PEGA » Topics » Provision for income taxes

This excerpt taken from the PEGA 10-Q filed May 5, 2009.

Provision for income taxes

The provision for income taxes represents current and future amounts owed for federal, state, and foreign taxes. During the first quarter of 2009 and 2008, we recorded a $3.8 million and $1.2 million provision, respectively, which resulted in an effective tax rate of 30.4% and 29.5%, respectively.

 

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Our effective tax rate during the first quarter of 2009 and 2008 was below the statutory federal income tax rate primarily due to the investment in tax-exempt municipal bonds and the benefit from the SEZ India tax holiday.

The determination of the provision for income tax expense, deferred tax assets and liabilities and related valuation allowance involves judgment. As a global company, we are required to calculate and provide for income taxes in each of the tax jurisdictions where we operate. This involves making judgments regarding the recoverability of deferred tax assets, which can affect the overall effective tax rate. As of March 31, 2009 the amount of unrecognized tax benefits totaled approximately $6.2 million, of which $5.2 million, if recognized would impact our effective tax rate. We expect that the changes in the unrecognized benefits within the next twelve months will be approximately $1.3 million related to tax positions for which the ultimate settlement is highly certain but for which there is uncertainty about the timing of such recognition.

These excerpts taken from the PEGA 10-K filed Mar 9, 2009.

Provision for income taxes

The provision for income taxes represents current and future amounts owed for federal, state, and foreign taxes. During 2008 and 2007, we recorded a $4.7 million and $3.3 million provision, respectively, which resulted in an effective tax rate of 30% and 34%, respectively.

The decrease in the effective tax rate during 2008 compared to 2007 was primarily due to the increased investment in tax-exempt municipal bonds and the benefit from the SEZ India tax holiday. These decreases in the effective tax rate were partially offset by an increase in our reserve for uncertain tax positions.

During 2008, we recorded a charge related to positions taken on prior tax returns, which resulted in an increase of $0.9 million to our unrecognized tax benefits, the majority of which was related to state income tax credits. As of December 31, 2008, the amount of unrecognized tax benefits totaled approximately $6.2 million, of which $5.2 million, if recognized would impact our effective tax rate. We expect that the changes in the unrecognized benefits within the next twelve months would be approximately $1.3 million related to tax positions for which the ultimate settlement is highly certain but for which there is uncertainty about the timing of such recognition.

Our effective income tax rate for 2008 was below the statutory federal income tax rate due to approximately $0.5 million of benefits related to the current period domestic production activities, approximately $0.8 million of estimated federal income tax credits, and approximately $0.6 million of benefit from tax-exempt income. These benefits were partially offset by an increase in the Company’s reserve for uncertain tax positions of $1.3 million, the majority of which is related to the state tax credits, and permanent differences of $0.4 million primarily related to nondeductible meals and entertainment expenses.

Our effective income tax rate for 2007 was below the statutory federal income tax rate due to approximately $0.3 million of benefits related to the current period domestic production activities, approximately $0.5 million of estimated federal income tax credits, and approximately $0.2 million of state income tax credits. These benefits were partially offset by $0.3 million of permanent differences primarily related to nondeductible meals and entertainment expenses and approximately $0.2 million of prior year provision to tax return adjustments.

Provision for income taxes

STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%">The provision for income taxes represents current and future amounts owed for federal, state, and foreign taxes. During 2008 and 2007, we recorded a $4.7
million and $3.3 million provision, respectively, which resulted in an effective tax rate of 30% and 34%, respectively.

The decrease in
the effective tax rate during 2008 compared to 2007 was primarily due to the increased investment in tax-exempt municipal bonds and the benefit from the SEZ India tax holiday. These decreases in the effective tax rate were partially offset by an
increase in our reserve for uncertain tax positions.

