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Income Taxes

12 Months Ended

Jun. 30, 2017

11. Income Taxes

Income (loss) before income taxes was:

For the Years Ended June 30	2017			2016			2015
Domestic		$	18,015		$	2,027		$	15,937
Foreign			62,528			74,734			62,826
Income (loss) before income taxes		$	80,543		$	76,761		$	78,763

Components of the provision for income taxes were:

For the Years Ended June 30	2017			2016			2015
Current provision (benefit):
Federal		$	383		$	(2,889)		$	(468)
State and local			724			(474)			(48)
Foreign			14,839			20,168			13,868
Total current provision			15,946			16,805			13,352
Deferred provision (benefit):
Federal			4,675			(2,985)			6,157
State and local			251			911			1,311
Foreign			(833)			(989)			5,933
Change in valuation allowance–domestic			—			(19,588)			(7,468)
Change in valuation allowance–foreign			(4,111)			(121)			(802)
Total deferred provision			(18)			(22,772)			5,131
Provision (benefit) for income taxes		$	15,928		$	(5,967)		$	18,483

During 2017, based on continued profitability, we concluded that it was more likely than not that the value of certain foreign deferred tax assets would be realized, and it was no longer necessary to maintain a related valuation allowance. Accordingly, we released the valuation allowance related to these foreign deferred tax assets. We review the realizability of our deferred tax assets when circumstances indicate a review is required.

Reconciliations of the federal statutory rate to the Company’s effective tax rate were:

For the Years Ended June 30	2017		2016		2015
Federal income tax rate		35.0%		35.0%		35.0%
State and local taxes, net of federal benefit		0.9		0.2		0.2
Change in federal valuation allowance		—		(27.8)		(7.8)
Change in foreign valuation allowance		(5.1)		—		—
Foreign income tax rates		(6.8)		(5.5)		(2.2)
Foreign withholding tax		0.1		0.1		0.3
Foreign incentive tax rates		(3.1)		(4.5)		(4.1)
Domestic tax on foreign income		2.7		2.7		0.9
Change in liability for uncertain tax positions		1.6		(4.9)		1.5
Permanent items		(0.9)		1.5		(0.6)
Exercise of employee stock options		(3.8)		(4.6)		—
Other		(0.8)		—		0.3
Effective tax rate		19.8%		(7.8)%		23.5%

We have not provided for United States or additional foreign taxes on approximately $211,631 of undistributed earnings of foreign subsidiaries, which earnings have been or are intended to be indefinitely reinvested. It is not practicable at this time to determine the amount of income tax liability that would result should such earnings be repatriated. Taxes are not provided for foreign currency translation adjustments relating to investments in international subsidiaries that will be held indefinitely.

The tax effects of significant temporary differences that comprise deferred tax assets and liabilities were:

As of June 30	2017			2016
Deferred tax assets:
Employee related accruals		$	7,146		$	12,603
Inventory			4,851			2,573
Environmental remediation			2,280			2,208
Net operating loss carry forwards–domestic			4,893			13,768
Net operating loss carry forwards–foreign			4,023			4,346
Other			11,139			7,566
			34,332			43,064
Valuation allowance			(438)			(4,614)
			33,894			38,450
Deferred tax liabilities:
Property, plant and equipment and intangible assets			(9,671)			(9,725)
Other			(2,004)			(1,956)
			(11,675)			(11,681)
Net deferred tax asset		$	22,219		$	26,769

Deferred taxes are included in the consolidated balance sheets as follows:

As of June 30	2017			2016
Other assets		$	23,269		$	28,019
Other liabilities			(1,050)			(1,250)
		$	22,219		$	26,769

The valuation allowances for deferred tax assets were:

As of June 30	2017			2016			2015
Balance at beginning of period		$	4,614		$	26,622		$	32,892
Provision for income taxes			(4,111)			(19,709)			(6,270)
Net operating loss utilization			(65)			(2,299)			—
Balance at end of period		$	438		$	4,614		$	26,622

The valuation allowance for deferred tax assets as of June 30, 2017, is solely related to foreign jurisdictions.

The Company has approximately $9,191 of domestic federal net operating loss carry forwards that expire in 2028 through 2036 and approximately $32,555 of state net operating loss carry forwards that will expire in 2017 through 2036. In addition, the Company has approximately $11,915 of foreign net operating loss carry forwards, most of which are in jurisdictions that have no expiration.

As tax law is complex and often subject to varied interpretations, it is uncertain whether some of our tax positions will be sustained upon examination. Tax liabilities associated with uncertain tax positions represent unrecognized tax benefits, which arise when the estimated benefit recorded in our financial statements differs from the amounts taken or expected to be taken in a tax return because of the uncertainties described above. Substantially all of these unrecognized tax benefits, if recognized, would benefit our effective income tax rate. The reconciliation of the beginning and ending amounts of gross unrecognized tax benefits follows:

As of June 30	2017			2016			2015
Unrecognized tax benefits–beginning of period		$	4,946		$	8,078		$	7,420
Tax position changes–prior periods			—			188			(24)
Tax position changes–current period			1,490			472			1,945
Lapse of statute of limitations			(391)			(3,700)			(907)
Translation			508			(92)			(356)
Unrecognized tax benefits–end of period			6,553			4,946			8,078
Interest and penalties–end of period			449			308			1,326
Total liabilities related to uncertain tax positions		$	7,002		$	5,254		$	9,404

We recognize interest and penalties associated with uncertain tax positions as a component of the provision for income taxes. We recognized interest and penalties expense (income) of $116, $(980) and $66 for 2017, 2016 and 2015, respectively.

During 2018, we potentially will reverse $300 of uncertain tax positions as a result of the lapse of the statute of limitations, with a corresponding benefit to the provision for income taxes.

One of our international subsidiaries is undergoing an income tax examination for the years 2013 and 2014. The examination is ongoing and is expected to be completed during 2018. We are unable to determine the effect, if any, of the results of the examination on the provision for income taxes.

Income tax returns for the following periods are no longer subject to examination by the relevant tax authorities:

• U.S. federal and significant states, through June 30, 2007;

• Brazil, through December 31, 2011;

• Israel, through June 30, 2012 for certain subsidiaries and through June 30, 2013 for certain subsidiaries.