Note 12 - Income Taxes

9 Months Ended

Jun. 30, 2012

Income Tax Disclosure [Text Block]

12.           INCOME TAXES

Our provision for income taxes is based on an estimated effective annual income tax rate, as well as the impact of discrete items, if any, occurring during the period. The provision differs from income taxes currently payable because certain items of income and expense are recognized in different periods for financial statement purposes than for tax return purposes. We reduce deferred tax assets by a valuation allowance when it is more likely than not that some or all of the deferred tax assets will not be realized.

Our effective tax rate for the nine months ended June 30, 2012 increased to 36.2% from 29.4% for the same prior year period. The prior year effective tax rate was positively impacted by the reduction in UTB interest and penalties, an increase in the manufacturing deduction, and the retroactive reinstatement of the R&D tax credit. The current year effective tax rate was negatively impacted by losses in foreign jurisdictions for which there are no associated tax benefits and the expiration of the R&D tax credit partially offset by a reduction in transfer pricing reserves.

At June 30, 2012, our gross UTBs totaled $111.0 million, excluding related accrued interest and penalties of $21.8 million. At June 30, 2012, $76.5 million of our UTBs, including related accrued interest and penalties, would affect our effective tax rate if recognized. During the nine months ended June 30, 2012, our UTBs decreased $5.4 million and related interest and penalties increased $1.7 million.

We are currently under audit by the IRS for amended returns filed for 1999, 2006 and 2007 as well as both the originally filed and amended returns for 2008 and 2009. We are also subject to examination in various state and foreign jurisdictions. We believe we have recorded all appropriate provisions for outstanding issues for all jurisdictions and open years. However, we can give no assurance that taxing authorities will not propose adjustments that increase our tax liabilities.