Quarterly report pursuant to Section 13 or 15(d)

Income Taxes

v2.4.0.6
Income Taxes
 6 Months Ended
May 31, 2012
Income Taxes [Abstract]  
INCOME TAXES

NOTE 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 May 31, 2012 and May 31, 2011. 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. There were penalties and related interest of $6,661 for the fiscal year to date ended May 31, 2012, and no penalties for the fiscal year to date ended May 31, 2011.

As of May 31, 2012, the Company had unrealized gain on its investments of $52,030. This amount was reduced by a deferred tax (expense) of $(20,760), of which a $77,594 benefit was recorded in prior fiscal years and an expense of $(98,354) was recorded in the six months ended May 31, 2012. The deferred tax expense 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 $122,580 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 May 31, 2012.

At May 31, 2012 and November 30, 2011, respectively, the Company had temporary differences arising from the following:

 

                                 
    May 31, 2012  
                Classified As  
          Deferred     Short-Term     Long-Term  

Type

   Amount     Tax     Asset     (Liability)  

Depreciation

   $ (450,752 )    $ (179,850 )    $ —       $ (179,850 ) 

Unrealized loss on investments

     52,030       (20,760 )      (20,760 )      —    

Reserve for bad debts

     19,602       7,821       7,821       —    

Reserve for returns

     2,369,449       945,410       945,410       —    

Reserve for obsolete inventory

     522,560       208,502       208,502       —    

Vacation accrual

     399,491       159,397       159,397       —    

Charitable contributions

     533,974       213,055       90,475     $ 122,580  

Section 263A costs

     276,375       110,274       110,274       —    
   

 

 

    

 

 

    

 

 

    

 

 

  

Net deferred tax asset (liability)

           $ 1,443,849     $ 1,501,119     $ (57,270 ) 
           

 

 

    

 

 

    

 

 

  

 

 

                                 
    November 30, 2011  
                Classified As  
          Deferred     Short-Term     Long-Term  

Type

   Amount     Tax     Asset     (Liability)  

Depreciation

   $ (451,334 )    $ (182,339 )    $ —       $ (182,339 ) 

Unrealized loss on investments

     192,064       77,594       77,594       —    

Reserve for bad debts

     53,191       21,489       21,489       —    

Reserve for returns

     2,014,303       813,778       813,778       —    

Reserve for obsolete inventory

     892,226       360,459       360,459       —    

Vacation accrual

     348,558       140,817       140,817       —    

Charitable contributions

     564,583       228,093       228,093       —    

Section 263A costs

     239,404       96,719       96,719       —    
   

 

 

    

 

 

    

 

 

    

 

 

  

Net deferred tax asset (liability)

           $ 1,556,610     $ 1,738,949     $ (182,339 ) 
           

 

 

    

 

 

    

 

 

  

Income tax expense is made up of the following components:

 

                 
    Three Months Ended May 31,  
    2012     2011  

Current tax expense — Federal

   $ 180,130     $ —    

Current tax expense (benefit) — State & Local

     57,071       (4,763 ) 

Deferred tax (benefit)

     (37,548 )      (201,008 ) 
   

 

 

    

 

 

  

Total tax expense (benefit)

   $ 199,653     $ (205,771 ) 
   

 

 

    

 

 

  

 

                 
    Six Months Ended May 31,  
    2012     2011  

Current tax expense — Federal

   $ 191,618     $ —    

Current tax expense — State & Local

     60,540       13,622  

Deferred tax expense

     14,407       34,120  
   

 

 

    

 

 

  

Total tax expense

   $ 266,565     $ 47,742  
   

 

 

    

 

 

  

 

Prepaid and refundable income taxes are made up of the following components:

 

                         
          State &        
    Federal     Local     Total  

May 31, 2012

   $ 176,889     $ 308,648     $ 485,537  
   

 

 

    

 

 

    

 

 

  

November 30, 2011

   $ 368,507     $ 350,321     $ 718,828  
   

 

 

    

 

 

    

 

 

  

Income tax payable is made up of the following components:

 

                         
          State &        
    Federal     Local     Total  

May 31, 2012

   $           —       $ 28,997     $ 28,997  
   

 

 

    

 

 

    

 

 

  

November 30, 2011

   $ —       $ 47,232     $ 47,232  
   

 

 

    

 

 

    

 

 

  

A reconciliation of the provision for income taxes computed at the statutory rate to the effective rate for the three and six months ended May 31, 2012 and May 31, 2011 is as follows:

 

                                 
    Three Months Ended     Three Months Ended  
    May 31, 2012     May 31, 2011  
          Percent           Percent  
          of Pretax           of Pretax  
    Amount     Income     Amount     Income  

Provision for (Benefit from)

                                

Income taxes at federal statutory rate

   $ 170,596       34.00 %    $ (154,033 )      (34.00 )% 
         

Increases in taxes resulting from:

                                

State income taxes, net of federal income tax benefit

     32,112       6.40       (31,260 )      (6.90 ) 
         

Non-deductible expenses and other adjustments

     (3,055 )      (0.61 )      (20,478 )      (4.52 ) 
   

 

 

    

 

 

    

 

 

    

 

 

  

Provision for (Benefit from) Income taxes at effective rate

   $ 199,653       39.79 %    $ (205,771 )      (45.42 )% 
   

 

 

    

 

 

    

 

 

    

 

 

  

 

 

                                 
    Six Months Ended     Six Months Ended  
    May 31, 2012     May 31, 2011  
          Percent           Percent  
          of Pretax           of Pretax  
    Amount     Income     Amount     Income  

Provision for

                                

Income taxes at federal statutory rate

   $ 223,107       34.00 %    $ 48,817       34.00 % 
         

Increases in taxes resulting from:

                                

State income taxes, net of federal income tax benefit

     41,997       6.40       9,907       6.90  
         

Non-deductible expenses and other adjustments

     1,461       0.22       (10,982 )      (7.65 ) 
   

 

 

    

 

 

    

 

 

    

 

 

  

Provision for income taxes at effective rate

   $ 266,565       40.62 %    $ 47,742       33.25 %