XML 28 R14.htm IDEA: XBRL DOCUMENT
v3.10.0.1

Income Taxes | 12 Months Ended
--- | ---
Jun. 30, 2018
Income Taxes |
Income Taxes | 5. Income Taxes The provision for income taxes is based on earnings reported in the consolidated financial statements. A deferred income tax asset or liability is determined by applying currently enacted tax laws and rates to the expected reversal of the cumulative temporary differences between the carrying value of assets and liabilities for financial statement and income tax purposes. Deferred income tax expense or benefit is measured by the change in the deferred income tax asset or liability during the year. On December 22, 2017, the Tax Cuts and Job Act (the “Tax Act”) was enacted into law which, among other provisions, reduced the U.S. statutory federal income tax rate from 35% to 21%. The Company has included the amount for the impact of the re-measurement of the Company’s net U.S. deferred tax liabilities and the transition tax on the Company’s accumulated unremitted foreign earnings in the Company’s consolidated financial statements for the year ended June 30, 2018. The SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) to allow the registrant to record provisional amounts during a measurement period not to extend beyond one year of the enactment date. The Company has included in its taxable income the provisional impact related to the one-time transition tax and the revaluation of deferred tax balances and included these estimates in its consolidated financial statements for the year ended June 30, 2018. The Company believes the analysis of the various provisions of the Act has been substantially completed, but the ultimate impact may differ from these provisional amounts due to, among other things, additional analysis, changes in interpretations and assumptions the Company has made, additional regulatory guidance that may be issued, and actions the Company may take as a result of the Act. The Company expects to complete its analysis within the measurement period in accordance with SAB 118. Deferred tax assets and liabilities result primarily from temporary differences in book versus tax basis accounting. Deferred tax assets and liabilities consist of the following:
|  | June 30,
|  | 2018 |  | 2017
|  | (In thousands)
Deferred tax assets (liabilities): |  |  |  |  |  |
Net operating loss carryforward |  | $ | 5,047 |  | $ | 8,033
Reserves |  |  | 4,618 |  |  | 7,400
Accrued expenses |  |  | 3,156 |  |  | 10,695
Stock compensation expense |  |  | 8,293 |  |  | 11,449
Other assets |  |  | 1,289 |  |  | 1,720
Deferred rent |  |  | 1,502 |  |  | 3,299
Deferred revenue |  |  | 673 |  |  | 401
Federal tax credits |  |  | 20 |  |  | 20
State tax credits |  |  | 431 |  |  | 390
Total deferred tax assets |  |  | 25,029 |  |  | 43,407
Deferred tax liabilities |  |  |  |  |  |
Capitalized curriculum development |  |  | (9,890) |  |  | (15,323)
Capitalized software and website development costs |  |  | (13,734) |  |  | (23,288)
Property and equipment |  |  | (2,573) |  |  | (2,649)
Returned materials |  |  | (2,452) |  |  | (4,559)
Purchased intangibles |  |  | (4,498) |  |  | (7,161)
Total deferred tax liabilities |  |  | (33,147) |  |  | (52,980)
Net deferred tax liability before valuation allowance |  |  | (8,118) |  |  | (9,573)
Valuation allowance |  |  | (4,459) |  |  | (7,153)
Net deferred tax liability |  | $ | (12,577) |  | $ | (16,726)
Reported as: |  |  |  |  |  |
Long-term deferred tax liabilities |  | $ | (12,577) |  | $ | (16,726)
The Company maintained a valuation allowance on net noncurrent deferred tax assets of $4.5 million and $7.2 million as of June 30, 2018 and 2017, respectively, predominantly related to foreign income tax net operating losses ("NOL") and operating losses related to its tax non-consolidating entity. The decrease in the valuation allowance is due to the acquisition of the non-controlling interest of the tax non-consolidating entity which enabled the Company to utilize a portion of the tax non-consolidating entity’s NOLs. At June 30, 2018, the Company had available federal and state NOL carryforwards of $0.2 million and $0.4 million, respectively, net of valuation allowances. The federal NOLs, if unused, expire in 2020 and the state NOLs expire on various dates. For the years ended June 30, 2018 and 2017, the Company has evaluated whether a change in the Company's ownership of outstanding classes of stock as defined in Internal Revenue Code Section 382 could prohibit or limit the Company's ability to utilize its NOLs. The Company has concluded it is more likely than not that the Company will be able to fully utilize its NOLs subject to the Section 382 limitation. The components of the income tax (benefit) expense for the years ended June 30, 2018, 2017 and 2016 were as follows:
