| INCOME TAXES | INCOME TAXES The components of income (loss) from continuing operations before income taxes and equity in net loss of equity-method investees were as follows: Fiscal Year Ended June 30, 2022 2021 2020 Domestic $ 24,541 $ 60,215 $ (29,339) Foreign 78,950 48,578 63,167 Total $ 103,491 $ 108,793 $ 33,828 The provision for income taxes consisted of the following: Fiscal Year Ended June 30, 2022 2021 2020 Current: Federal $ (197) $ 2,243 $ (44,595) State and local 179 1,735 619 Foreign 13,714 27,253 14,021 13,696 31,231 (29,955) Deferred: Federal 6,237 14,266 33,007 State and local (463) (10,064) 3,414 Foreign 3,246 5,660 (261) 9,020 9,862 36,160 Total $ 22,716 $ 41,093 $ 6,205 Cash paid for income taxes, net of (refunds), during the fiscal years ended June 30, 2022 amounted to $19,235. For the fiscal year ended June 30, 2021 , the Company received net tax refunds of $32,998 including a $53,817 tax loss carryback claim under the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") which allowed for, among other provisions, a five-year carryback of net operating losses (“NOLs”) for 2018-2020 offset by taxes paid in other jurisdictions. Cash paid for income taxes, net of refunds, during the fiscal year ended June 30, 2020 amounted to $16,162. The reconciliation of the U.S. federal statutory rate to the Company’s effective rate on income before provision for income taxes is as follows: Fiscal Year Ended June 30, 2022 % 2021 % 2020 % Expected United States federal income tax at statutory rate $ 21,733 21.0 % $ 22,847 21.0 % $ 7,104 21.0 % State income taxes, net of federal provision (benefit) 1,227 1.2 % 1,150 1.1 % (668) (1.9) % Foreign income at different rates (576) (0.6) % 4,756 4.4 % 382 1.1 % Impairment of intangible assets — — % 13,466 12.4 % — — % Change in valuation allowance (a) (220) (0.2) % (5,921) (5.4) % 4,499 13.3 % Change in reserves for uncertain tax positions (997) (1.0) % 1,971 1.8 % 7,925 23.4 % Change in foreign tax rate (b) (341) (0.3) % 1,840 1.7 % — — % Loss on disposal of subsidiary — % 1,073 1.0 % — — % U.S. tax (benefit) on foreign earnings 2,404 2.3 % (50) (0.1) % 7,449 22.0 % CARES Act (c) — % (1,116) (1.0) % (25,668) (75.9) % Other (514) (0.4) % 1,077 1.0 % 5,182 15.3 % Provision for income taxes $ 22,716 21.9 % $ 41,093 37.8 % $ 6,205 18.3 % (a) The Company estimated that it would utilize certain of its state tax loss carryovers in the year ended June 30, 2021. This positive evidence, in addition to other positive evidence, resulted in the Company releasing the valuation allowance on its state deferred assets of $9,774. Further, in fiscal 2021, there was a release of a valuation allowance of $1,600 related to Danival; an increase in the valuation allowance of $5,051 related to the UK rate change; and a valuation allowance increase of $402 related to capital leases. (b) In fiscal year 2021, the U.K. enacted into law a tax rate increase from 17% to 19% and on June 10, 2021, the U.K. enacted an increase in the corporate income tax rate to 25% effective April 1, 2023. The rate change impact in fiscal 2021 was primarily for the re-measurement of deferred tax liabilities on indefinite lived intangible assets. (c) In fiscal 2020, the Company carried back NOLs generated in the June 30, 2019 tax year for five years, resulting in an income tax benefit of $18,949. The $18,949 income tax benefit represents the federal rate differential between 35% and 21%. In addition, there was an indirect tax benefit of $6,719 related to discontinued operations due to the CARES Act. Accordingly, the gross benefit recorded under the CARES Act in fiscal 2020 was $25,668 prior to the reserve under ASC 740-10. In fiscal 2021, the Company received the full refund with interest, with the net adjustment resulting in a benefit of $1,116. With the effective date of January 1, 2018, the Tax Act also introduced a provision to tax global intangible low-taxed income (“GILTI”) of foreign subsidiaries and a measure to tax certain intercompany payments under the base erosion anti-abuse tax “BEAT” regime. For the fiscal years ended June 30, 2022, 2021 and 2020, the Compa ny did not generate intercompany transactions that met the BEAT threshold but does have to include GILTI tax relating to the Company’s foreign subsidiaries. The Company elected to account for GILTI tax as a current period cost and recorded expense of $1,119 during the fiscal year ended June 30, 2022. The GILTI of $1,119 is included in the U.S. tax benefit on foreign earnings in the effective tax rate which also includes tax expense related to Subpart F income and unremitted earnings in total. