SYMM » Topics » Note 3. Income Taxes

These excerpts taken from the SYMM 10-Q filed May 8, 2009.

Note 2. Income Taxes

We reported in our Annual Report on Form 10-K for the year ended June 29, 2008 that our subsidiary Symmetricom Puerto Rico, Ltd. had applied to the Internal Revenue Service (“IRS”) for a ruling request related to its tax-free restructuring in July 2006. Symmetricom Puerto Rico, Ltd. received a favorable ruling from the IRS dated September 19, 2008 confirming the tax-free treatment.

Income taxes:

 

     Three Months Ended     $ Change    % Change     Nine Months Ended     $ Change    % Change  
     March 29,
2009
    March 30,
2008
         March 29,
2009
    March 30,
2008
      

Income tax expense (dollars in thousands)

   $ 330     $ (773 )   $ 1,103    (142.7 )%   $ 2,817     $ (623 )   $ 3,440    (552.2 )%

Percentage of Revenue

     0.6 %     (1.5 )%          1.8 %     (0.4 )%     

Third Quarter of Fiscal 2009: Our income tax provision was $0.3 million in the third quarter of fiscal 2009, compared to a $0.8 million benefit in the corresponding quarter of fiscal 2008. Our effective tax rate in the third quarter of fiscal 2009 was (0.7) %, compared to an effective tax rate of 45.7% in the corresponding period of fiscal 2008. Our effective tax rate and provision was impacted by the impairment of goodwill recorded in the third quarter of fiscal 2009. A substantial portion of this charge provided no current or future tax benefits.

First Nine Months of Fiscal 2009: Our income tax provision was $2.8 million for the first nine months of fiscal 2009, compared to an income tax benefit of $0.6 million in the corresponding period of fiscal 2008. Our effective tax rate for the first nine months of fiscal 2009 was (7.1) %, compared to an effective tax rate of 37.7% in the corresponding period of fiscal 2008. The impairment of goodwill recorded in the third quarter of fiscal 2009 substantially affected our year to date tax rate and provision. The tax rate and provision are not comparable to the prior year period owing to the impact of this goodwill impairment.

This excerpt taken from the SYMM 10-Q filed Feb 6, 2009.

Note 2. Income Taxes

 

Symmetricom reported in its Form 10-K for the year ended June 29, 2008, that its subsidiary Symmetricom Puerto Rico, Ltd. had applied to the Internal Revenue Service, or IRS, for a ruling request related to its tax-free restructuring in July 2006.  Symmetricom Puerto Rico Ltd received a favorable ruling from the IRS dated September 19, 2008 confirming the tax-free treatment.

 

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

Income taxes:

 

 

 

Three Months Ended

 

 

 

 

 

 

 

September 28, 2008

 

September 30, 2007

 

$ Change

 

% Change

 

Income tax expense (benefit) (dollars in thousands)

 

$

1,660

 

$

(129

)

$

1,789

 

(1,386.8

)%

Percentage of Revenue

 

3.0

%

(0.3

)%

 

 

 

 

 

Our income tax provision was $1.7 million in the first quarter of fiscal 2009, compared to an income tax benefit of $0.1 million in the corresponding quarter of fiscal 2008.  Our effective tax rate in the first quarter of fiscal 2009 was 39.0%, compared to an effective tax rate of 29.3% in the corresponding period of fiscal 2008. The estimated full year rate is used as a basis for determining the quarterly effective tax rate, with certain required adjustments. The fiscal 2009 full year rate is estimated to be higher than the fiscal 2008 full year tax rate, primarily since the prior year included the benefit of both federal and state research tax credits which at this time are not included in the fiscal 2009 tax rate estimate.

 

This excerpt taken from the SYMM 10-Q filed Jun 17, 2008.

Note 3. Income Taxes

 

On July 2, 2007, we adopted the provisions of the Financial Accounting Standards Board (“FASB”) Interpretation No. 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109 , which provides a financial statement recognition threshold and measurement attribute for a tax position taken or expected to be taken in a tax return. Under FIN 48, we may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon

 

7



 

ultimate settlement. FIN 48 also provides guidance on de-recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, and income tax disclosures.