During 2008, we recorded a charge related to positions taken on prior tax returns,
which resulted in an increase of $0.9 million to our unrecognized tax benefits, the majority of which was related to state income tax credits. As of December 31, 2008, the amount of unrecognized tax benefits totaled approximately $6.2 million,
of which $5.2 million, if recognized would impact our effective tax rate. We expect that the changes in the unrecognized benefits within the next twelve months would be approximately $1.3 million related to tax positions for which the ultimate
settlement is highly certain but for which there is uncertainty about the timing of such recognition.

Our effective income tax rate for
2008 was below the statutory federal income tax rate due to approximately $0.5 million of benefits related to the current period domestic production activities, approximately $0.8 million of estimated federal income tax credits, and approximately
$0.6 million of benefit from tax-exempt income. These benefits were partially offset by an increase in the Company’s reserve for uncertain tax positions of $1.3 million, the majority of which is related to the state tax credits, and permanent
differences of $0.4 million primarily related to nondeductible meals and entertainment expenses.

Our effective income tax rate for 2007
was below the statutory federal income tax rate due to approximately $0.3 million of benefits related to the current period domestic production activities, approximately $0.5 million of estimated federal income tax credits, and approximately $0.2
million of state income tax credits. These benefits were partially offset by $0.3 million of permanent differences primarily related to nondeductible meals and entertainment expenses and approximately $0.2 million of prior year provision to tax
return adjustments.

This excerpt taken from the PEGA 10-Q filed Nov 6, 2008.

Provision for income taxes

 

     Three Months Ended
September 30,
   Nine Months Ended
September 30,
     2008    2007    2008    2007

Income before income taxes

   $ 2,717    $ 5,154    $ 10,923    $ 7,791

Provision for income taxes

     366      1,644      2,776      2,614
                           

Net Income

   $ 2,351    $ 3,510    $ 8,147    $ 5,177
                           

Reported Tax Rate

     13.5%      31.9%      25.4%      33.6%

(Benefit) Provision from discrete items

     (8.2)%      (0.5)%      (1.6)%      1.8%

The provision for income taxes represents current and future amounts owed for federal, state, and foreign taxes. During the third quarter of 2008 and 2007, we recorded a $0.4 million and $1.6 million provision, respectively, which resulted in an effective tax rate of 13.5% and 31.9%, respectively. For the nine months ended September 30, 2008 and 2007, we recorded a $2.8 million and $2.6 million provision, respectively, which resulted in an effective rate of 25.4% and 33.6%, respectively.

The decrease in the effective tax rate during the third quarter and nine months ended September 30, 2008 compared to the same periods in 2007 was primarily due to the increased investment in tax-exempt municipal bonds and the benefit from the SEZ India tax holiday. In addition, during the third quarter of 2008, we recorded a $0.2 million reduction to our tax reserves related to the expiration of certain statutes of limitations.

 

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The determination of the provision for income tax expense, deferred tax assets and liabilities and related valuation allowance involves judgment. As a global company, we are required to calculate and provide for income taxes in each of the tax jurisdictions where we operate. This involves making judgments regarding the recoverability of deferred tax assets, which can affect the overall effective tax rate. As of September 30, 2008, the amount of unrecognized tax benefits totaled approximately $10.1 million, of which $4.2 million, if recognized would impact our effective tax rate. We expect that the amount of our unrecognized tax benefits may change within the next 12 months, however we cannot determine whether this change will be material until a tax study is completed.

This excerpt taken from the PEGA 10-Q filed Aug 7, 2008.

Provision for income taxes

The provision for income taxes represents current and future amounts owed for federal, state, and foreign taxes. During the second quarter of 2008 and 2007, we recorded a $1.2 million provision and $0.4 million provision, respectively, which resulted in an effective tax rate of 29.2% and 40.1%, respectively. For the six months ended June 30, 2008 and 2007, we recorded a $2.4 million provision and $1.0 million provision, respectively, which resulted in an effective rate of 29.4% and 36.8%, respectively.

The decrease in the effective tax rate was due primarily to changes in the geographic mix of income and the increased investment in tax exempt municipal bonds. The determination of the provision for income tax expense, deferred tax assets and liabilities and related valuation allowance involves judgment. As a global company, we are required to calculate and provide for income taxes in each of the tax jurisdictions where we operate. This involves making judgments regarding the recoverability of deferred tax assets, which can affect the overall effective tax rate.