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts for income tax purposes. Deferred tax assets and liabilities consisted of the following: June 30, 2022 June 30, 2021 Noncurrent deferred tax assets (liabilities): Basis difference on inventory $ 6,395 $ 6,213 Reserves not currently deductible 11,675 15,261 Basis difference on intangible assets (119,109) (70,482) Basis difference on property and equipment (15,049) (11,643) Other comprehensive income (726) 2,792 Net operating loss and tax credit carryforwards 50,077 43,960 Stock-based compensation 1,516 1,797 Unremitted earnings of foreign subsidiaries (2,232) (1,172) Operating lease liability 25,423 14,165 Lease ROU assets (23,905) (12,971) Other 7,782 7,048 Valuation allowances (36,891) (37,453) Noncurrent deferred tax liabilities, net (1) $ (95,044) $ (42,485) (1) Includes $0 and $154 of non-current deferred tax assets included within other assets on the June 30, 2022 and 2021 Consolidated Balance Sheets, respectively. At June 30, 2022 and 2021, the Company had U.S. federal NOL carryforwards of approximately $79,890 and $59,514, respectively, certain of which will not expire until 2036. Certain of these federal loss carryforwards are subject to Internal Revenue Code Section 382 which imposes limitations on utilization following certain changes in ownership of the entity generating the loss carryforward. The Company had foreign NOL carryforwards of approximately $12,108 and $15,441 at June 30, 2022 and 2021, respectively, the majority of which are indefinite lived. For the year ended June 30, 2022, the Company represents that $149,252 of foreign earnings are not permanently reinvested with a corresponding deferred tax liability of $2,232. The Company continues to reinvest $809,196 of undistributed earnings of its foreign subsidiaries and may be subject to additional foreign withholding taxes and U.S. state income taxes if it reverses its indefinite reinvestment assertion on these foreign earnings in the future. All other outside basis differences not related to earnings were impractical to account for a t this period of time and are currently considered as being permanent in duration. As required by the authoritative guidance on accounting for income taxes, the Company evaluates the realizability of deferred tax assets on a jurisdictional basis at each reporting date. Accounting for income taxes requires that a valuation allowance be established when it is more likely than not that all or a portion of the deferred tax assets will not be realized. In circumstances where there is sufficient negative evidence indicating that the deferred tax assets are not more likely than not realizable, the Company establishes a valuation allowance. T he Company has recorded valuation allowances in the amounts of $36,891 and $37,453 at June 30, 2022 and 2021, respectively . The changes in valuation allowances against deferred income tax assets were as follows: Fiscal Year Ended June 30, 2022 2021 Balance at beginning of year $ 37,453 $ 41,941 Additions charged to income tax expense 784 5,601 Reductions credited to income tax expense (1,004) (11,520) THWR purchase accounting 1,743 — Currency translation adjustments (2,085) 1,431 Balance at end of year $ 36,891 $ 37,453 Unrecognized tax benefits activity, including interest and penalties, is summarized below: Fiscal Year Ended June 30, 2022 2021 2020 Balance at beginning of year $ 22,870 $ 20,899 $ 11,869 Additions based on tax positions related to the current year 273 343 636 Additions based on tax positions related to prior years 304 3,045 8,499 Reductions due to lapse in statute of limitations and settlements (1,546) (1,417) (105) Balance at end of year $ 21,901 $ 22,870 $ 20,899 As of June 30, 2022, the Company had $21,901 of unrecognized tax benefits, of which $18,089 represents an amount that, if recognized, would impact the effective tax rate in future periods. As of June 30, 2021, the Company had $22,870 of unrecognized tax benefits, of which $19,058 represents the amount that, if recognized, would impact the effective tax rate in future periods. As of June 30, 2020 , the C ompany had $20,899 of unrecognized tax benefits of which $17,087 would impact the effective income tax rate in future periods. Accrued liabilities for interest and penalties w ere $2,952 a nd $2,549 at June 30, 2022 and 2021, respectively. The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, various U.S. state jurisdictions and several foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years prior to fiscal 2014. However, to the extent we generated NOLs or tax credits in closed tax years, future use of the NOL or tax credit carryforward balance would be subject to examination within the relevant statute of limitations for the year in which utilized. The Company is no longer subject to tax examinations in the United Kingdom for years prior to fiscal 2021. Given the uncertainty regarding when tax authorities will complete their examinations and the possible outcomes of their examinations, a current estimate of the range of reasonably possible significant increases or decreases of income tax that may occur within the next twelve months cannot be made. Although there are various tax audits currently ongoing, the Company does not believe the ultimate outcome of such audits will have a material impact on the Company’s consolidated financial statements. |
