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Income Taxes | 6 Months Ended
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Nov. 30, 2015
Income Tax Disclosure [Abstract] |
Income Taxes | INCOME TAXES The following table presents the components of income tax expense (benefit) for the three and six months ended November 30, 2015 and 2014 (in thousands of dollars):
| Three Months Ended |  | Six Months Ended
| Nov 30, 2015 |  | Nov 30, 2014 |  | Nov 30, 2015 |  | Nov 30, 2014
Income (loss) before Income Taxes | $ | (728 | ) |  | $ | 2,829 |  |  | $ | (1,402 | ) |  | $ | 4,247 |
Less discrete book income (expense): |  |  |  |  |  |  |
Non-taxable portion of change in fair value of contingent consideration | — |  |  | — |  |  | 170 |  |  | — |
Ordinary income (loss) before income taxes | (728 | ) |  | 2,829 |  |  | (1,572 | ) |  | 4,247 |
Income tax expense (benefit) based on ordinary income (loss) at estimated tax rates for the three and six months ended November 30, 2015 and November 30, 2014, respectively | $ | (429 | ) |  | $ | 1,140 |  |  | $ | (792 | ) |  | $ | 1,738 |
Discrete tax expense (benefit): |  |  |  |  |  |  |
Adjustment for elimination of the ASC 718 APIC pool | 43 |  |  | 330 |  |  | 514 |  |  | 685 |
Adjustments to prior period tax liabilities | 20 |  |  | 21 |  |  | (5 | ) |  | 16 |
Total income tax expense (benefit) | $ | (366 | ) |  | $ | 1,491 |  |  | $ | (283 | ) |  | $ | 2,439 |
The estimated full year effective tax rate prior to discrete items was 50.4% in the second quarter of fiscal 2016, as compared to 40.9% for the same period in fiscal 2015. The tax rates are greater than the 35% US statutory tax rate in both periods primarily due to the impact of non-deductible expenses (such as the non-deductible portion of meals and entertainment, non-deductible interest on contingent payments and non-deductible stock based compensation related to employee stock purchase plan). These non-deductible expenses have a larger impact on the estimated tax rate in fiscal year 2016 as a result of lower ordinary income in fiscal 2016 as compared to fiscal 2015. Our ASC 718 APIC pool was depleted during fiscal year 2014. Prior to its depletion, the APIC pool was reduced when share-based compensation cost previously recognized by us was greater than the deduction allowed for income tax purposes based on the price of our common stock on the date of exercise or vesting. Due to its depletion we recorded a discrete tax expense in the three and six months ended November 30, 2015 and 2014, as noted in the above table. We have recorded a net deferred tax asset in the US of $19.8 million which includes the benefit of $148.3 million of loss carryforwards, which expire as follows:
Expiration Date | NOL Available (in thousands)
FY 2017 | $ | 802 |
FY 2019 | 11,898 |
FY 2020 | 8,128 |
FY 2022 | 7,526 |
FY 2023 | 2,346 |
FY 2027 | 20,167 |
FY 2028 | 22,527 |
FY 2029 | 27,684 |
FY 2030 | 28,043 |
FY 2031 | 5,647 |
FY 2032 | 600 |
FY 2033 | 1,345 |
FY 2034 | — |
FY 2035 | 11,581 |
The Company’s analysis of the need for a valuation allowance considered that the Company has incurred a cumulative loss before taxes in the U.S. over the three year period ended November 30, 2015. A majority of the cumulative loss has been caused by the charges associated with the product recall and discontinuance and the impairment of fixed and intangible assets recorded in the quarter ended February 28, 2015, as well as restructuring and integration expenses in the period since the acquisition of Navilyst Medical in May 2012. We anticipate a return to profitability in fiscal 2016. Consideration has also been given to our history of not having Federal tax loss carryforwards expire unused, as well as the period over which the net deferred tax assets can be realized, including the expiration of our loss carryforwards and IRC Section 382 limitations. Based on our assessment, it is more likely than not that our U.S. net deferred tax asset will be realized through future taxable earnings, the reversal of existing taxable temporary differences, and tax planning strategies. Accordingly no valuation allowance has been recorded on this net asset. We will continue to assess the need for a valuation allowance in the future. If future results are less than projected in the U.S. and if tax planning alternatives do not offset those effects, a valuation allowance may be required to reduce the deferred tax asset, which could have a material impact on our results of operations in the period in which it is recorded. While the net deferred tax asset at November 30, 2015 is $19.8 million, if the Company were required to record a valuation allowance it could be $15.3 million greater than this amount due to deferred tax liabilities related to intangibles that have an indefinite reversal period. During December 2015, the Consolidated Appropriations Act of 2016 (H.R. 2029) was enacted and permanently extended the research credit effective January 1, 2015. Accordingly, the retroactive benefit related to this renewal will be reflected in our third quarter results.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 + Details
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