|
11. Income Taxes
The components of the provision for income taxes of continuing operations are as follows:
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|
|
|
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|
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Years ended September 30, |
|
|
|
2011 |
|
2010 |
|
2009 |
|
|
|
(in thousands)
|
|
|
Current tax provision: |
|
|
|
|
|
|
|
|
|
|
|
U.S. Federal |
|
$ |
13,019 |
|
$ |
9,833 |
|
$ |
7,128 |
|
|
State |
|
|
2,374 |
|
|
3,254 |
|
|
2,367 |
|
|
Foreign |
|
|
— |
|
|
— |
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
15,393 |
|
|
13,087 |
|
|
9,495 |
|
|
Deferred tax benefit (expense): |
|
|
|
|
|
|
|
|
|
|
|
U.S. Federal |
|
|
(194 |
) |
|
(958 |
) |
|
(1,358 |
) |
|
State |
|
|
260 |
|
|
65 |
|
|
(349 |
) |
|
Foreign |
|
|
— |
|
|
— |
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
66 |
|
|
(893 |
) |
|
(1,707 |
) |
| |
|
|
|
|
|
|
|
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Total provision |
|
$ |
15,459 |
|
$ |
12,194 |
|
$ |
7,788 |
|
| |
|
|
|
|
|
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|
Deferred taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets and liabilities are as follows:
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|
|
|
|
|
|
|
|
September 30, |
|
|
|
2011 |
|
2010 |
|
|
|
(in thousands)
|
|
|
Deferred tax assets: |
|
|
|
|
|
|
|
|
Net operating losses—Foreign |
|
$ |
3,341 |
|
$ |
1,780 |
|
|
Net operating losses—US |
|
|
3,408 |
|
|
3,588 |
|
|
Accrued vacation and bonus |
|
|
952 |
|
|
903 |
|
|
Inventory capitalization |
|
|
1,810 |
|
|
1,863 |
|
|
Allowance for doubtful accounts |
|
|
200 |
|
|
129 |
|
|
Stock compensation expense |
|
|
4,672 |
|
|
4,025 |
|
|
Depreciation |
|
|
— |
|
|
— |
|
|
Other |
|
|
1,441 |
|
|
661 |
|
| |
|
|
|
|
|
|
Total deferred tax assets before valuation allowance |
|
|
15,824 |
|
|
12,949 |
|
|
Less: valuation allowance |
|
|
(3,341 |
) |
|
(1,733 |
) |
| |
|
|
|
|
|
|
Net deferred tax assets |
|
|
12,483 |
|
|
11,216 |
|
|
Deferred tax liabilities: |
|
|
|
|
|
|
|
|
Amortization of goodwill and intangibles |
|
|
1,556 |
|
|
1,306 |
|
|
Depreciation |
|
|
1,781 |
|
|
963 |
|
|
Other |
|
|
110 |
|
|
204 |
|
| |
|
|
|
|
|
|
Total deferred tax liabilities |
|
|
3,447 |
|
|
2,473 |
|
| |
|
|
|
|
|
|
Net deferred taxes |
|
$ |
9,036 |
|
$ |
8,743 |
|
| |
|
|
|
|
|
The reconciliation of the U.S. federal statutory rate to the effective rate for continuing operations is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended September 30, |
|
|
|
2011 |
|
2010 |
|
2009 |
|
|
U.S. statutory rate |
|
|
35.0 |
% |
|
35.0 |
% |
|
35.0 |
% |
|
Permanent items |
|
|
3.5 |
% |
|
2.2 |
% |
|
1.3 |
% |
|
State taxes |
|
|
4.3 |
% |
|
7.6 |
% |
|
6.1 |
% |
|
Changes in valuation allowance and other |
|
|
— |
|
|
(0.1 |
%) |
|
5.1 |
% |
|
Net foreign rate differential |
|
|
— |
|
|
— |
|
|
0.6 |
% |
| |
|
|
|
|
|
|
|
|
Provision for income taxes |
|
|
42.8 |
% |
|
44.7 |
% |
|
48.1 |
% |
| |
|
|
|
|
|
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|
At September 30, 2011 and 2010, the Company had available foreign net operating loss (NOL) carryforwards of approximately $3,341,000 and $1,780,000 related to its UK subsidiary, which do not expire. Due to the discontinuation of its UK operations, the Company does not believe that it is more likely than not that the related deferred tax assets will be realized and a full valuation allowance has been recorded. In addition, the Company also recorded a deferred tax asset of $3,753,000 related to NOL carryforwards related to its acquisition of Network International, Inc. in 2010. These NOL carryforwards expire in 2023.
The Company applies the authoritative guidance related to uncertainty in income taxes. The Company has concluded that there were no uncertain tax positions identified during its analysis. The Company's policy is to recognize interest and penalties in the period in which they occur in the income tax provision. The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, various state and local jurisdictions and in foreign jurisdictions, primarily the U.K. Currently, the Company is not subject to any income tax examinations. The statute of limitations for years prior to fiscal 2008 is now closed. However, certain tax attribute carryforwards that were generated prior to fiscal 2008 may be adjusted upon examination by tax authorities if they are utilized. |
