XML 37 R22.htm IDEA: XBRL DOCUMENT
v3.22.2

Income Taxes | 12 Months Ended
--- | ---
Jun. 30, 2022
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES Income (loss) before income taxes consisted of the following for the years ended June 30:
(in thousands) |  | 2022 |  | 2021 |  | 2020
Income (loss) before income taxes: |  |  |  |  |  |
United States |  | $ | 10,109 |  |  | $ | (60,775) |  |  | $ | (76,107) |
International |  | 196,624 |  |  | 125,435 |  |  | 78,067 |
Total income before income taxes |  | $ | 206,733 |  |  | $ | 64,660 |  |  | $ | 1,960 |
Current income taxes: |  |  |  |  |  |
Federal |  | $ | 1,115 |  |  | $ | 39 |  |  | $ | (3,558) |
State |  | 106 |  |  | 133 |  |  | 905 |
International |  | 44,019 |  |  | 30,726 |  |  | 33,559 |
Total current income taxes |  | 45,240 |  |  | 30,898 |  |  | 30,906 |
Deferred income taxes: |  |  |  |  |  |
Federal |  | $ | 10,841 |  |  | $ | (23,170) |  |  | $ | (9,113) |
State |  | (676) |  |  | (2,948) |  |  | 724 |
International |  | 1,127 |  |  | 1,463 |  |  | (15,510) |
Total deferred income taxes: |  | 11,292 |  |  | (24,655) |  |  | (23,899) |
Provision for income taxes |  | $ | 56,532 |  |  | $ | 6,243 |  |  | $ | 7,007 |
Effective tax rate |  | 27.3 | % |  | 9.7 | % |  | 357.5 | %
Coronavirus Aid, Relief, and Economic Security Act (CARES Act) On March 27, 2020, the CARES Act was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, allows net operating losses arising in taxable years beginning after December 31, 2017 and before January 1, 2021 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes; permits net operating loss carryovers and carrybacks to offset 100 percent of taxable income for taxable years beginning before January 1, 2021; and modifies the limitation on business interest by increasing the allowable business interest deduction from 30 percent of adjusted taxable income to 50 percent of adjusted taxable income for taxable years beginning in 2019 or 2020. We carried back our taxable loss in the U.S. for fiscal 2020 under the provisions of the CARES Act and recorded a benefit in our tax provision during fiscal 2020. Swiss tax reform Legislation was effectively enacted during the December quarter of fiscal 2020 when the Canton of Schaffhausen approved the Federal Act on Tax Reform and AHV Financing on October 8, 2019 (Swiss tax reform). Significant changes from Swiss tax reform include the abolishment of certain favorable tax regimes and the creation of a multi-year transitional period at both the federal and cantonal levels. The transitional provisions of Swiss tax reform allow companies to utilize a combination of lower tax rates and tax basis adjustments to fair value, which are used for tax depreciation and amortization purposes resulting in deductions over the transitional period. To reflect the federal and cantonal transitional provisions, as they apply to us, we recorded a deferred tax asset of $14.5 million during the December quarter of fiscal 2020. We consider the deferred tax asset from Swiss tax reform to be an estimate based on our current interpretation of the legislation, which is subject to change based on further legislative guidance, review with the Swiss federal and cantonal authorities, and modifications to the underlying valuation. We anticipate finalization of the deferred tax asset within the next six months. The reconciliation of income taxes computed using the statutory U.S. income tax rate and the provision for income taxes was as follows for the years ended June 30:
(in thousands) |  | 2022 |  | 2021 |  | 2020
Income taxes at U.S. statutory rate |  | $ | 43,414 |  |  | $ | 13,579 |  |  | $ | 412 |
State income taxes, net of federal tax benefit |  | (450) |  |  | (1,725) |  |  | 1,283 |
U.S. income taxes provided on international income |  | 12,815 |  |  | (6,479) |  |  | 12,422 |
Combined tax effects of international income |  | 2,747 |  |  | 5,860 |  |  | 10,583 |
Impact of goodwill impairment charges |  | — |  |  | — |  |  | 5,651 |
