| INCOME TAXES |
OTE 12 - INCOME TAXES
CCA and its subsidiaries file a consolidated federal income tax return.
The Company previously adopted the provisions of ASC Subtopic 740-10-25, “Uncertain Tax Positions”. Management believes that there were no unrecognized tax benefits, or tax positions that would result in uncertainty regarding the deductions taken, as of February 28, 2013 and February 29, 2012. ASC Subtopic 740-10-25 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities.
As of February 28, 2013, the Company had unrealized gain on its investments of $134,162. This amount was reduced by a deferred tax expense of $49,511, of which a $20,616 expense was recorded in prior fiscal years. The deferred tax expense for the three months ended February 28, 2013 has been recorded as part of the deferred tax asset, and offset against the unrealized gains on marketable securities reported on the consolidated balance sheet. The charitable contributions portion of the deferred tax asset has $146,736 that has been reclassified as a long-term asset, based on an estimate of the amount that will be realizable in periods greater than twelve months from February 28, 2013.
At February 28, 2013 and November 30, 2012, respectively, the Company had temporary differences arising from the following:
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|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
February 28, 2013 |
|
|
|
|
|
|
Classified As |
Type |
|
Amount |
|
Deferred Tax |
|
Short-Term
Asset |
|
Long-Term
(Liability) |
Depreciation |
|
$ |
(523,404 |
) |
|
$ |
(193,136 |
) |
|
$ |
— |
|
|
$ |
(193,136 |
) |
Unrealized (gain) on investments |
|
(134,162 |
) |
|
(49,511 |
) |
|
(49,511 |
) |
|
— |
|
Reserve for bad debts |
|
23,966 |
|
|
8,844 |
|
|
8,844 |
|
|
— |
|
Reserve for returns |
|
1,663,018 |
|
|
613,715 |
|
|
613,715 |
|
|
— |
|
Reserve for obsolete inventory |
|
598,526 |
|
|
220,878 |
|
|
220,878 |
|
|
— |
|
Vacation accrual |
|
304,513 |
|
|
112,376 |
|
|
112,376 |
|
|
— |
|
Charitable contributions |
|
741,356 |
|
|
273,588 |
|
|
126,852 |
|
|
146,736 |
|
Section 263A costs |
|
291,440 |
|
|
107,552 |
|
|
107,552 |
|
|
— |
|
Loss carry forward |
|
1,853,514 |
|
|
684,015 |
|
|
684,015 |
|
|
— |
|
Net deferred tax asset (liability) |
|
|
|
$ |
1,778,321 |
|
|
$ |
1,824,721 |
|
|
$ |
(46,400 |
) |
|
|
|
|
|
November 30, 2012 |
|
|
|
|
|
|
Classified As |
Type |
|
Amount |
|
Deferred Tax |
|
Short-Term
Asset |
|
Long-Term
(Liability) |
Depreciation |
|
$ |
(1,028,273 |
) |
|
$ |
(379,470 |
) |
|
$ |
— |
|
|
$ |
(379,470 |
) |
Unrealized (gain) on investments |
|
(55,863 |
) |
|
(20,616 |
) |
|
(20,616 |
) |
|
— |
|
Reserve for bad debts |
|
26,340 |
|
|
9,721 |
|
|
9,721 |
|
|
— |
|
Reserve for returns |
|
1,772,405 |
|
|
654,083 |
|
|
654,083 |
|
|
— |
|
Reserve for obsolete inventory |
|
671,609 |
|
|
247,849 |
|
|
247,849 |
|
|
— |
|
Vacation accrual |
|
323,470 |
|
|
119,372 |
|
|
119,372 |
|
|
— |
|
Charitable contributions |
|
722,555 |
|
|
266,649 |
|
|
126,852 |
|
|
139,797 |
|
Section 263A costs |
|
285,129 |
|
|
105,223 |
|
|
105,223 |
|
|
— |
|
Net deferred tax asset (liability) |