We adopted the provisions of Financial Accounting Standards Board (“FASB”) Interpretation No. 48, “Accounting for Uncertainty in Income Taxes (“FIN 48”) on January 1, 2007. As a result, we recorded the cumulative effect of applying the provisions of FIN 48 and recorded a $1.5 million reduction to our January 1, 2007 retained earnings. As of June 30, 2008, the amount of unrecognized tax benefits totaled approximately $10.1 million, of which $4.4 million, if recognized would impact our effective tax rate. We do not expect the changes in the unrecognized benefits within the next 12 months to be material.

 

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This excerpt taken from the PEGA 10-Q filed May 8, 2008.

Provision for income taxes

The provision for income taxes represents current and future amounts owed for federal, state, and foreign taxes. In the first quarter of 2008, we recorded a $1.2 million provision compared to a provision of $0.5 million in the first quarter of 2007, which resulted in an effective tax rate of 29.5% in the first quarter of 2008 compared to 34.4% in the first quarter of 2007. The decrease in the effective tax rate was due primarily to changes in the geographic mix of income. The determination of the provision for income tax expense, deferred tax assets and liabilities and related valuation allowance involves judgment. As a global company, we are required to calculate and provide for income taxes in each of the tax jurisdictions where we operate. This involves making judgments regarding the recoverability of deferred tax assets, which can affect the overall effective tax rate.

We adopted the provisions of FIN 48 on January 1, 2007. As a result, we recorded the cumulative effect of applying the provisions of FIN 48 and recorded a $1.5 million reduction to our January 1, 2007 retained earnings. As of March 31, 2008, the amount of unrecognized tax benefits totaled approximately $10.1 million, of which $4.3 million, if recognized would impact our effective tax rate. We do not expect the changes in the unrecognized benefits within the next twelve months to be material.

This excerpt taken from the PEGA 10-K filed Mar 10, 2008.

Provision for income taxes

The provision for income taxes was a benefit of $0.7 million in 2006 compared to $0.1 million provision in 2005. The effective tax rate was (55%) in 2006 compared to 2% in 2005.

Our effective income tax rate for 2006 differed from the statutory federal income tax rate primarily because we recorded $0.7 million of benefits related to current period extra-territorial income exclusions, $0.2 million of estimated federal income tax credits, a $0.3 million benefit from foreign activities, and $0.3 million of net benefit from state income taxes primarily due to state income tax credits. These factors were partially offset by $0.2 million of permanent differences primarily related to nondeductible meals and entertainment expenses and $0.2 million increase in reserve for tax uncertainties related to international activity.

We have provided reserves for certain tax matters, both domestic and foreign, which we believe could result in additional tax being due. Any additional assessment or reduction of these contingent liabilities will be reflected in the Company’s effective tax rate in the period that additional facts become known. The reserve for tax uncertainties totaled approximately $2.0 million as of December 31, 2006 and 2005.

This excerpt taken from the PEGA 10-Q filed Nov 5, 2007.

Provision for income taxes

The provision for income taxes for the third quarter of 2007 was $1.6 million, compared to $0.4 million for the third quarter of 2006. The $1.6 million provision represents a 31.9% effective tax rate. The provision for income taxes for the first nine months of 2007 was $2.6 million, compared to $11 thousand for the first nine months of 2006. The $2.6 million provision represents a 33.6% effective tax rate. The Company adopted the provisions of FIN 48 on January 1, 2007. See additional disclosure in the Notes to Unaudited Condensed Consolidated Financial Statements for additional information.

This excerpt taken from the PEGA 10-Q filed Aug 7, 2007.

Provision for income taxes

The provision for income taxes for the first six months of 2007 was $1.0 million, compared to a tax benefit of $0.4 million for the first six months of 2006. The $1.0 million provision represents a 37% effective tax rate on the income before provision for income taxes. The increase in the provision for income taxes was due primarily to improved profitability. The Company adopted the provisions of FIN 48 on January 1, 2007. See additional disclosure in the Notes to Unaudited Condensed Consolidated Financial Statements for additional information.

