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Income Taxes
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6 Months Ended |
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Jul. 31, 2011
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| Income Taxes |
12. Income Taxes
For
the three months and six months ended July 31, 2011, the Company
recorded an income tax provision of $40,000 and $41,000,
respectively, on a income before tax of $901,000 and income before
tax of $424,000, respectively. The difference between
our forecasted effective tax rate of 16% for fiscal 2012 and the
federal statutory rate of 35% is primarily due to the differential
in foreign tax rates and the utilization of federal tax
credits.
For
the three and six months ended July 31, 2010, the Company recorded
an income tax benefit of $3.3 million on income before tax of
$364,000 and an income tax benefit of $3.6 million on income before
tax of $20.4 million, respectively. For the three months ended July
31, 2010, the income tax benefit was due to the adjustment during
the second quarter of fiscal 2011to reflect the lower forecasted
profit before tax for the fiscal year 2011. The Company estimates
its annual effective tax rate for the year and applies that rate to
the year to date profit before tax to determine the quarterly and
year to date tax expense or benefit. The income tax benefit
recorded for the six months ended July 31, 2010 includes the second
quarter benefit resulting from the change in lower forecasted
fiscal 2011 profit before tax as well as the benefit in the first
quarter associated with the gain on the sale of the Company’s
equity investment in Casa Systems, Inc. in the first quarter and
the benefit from the decrease of a portion of the valuation
allowance against its deferred tax assets due to the Company having
met the “more likely than not” realization criteria on
its U.S. deferred tax assets as of July 31, 2010.
The
effective income tax rate is based upon the estimated income for
the year, the composition of the income in different countries and
adjustments, if any, in the applicable quarterly periods for the
potential tax consequences, benefits, resolution of tax audits or
other tax contingencies. Our income tax provision or benefit
consists of federal, foreign, and state income taxes.
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