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Note 13 - Income Taxes | 12 Months Ended
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Jun. 30, 2019
Notes to Financial Statements |
Income Tax Disclosure [Text Block] |
( 13 ) | Income Taxes
Income tax expense attributable to income before income taxes consists of the following for the fiscal years ended June 30 ( in thousands):
|  | 2019 |  |  | 2018 |  |  | 2017 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 10,133 |  |  | $ | 10,289 |  |  | $ | 15,265 |
State |  |  | 1,237 |  |  |  | 1,689 |  |  |  | 1,585 |
Foreign |  |  | 304 |  |  |  | 824 |  |  |  | 445 |
Total current |  |  | 11,674 |  |  |  | 12,802 |  |  |  | 17,295 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | (3,092 | ) |  |  | 174 |  |  |  | 3,413 |
State |  |  | (381 | ) |  |  | (124 | ) |  |  | 85 |
Foreign |  |  | (39 | ) |  |  | (156 | ) |  |  | 8 |
Total deferred |  |  | (3,512 | ) |  |  | (106 | ) |  |  | 3,506 |
Income tax expense |  | $ | 8,162 |  |  | $ | 12,696 |  |  | $ | 20,801 |
The following is a reconciliation of expected income tax expense (benefit) (computed by applying the federal statutory income tax rate to income before taxes) to actual income tax expense (benefit) (in thousands):
|  | 2019 |  |  | 2018 |  |  | 2017 |
Expected income tax expense |  | $ | 7,111 |  |  |  | 21.0 | % |  | $ | 13,739 |  |  |  | 28.0 | % |  | $ | 19,947 |  |  |  | 35.0 | %
State income taxes, net of federal income tax |  |  | 737 |  |  |  | 2.2 | % |  |  | 1,263 |  |  |  | 2.6 | % |  |  | 1,403 |  |  |  | 2.5 | %
Valuation allowance |  |  | 602 |  |  |  | 1.8 | % |  |  | 42 |  |  |  | 0.1 | % |  |  | 329 |  |  |  | 0.6 | %
Re-measurement of deferred taxes |  |  | - |  |  |  | 0.0 | % |  |  | (2,651 | ) |  |  | -5.4 | % |  |  | - |  |  |  | - |
Section 199 Qualified Production Activities deduction |  |  | - |  |  |  | 0.0 | % |  |  | (678 | ) |  |  | -1.4 | % |  |  | (999 | ) |  |  | -1.8 | %
Section 250 Foreign Derived Intangible Income deduction |  |  | (161 | ) |  |  | -0.5 | % |  |  | - |  |  |  | 0.0 | % |  |  | - |  |  |  | 0.0 | %
Unrecognized tax expense (benefit) |  |  | 26 |  |  |  | 0.1 | % |  |  | 55 |  |  |  | 0.1 | % |  |  | (48 | ) |  |  | -0.1 | %
Stock-based compensation - forfeitures and exercises |  |  | 184 |  |  |  | 0.5 | % |  |  | 570 |  |  |  | 1.2 | % |  |  | - |  |  |  | - |
Other, net |  |  | (337 | ) |  |  | -1.0 | % |  |  | 356 |  |  |  | 0.7 | % |  |  | 169 |  |  |  | 0.3 | %
Actual income tax expense |  | $ | 8,162 |  |  |  | 24.1 | % |  | $ | 12,696 |  |  |  | 25.9 | % |  | $ | 20,801 |  |  |  | 36.5 | %
The significant components of deferred tax assets recorded within the consolidated balance sheet were as follows (in thousands):
|  | 2019 |  |  | 2018 |
Deferred tax assets: |  |  |  |  |  |  |  |
Employee compensation accruals |  | $ | 2,697 |  |  | $ | 2,729 |
Stock-based compensation |  |  | 715 |  |  |  | 933 |
Deferred rent credits |  |  | 4,184 |  |  |  | 4,407 |
Net operating loss carryforwards |  |  | 4,259 |  |  |  | 3,959 |
Property, plant and equipment |  |  | 1,021 |  |  |  | - |
Goodwill |  |  | 77 |  |  |  | 328 |
Reserves |  |  | 863 |  |  |  | 247 |
Other, net |  |  | 1,401 |  |  |  | 1,460 |
Subtotal deferred tax assets |  |  | 15,217 |  |  |  | 14,063 |
Less: Valuation allowance |  |  | (3,197 | ) |  |  | (2,527 | )
Total net deferred tax assets |  | $ | 12,020 |  |  | $ | 11,536 |
The significant components of deferred tax liabilities recorded within the consolidated balance sheet were as follows (in thousands)
|  | 2019 |  |  | 2018 |
Property, plant and equipment |  | $ | - |  |  | $ | 2,827 |
Intangible assets other than goodwill |  |  | 9,007 |  |  |  | 8,951 |
Commissions |  |  | 1,974 |  |  |  | 2,230 |
Total deferred tax liability |  | $ | 10,981 |  |  | $ | 14,008 |
The deferred tax balances are classified in the consolidated balance sheets as follows at June 30 ( in thousands):
|  | 2019 |  |  | 2018 |
Non-current assets |  | $ | 2,108 |  |  | $ | 1,688 |
Non-current liabilities |  |  | 1,069 |  |  |  | 4,160 |
Total net deferred tax asset (liability) |  | $ | 1,039 |  |  | $ | (2,472 | )
Commencing with fiscal 2018 the Company is prospectively reporting its deferred tax assets and liabilities as non-current in conformance with ASU 2015 - 17, Balance Sheet Classification of Deferred Tax Assets . Prior to that, current deferred tax assets and liabilities and non-current deferred tax assets and liabilities were presented net in the consolidated balance sheets. We evaluate our deferred tax assets to determine if the “more likely than not ” standard of evidence has not been met thereby supporting the need for a valuation allowance. A valuation allowance must be established for deferred tax assets when it is not more likely than not that assets will be realized. At June 30, 2019, such an allowance was in place against the Belgian and Canadian foreign tax assets, and totaled $3.2 million compared to $2.5 million at June 30, 2018. The Company’s deferred income tax assets at June 30, 2019 with respect to the net operating losses expire as follows (in thousands):