 

The adoption of FIN 48 had the following impact on our financial statements:

 

•       increased goodwill by $0.1 million;

 

         decreased long-term assets (non-current deferred tax assets) by $4.1 million;

 

         increased long-term obligations by $0.7 million;

 

         increased long-term deferred tax liabilities by $0.4 million;

 

         decreased retained earnings by $0.4 million; and

 

         decreased our income taxes payable by $4.7 million.

 

As of July 2, 2007, we had $14.6 million of unrecognized tax benefits of which $8.4 million, if recognized, would impact our effective tax rate. We also had $4.1 million of unrecognized tax benefits that, if recognized, would result in a decrease to goodwill recorded in purchase business combinations. The impact on net income reflects the liabilities for unrecognized tax benefits net of certain deferred tax assets and the federal tax benefit of state income tax items.

 

Our policy is to include interest and penalties, when material, related to unrecognized tax benefits in income tax expense. As of July 2, 2007 we had no accrued interest related to uncertain tax positions on our balance sheet.

 

We file income tax returns in the United States (“U.S.”) and a number of U.S. state and foreign jurisdictions.  The tax years ended June 2002 forward remain open to examination by the major taxing jurisdictions in which we operate which include the U.S., California, Puerto Rico, and Germany.  We are not currently under examination by any income tax authority.

 

As of September 30, 2007, we had $14.6 million of liabilities from unrecognized tax benefits that are included in deferred and other tax liabilities, net. The total liabilities for unrecognized tax benefits relate primarily to the allocations of revenue and costs among our global operations and credits that may be available to reduce taxes. There were no material changes related to activities during the first quarter of fiscal 2008. At September 30, 2007, we had no accrued interest related to uncertain tax positions on our balance sheet.

 

This excerpt taken from the SYMM 10-Q filed Jun 17, 2008.

Note 3. Income Taxes

 

On July 2, 2007, we adopted the provisions of the Financial Accounting Standards Board (“FASB”) Interpretation No. 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109, which provides a financial statement recognition threshold and measurement attribute for a tax position taken or expected to be taken in a tax return. Under FIN 48, we may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. FIN 48 also provides guidance on de-recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, and income tax disclosures.

 

The adoption of FIN 48 had the following impact on our financial statements:

 

·      increased goodwill by $0.1 million;

 

·      decreased long-term assets (non-current deferred tax assets) by $4.1 million;

 

·      increased long-term obligations by $0.7 million;

 

·      increased long-term deferred tax liabilities by $0.4 million;

 

·      decreased retained earnings by $0.4 million; and

 

·      decreased our income taxes payable by $4.7 million.

 

As of July 2, 2007, we had $14.6 million of unrecognized tax benefits of which $8.4 million, if recognized, would affect our effective tax rate. We also had $4.1 million of unrecognized tax benefits that, if recognized, would result in a decrease to goodwill recorded in purchase business combinations. The impact on net income reflects the liabilities for unrecognized tax benefits net of certain deferred tax assets and the federal tax benefit of state income tax items.

 

Our policy is to include interest and penalties, when material, related to unrecognized tax benefits in income tax expense. As of July 2, 2007 we had no accrued interest related to uncertain tax positions on our condensed consolidated balance sheet.

 

We file income tax returns in the United States and a number of U.S. state and foreign jurisdictions.  The tax years ended June 2004 forward remain open to examination by the major taxing jurisdictions in which we operate which include the U.S., California, Puerto Rico, and Germany.  We are not currently under examination by any income tax authority.

 

As of March 30, 2008, we had $14.6 million of liabilities from unrecognized tax benefits that are included in deferred and other tax liabilities, net. The total liabilities for unrecognized tax benefits relate primarily to the allocations of revenue and costs among our global operations and credits that may be available to reduce taxes. There were no material changes related to activities during the first nine months of fiscal 2008. At March 30, 2008, we had no accrued interest related to uncertain tax positions on our balance sheet.

 

7



 

This excerpt taken from the SYMM 10-Q filed Jun 17, 2008.

Note 3. Income Taxes

 

On July 2, 2007, we adopted the provisions of the Financial Accounting Standards Board (“FASB”) Interpretation No. 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109, which provides a financial statement recognition threshold and measurement attribute for a tax position taken or expected to be taken in a tax return. Under FIN 48, we may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. FIN 48 also provides guidance on de-recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, and income tax disclosures.