This excerpt taken from the PEGA 10-Q filed May 21, 2007.

Provision for income taxes

The provision for income taxes in the first quarter of 2007 was $0.5 million, compared to a tax benefit of $0.1 million in the first quarter of 2006. The $0.5 million provision represents a 34% effective tax rate on the income before provision for income taxes. The increase in the provision for income taxes was due primarily to improved profitability. The Company adopted the provisions of FIN 48 on January 1, 2007. See additional disclosure in the Notes to Unaudited Condensed Consolidated Financial Statements for additional information.

This excerpt taken from the PEGA 10-K filed May 3, 2007.

Provision for income taxes

The provision for income taxes in 2005 was $0.1 million compared to $2.9 million in 2004. The effective tax rate was 2% in 2005 compared to 26% in 2004.

During 2005, we engaged outside tax experts to review certain significant tax positions previously taken by the Company. In the fourth quarter of 2005, we completed a study of our extra-territorial income exclusions, which resulted in a decrease of our reserve for tax uncertainties related to this item. During the fourth quarter of 2005, we recorded a net income tax benefit of $1.3 million due primarily to changes in estimates upon completion of the study of benefits related to extra-territorial income exclusions, recording of tax refunds and overpayments, and changes in deferred tax items. These fourth quarter 2005 adjustments also significantly decreased the effective tax rate for 2005 compared to the statutory rate. Our effective income tax rate for 2005 was below the statutory federal income tax rate primarily because we recorded $1.0 million of benefits related to current period extra-territorial income exclusions, a $0.3 million reduction in reserve for tax uncertainties related to extra-territorial income exclusions, $0.2 million of estimated federal research and experimentation credit, a $0.2 million benefit from foreign activities, and $0.2 million of net benefit from state income taxes primarily due to state income tax credits. These factors were partially offset by $0.1 million of permanent differences primarily related to non-deductible meals and entertainment expenses.

Judgment is required in determining our worldwide income tax expense provision. In the ordinary course of conducting a global business enterprise, there are many transactions and calculations undertaken whose ultimate tax outcome cannot be certain. Some of these uncertainties arise as a consequence of transactions and arrangements made among related parties, transfer pricing for transactions with our subsidiaries, and potential challenges to nexus and tax credit estimates. We estimate our exposure to unfavorable outcomes related to these uncertainties and estimate the probability for such outcomes. Although we believe our estimates are reasonable, no assurance can be given that the final tax outcome of these matters will not be different from what is reflected in our historical income tax provisions, returns and accruals. Such differences, or changes in estimates relating to potential differences, could have a material impact, unfavorable or favorable, on our income tax provision and operating results in the period in which such a determination is made. The reserve for tax uncertainties totaled approximately $2 million as of December 31, 2005 and 2004.

This excerpt taken from the PEGA 10-K filed Apr 25, 2007.

Provision for income taxes

The provision for income taxes in 2004 was $2.9 million compared to $5.2 million in 2003. The effective tax rate was 26% in 2004 compared to 24% for 2003. This increase in effective rate was due to lower benefits from the recognition of loss and credit carry forwards in 2004 compared to 2003, partially offset by improved estimates in 2004 of tax benefits related to export sales. Provisions have been made for uncertainties, with reserves totaling approximately $2 million as of December 31, 2004.

 

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This excerpt taken from the PEGA 10-Q filed Apr 25, 2007.

Provision for income taxes

The provision for income taxes in the first three quarters of 2006 was $11 thousand, compared to a tax provision of $1.5 million in the first three quarters of 2005. The income tax provision during 2006 is expected to benefit from research and experimentation tax credits, deductions related to export activity and claims filed for refunds of foreign income taxes.

This excerpt taken from the PEGA 10-Q filed Apr 25, 2007.

