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INCOME TAXES

12 Months Ended

Jun. 30, 2022

INCOME TAXES

INCOME TAXES

10.            INCOME TAXES

The following is a geographical breakdown of income before the provision for income taxes (in thousands):

​

​	​	​	​	​	​	​	​	​	​
​		2020			2021			2022
Pre-tax income:	​	​	​	​	​	​	​	​	​
United States	​	$	41,025	​	$	34,323	​	$	51,295
Foreign	​		45,097	​		64,317	​		88,865
Total pre-tax income	​	$	86,122	​	$	98,640	​	$	140,160

​

Our provision (benefit) for income taxes consists of the following (in thousands):

​

​	​	​	​	​	​	​	​	​	​
​		2020			2021			2022
Current:	​	​	​	​	​	​	​	​	​
Federal	​	$	2,661	​	$	4,407	​	$	6,216
State	​		577	​		1,190	​		1,964
Foreign	​		8,063	​		18,562	​		13,113
Total current provision	​		11,301	​		24,159	​		21,293
Deferred:	​	​	​	​	​	​	​	​	​
Federal	​	$	2,882	​	$	679	​	$	3,915
State	​		45	​		464	​		133
Foreign	​		(3,358)	​		(711)	​		(528)
Total deferred provision (benefit)	​		(431)	​		432	​		3,520
Total provision	​	$	10,870	​	$	24,591	​	$	24,813

​

As of June 30, 2021 and 2022, our liability for uncertain tax positions was $10.0 million and $8.2 million, respectively. The amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $8.1 million.

We recognize potential interest and penalties related to income tax matters in income tax expense. As of June 30, 2022, we have accrued $0.5 million for interest and penalties. Our uncertain tax positions are related to tax years that remain subject to examination by the relevant tax authorities. These include fiscal years after 2019 for federal purposes, fiscal years after 2018 for state purposes and fiscal years after 2010 for various foreign jurisdictions. Facts and circumstances could arise that could cause us to reduce the liability for unrecognized tax benefits, including, but not limited to, settlement of income tax positions or expiration of statutes of limitation. Since the ultimate resolution of uncertain tax positions depends on many factors and assumptions, we are not able to estimate the range of potential changes in the liability for unrecognized tax benefits or the timing of such changes.

A summary of activity of unrecognized tax benefits for fiscal 2021 and 2022 is as follows (in thousands).

​

​	​	​	​
Balance at June 30, 2020		$	13,310
Additions on tax positions for the current year	​		5,937
Additions on tax positions from prior years	​		678
Reduction in tax positions from prior year	​		(248)
Balance at June 30, 2021	​	$	19,677
Additions on tax positions for the current year	​		3,084
Additions on tax positions from prior years	​		1,479
Reduction in tax positions from prior year	​		(10,663)
Balance at June 30, 2022	​	$	13,577

​

Deferred income tax assets (liabilities) consisted of the following (in thousands):

​

​	​	​	​	​	​	​
​	​	June 30,
​		2021			2022
Deferred income tax assets:	​	​	​	​	​	​
Tax credit carryforwards	​	$	16,767	​	$	13,130
Net operating loss carryforwards	​		3,745	​		6,494
Customer advances	​		2,819	​		2,848
Allowance for doubtful accounts	​		5,266	​		4,471
Inventory reserve	​		10,391	​		11,636
Inventory capitalization	​		489	​		406
Accrued liabilities	​		4,466	​		3,241
Operating lease liabilities	​	​	10,522	​	​	8,714
Stock and deferred compensation	​		12,323	​		10,601
Other assets	​		2,685	​		1,446
Total deferred income tax assets	​		69,473	​		62,987
Valuation allowance	​		(16,177)	​		(12,301)
Net deferred income tax assets	​		53,296	​		50,686
Deferred income tax liabilities:	​	​	​	​	​	​
Depreciation	​		(2,137)	​		(7,604)
Amortization of intangible assets	​		(31,779)	​		(31,518)
Withholding tax on unrepatriated foreign earnings	​	​	(6,851)	​	​	(6,851)
Operating lease ROU assets	​	​	(10,355)	​	​	(8,480)
State transition tax	​	​	(1,754)	​	​	(1,754)
Convertible debt	​	​	(2,384)	​	​	—
Other liabilities	​		(1,036)	​		(1,750)
Total deferred income tax liabilities	​		(56,296)	​		(57,957)
Net deferred income tax liability	​	$	(3,000)	​	$	(7,271)