 

The adoption of FIN 48 had the following impact on our financial statements:

 

·                  increased goodwill by $0.1 million;

 

·                  decreased long-term assets (non-current deferred tax assets) by $4.1 million;

 

·                  increased long-term obligations by $0.7 million;

 

·      increased long-term deferred tax liabilities by $0.4 million;

 

·                  decreased retained earnings by $0.4 million; and

 

·                  decreased our income taxes payable by $4.7 million.

 

As of July 2, 2007, we had $14.6 million of unrecognized tax benefits of which $8.4 million, if recognized, would affect our effective tax rate. We also had $4.1 million of unrecognized tax benefits that, if recognized, would result in a decrease to goodwill recorded in purchase business combinations. The impact on net income reflects the liabilities for unrecognized tax benefits net of certain deferred tax assets and the federal tax benefit of state income tax items.

 

Our policy is to include interest and penalties, when material, related to unrecognized tax benefits in income tax expense. As of July 2, 2007 we had no accrued interest related to uncertain tax positions on our condensed consolidated balance sheet.

 

We file income tax returns in the United States and a number of U.S. state and foreign jurisdictions.  The tax years ended June 2002 forward remain open to examination by the major taxing jurisdictions in which we operate which include the U.S., California, Puerto Rico, and Germany.  We are not currently under examination by any income tax authority.

 

As of December 30, 2007, we had $14.6 million of liabilities from unrecognized tax benefits that are included in deferred and other tax liabilities, net. The total liabilities for unrecognized tax benefits relate primarily to the allocations of revenue and costs among our global operations and credits that may be available to reduce taxes. There were no material changes related to activities during the first six months of fiscal 2008. At December 30, 2007, we had no accrued interest related to uncertain tax positions on our balance sheet.

 

7



 

This excerpt taken from the SYMM 10-Q filed Nov 9, 2007.

Note 3. Income Taxes

On July 2, 2007, we adopted the provisions of the Financial Accounting Standards Board (“FASB”) Interpretation No. 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109, which provides a financial statement recognition threshold and measurement attribute for a tax position taken or expected to be taken in a tax return. Under FIN 48, we may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. FIN 48 also provides guidance on de-recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, and income tax disclosures.

The adoption of FIN 48 had the following impact on our financial statements:

                  increased goodwill by $0.1 million;

                  decreased long-term assets (non-current deferred tax assets) by $4.1 million;

                  increased long-term liabilities by $1.1 million;

                  decreased retained earnings by $0.4 million; and

                  decreased our income taxes payable by $4.7 million.

As of July 2, 2007, we had $14.6 million of unrecognized tax benefits of which $8.4 million, if recognized, would impact our effective tax rate. We also had $4.1 million of unrecognized tax benefits that, if recognized, would result in a decrease to goodwill recorded in purchase business combinations. The impact on net income reflects the liabilities for unrecognized tax benefits net of certain deferred tax assets and the federal tax benefit of state income tax items.

Our policy is to include interest and penalties, when material, related to unrecognized tax benefits in income tax expense. As of July 2, 2007 we had no accrued interest related to uncertain tax positions on our balance sheet.

We file income tax returns in the United States (“U.S.”) and a number of U.S. state and foreign jurisdictions.  The tax years ended June 2002 forward remain open to examination by the major taxing jurisdictions in which we operate which include the U.S., California, Puerto Rico, and Germany.  We are not currently under examination by any income tax authority.

As of September 30, 2007, we had $14.6 million of liabilities from unrecognized tax benefits that are included in deferred and other tax liabilities, net. The total liabilities for unrecognized tax benefits relate primarily to the allocations of revenue and costs among our global operations and credits that may be available to reduce taxes. There were no material changes related to activities during the first quarter of fiscal 2008. At September 30, 2007, we had no accrued interest related to uncertain tax positions on our balance sheet.

This excerpt taken from the SYMM 10-Q filed Aug 31, 2007.

