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INCOME TAXES
9 Months Ended
Jun. 30, 2016
Income Taxes [Abstract]  
Income Taxes

NOTE 8. INCOME TAXES



During the three and nine months ended June 30, 2016, the Company recorded a tax expense of $1.8 million and $1.6 million, respectively, primarily related to the change in valuation allowance against Swedish tax assets, estimated state taxes, and accruing interest on uncertain tax positions.  During the three months ended June 30, 2015, the Company recorded a tax benefit of $0.1 million, primarily related to the change in the deferred tax asset in Sweden as a result of generating losses, estimated state taxes, return to provision adjustments, and accrued interest on uncertain tax positions.  During the nine months ended June 30, 2015, the Company recorded a tax benefit of $2.6 million, primarily related to the change in the deferred tax liability in Sweden as a result of impairing non-goodwill intangibles and amortization, estimated state taxes, and accrued interest on uncertain tax positions.     



The Company’s deferred tax assets include net operating loss carry forwards and tax credits that expire at different times through 2035.  ASC Topic 740, Income Taxes, requires that all available evidence, both positive and negative, be considered in determining, based on the weight of that evidence, whether a valuation allowance is appropriate. The weight given to the potential effect of negative and positive evidence should be commensurate with the extent to which such evidence can be objectively verified.  The more negative evidence that exists, the more positive evidence is necessary, and the more difficult it is, to support a conclusion that a valuation allowance is not appropriate for some portion or all of the deferred tax asset.  A cumulative loss in recent years is considered a significant piece of negative evidence that is difficult to overcome in assessing the need for a valuation allowance.



The Company evaluates the realizability of its deferred tax assets by each tax jurisdiction and assesses the need for a valuation allowance in such tax jurisdictions on a quarterly basis.  The Company evaluates the profitability of each tax jurisdiction on a historic cumulative basis and on a forward-looking basis in the course of performing this analysis.  The Company has evaluated all positive and negative evidence in concluding it is appropriate to continue to maintain a full valuation allowance on its deferred tax assets in the United States, Australia, United Kingdom, Germany, and Singapore.  In addition, the Company has concluded that it is appropriate to establish a full valuation allowance against its net deferred tax assets in Sweden during the three months ended June 30, 2016.



The Company evaluated negative evidence to assess if it is more likely than not that the Company could make use of its deferred tax assets.  The Company is in a cumulative loss position in all tax jurisdictions in which it currently has operations and has no ability to carry back any of those losses.  The reversal of temporary differences in each respective tax jurisdiction will not generate sufficient income to enable the Company to use its deferred tax assets in those jurisdictions.  The Company anticipates that it will continue to generate losses in all of the tax jurisdictions in which it operates for the foreseeable future.



The Company also considered positive evidence, such as expected growth in its business.  Prior to the third quarter of fiscal 2016, the Company projected that its operations in Sweden in future years would generate sufficient income to be able to fully utilize its losses in Sweden.  Upon review and analysis of recently provided sales data, the Company re-evaluated its projected income and believes that the Sweden operations may generate less income in the foreseeable future than previously projected. As a result of this change in assessment and revised projections, the Company has determined that it is appropriate to establish a valuation allowance on its deferred tax assets in Sweden during the three months ended June 30, 2016.  The Company will continue to maintain a full valuation allowance on its net deferred tax assets in the United States, Australia, United Kingdom, Germany, and Singapore until there is sufficient positive evidence to support the reversal of all or some portion of these allowances.

At September 30, 2015, the Company had a cumulative tax liability of $0.3 million related to uncertain tax positions for Federal, state, and foreign tax exposure that could result in cash payments.  There were no significant changes to the Company’s uncertain tax positions during the three and nine months ended June 30, 2016.