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Income Taxes
6 Months Ended
Sep. 30, 2011
Income Taxes [Abstract] 
Income Taxes
Note 20 — Income Taxes
For the three months ended September 30, 2011, the Company recorded income tax benefit from continuing operations of $879,000, compared to income tax expense from continuing operations of $1.1 million for the three months ended September 30, 2010. The effective income tax rate applied to continuing operations for the three months ended September 30, 2011 was 41.3%, compared to 42.4% for the three months ended September 30, 2010. For the six months ended September 30, 2011, the Company recorded income tax benefit from continuing operations of $1.2 million, compared to income tax expense from continuing operations of $1.4 million for the six months ended September 30, 2010. The effective income tax rate applied to continuing operations for the six months ended September 30, 2011 was 39.3%, compared to 45.2% for the six months ended September 30, 2010.
For the three months ended September 30, 2010, the Company recorded income tax expense from discontinued operations of $957,000 at an effective tax rate of 36.3%. For the six months ended September 30, 2010, the Company recorded income tax expense from discontinued operations of $1.5 million at an effective tax rate of 36.6%.
Deferred tax assets are evaluated by considering historical levels of income, estimates of future taxable income streams and the impact of tax planning strategies. A valuation allowance is recorded to reduce deferred tax assets when it is determined that it is more likely than not, based on the weight of available evidence, the Company would not be able to realize all or part of its deferred tax assets. An assessment is required of all available evidence, both positive and negative, to determine the amount of any required valuation allowance.
At September 30, 2011 and March 31, 2011, management evaluated the need for a valuation allowance. Based on the history of pretax earnings, future taxable income projections and future reversals of existing taxable temporary differences, it was concluded that the Company would more likely than not be able to realize the entire $32.0 million of deferred tax assets recorded at September 30, 2011 and $30.8 million at March 31, 2011. Therefore no valuation allowance was recorded at either September 30, 2011 or March 31, 2011. The deferred tax assets at September 30, 2011 are composed of temporary differences primarily related to the book write-off of certain intangibles and net operating loss carryforwards which will begin to expire in fiscal 2029. The Company also had foreign tax credit carryforwards at September 30, 2011 which will begin to expire in 2016.
The Company recognizes interest accrued related to unrecognized income tax benefits (“UTB’s”) in the provision for income taxes. At March 31, 2011, interest accrued was approximately $168,000, which was net of federal and state tax benefits and total UTB’s net of deferred federal and state tax benefits that would impact the effective tax rate if recognized were $612,000. During the six months ended September 30, 2011 an additional $111,000 of UTB’s were accrued, which was net of $23,000 of deferred federal and state income tax benefits. At September 30, 2011, interest accrued was $198,000 and total UTB’s, net of deferred federal and state income tax benefits that would impact the effective tax rate if recognized, were $723,000.
The Company’s federal income tax returns for tax years ending in 2007 through 2010 remain subject to examination by tax authorities. The Company files in numerous state jurisdictions with varying statutes of limitations. The Company does not anticipate that the total unrecognized tax benefits will significantly change prior to March 31, 2012.