Note 16. Income Taxes

The income tax provision for the quarter ended March 31, 2007 was $4.5 million or 140% of pre-tax income of $3.2 million.  Excluding the $3.4 million tax provision related to the QoSmetrics liquidations discussed in Note 2 – Acquisitions, the tax provision was $1.1 million, or 34% of pre-tax income.

This excerpt taken from the SYMM 10-Q filed Nov 8, 2006.

Income Taxes:

 

Three Months Ended

 

 

 

 

 

September 30,

 

Percentage

 

 

 

2006

 

2005

 

Change

 

 

 

 

 

 

 

 

 

Income tax provision (in thousands)

 

$

1,958

 

$

435

 

350.1

%

Percentage of Revenue

 

3.8

%

1.0

%

 

 

 

Our income tax provision from continuing operations was $2.0 million in the first quarter of fiscal 2007, compared to a provision of $0.4 million in the corresponding quarter of fiscal 2006. Our effective tax rate in the first quarter of fiscal 2007 was 34.0%, compared to an effective tax rate of 24.1% in the corresponding period of fiscal 2006. The primary reason for this increase in our tax rate is the expiration of Section 936 of the U.S. Internal Revenue Code, which exempted qualified Puerto Rico earnings from regular federal income tax.  Section 936 expired at the end of fiscal 2006.

24




This excerpt taken from the SYMM 10-Q filed Nov 8, 2005.
Income Taxes:

 

 

 

Three Months Ended

 

 

 

 

 

September 30,

 

Percentage

 

 

 

2005

 

2004

 

Change

 

Income tax provision (in thousands).

 

$

435

 

$

1,369

 

(68.2

)%

Percentage of Revenue

 

1.0

%

2.6

%

 

 

 

25



 

Our income tax provision from continuing operations was $0.4 million in the first quarter of fiscal 2006, compared to a tax provision of $1.4 million in the corresponding quarter of fiscal 2005. Our effective tax rate in the first quarter of fiscal 2006 was 24.1%, compared to an effective tax rate of 23.4% in the corresponding quarter of fiscal 2005. Our effective tax rate is affected by the percentage of qualified Puerto Rico earnings compared to total earnings, as most of our Puerto Rico earnings are taxed under Section 936 of the U.S. Internal Revenue Code, which exempts qualified Puerto Rico earnings from federal income taxes. This exemption is subject to wage-based and other limitations and expires at the end of fiscal 2006.

This excerpt taken from the SYMM 10-Q filed May 9, 2005.

Income Taxes:

 

 

 

Three Months Ended

 

 

 

Nine Months Ended

 

 

 

 

 

March 31,

 

Percentage

 

March 31,

 

Percentage

 

 

 

2005

 

2004

 

Change

 

2005

 

2004

 

Change

 

Income Tax Provision (Benefit) (in thousands)

 

$

883

 

$

592

 

49.2

%

$

4,134

 

$

(2,244

)

(284.2

)%

 

Our income tax provision from continuing operations was $0.9 million and $4.1 million in the third quarter and the first nine months of fiscal 2005, respectively, compared to a tax provision of $0.6 million and tax benefit of $2.2 million in the corresponding periods of fiscal 2004. Our effective tax rates (our income tax provision as a percentage of our pre-tax income) for the three-month and nine-month period ended March 31, 2005 were 23.9% and 25.8%, respectively, compared to 25.3% and 33.9% for the same periods of last fiscal year, respectively.  Similar to prior years, our fiscal 2005 effective tax rate is also affected by the percentage of qualified Puerto Rican earnings compared to total earnings, because most of our Puerto Rican earnings are taxed under Section 936 of the U.S. Internal Revenue Code, which exempts qualified Puerto Rican earnings from regular federal income taxes. The Section 936 exemption is subject to various limitations and is scheduled to expire at the end of our fiscal year 2006.

 

23



 

As a result of the factors discussed above, we had net earnings of $2.8 million, or $0.06 per share, in the third quarter of fiscal 2005 compared to net earnings of $1.7 million, or $0.04 per share, during the corresponding quarter of fiscal 2004.

 

For the first nine months of fiscal 2005, we had net earnings of $12.0 million, or $0.27 per share, compared to a net loss of $4.4 million, or $0.10 per share, for the corresponding period of fiscal 2004.

 

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