|
|
|
$ |
1,002,811 |
|
|
$ |
1,242,484 |
|
|
$ |
(239,673 |
) |
Income tax expense is made up of the following components:
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
February 28, 2013 |
|
February 29, 2012 |
Current tax - Federal |
|
$ |
— |
|
|
$ |
11,488 |
|
Current tax - State & Local |
|
552 |
|
|
3,469 |
|
Deferred tax |
|
(658,282 |
) |
|
51,955 |
|
Total tax |
|
$ |
(657,730 |
) |
|
$ |
66,912 |
|
|
|
|
|
|
Prepaid and refundable income taxes are made up of the following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid and refundable income taxes |
|
Federal |
|
State &
Local |
|
Total |
February 28, 2013 |
|
$ |
231,168 |
|
|
$ |
396,145 |
|
|
$ |
627,313 |
|
November 30, 2012 |
|
$ |
377,292 |
|
|
$ |
367,885 |
|
|
$ |
745,177 |
|
Income tax payable is made up of the following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Taxes Payable |
|
Federal |
|
State &
Local |
|
Total |
February 28, 2013 |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
November 30, 2012 |
|
$ |
— |
|
|
$ |
9,440 |
|
|
$ |
9,440 |
|
A reconciliation of the (benefit) provision for income taxes computed at the statutory rate to the effective rate for the three months ended February 28, 2013 and February 29, 2012 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Three Months Ended |
|
|
February 28, 2013 |
|
February 29, 2012 |
|
|
Amount |
|
Percent of Pretax Income |
|
Amount |
|
Percent of Pretax Income |
(Benefit) provision for income taxes at federal statutory rate |
|
$ |
(568,861 |
) |
|
34.00 |
% |
|
$ |
52,512 |
|
|
34.00 |
% |
Increases in taxes resulting from: |
|
|
|
|
|
|
|
|
State income taxes, net of federal income tax benefit |
|
(48,520 |
) |
|
2.90 |
% |
|
9,483 |
|
|
6.14 |
% |
Non-deductible expenses and other adjustments |
|
(40,349 |
) |
|
2.41 |
% |
|
4,917 |
|
|
3.18 |
% |
(Benefit) provision for income taxes at effective rate |
|
$ |
(657,730 |
) |
|
39.31 |
% |
|
$ |
66,912 |
|
|
43.32 |
% |
|
|
|
|
|
|
|
|
|
INCOME TAXES
CCA and its subsidiaries file a consolidated federal income tax return.
The Company previously adopted the provisions of ASC Subtopic 740-10-25, “Uncertain Tax Positions”. Management believes that there were no unrecognized tax benefits, or tax positions that would result in uncertainty regarding the deductions taken, as of February 28, 2013 and February 29, 2012. ASC Subtopic 740-10-25 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities.
As of February 28, 2013, the Company had unrealized gain on its investments of $134,162. This amount was reduced by a deferred tax expense of $49,511, of which a $20,616 expense was recorded in prior fiscal years. The deferred tax expense for the three months ended February 28, 2013 has been recorded as part of the deferred tax asset, and offset against the unrealized gains on marketable securities reported on the consolidated balance sheet. The charitable contributions portion of the deferred tax asset has $146,736 that has been reclassified as a long-term asset, based on an estimate of the amount that will be realizable in periods greater than twelve months from February 28, 2013.