Provision for income taxes

The provision (benefit) for income taxes in the first half of 2006 was a tax benefit of $(0.4) million, compared to a tax provision of $0.4 million in the first half of 2005. The income tax provision during 2006 is expected to benefit from research and experimentation tax credits, deductions related to export activity and claims filed for refunds of foreign income taxes.

This excerpt taken from the PEGA 10-Q filed Apr 25, 2007.

Provision for income taxes

The provision for income taxes in the first quarter of 2006 was a benefit of $(0.1) million, compared to a tax provision of $0.3 million in the first quarter of 2005. The $(0.1) million provision benefit represents a 5% effective tax rate on the loss before provision for income taxes. The effective income tax rate expected during 2006 is less than the statutory tax rate because of benefits expected from research and experimentation tax credits and deductions related to export activity.

This excerpt taken from the PEGA 10-Q filed Aug 7, 2006.

Provision for income taxes

The provision for income taxes in the first half of 2006 was a benefit of $(0.4) million, compared to a tax provision of $0.2 million in the first half of 2005. The income tax provision during 2006 is expected to benefit from research and experimentation tax credits, deductions related to export activity and claims filed for refunds of foreign income taxes.

This excerpt taken from the PEGA 10-Q filed May 3, 2006.

Provision for income taxes

The provision for income taxes in the first quarter of 2006 was a benefit of $(0.2) million, compared to a tax provision of $0.1 million in the first quarter of 2005. The $(0.2) million provision benefit represents a 14% effective tax rate on the loss before provision for income taxes. The effective income tax rate expected during 2006 is less than the statutory tax rate because of benefits expected from research and experimentation tax credits and deductions related to export activity.

This excerpt taken from the PEGA 10-K filed Mar 7, 2006.

Provision for income taxes

 

The provision for income taxes in 2004 was $3.6 million compared to $4.2 million in 2003. The effective tax rate was 32% in 2004 compared to 19% for 2003. This increase in effective rate was due to lower benefits from the recognition of loss and credit carry forwards in 2004 compared to 2003, partially offset by improved estimates in 2004 of tax benefits related to export sales. Provisions have been made for uncertainties, with reserves totaling approximately $2 million as of December 31, 2004.

 

This excerpt taken from the PEGA 10-Q filed Nov 8, 2005.

Provision for income taxes

 

Our effective tax rate for the third quarter and first three quarters of fiscal 2005 was 56% and 53%, respectively. The effective tax rate was 35% for the third quarter and first three quarters of fiscal 2004. The increased rates in 2005 resulted specifically from certain adjustments to deferred tax liabilities related to term license installments. We anticipate that the effective tax rate will be closer to statutory rates for the remainder of 2005.

 

This excerpt taken from the PEGA 10-Q filed Jul 29, 2005.

Provision for income taxes

 

The provision for income taxes decreased to $0.1 million, a 26% effective tax rate, in the second quarter of 2005 from $1.2 million, a 35% effective tax rate, in the second quarter of 2004. In the first quarter of 2005, we recorded a minimum income tax provision for our foreign subsidiaries, which resulted in a lower provision in the second quarter of 2005. The provision for income taxes for the first half of 2005 was $0.2 million, a 34% effective rate, compared to $2.1 million, a 35% effective rate, for the first half of 2004. The decreases in provision for income taxes were due to a decrease in income before provision for income taxes in the first half of 2005.

 

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This excerpt taken from the PEGA 10-Q filed Apr 28, 2005.

Provision for income taxes

 

The provision for income taxes in the first quarter of 2005 was $0.1 million compared to $0.9 million in the first quarter of 2004. The $0.1 million provision represents the expected minimum foreign subsidiary income tax obligation for the first quarter of 2005, as there was no income tax liability incurred from U.S. operations.

 

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This excerpt taken from the PEGA 10-K filed Feb 25, 2005.

Provision for income taxes

 

Our effective income tax rate increased from 11% in 2002 to 19% in 2003. The provision for income taxes in 2003 was $4.2 million, compared to $1.9 million in 2002. The provision increased due to higher levels of income before income taxes and lower benefits from the recognition of loss and credit carry forwards in 2003.

 

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