​

The components of the net deferred income tax liability are classified in the consolidated balance sheets as follows (in thousands):

​

​	​	​	​	​	​	​
​	​	June 30,
​		2021			2022
Long term deferred income tax asset, included in other assets	​	$	4,157	​	$	3,841
Long term deferred income tax liability	​		(7,157)	​		(11,112)
Net deferred income tax liability	​	$	(3,000)	​	$	(7,271)

​

The components of current taxes receivable and payable and prepaid taxes are classified in the consolidated balance sheets as follows (in thousands):

​

​	​	​	​	​	​	​
​		June 30,
​	​	2021			2022
Current taxes receivable and prepaid taxes, included in prepaid expenses and other current assets	​	$	10,383	​	$	7,843
Current taxes payable, included in other accrued expenses and current liabilities	​		(4,377)	​		(7,722)
Net tax receivable	​	$	6,006	​	$	121

​

As of June 30, 2022, we had federal, state and foreign net operating losses carryforwards of approximately $3.6 million, $26.8 million and $16.1 million, respectively. As of June 30, 2022, we had federal and state tax credit carryforwards of approximately $11.9 million and $9.1 million, respectively. Our credit carryforwards will begin to expire in the tax year ending June 30, 2029.

We have established valuation allowances that relate to the net operating loss of certain subsidiaries, capital losses, and tax credits. During the year ended June 30, 2022, we recorded a net aggregated decrease of $3.9 million to these valuation allowances. We review the adequacy of individual valuation allowances and release such allowances when it is determined that it is more likely than not that the related benefits will be realized.

We recognized all excess tax benefits and tax deficiencies as income tax expense or benefit in the current year. An income tax expense of approximately $1.2 million and $2.0 million was recognized in fiscal 2021 and 2022, respectively.

The consolidated effective income tax rate differs from the federal statutory income tax rate due primarily to the following:

​

​	​	​	​	​	​	​	​
​	​	June 30,
​		2020		2021		2022
Provision for income taxes at federal statutory rate	​	21.0	%	21.0	%	21.0	%
Research and development tax credits	​	(1.6)	​	(1.7)	​	(1.3)	​
Foreign income subject to tax at other than federal statutory rate	​	(0.8)	​	0.6	​	0.2	​
Stock compensation	​	(6.7)	​	(.9)	​	(1.2)	​
Officers’ compensation	​	4.4	​	5.8	​	4.3	​
Change in valuation allowance	​	(1.3)	​	(5.9)	​	(4.0)	​
Unrecognized tax expense (benefit)	​	1.2	​	4.2	​	(1.4)	​
Tax on foreign currency gains and losses	​	2.1	​	(0.2)	​	—	​
State tax expense	​	1.1	​	1.2	​	1.0	​
U.S. tax on foreign earnings	​	(2.1)	​	(1.8)	​	0.9	​
Changes in prior year estimates	​	(6.4)	​	—	​	(0.6)	​
Global intangible low-taxed income, net of foreign tax credits	​	1.8	​	0.5	​	0.3	​
Foreign Derived Intangible Income Benefit	​	(0.6)	​	(1.3)	​	(1.3)	​
Withholding tax on foreign earnings	​	—	​	3.4	​	—	​
Other	​	0.5	​	—	​	(0.2)	​
Effective income tax rate	​	12.6	%	24.9	%	17.7	%

​

The provision for income taxes consists of provisions for federal, state, and foreign income taxes. We operate in an international environment with significant operations in various locations outside the U.S. Accordingly, the consolidated income tax rate is a composite rate reflecting the earnings in the various locations and the applicable rates.

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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.

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