assets.

(4) An understatement in recording the Company’s net operating loss carryforward related to excess tax benefits on shared-based compensation. The unrecognized excess tax benefits in certain years were not recorded in accordance with the same methodology the Company had elected on the date of adoption of FAS 123R. Correction of the error resulted in an increase to the deferred tax asset related to the net operating loss carryforward and an increase to additional paid-in capital of $1,370 as of June 30, 2013.

(5) An error in the recognition of uncertain tax positions against a net operating loss carryforward related to an acquisition. The Company’s uncertain tax positions were understated by $1,086 and therefore were corrected to reflect the uncertainty on the availability of an acquired net operating loss carryforward. As of June 30, 2013, correction of the error resulted in an increase in other long-term liabilities of $1,086 with a corresponding decrease in retained earnings.

The Company’s management has evaluated the impact of these errors on the previously reported financial information on the basis of quantitative and qualitative considerations and does not believe the errors are material to the previously-issued financial information.  However, because correction of these amounts in the current period would be significant to the current statement of operations, they have been corrected by immaterial restatement of the previously-reported amounts. The table below provides a reconciliation of the restated balances to the amounts previously reported:

(Amounts in thousands, except per share amounts)

Fiscal 2013

Condensed Consolidated Statements of Operations	Three Months Ended March 31, 2013				Nine Months Ended March 31, 2013
	As Previously Reported		As Restated		As Previously Reported			As Restated
Income tax benefit (expense)	$	890	$	504	$	(866	)	$	(2,602	)
Net income attributable to Zygo Corporation		1,366		980		5,333			3,597
Basic Earnings per Share	$	0.07	$	0.05	$	0.29		$	0.20
Diluted Earnings Per Share	$	0.07	$	0.05	$	0.28		$	0.19

Fiscal 2013

Condensed Consolidated Balance Sheet	At June 30, 2013
	As Previously Reported		As Restated
Deferred income taxes - Asset - Current	$	7,261	$	8,631
Total current assets	$	163,633	$	165,003
Deferred income taxes - Asset - Long Term	$	14,967	$	10,490
Total assets	$	218,220	$	215,113
Other long term liabilities	$	4,997	$	3,769
Total liabilities	$	32,336	$	31,108
Additional paid-in capital	$	180,324	$	181,694
Retained earnings	$	30,104	$	26,855
Total shareholders’ equity - Zygo Corporation	$	183,841	$	181,962
Total equity	$	185,884	$	184,005
Total liabilities and equity	$	218,220	$	215,113

Fiscal 2013

Condensed Consolidated Statement of Cash Flows	Nine Months Ended March 31, 2013
	As Previously Reported			As Restated
Cash provided by operating activites - Net income including noncontrolling interest	$	6,208		$	4,472
Adjustments to reconcile net income to cash - Deferred income taxes	$	(3,494	)	$	(1,942	)
Adjustments to reconcile net income to cash - Changes in operating accounts: Accounts payable, accrued expenses and taxes payable	$	(4,788	)	$	(4,604	)