Hweb2...DAIO...they most likely will have to capitalize at least some portion of their net income loss carry forward this year in 4th Q which could make them be paying taxes (on paper at least) on quarterly reports in 2018. They have been profitable now 3 years in a row + the likelihood that it will continue. It's the same thing that happened to SCKT. DAIO may try and push their luck with their auditor and argue that the volatility of their industry means they should be able to continue to hold them, but I know SCKT's CFO told me that they didn't have a choice. The auditor wouldn't allow it anymore.
Even DAIO's wording on the subject in their 10Q has changed suggesting they are planning for it:
Q1 "Given the uncertainty created by our loss history, as well as the ongoing uncertain economic outlook for our industry as well as capital and geographic spending, we expect to continue to limit the recognition of net deferred tax assets and accounting for uncertain tax positions and maintain the tax valuation allowances.
Q2 "Given the uncertainty created by our past loss history and the cyclical nature of the industry in which we operate, we have limited the recognition of net deferred tax assets and maintain the tax valuation allowances. We expect to further analyze the level of valuation allowance during the second half of 2017 as we get better forecast visibility.
Q3 "Given the uncertainty created by our loss history, as well as the volatile and uncertain economic outlook for our industry and capital spending, we have limited the recognition of net deferred tax assets associated with our net operating losses and credit carryforwards and continue to maintain a valuation allowance for the full amount of the net deferred tax asset balance. We expect to further analyze the level of valuation allowance during the remainder of 2017.
If it does happen, one way to help tank the stock after Q4 report is to go on the cc call and ask "now that you have capitalized all your tax loss carry forward and will be paying full taxes in 2018, what will your effective tax rate be?" It points it out to everyone that they are fully taxed in quarterly reports and that makes the year over year comps much harder.
