Note 14 - Income Taxes |
9 Months Ended |
|---|---|
Jun. 30, 2025 | |
| Notes to Financial Statements | |
| Income Tax Disclosure [Text Block] |
Note 14. Income Taxes
For the three and nine months ended June 30, 2025, the Company recorded an income tax expense of $1,372,000 and $1,401,000, respectively, reflecting an effective tax rate of 46.1% and 57.7%, respectively. The difference between the effective tax rate and the statutory tax rate for the three months and nine months ended was primarily due to a valuation allowance of $780,000 recorded against the deferred tax assets of the Nestor Cables segment.
For the three and nine months ended June 30, 2024, the Company recorded an income tax benefit of $277,000 and $3,311,000, respectively, reflecting an effective tax rate of 38.2% and 22.1%, respectively. The difference between the effective tax rate and the statutory tax rate for the three months ended June 30, 2024, was primarily due to the higher percentage impact of discrete events during the quarter due to the lower level of pre-tax book loss during the period. The difference between the effective tax rate and the statutory tax rate for the nine months ended June 30, 2024, was primarily due to discrete events during the period, including excess tax shortfall from vesting of restricted stock.
Deferred taxes recognize the impact of temporary differences between the amounts of the assets and liabilities recorded for financial statement purposes and these amounts measured in accordance with tax laws. The Company’s realization of deferred tax temporary differences is contingent upon future taxable earnings. The Company reviewed its deferred tax asset for expected utilization using a “more likely than not” criteria by assessing the available positive and negative factors surrounding its recoverability. ASC 740 requires a valuation allowance to reduce the deferred tax assets reported if, based on the weight of evidence, it is more than likely than not that some portion or all of the deferred tax assets will not be recognized. After consideration of all the evidence, both positive and negative, the Company has determined that a $780,000 valuation allowance at June 30, 2025, on the deferred tax assets of the Nestor Cables segment is necessary to reduce the deferred tax assets to the amount that will more likely than not be realized. The Company determined that no valuation allowance is required for the deferred tax assets of the Clearfield segment as of June 30, 2025, and no valuation allowance against deferred tax assets is required as of September 30, 2024.The Company will continue to assess the need for a valuation allowance based on changes in assumptions of estimated future income and other factors in future periods.
As of June 30, 2025, the Company does have any unrecognized tax benefits. It is the Company’s practice to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. The Company does not expect any material changes in its unrecognized tax positions over the next 12 months.
The One Big Beautiful Bill Act ("OBBBA") was enacted on July 4, 2025 and the Company continues to evaluate the impact on its financial position. The OBBBA is not currently expected to materially impact the Company's effective tax rate or cash flows in the current fiscal year. |