|  | Year Ended June 30,
|  | 2018 |  | 2017 |  | 2016
|  | (In thousands)
Current: |  |  |  |  |  |  |  |  |
Federal |  | $ | 887 |  | $ | 8,756 |  | $ | 4,651
State |  |  | 774 |  |  | 3,153 |  |  | 1,152
Foreign |  |  | 1,444 |  |  | 552 |  |  | 2,761
Total current |  |  | 3,105 |  |  | 12,461 |  |  | 8,564
Deferred: |  |  |  |  |  |  |  |  |
Federal |  |  | (4,769) |  |  | (6,505) |  |  | (1,648)
State |  |  | 754 |  |  | (560) |  |  | (97)
Foreign |  |  | — |  |  | — |  |  | (2,073)
Total deferred |  |  | (4,015) |  |  | (7,065) |  |  | (3,818)
Total income tax (benefit) expense |  | $ | (910) |  | $ | 5,396 |  | $ | 4,746
The (benefit) provision for income taxes can be reconciled to the income tax that would result from applying the statutory rate to the net income before income taxes as follows:
|  | Year Ended June 30, |
|  | 2018 |  | 2017 |  | 2016 |
U.S. federal tax at statutory rates (1) |  | 28.0 | % | 35.0 | % | 35.0 | %
Permanent items |  | 0.9 |  | 7.1 |  | 4.8 |
Lobbying |  | 1.2 |  | 7.2 |  | 5.3 |
State taxes, net of federal benefit |  | 3.1 |  | 19.5 |  | 3.8 |
Research and development tax credits |  | - |  | (8.2) |  | (8.1) |
Domestic production activities deduction |  | (0.1) |  | (22.9) |  | (5.2) |
Change in valuation allowance |  | (7.2) |  | 53.3 |  | 2.9 |
Effects of foreign operations |  | - |  | 2.6 |  | (0.9) |
Reserve for unrecognized tax benefits |  | 0.9 |  | 3.3 |  | (6.3) |
Noncontrolling interests |  | 0.4 |  | 12.5 |  | 4.2 |
Other |  | (3.9) |  | (0.1) |  | 0.2 |
Impact of federal tax rate reduction |  | (25.4) |  | - |  | - |
Repatriation transition tax |  | 6.4 |  | - |  | - |
Stock-based compensation |  | (7.7) |  | - |  | - |
(Benefit) provision for income taxes |  | (3.4) | % | 109.3 | % | 35.7 | %
| (1) |  | The corporate tax rate was lowered from 35% to 21%, effective as of January 1, 2018. Under IRC §15 which governs rate changes, fiscal year taxpayers are subject to a “blended” tax rate for tax years that include January 1, 2018. Using the weighted average calculation, the company’s blended federal tax rate for the year ended June 30, 2018 is 28%.
The decrease in the effective income tax rate for the year ended June 30, 2018 was predominantly impacted by the Tax Act as well as the adoption of ASU 2016-09 related to stock compensation. Tax Uncertainties The Company follows the provisions of ASC 740-10 which applies to all tax positions related to income taxes. ASC 740-10 provides a comprehensive model for how a company should recognize, measure, present and disclose in its financial statements uncertain tax positions that the Company has taken or expects to take on a tax return. ASC 740-10 clarifies accounting for income taxes by prescribing a minimum probability threshold that a tax position must meet before a financial statement benefit is recognized. If the probability for sustaining a tax position is greater than 50%, then the tax position is warranted and recognition should be at the highest amount which would be expected to be realized upon ultimate settlement related to unrecognized tax benefits. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense. As of June 30, 2018, 2017 and 2016, the Company had $0.2 million, $0.1 million and $0.1 million in accrued interest and penalties, respectively. The unrecognized tax benefits for the years ended June 30, 2018, 2017 and 2016 were as follows:
|  | Year Ended June 30,
|  | 2018 |  | 2017 |  | 2016
|  | (In thousands)
Balance at beginning of the year |  | $ | 2,260 |  | $ | 2,224 |  | $ | 3,558
Additions for prior year tax positions |  |  | 585 |  |  | 951 |  |  | 351
Additions for current year tax positions |  |  | 8 |  |  | 241 |  |  | 290
Reductions for prior year tax positions |  |  | (461) |  |  | (1,156) |  |  | (1,975)
Balance at end of the year |  | $ | 2,392 |  | $ | 2,260 |  | $ | 2,224
If recognized, all of the $2.4 million balance of unrecognized tax benefits as of June 30, 2018 would affect the effective tax rate. The Company does not anticipate a significant increase or decrease in unrecognized tax benefits in the next twelve months. The Company remains subject to audit by the Internal Revenue Service for federal tax purposes for tax years after June 30, 2014. Certain state and foreign tax jurisdictions are also either currently under audit or remain open under the statute of limitations for the tax years after June 30, 2012.

X
- References No definition available. + Details
Name: | us-gaap_IncomeTaxDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- 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
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration