Note 15 - Income Taxes

9 Months Ended

Feb. 28, 2015

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

15. INCOME TAXES

The effective tax rate for the nine months ended February 28, 2015 and 2014 was -73.0% and 42.4%, respectively. The difference between the U.S. federal statutory rate and the effective tax rate for the nine month period ended February 28, 2015 was primarily due to the impact of discrete items recorded during the third quarter of fiscal 2015. These discrete items resulted from the Company’s change in estimate related to its treatment of foreign tax credits (“FTCs”) and the change in the valuation allowance for its FTC carryovers. Excluding these discrete items recorded during the nine months ended February 28, 2015, the effective tax rate would have been 27.3%. The difference between the U.S. federal statutory rate and the effective tax rate for the nine months ended February 28, 2014 was primarily due to the following: (1) the fact that the gain on the acquisition-related item was not taxable, (2) a portion of the Company’s income is subject to tax in various tax jurisdictions with rates that differ from the U.S. statutory rate, (3) the impact of recording U.S. income taxes associated with current and future distributions of foreign earnings, and (4) changes in discrete tax items recognized during the period based on enacted tax laws and expirations of the statute of limitations for the benefits associated with uncertain tax positions.

The effective tax rate for the nine month period ended February 28, 2015 was significantly impacted by the Company’s decision during the third quarter of fiscal 2015 to change its estimate with regard to the treatment of its foreign tax credits. This decision is expected to generate a significant reduction in cash tax payments related to the fiscal 2014, fiscal 2015 and fiscal 2016 years as a result of the Company changing from the credit method to the deduction method for its FTCs in various tax periods. As a result, the Company elected the deduction method for FTCs for the Successor fiscal 2012, fiscal 2013, fiscal 2014 and fiscal 2015 periods. The Company filed its fiscal 2014 U.S. income tax returns reflecting this change. In addition, the Company will amend its Successor fiscal 2012 and fiscal 2013 income tax returns to reflect this change. The Company will not amend the Predecessor income tax return for the period ended August 19, 2011. As a result of this change in estimate, the Company recognized a discrete charge of additional income tax expense of $23.7 million during the third quarter of fiscal 2015. In addition, the Company recorded a valuation allowance of $7.6 million during the period related to uncertainties in the Company’s ability to utilize the FTC carryovers prior to their expiration. As a result of this change in estimate, as of February 28, 2015, the Company has an adjusted NOL carry forward of $44.9 million and FTC carry forwards, after the valuation allowance, of $0.

The Company does not consider itself to be permanently reinvested with respect to its accumulated and un-repatriated earnings as well as future earnings of each foreign subsidiary. Accordingly, the Company has provided for deferred taxes on future earnings of its foreign subsidiaries. The Company continues to consider its investment in each foreign subsidiary in excess of its accumulated and un-repatriated earnings to be permanently reinvested and thus has not recorded a deferred tax liability on that amount.