At February 28, 2013 and November 30, 2012, respectively, the Company had temporary differences arising from the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 28, 2013 |
|
|
|
|
|
|
Classified As |
Type |
|
Amount |
|
Deferred Tax |
|
Short-Term
Asset |
|
Long-Term
(Liability) |
Depreciation |
|
$ |
(523,404 |
) |
|
$ |
(193,136 |
) |
|
$ |
— |
|
|
$ |
(193,136 |
) |
Unrealized (gain) on investments |
|
(134,162 |
) |
|
(49,511 |
) |
|
(49,511 |
) |
|
— |
|
Reserve for bad debts |
|
23,966 |
|
|
8,844 |
|
|
8,844 |
|
|
— |
|
Reserve for returns |
|
1,663,018 |
|
|
613,715 |
|
|
613,715 |
|
|
— |
|
Reserve for obsolete inventory |
|
598,526 |
|
|
220,878 |
|
|
220,878 |
|
|
— |
|
Vacation accrual |
|
304,513 |
|
|
112,376 |
|
|
112,376 |
|
|
— |
|
Charitable contributions |
|
741,356 |
|
|
273,588 |
|
|
126,852 |
|
|
146,736 |
|
Section 263A costs |
|
291,440 |
|
|
107,552 |
|
|
107,552 |
|
|
— |
|
Loss carry forward |
|
1,853,514 |
|
|
684,015 |
|
|
684,015 |
|
|
— |
|
Net deferred tax asset (liability) |
|
|
|
$ |
1,778,321 |
|
|
$ |
1,824,721 |
|
|
$ |
(46,400 |
) |
|
|
|
|
|
November 30, 2012 |
|
|
|
|
|
|
Classified As |
Type |
|
Amount |
|
Deferred Tax |
|
Short-Term
Asset |
|
Long-Term
(Liability) |
Depreciation |
|
$ |
(1,028,273 |
) |
|
$ |
(379,470 |
) |
|
$ |
— |
|
|
$ |
(379,470 |
) |
Unrealized (gain) on investments |
|
(55,863 |
) |
|
(20,616 |
) |
|
(20,616 |
) |
|
— |
|
Reserve for bad debts |
|
26,340 |
|
|
9,721 |
|
|
9,721 |
|
|
— |
|
Reserve for returns |
|
1,772,405 |
|
|
654,083 |
|
|
654,083 |
|
|
— |
|
Reserve for obsolete inventory |
|
671,609 |
|
|
247,849 |
|
|
247,849 |
|
|
— |
|
Vacation accrual |
|
323,470 |
|
|
119,372 |
|
|
119,372 |
|
|
— |
|
Charitable contributions |
|
722,555 |
|
|
266,649 |
|
|
126,852 |
|
|
139,797 |
|
Section 263A costs |
|
285,129 |
|
|
105,223 |
|
|
105,223 |
|
|
— |
|
Net deferred tax asset (liability) |
|
|
|
$ |
1,002,811 |
|
|
$ |
1,242,484 |
|
|
$ |
(239,673 |
) |
Income tax expense is made up of the following components:
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
February 28, 2013 |
|
February 29, 2012 |
Current tax - Federal |
|
$ |
— |
|
|
$ |
11,488 |
|
Current tax - State & Local |
|
552 |
|
|
3,469 |
|
Deferred tax |
|
(658,282 |
) |
|
51,955 |
|
Total tax |
|
$ |
(657,730 |
) |
|
$ |
66,912 |
|
|
|
|
|
|
Prepaid and refundable income taxes are made up of the following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid and refundable income taxes |
|
Federal |
|
State &
Local |
|
Total |
February 28, 2013 |
|
$ |
231,168 |
|
|
$ |
396,145 |
|
|
$ |
627,313 |
|
November 30, 2012 |
|
$ |
377,292 |
|
|
$ |
367,885 |
|
|
$ |
745,177 |
|
Income tax payable is made up of the following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Taxes Payable |
|
Federal |
|
State &
Local |
|
Total |
February 28, 2013 |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
November 30, 2012 |
|
$ |
— |
|
|
$ |
9,440 |
|
|
$ |
9,440 |
|
A reconciliation of the (benefit) provision for income taxes computed at the statutory rate to the effective rate for the three months ended February 28, 2013 and February 29, 2012 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Three Months Ended |
|
|
February 28, 2013 |
|
February 29, 2012 |
|
|
Amount |
|
Percent of Pretax Income |
|
Amount |
|
Percent of Pretax Income |
(Benefit) provision for income taxes at federal statutory rate |
|
$ |
(568,861 |
) |
|
34.00 |
% |
|
$ |
52,512 |
|
|
34.00 |
% |
Increases in taxes resulting from: |
|
|
|
|
|
|
|
|
State income taxes, net of federal income tax benefit |
|
(48,520 |
) |
|
2.90 |
% |
|
9,483 |
|
|
6.14 |
% |
Non-deductible expenses and other adjustments |
|
(40,349 |
) |
|
2.41 |
% |
|
4,917 |
|
|
3.18 |
% |
(Benefit) provision for income taxes at effective rate |
|
$ |
(657,730 |
) |
|
39.31 |
% |
|
$ |
66,912 |
|
|
43.32 |
% |
|
|
|
|
|
|
|
|
|
|