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Income Taxes | 12 Months Ended
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Jun. 30, 2017
Income Tax Disclosure [Abstract] |
Income Taxes |
Note 7. | Income Taxes
The components of earnings (losses) before income taxes were as follows:
Year Ended June 30, |  | 2017 |  |  | 2016 |  |  | 2015 |
($000) |  |  |  |  |  |  |  |  |  |  |  |
U.S. loss |  | $ | (6,944 | ) |  | $ | (5,809 | ) |  | $ | (5,326 | )
Non-U.S. income |  |  | 125,732 |  |  |  | 95,764 |  |  |  | 84,438 |
Earnings before income taxes |  | $ | 118,788 |  |  | $ | 89,955 |  |  | $ | 79,112 |
The components of income tax expense were as follows:
Year Ended June 30, |  | 2017 |  |  | 2016 |  |  | 2015 |
($000) |  |  |  |  |  |  |  |  |  |  |  |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 2,133 |  |  | $ | 3,704 |  |  | $ | (146 | )
State |  |  | 253 |  |  |  | 5 |  |  |  | 86 |
Foreign |  |  | 22,312 |  |  |  | 19,783 |  |  |  | 16,978 |
Total Current |  | $ | 24,698 |  |  | $ | 23,492 |  |  | $ | 16,918 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | (6,963 | ) |  | $ | 2,759 |  |  | $ | (2,762 | )
State |  |  | (1,251 | ) |  |  | 1,302 |  |  |  | (251 | )
Foreign |  |  | 7,030 |  |  |  | (3,084 | ) |  |  | (768 | )
Total Deferred |  | $ | (1,184 | ) |  | $ | 977 |  |  | $ | (3,781 | )
Total Income Tax Expense |  | $ | 23,514 |  |  | $ | 24,469 |  |  | $ | 13,137 |
Principal items comprising deferred income taxes were as follows:
June 30, |  | 2017 |  |  | 2016 |
($000) |  |  |  |  |  |  |  |
Deferred income tax assets |  |  |  |  |  |  |  |
Inventory capitalization |  | $ | 6,338 |  |  | $ | 6,814 |
Non-deductible accruals |  |  | 1,705 |  |  |  | 2,212 |
Accrued employee benefits |  |  | 9,738 |  |  |  | 15,543 |
Net-operating loss and credit carryforwards |  |  | 53,048 |  |  |  | 43,516 |
Share-based compensation expense |  |  | 12,386 |  |  |  | 11,693 |
Other |  |  | 1,761 |  |  |  | 1,770 |
Valuation allowances |  |  | (42,562 | ) |  |  | (42,641 | )
Total deferred income tax assets |  | $ | 42,414 |  |  | $ | 38,907 |
Deferred income tax liabilities |  |  |  |  |  |  |  |
Tax over book accumulated depreciation |  | $ | (7,803 | ) |  | $ | (9,759 | )
Intangible assets |  |  | (38,108 | ) |  |  | (29,628 | )
Tax on unremitted earnings |  |  | (6,210 | ) |  |  | (797 | )
Other |  |  | (2,615 | ) |  |  | (1,978 | )
Total deferred income tax liabilities |  | $ | (54,736 | ) |  | $ | (42,162 | )
Net deferred income taxes |  | $ | (12,322 | ) |  | $ | (3,255 | )
The reconciliation of income tax expense at the statutory federal rate to the reported income tax expense is as follows:
Year Ended June 30, |  | 2017 |  |  | % |  |  | 2016 |  |  | % |  |  | 2015 |  |  | % |
($000) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Taxes at statutory rate |  | $ | 41,576 |  |  |  | 35 |  |  | $ | 31,484 |  |  |  | 35 |  |  | $ | 27,689 |  |  |  | 35 |
Increase (decrease) in taxes resulting from: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
State income taxes-net of federal benefit |  |  | (641 | ) |  |  | - |  |  |  | 864 |  |  |  | 1 |  |  |  | (196 | ) |  |  | - |
Taxes on non U.S. earnings |  |  | (12,907 | ) |  |  | (11 | ) |  |  | (13,860 | ) |  |  | (15 | ) |  |  | (11,687 | ) |  |  | (15 | )
Valuation allowance |  |  | (806 | ) |  |  | (1 | ) |  |  | 8,464 |  |  |  | 9 |  |  |  | 678 |  |  |  | 1 |
Research and manufacturing incentive deductions |  |  | (3,346 | ) |  |  | (3 | ) |  |  | (3,074 | ) |  |  | (3 | ) |  |  | (2,573 | ) |  |  | (3 | )
Other |  |  | (362 | ) |  |  | - |  |  |  | 591 |  |  |  | - |  |  |  | (774 | ) |  |  | (1 | )
|  | $ | 23,514 |  |  |  | 20 |  |  | $ | 24,469 |  |  |  | 27 |  |  | $ | 13,137 |  |  |  | 17 |
During the fiscal years ended June 30, 2017, 2016, and 2015, net cash paid by the Company for income taxes was $23.6 million, $18.5 million, and $13.0 million, respectively. Our foreign subsidiaries in the Philippines operate under various tax holiday arrangements. The benefits of such arrangements phase out through the fiscal year ended June 30, 2019. The impact of the tax holidays on our effective rate is a reduction in the rate of 0.31%, 0.37% and 0.22% for the fiscal years ended June 30, 2017, 2016 and 2015, respectively, and the impact of the tax holidays on diluted earnings per share is immaterial. The cumulative amount of the Company’s foreign undistributed net earnings for which no deferred taxes have been