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Income Taxes
 12 Months Ended
Jun. 30, 2011
Income Taxes  
Income Taxes
(12)

Income Taxes

Income tax expense (benefit) consists of:

 

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     Fiscal Year Ended June 30,  
     2011     2010     2009  
     (in thousands)  

Current:

                         

Federal

    $ 34,782      $ 27,749      $ 20,444   

State

      248        1,104        (314 ) 

Foreign

      5,008        2,922        5,626   
    

 

 

    

 

 

    

 

 

  

Total current

      40,038        31,775        25,756   
    

 

 

    

 

 

    

 

 

  

Deferred:

                         

Federal

      (168 )      (4,410 )      2,253   

State

      (9 )      (323 )      191   

Foreign

      (1,498 )      (113 )      (234 ) 
    

 

 

    

 

 

    

 

 

  

Total deferred

      (1,675 )      (4,846 )      2,210   
    

 

 

    

 

 

    

 

 

  

Provision for income taxes

    $ 38,363      $ 26,929      $ 27,966   
    

 

 

    

 

 

    

 

 

  

 

A reconciliation of the U.S. Federal income tax expense at a statutory rate of 35% to actual income tax expense, excluding any other taxes related to extraordinary gain is as follows:

 

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     Fiscal Year Ended June 30,  
     2011     2010     2009  
     (in thousands)  

U.S. Federal income tax at statutory rate

    $ 39,160      $ 26,509      $ 26,479   

Increase (decrease) in income taxes due to:

                         

State and local income taxes, net of Federal benefit

      625        935        (81 ) 

Tax credits

      (312 )     (633 )      (175 ) 

Valuation allowance

      (195 )      (128 )      21   

Effect of foreign operations, net

      (2,054 )      (1,342 )      (162 ) 

Stock compensation

      239        580        548   

Other

      900        1,008        1,336   
    

 

 

    

 

 

    

 

 

  

Provision for income taxes

    $ 38,363      $ 26,929      $ 27,966   
    

 

 

    

 

 

    

 

 

  

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities are presented below:

 

      00000000       00000000  
     June 30,  
     2011     2010  
     (in thousands)  

Deferred tax assets derived from:

                 

Allowance for accounts receivable

    $ 2,857      $ 4,164   

Inventories

      11,310        7,891   

Nondeductible accrued expenses

      2,204        974   

Net operating loss carryforwards

      452        290   

Tax credits

      241        643   

Deferred compensation

      4,822        3,132   

Stock compensation

      2,868        4,857   
    

 

 

    

 

 

  

Total deferred tax assets

      24,754        21,951   

Valuation allowance

      (517 )      (712 ) 
    

 

 

    

 

 

  

Total deferred tax assets

      24,237        21,239   

Deferred tax liabilities derived from:

                 

Timing of amortization deduction from intangible assets

      (2,717 )      (2,317 ) 

Timing of depreciation and other deductions for building and equipment

      (238 )      (459 ) 
    

 

 

    

 

 

  

Total deferred tax liabilities

      (2,955 )      (2,776 ) 
    

 

 

    

 

 

  

Net deferred tax assets

    $ 21,282      $ 18,463   
    

 

 

    

 

 

  

The components of pretax earnings are as follows:

 

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     Fiscal Year Ended June 30,  
     2011      2010      2009  
     (in thousands)  

Domestic

    $ 96,436       $ 65,566       $ 59,957   

Foreign

      15,450         10,175         15,697   
    

 

 

     

 

 

     

 

 

  

Worldwide pretax earnings

    $ 111,886       $ 75,741       $ 75,654   
    

 

 

     

 

 

     

 

 

  

 

At June 30, 2011, the Company has: (i) gross net operating loss carry forwards of approximately $0.1 million for U.S. Federal income tax purposes that will begin to expire in 2020; (ii) gross net operating loss carry forwards of approximately $0.9 million for state income tax purposes, (iii) foreign gross net operating loss carry forwards of approximately $1.2 million and (iv) state income tax credit carry forwards of approximately $0.1 million that will begin to expire in 2025. As of June 30, 2011, the Company has established a full valuation reserve against the foreign net operating loss carry forwards, and, for both periods, a valuation allowance of less than $0.1 million for state net operating losses where it was determined that, in accordance with ASC 740, it is more likely than not that they cannot be utilized.

The Company has not provided U.S. income taxes for undistributed earnings of foreign subsidiaries that are considered to be retained indefinitely for reinvestment. The distribution of these earnings would result in additional foreign withholding taxes and additional U.S. federal income taxes to the extent they are not offset by foreign tax credits. It has been the practice of the Company to reinvest those earnings in the business outside the United States. These undistributed earnings amounted to approximately $57.2 million at June 30, 2011. If these earnings were remitted to the U.S. they would be subject to income tax. The tax, after foreign tax credits, is estimated to be approximately $8.2 million.

As of June 30, 2011, the Company had gross unrecognized tax benefits of $2.1 million, $1.8 million of which, if recognized, would affect the effective tax rate. This reflects no change on a net basis over the prior fiscal year. The Company does not expect that the total amounts of unrecognized tax benefits will significantly increase or decrease within the next twelve months.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

 

      0000000000       0000000000       0000000000  
     2011     2010     2009  
     (in thousands)  

Beginning Balance

    $ 2,257      $ 2,309      $ 1,976   

Additions based on tax positions related to the current year

      252        -        173   

Additions for tax positions of prior years

      155        307        182   

Reduction for tax positions of prior years

      (559 )      (359 )      (22 ) 

Settlements

      -        -        -   
    

 

 

    

 

 

    

 

 

  

Ending Balance

    $ 2,105      $ 2,257      $ 2,309   
    

 

 

    

 

 

    

 

 

  

The Company conducts business globally and, as a result, one or more of its subsidiaries files income tax returns in the U.S. federal, various state, local and foreign jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities in countries in which it operates. With few exceptions, the Company is no longer subject to state and local, or non-U.S. income tax examinations by tax authorities for the years before 2007.

The Company's continuing practice is to recognize interest and penalties related to income tax matters in income tax expense. As of June 30, 2011, the Company had approximately $0.9 million accrued for interest and penalties, of which $0.2 million was a current period expense.