Change in valuation allowance and other uncertain tax positions |  | (614) |  |  | 1,127 |  |  | 755 |
U.S. research and development credit |  | (2,814) |  |  | (3,055) |  |  | (4,093) |
Change in permanent reinvestment assertion |  | 775 |  |  | — |  |  | — |
Combined effects of Swiss tax reform |  | — |  |  | — |  |  | (14,500) |
Combined effects of the U.S. CARES Act |  | — |  |  | — |  |  | (6,913) |
Recognition of stranded deferred tax balance |  | — |  |  | (3,465) |  |  | — |
Other |  | 659 |  |  | 401 |  |  | 1,407 |
Provision for income taxes |  | $ | 56,532 |  |  | $ | 6,243 |  |  | $ | 7,007 |
During 2021, we recorded a tax benefit of $3.5 million for the recognition of a stranded deferred tax balance in accumulated other comprehensive loss associated with the forward starting interest rate swap contracts that were terminated when the 2022 Senior Notes were extinguished. The impact of this item is included in the tax reconciliation table under the caption “Recognition of stranded deferred tax balance” and in the consolidated statements of cash flows as a non-cash item within the caption "Debt refinancing charge." During 2021, we recorded a net tax benefit of $9.3 million related to a tax election made in our fiscal 2020 U.S. income tax return pursuant to global intangible low-taxed income (GILTI) regulations which were issued during the current fiscal year. The impact of this item is included in the tax reconciliation table under the caption “U.S. income taxes provided on international income.” The components of net deferred tax assets and liabilities were as follows at June 30:
(in thousands) |  | 2022 |  | 2021
Deferred tax assets: |  |  |  |
Net operating loss (NOL) carryforwards |  | $ | 25,868 |  |  | $ | 44,258 |
Inventory valuation and reserves |  | 11,747 |  |  | 11,068 |
Pension benefits |  | — |  |  | 7,136 |
Other postretirement benefits |  | 3,050 |  |  | 3,486 |
Accrued employee benefits |  | 11,775 |  |  | 11,168 |
Operating lease liabilities |  | 11,995 |  |  | 12,652 |
Other accrued liabilities |  | 12,992 |  |  | 15,596 |
Tax credits and other carryforwards |  | 34,930 |  |  | 32,490 |
Intangible assets |  | 4,246 |  |  | 7,784 |
Total |  | 116,603 |  |  | 145,638 |
Valuation allowance |  | 14,385 |  |  | 21,263 |
Total deferred tax assets |  | $ | 102,218 |  |  | $ | 124,375 |
Deferred tax liabilities: |  |  |  |
Tax depreciation in excess of book |  | $ | 57,109 |  |  | $ | 63,020 |
Operating lease right-of-use assets |  | 11,852 |  |  | 12,502 |
Unremitted earnings not permanently reinvested |  | 7,242 |  |  | 6,429 |
Pension benefits |  | 1,061 |  |  | — |
Other |  | 2,537 |  |  | 7,392 |
Total deferred tax liabilities |  | $ | 79,801 |  |  | $ | 89,343 |
Total net deferred tax assets (liabilities) |  | $ | 22,417 |  |  | $ | 35,032 |
As of June 30, 2022, we have $25.9 million of U.S. net deferred tax assets. Within this amount is $46.2 million related to net operating loss, tax credit, and other carryforwards that can be used to offset future U.S. taxable income. Certain of these carryforwards will expire if they are not used within a specified timeframe. At this time, we consider it more likely than not that we will have sufficient U.S. taxable income in the future that will allow us to realize these net deferred tax assets. However, it is possible that some or all of these tax attributes could ultimately expire unused. Therefore, if we are unable to generate sufficient U.S. taxable income from our operations, a valuation allowance to reduce the U.S. net deferred tax assets may be required, which would materially increase income tax expense in the period in which the valuation allowance is recorded. Included in deferred tax assets at June 30, 2022 is $34.9 million associated with tax credits and other carryforward items in the U.S. and Europe. Of that amount, $2.5 million expires through 2032, $4.6 million expires through 2037, $19.1 million expires through 2042, $1.5 million does not expire, and $7.2 million is amortizable over