provided was approximately $715 million at June 30, 2017. If the earnings of such foreign subsidiaries were not indefinitely reinvested, an additional deferred tax liability of approximately $108 million would have been required as of June 30, 2017. It is the Company’s intention to permanently reinvest substantially all of its undistributed earnings of its foreign subsidiaries; therefore, no provision has been made for future income taxes on the undistributed earnings of the majority of foreign subsidiaries, as they are considered indefinitely reinvested. The Company has provided a deferred tax liability for future income taxes on the earnings of certain foreign subsidiaries as these earnings are planned to be repatriated. The Company has the following gross operating loss carryforwards and tax credit carryforwards as of June 30, 2017:
Type |  | Amount |  |  | Expiration Date
($000) |  |  |  |  |  |
Tax credit carryforwards: |  |  |  |  |  |
Federal research and development credits |  | $ | 10,953 |  |  | June 2019-June 2037
Foreign tax credits |  |  | 4,539 |  |  | June 2024-June 2027
State tax credits |  |  | 4,820 |  |  | June 2018-June 2037
Operating loss carryforwards: |  |  |  |  |  |
Loss carryforwards - federal |  | $ | 100,922 |  |  | June 2020-June 2037
Loss carryforwards - state |  |  | 71,536 |  |  | June 2018-June 2037
Loss carryforwards - foreign |  |  | 2,610 |  |  | June 2018-June 2024
The Company has recorded a valuation allowance against the majority of the loss and credit carryforwards. The Company’s federal loss carryforwards, federal research and development credit carryforwards, and certain state tax credits resulted from the Company’s acquisitions are subject to various annual limitations under Section 382 of the Internal Revenue Code. Changes in the liability for unrecognized tax benefits for the fiscal years ended June 30, 2017, 2016 and 2015 were as follows:
|  | 2017 |  |  | 2016 |  |  | 2015 |
($000) |  |  |  |  |  |  |  |  |  |  |  |
Balance at Beginning of Year |  | $ | 5,559 |  |  | $ | 4,022 |  |  | $ | 2,775 |
Increases in current year tax positions |  |  | 895 |  |  |  | 2,146 |  |  |  | 2,450 |
Increases in prior year tax positions |  |  | 2,605 |  |  |  | 190 |  |  | 203 |
Decreases in prior year tax positions |  |  | - |  |  |  | (67 | ) |  |  | - |
Settlements |  |  | (1,143 | ) |  |  | - |  |  |  | - |
Expiration of statute of limitations |  |  | (339 | ) |  |  | (732 | ) |  |  | (1,406 | )
Balance at End of Year |  | $ | 7,577 |  |  | $ | 5,559 |  |  | $ | 4,022 |
The Company classifies all estimated and actual interest and penalties as income tax expense. During fiscal year 2017, there was $0.5 million of interest and penalties within income tax expense. During the fiscal year 2016, there was no interest and penalties within income tax expense. During the fiscal year 2015, there was a benefit of $0.1 million of interest and penalties within tax expense. The Company had $0.3 million, $0.1 million, and $0.1 million of interest and penalties accrued at June 30, 2017, 2016, and 2015, respectively. The Company has classified the uncertain tax positions as non-current income tax liabilities as the amounts are not expected to be paid within one year. Including tax positions for which the Company determined that the tax position would not meet the more likely than not recognition threshold upon examination by the tax authorities based upon the technical merits of the position, the total estimated unrecognized tax benefit that, if recognized, would affect our effective tax rate was approximately $1.3 million and $0.5 million at June 30, 2017 and 2016, respectively. The Company expects a decrease of $0.4 million of unrecognized tax benefits during the next 12 months due to the expiration of statutes of limitation. Fiscal years 2014 to 2017 remain open to examination by the Internal Revenue Service, fiscal years 2012 to 2017 remain open to examination by certain state jurisdictions, and fiscal years 2007 to 2017 remain open to examination by certain foreign taxing jurisdictions. The Company’s subsidiary in Germany has been notified of an examination to start in fiscal year 2018. The Company believes its income tax reserves for these tax matters are adequate.

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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 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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