|  | Deferred Income |  |  | Net Operating Loss |
|  | Tax Assets |  |  | Carryforwards |
United States (federal and state), expiring between 2023 and 2032 |  | $ | 1,168 |  |  | $ | 20,662 |
Foreign, expiring between 2034 and 2039 |  | $ | 3,091 |  |  | $ | 9,566 |
Deferred federal income taxes were previously not provided for unremitted foreign earnings of our foreign subsidiaries because we expected those earnings to be indefinitely reinvested. As part of the Tax Act, the Company reported the Deemed Repatriation Transition Tax (the “Transition Tax”) on previously untaxed accumulated earnings and profits (“E&P”) of certain of our foreign subsidiaries. To determine the amount of the Transition Tax, we determined, in addition to other factors, the amount of post- 1986 E&P of the relevant subsidiaries, as well as the amount of non-U.S. income taxes paid on such earnings. We reported a Transition Tax obligation of $0.1 million for the fiscal year ended June 30, 2018. On December 22, 2017, the Tax Act was enacted. Among the significant changes to the United States Internal Revenue Code, the Tax Act lowered the United States federal corporate income tax rate (“Federal Tax Rate”) from 35% to 21% effective January 1, 2018, introduced a limitation on the deduction of certain interest expenses, introduced a deduction for certain business capital expenditures and introduced a system of taxing foreign-sourced income from multinational corporations. The Company computed its income tax expense for the 2018 fiscal year using a blended Federal Tax Rate of 28%. The 21% Federal Tax Rate applies to fiscal years ending June 30, 2019 and each year thereafter. The Company re-measured its net deferred tax assets and liabilities using the Federal Tax Rate that would apply when these amounts were expected to reverse. At June 30, 2018, the Company’s re-measurement of its deferred tax assets and liabilities resulted in a discrete tax benefit $2.7 million, which lowered the effective tax rate by 5.4% for that fiscal year. Uncertain Tax Positions We recognize interest and penalties related to income tax matters as a component of income tax expense. If the $2.2 million of unrecognized tax benefits and related interest and penalties as of June 30, 2019 were recognized, approximately $1.7 million would be recorded as a benefit to income tax expense. A reconciliation of the beginning and ending amount of unrecognized tax benefits including related interest and penalties as of June 30, 2019 and 2018 is as follows (in thousands):
|  | 2019 |  |  | 2018 |
Beginning balance |  | $ | 2,187 |  |  | $ | 2,106 |
Additions for tax positions taken during the current year |  |  | 329 |  |  |  | 360 |
Additions for tax positions taken during the prior year |  |  | 143 |  |  |  | 107 |
Reductions for tax positions taken in prior years |  |  | (450 | ) |  |  | (386 | )
Decreases related to settlements with taxing authorities |  |  | - |  |  |  | - |
Ending balance |  | $ | 2,209 |  |  | $ | 2,187 |
It is reasonably possible that various issues relating to approximately $0.6 million of the total gross unrecognized tax benefits as of June 30, 2019 will be resolved within the next twelve months as exams are completed or statutes expire. If recognized, approximately $0.6 million of unrecognized tax benefits would reduce our tax expense in the period realized. However, actual results could differ from those currently anticipated. The Company conducts business globally and, as a result, the Company or one or more of its subsidiaries files income tax returns in the United States, various state, and foreign jurisdictions. In the normal course of business, the Company is subject to examination by the taxing authorities in such major jurisdictions as the United States, Canada, Mexico, Belgium and Honduras. As of June 30, 2019, the Company and certain subsidiaries are currently under audit from 2015 through 2017 in the United States. While the amount of uncertain tax benefits with respect to the entities and years under audit may change within the next twelve months, it is not anticipated that any of the changes will be significant.

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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. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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