Crown Crafts, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Note 8 - Income Taxes

Note 8 - Income Taxes

12 Months Ended

Mar. 29, 2015

Notes to Financial Statements

Income Tax Disclosure [Text Block]

Note 8 –

Income Taxes

The Company’s income tax provision for fiscal years 2015 and 2014 is summarized below (in thousands):

	Fiscal year ended March 29, 2015
	Current			Deferred			Total
Federal	$	3,255		$	(280	)	$	2,975
State		574			(48	)		526
Other - net, including foreign		(194	)		135			(59	)
Income tax expense (benefit)		3,635			(193	)		3,442

Income tax reported in stockholders' equity related to stock-based compensation		(69	)		-			(69	)
Total	$	3,566		$	(193	)	$	3,373

	Fiscal year ended March 30, 2014
	Current			Deferred			Total
Federal	$	3,571		$	(628	)	$	2,943
State		750			(115	)		635
Other - net, including foreign		(3	)		-			(3	)
Income tax expense (benefit)		4,318			(743	)		3,575

Income tax reported in stockholders' equity related to stock-based compensation		(33	)		-			(33	)
Total	$	4,285		$	(743	)	$	3,542

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities as of March 29, 2015 and March 30, 2014 are as follows (in thousands):

	2015			2014
Deferred tax assets:
Employee wage and benefit accruals	$	787		$	849
Accounts receivable and inventory reserves		485			356
Deferred rent		48			6
Intangible assets		704			890
State net operating loss carryforwards		824			904
Stock-based compensation		556			391
Total gross deferred tax assets		3,404			3,396
Less valuation allowance		(824	)		(904	)
Deferred tax assets after valuation allowance		2,580			2,492

Deferred tax liabilities:
Prepaid expenses		(352	)		(412	)
Property, plant and equipment		(127	)		(172	)
Total deferred tax liabilities		(479	)		(584	)
Net deferred income tax assets	$	2,101		$	1,908

In assessing the probability that the Company’s deferred tax assets will be realized, management of the Company has considered whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of taxable income during the future periods in which the temporary differences giving rise to the deferred tax assets will become deductible. The Company has also considered the scheduled inclusion into taxable income in future periods of the temporary differences giving rise to the Company’s deferred tax liabilities. The valuation allowance as of March 29, 2015 and March 30, 2014 was related to state net operating loss carryforwards that the Company does not expect to be realized. Based upon the Company’s expectations of the generation of sufficient taxable income during future periods, the Company believes that it is more likely than not that the Company will realize its deferred tax assets, net of the valuation allowance and the deferred tax liabilities.

Management evaluates items of income, deductions and credits reported on the Company’s various federal and state income tax returns filed, and recognizes the effect of positions taken on those income tax returns only if those positions are more likely than not to be sustained. Recognized income tax positions are measured at the largest amount that has a greater than 50% likelihood of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. Based on its recent evaluation, the Company has concluded that there are no significant uncertain tax positions requiring recognition in the Company’s consolidated financial statements. The Company’s policy is to accrue interest expense and penalties as appropriate on any estimated unrecognized tax benefits as a charge to interest expense in the Company’s consolidated statements of income.

The Company's provision for income taxes on continuing operations is based upon effective tax rates of 37.6% and 38.3% in fiscal years 2015 and 2014, respectively. These effective tax rates are the sum of the top U.S. statutory federal income tax rate and a composite rate for state income taxes, net of federal tax benefit, in the various states in which the Company operates.

The following table reconciles income tax expense on income from continuing operations at the U.S. federal income tax statutory rate to the net income tax provision reported for fiscal years 2015 and 2014 (in thousands):

	2015			2014
Tax expense at statutory rate (34%)	$	3,114		$	3,178
State income taxes, net of Federal income tax benefit		347			419
Tax credits		(24	)		(12	)
Net tax effect of expenses deductible only for tax purposes		(6	)		(7	)
Other - net, including foreign		11			(3	)
Income tax expense	$	3,442		$	3,575

- 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.

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