Note 8 - Income Tax

9 Months Ended

Mar. 31, 2013

Income Tax Disclosure [Text Block]

Note 8:    Income Tax

The Company is subject to U.S. federal income tax and various state, local and foreign income taxes in numerous jurisdictions.  The Company’s domestic and foreign tax liabilities are subject to the allocation of revenues and expenses in different jurisdictions and the timing of recognizing revenues and expenses.  Additionally, the amount of income taxes paid is subject to the Company’s interpretation of applicable tax laws in the jurisdictions in which it files.

The Company provides for income taxes on an interim basis based on an estimate of the effective tax rate for the year.  This estimate is reassessed on a quarterly basis.  Discrete tax items are accounted for in the quarterly period in which they occur.

The tax expense for the third quarter of fiscal 2013 was $249,000 on a loss before tax for the quarter of $1,236,000 (an effective tax rate of (20.1%)). The tax expense for the third quarter of 2012 was $661,000 on income before tax of $2,231,000 (an effective tax rate of 29.6%).  For the first nine months of 2013, tax expense was $507,000 on a loss before tax of $853,000 (an effective tax rate of (59.4%)) and for the nine months ended March 31, 2012 it was $3,682,000 on income before tax of $9,216,000 (an effective tax rate of 40%).   The primary reasons for the negative effective tax rate in the third quarter of fiscal 2013 are as follows:  1.  no tax benefit has been recognized for losses in certain foreign subsidiaries;  2.  there was a cash dividend from the Company’s subsidiary in Australia which caused a discrete increase to tax expense of $178,000; 3.  there was a reduction in the effective state tax rate applied to deferred tax balances (based on both actual and expected future state tax apportionments and profitability) which caused a discrete tax expense of $675,000;  4.  the changes on the fiscal 2012 tax return from amounts estimated at provision, including the impact of a changed position on the 2012 and prior year returns to take the foreign tax credit rather than a deduction , created a discrete tax benefit of $414,000; and  5.  other discrete taxes increased tax expense by $66,000  In the first quarter of fiscal 2013, a discrete tax benefit was booked reducing the Company’s net tax liability for uncertain tax positions of $91,000.

U.S. Federal tax returns through fiscal 2008 are generally no longer subject to review by tax authorities; however, tax loss carryforwards from years before fiscal 2009 are still subject to review.   As of March 31, 2013, the Company has substantially resolved all open income tax audits.  There were no other local or federal income tax audits in progress as of March 31, 2013.  In international jurisdictions including Argentina, Australia, Brazil, Canada, China, UK, Germany, New Zealand, Singapore, Japan and Mexico, which comprise a significant portion of the Company’s operations, the years that may be examined vary by country.  The Company’s most significant foreign subsidiary in Brazil is subject to audit for the years 2008 – 2012.

The Company has identified no new uncertain tax positions during the nine month period year ended March 31, 2013 for which it is currently likely that the total amount of unrecognized tax benefits will significantly increase or decrease within the next twelve months.

No valuation allowance has been recorded for the Company’s domestic federal net operating loss (NOL) carry forwards. The Company continues to believe that due to forecasted future taxable income and certain tax planning strategies available, it is more likely than not that it will be able to utilize the federal NOL carry forwards.