Income Taxes

The Company provides for income taxes at the end of each interim period based on the estimated effective tax rate for the full year, adjusted for any discrete events which are recorded in the period they occur. The Company’s effective tax rate in fiscal 2019 differs from the U.S. federal statutory rate of 21% principally due to the impact of state taxes and the accrual of interest on uncertain tax positions, offset by tax benefits arising from stock compensation deductions. Cumulative adjustments to the tax provision are recorded in the interim period in which a change in the estimated annual effective tax rate is determined. The Company’s income tax expense is presented below:



	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2019		2018		2019		2018
Income tax expense	$	1,698	$	2,219	$	4,513	$	6,015

The Company regularly assesses its ability to realize its deferred tax assets. Assessing the realizability of deferred tax assets requires significant management judgment. In determining whether its deferred tax assets are more-likely-than-not realizable, the Company evaluates all available positive and negative evidence, and weighs the objective evidence and expected impact. The Company continues to record a valuation allowance against certain foreign deferred tax assets.

In connection with the Company’s acquisition of the medical imaging business from Bristol Myers Squibb (“BMS”) in 2008, the Company entered into a tax indemnification agreement with BMS. A long-term receivable is recorded to account for the expected value to the Company of future indemnification payments, net of actual tax benefits received. The tax indemnification receivable is recognized within other long-term assets. Changes in the tax indemnification asset are recognized within other income in the condensed consolidated statement of operations. In accordance with the Company’s accounting policy, the change in the tax liability, penalties and interest associated with these obligations (net of any offsetting federal or state benefit) is recognized within income tax expense. Accordingly, as these reserves change, adjustments are included in income tax expense while the offsetting adjustment is included in other income. Assuming that the receivable from BMS continues to be considered recoverable by the Company, there will be no effect on net income and no net cash outflows related to these liabilities.