ten years. Included in deferred tax assets at June 30, 2022 is $25.9 million associated with NOL carryforwards in U.S. state and foreign jurisdictions. Of that amount, $4.7 million expires through 2027, $2.0 million expires through 2032, $3.2 million expires through 2037, $2.2 million expires through 2042, and the remaining $13.8 million does not expire. The realization of these tax benefits is primarily dependent on future taxable income in these jurisdictions. A valuation allowance of $14.4 million has been placed against deferred tax assets primarily in U.S. state, Brazil, Bolivia, and Russia jurisdictions, all of which would be allocated to income tax expense upon realization of the deferred tax assets. As the respective operations generate sufficient income, the valuation allowances will be partially or fully reversed at such time we believe it will be more likely than not that the deferred tax assets will be realized. In 2022, the valuation allowance related to these deferred tax assets decreased by $6.9 million. We consider the majority of the $1.5 billion unremitted earnings of our non-U.S. subsidiaries to be permanently reinvested. With regard to these unremitted earnings, we have not, nor do we anticipate the need to, repatriate funds to the U.S. to satisfy domestic liquidity needs arising in the ordinary course of business, including liquidity needs associated with our domestic debt service requirements. Determination of the amount of unrecognized deferred tax liability related to indefinitely reinvested earnings is not practicable due to our legal entity structure and the complexity of U.S. and local tax laws. With regard to the small portion of unremitted earnings that are not indefinitely reinvested, we maintain a deferred tax liability for foreign withholding and U.S. state income taxes. The deferred tax liability associated with unremitted earnings of our non-U.S. subsidiaries not permanently reinvested is $7.2 million as of June 30, 2022. A reconciliation of the beginning and ending amount of unrecognized tax benefits (excluding interest and penalty) is as follows as of June 30:
(in thousands) |  | 2022 |  | 2021 |  | 2020
Balance at beginning of year |  | $ | 8,656 |  |  | $ | 8,680 |  |  | $ | 8,952 |
Increases for tax positions of prior years |  | 105 |  |  | — |  |  | — |
Decreases related to lapse of statute of limitations |  | (779) |  |  | (229) |  |  | (214) |
Foreign currency translation |  | (384) |  |  | 205 |  |  | (58) |
Balance at end of year |  | $ | 7,598 |  |  | $ | 8,656 |  |  | $ | 8,680 |
The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate in 2022, 2021 and 2020 is $7.6 million, $8.7 million and $8.7 million, respectively. We believe that it is reasonably possible that the amount of unrecognized tax benefits will decrease by approximately $2.0 million within the next twelve months. Our policy is to recognize interest and penalties related to income taxes as a component of the provision for income taxes in the consolidated statements of income. We recognized an increase of $0.1 million and $1.0 million in 2022 and 2020, respectively, and a decrease of $0.2 million in 2021. As of June 30, 2022 and 2021, the amount of interest accrued was $1.4 million in both periods. As of June 30, 2022 and 2021, there was no penalty accrued. With few exceptions, we are no longer subject to income tax examinations by tax authorities for years prior to 2015. The Internal Revenue Service has audited or the statute of limitations has expired for all U.S. tax years prior to 2018. Various state and foreign jurisdiction tax authorities are in the process of examining our income tax returns for various tax years ranging from 2015 to 2019. We continuously review our uncertain tax positions and evaluate any potential issues that may lead to an increase or decrease in the total amount of unrecognized tax benefits recorded.

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/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration