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Note 13 - Income Taxes | 12 Months Ended
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Jun. 30, 2021
Notes to Financial Statements |
Income Tax Disclosure [Text Block] |
(13) | Income Taxes
Income tax expense is based on taxable income determined in accordance with current enacted laws and tax rates. Deferred income taxes are recorded for the temporary differences between the financial statement and tax bases of assets and liabilities using currently enacted tax rates. Income tax expense for the fiscal years ended June 30 were as follows (in thousands):
|  | 2021 |  |  | 2020 |  |  | 2019 |
U.S. operations |  | $ | 75,458 |  |  | $ | 12,690 |  |  | $ | 35,041 |
Non-U.S. operations |  |  | 953 |  |  |  | 1,499 |  |  |  | (1,181 | )
Income before income taxes |  | $ | 76,411 |  |  | $ | 14,189 |  |  | $ | 33,860 |
U.S. operations |  |  | 15,812 |  |  |  | 4,989 |  |  |  | 7,897 |
Non-U.S. operations |  |  | 594 |  |  |  | 300 |  |  |  | 265 |
Total income tax expense |  | $ | 16,406 |  |  | $ | 5,289 |  |  | $ | 8,162 |
Effective tax rate |  |  | 21.5 | % |  |  | 37.3 | % |  |  | 24.1 | %
The components of income tax expense for the fiscal years ended June 30 were as follows (in thousands):
|  | 2021 |  |  | 2020 |  |  | 2019 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 10,617 |  |  | $ | 2,432 |  |  | $ | 10,132 |
State |  |  | 1,647 |  |  |  | 8 |  |  |  | 1,237 |
Foreign |  |  | 492 |  |  |  | 325 |  |  |  | 304 |
Total current |  |  | 12,756 |  |  |  | 2,765 |  |  |  | 11,673 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | 4,462 |  |  |  | 181 |  |  |  | (3,091 | )
State |  |  | (914 | ) |  |  | 2,368 |  |  |  | (381 | )
Foreign |  |  | 102 |  |  |  | (25 | ) |  |  | (39 | )
Total deferred |  |  | 3,650 |  |  |  | 2,524 |  |  |  | (3,511 | )
Total income tax expense |  | $ | 16,406 |  |  | $ | 5,289 |  |  | $ | 8,162 |
The following is a reconciliation of our effective tax rate to the U.S. federal income tax rate for the fiscal years ended June 30 (in thousands):
|  | 2021 |  |  | 2020 |  |  | 2019 |
Income tax expense at U.S. Federal statutory tax rate |  | $ | 16,046 |  |  |  | 21.0 | % |  | $ | 2,980 |  |  |  | 21.0 | % |  | $ | 7,111 |  |  |  | 21.0 | %
Increase (decrease) in income taxes resulting from: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
State and local income taxes, net of U.S. federal income benefit |  |  | 2,565 |  |  |  | 3.4 | % |  |  | 159 |  |  |  | 1.1 | % |  |  | 737 |  |  |  | 2.2 | %
Change in valuation allowance |  |  | (2,565 | ) |  |  | -3.4 | % |  |  | 2,534 |  |  |  | 17.9 | % |  |  | 602 |  |  |  | 1.8 | %
Foreign derived intangible income ("FDII") deduction |  |  | - |  |  |  | 0.0 | % |  |  | - |  |  |  | 0.0 | % |  |  | (161 | ) |  |  | -0.5 | %
Unrecognized tax benefits |  |  | 48 |  |  |  | 0.1 | % |  |  | (215 | ) |  |  | -1.5 | % |  |  | 26 |  |  |  | 0.1 | %
Share-based compensation |  |  | 72 |  |  |  | 0.1 | % |  |  | 17 |  |  |  | 0.1 | % |  |  | 184 |  |  |  | 0.5 | %
Other, net |  |  | 240 |  |  |  | 0.3 | % |  |  | (186 | ) |  |  | -1.3 | % |  |  | (337 | ) |  |  | -1.0 | %
Actual income tax expense (and corresponding effective tax rate) |  | $ | 16,406 |  |  |  | 21.5 | % |  | $ | 5,289 |  |  |  | 37.3 | % |  | $ | 8,162 |  |  |  | 24.1 | %
The significant components of deferred tax assets recorded within the consolidated balance sheet were as follows (in thousands):
|  | June 30, |
|  | 2021 |  |  | 2020 |
Leases |  | $ | 30,692 |  |  | $ | 32,184 |
Employee compensation accruals |  |  | 2,131 |  |  |  | 2,259 |
Share-based compensation |  |  | 727 |  |  |  | 670 |
Net operating loss carryforwards |  |  | 1,420 |  |  |  | 2,002 |
Property, plant and equipment |  |  | 1,446 |  |  |  | 1,020 |
Other |  |  | 2,263 |  |  |  | 2,825 |
Subtotal deferred tax assets |  |  | 38,679 |  |  |  | 40,960 |
Less: Valuation allowance |  |  | (593 | ) |  |  | (3,158 | )
Total deferred tax assets |  | $ | 38,086 |  |  | $ | 37,802 |
The significant components of deferred tax liabilities recorded within the consolidated balance sheet were as follows (in thousands):
|  | June 30, |
|  | 2021 |  |  | 2020 |
Operating lease right-of-use assets |  | $ | 26,811 |  |  | $ | 27,334 |
Intangible assets other than goodwill |  |  | 8,979 |  |  |  | 9,080 |
Commissions |  |  | 5,744 |  |  |  | 2,207 |
Other |  |  | 502 |  |  |  | 118 |
Total deferred tax liabilities |  | $ | 42,036 |  |  | $ | 38,739 |
Deferred tax balances are classified in the consolidated balance sheets as follows (in thousands):
|  | June 30, |
|  | 2021 |  |  | 2020 |
Other assets |  | $ | 1,078 |  |  | $ | 137 |
Other non-current liabilities |  |  | 5,028 |  |  |  | 1,074 |
Total net deferred tax asset (liability) |  | $ | (3,950 | ) |  | $ | (937 | )
We evaluate our deferred taxes to determine if the “more likely than not” standard of evidence has not been met thereby supporting the need for a valuation allowance. The evaluation of the amount of net deferred tax assets expected to be realized necessarily involves forecasting the amount of taxable income that will be generated in future years. We have forecasted future results using estimates management believes to be reasonable. Our forecasts are based on our best estimate of expected trends resulting from certain leading economic indicators. The realization of deferred income tax assets is dependent on future events. Actual results inevitably will vary from management's forecasts which may be impacted by the ongoing COVID-19 pandemic, possibly resulting in a sustained economic downturn, or significantly extended economic recovery. Such variances could result in adjustments to the valuation allowance on deferred tax assets in future periods, and such adjustments could be material to the financial statements. A valuation allowance must be established for deferred tax assets when it is more likely than not that assets will not be realized. At June 30, 2021, a valuation allowance of $0.6 million was in place against the retail segment's Canadian tax assets. The valuation allowance previously recorded of $2.5 million against the U.S. state and local deferred tax assets was removed during fiscal 2021 as it was now considered more likely than not to be realized based on the performance and related positive earnings generated by the retail segment’s U.S. operations over the past 36 months. At June 30, 2020, a valuation allowance of $3.2 million was in place against the retail segment’s U.S. state and local and Canadian foreign tax assets. With the liquidation of the Belgian subsidiary during fiscal 2020, the previously recorded valuation allowance of $2.6 million was removed in fiscal 2020. This reduction was partially offset by a $2.5 million valuation allowance recorded during fiscal 2020 on our U.S. retail segment’s state and local deferred tax assets. The deferred tax assets at June 30, 2021 associated with net operating loss carryforwards and the related expiration dates are as follows (in thousands):
|  | Deferred |  |  | Net Operating Loss |
|  | Tax Assets |  |  | Carryforwards |
Various U.S. state net operating losses, expiring between 2025 and 2040 |  | $ | 1,148 |  |  | $ | 21,457 |
Foreign capital losses, expiring between 2034 and 2040 |  | $ | 272 |  |  | $ | 1,027 |
Uncertain Tax Positions We recognize interest and penalties related to income tax matters as a component of income tax expense. If the $2.0 million of unrecognized tax benefits and related interest and penalties as of June 30, 2021 were recognized, approximately $1.6 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 is as follows (in thousands):
|  | June 30, |
|  | 2021 |  |  | 2020 |
Beginning balance |  | $ | 1,933 |  |  | $ | 2,209 |
Additions for tax positions related to the current year |  |  | 452 |  |  |  | 214 |
Additions for tax positions of prior years |  |  | 117 |  |  |  | 126 |
Reductions resulting from a lapse of the applicable statute of limitations |  |  | (518 | ) |  |  | (616 | )
Ending balance |  | $ | 1,984 |  |  | $ | 1,933 |
It is reasonably possible that various issues relating to approximately $0.4 million of the total gross unrecognized tax benefits as of June 30, 2021 will be resolved within the next twelve months as exams are completed or statutes expire. If recognized, approximately $0.4 million of unrecognized tax benefits would reduce our income tax expense in the period realized. 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 and Honduras. As of June 30, 2021, the Company and certain subsidiaries are currently under audit from 2017 through 2019 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://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
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