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INCOME TAXES

12 Months Ended

Jun. 30, 2023

INCOME TAXES

INCOME TAXES

10.            INCOME TAXES

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

​

​	​	​	​	​	​	​	​	​	​
​		2021			2022			2023
Pre-tax income:	​	​	​	​	​	​	​	​	​
United States	​	$	34,323	​	$	51,295	​	$	7,114
Foreign	​		64,317	​		88,865	​		108,124
Total pre-tax income	​	$	98,640	​	$	140,160	​	$	115,238

​

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

​

​	​	​	​	​	​	​	​	​	​
​		2021			2022			2023
Current:	​	​	​	​	​	​	​	​	​
Federal	​	$	4,407	​	$	6,216	​	$	6,860
State	​		1,190	​		1,964	​		861
Foreign	​		18,562	​		13,113	​		19,717
Total current provision	​		24,159	​		21,293	​		27,438
Deferred:	​	​	​	​	​	​	​	​	​
Federal	​	$	679	​	$	3,915	​	$	(2,547)
State	​		464	​		133	​		(678)
Foreign	​		(711)	​		(528)	​		(753)
Total deferred provision (benefit)	​		432	​		3,520	​		(3,978)
Total provision	​	$	24,591	​	$	24,813	​	$	23,460

​

As of June 30, 2022 and 2023, our liability for uncertain tax positions was $8.2 million and $12.0 million, respectively. The amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $12.0 million as of June 30, 2023.

We recognize potential interest and penalties related to income tax matters in income tax expense. As of June 30, 2023, we have accrued $0.4 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 2015 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 2022 and 2023 is as follows (in thousands).

​

​	​	​	​
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
Additions on tax positions for the current year	​		3,225
Additions on tax positions from prior years	​		2,582
Reduction in tax positions from prior year	​		(4,406)
Balance at June 30, 2023	​	$	14,978

​

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

​

​	​	​	​	​	​	​
​	​	June 30,
​		2022			2023
Deferred income tax assets:	​	​	​	​	​	​
Tax credit carryforwards	​	$	13,130	​	$	5,934
Net operating loss carryforwards	​		6,494	​		3,678
Customer advances	​		2,848	​		3,443
Allowance for doubtful accounts	​		4,471	​		2,994
Inventory reserve	​		11,636	​		11,026
Inventory capitalization	​		406	​		481
Accrued liabilities	​		3,241	​		2,956
Operating lease liabilities	​	​	8,714	​	​	8,043
Stock and deferred compensation	​		10,601	​		12,224
Other assets	​		1,446	​		1,164
Total deferred income tax assets	​		62,987	​		51,943
Valuation allowance	​		(12,301)	​		(8,433)
Net deferred income tax assets	​		50,686	​		43,510
Deferred income tax liabilities:	​	​	​	​	​	​
Depreciation	​		(7,604)	​		(5,860)
Amortization of intangible assets	​		(31,518)	​		(21,617)
Withholding tax on unrepatriated foreign earnings	​	​	(6,851)	​	​	(6,851)
Operating lease ROU assets	​	​	(8,480)	​	​	(7,931)
State transition tax	​	​	(1,754)	​	​	(1,754)
Other liabilities	​		(1,750)	​		(1,824)
Total deferred income tax liabilities	​		(57,957)	​		(45,837)
Net deferred income tax liability	​	$	(7,271)	​	$	(2,327)

​

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

​

​	​	​	​	​	​	​
​	​	June 30,
​		2022			2023
Long term deferred income tax asset, included in other assets	​	$	3,841	​	$	4,244
Long term deferred income tax liability	​		(11,112)	​		(6,571)
Net deferred income tax liability	​	$	(7,271)	​	$	(2,327)

​

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

​

​	​	​	​	​	​	​
​		June 30,
​	​	2022			2023
Current taxes receivable and prepaid taxes, included in prepaid expenses and other current assets	​	$	7,843	​	$	7,216
Current taxes payable, included in other accrued expenses and current liabilities	​		(7,722)	​		(13,692)
Net tax receivable (payable)	​	$	121	​	$	(6,476)

​

As of June 30, 2023, we had federal, state and foreign net operating losses carryforwards of approximately $1.1 million, $22.6 million and $7.9 million, respectively. Our net operating loss carryforwards will begin to expire in the tax year ending June 30, 2028. As of June 30, 2023, we had federal and state tax credit carryforwards of approximately $0.5 million and $8.1 million, respectively. Our credit carryforwards will begin to expire in the tax year ending June 30, 2026.

We have established valuation allowances that relate to the net operating losses of certain subsidiaries, capital losses, and tax credits. During the year ended June 30, 2023, 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 benefit of approximately $2.0 million and $0.6 million was recognized in fiscal 2022 and 2023, respectively.

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

​

​	​	​	​	​	​	​	​
​	​	June 30,
​		2021		2022		2023
Provision for income taxes at federal statutory rate	​	21.0	%	21.0	%	21.0	%
Research and development tax credits	​	(1.7)	​	(1.3)	​	(1.5)	​
Foreign income subject to tax at other than federal statutory rate	​	0.6	​	0.2	​	0.2	​
Stock compensation	​	(0.9)	​	(1.2)	​	(0.4)	​
Officers’ compensation	​	5.8	​	4.3	​	5.5	​
Change in valuation allowance	​	(5.9)	​	(4.0)	​	(0.5)	​
Unrecognized tax expense (benefit)	​	4.2	​	(1.4)	​	0.3	​
Tax on foreign currency gains and losses	​	(0.2)	​	—	​	(0.6)	​
State tax expense	​	1.2	​	1.0	​	0.3	​
U.S. tax on foreign earnings	​	(1.8)	​	0.9	​	1.4	​
Changes in prior year estimates	​	—	​	(0.6)	​	(1.1)	​
Global intangible low-taxed income, net of foreign tax credits	​	0.5	​	0.3	​	0.8	​
Foreign Derived Intangible Income Benefit	​	(1.3)	​	(1.3)	​	(1.8)	​
Non-taxable earnings from acquisitions	​	(0.4)	​	(0.6)	​	(2.1)	​
Patent box benefit	​	—	​	(0.3)	​	(1.9)	​
Withholding tax on foreign earnings	​	3.4	​	—	​	—	​
Other	​	0.4	​	0.7	​	0.8	​
Effective income tax rate	​	24.9	%	17.7	%	20.4	%

​

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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