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Income Taxes | 12 Months Ended
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Jun. 30, 2017
Income Tax Disclosure [Abstract] |
Income Taxes |
12. | INCOME TAXES
Income tax expense consists of the following:
|  | Year ended June 30, |
|  | 2017 |  |  | 2016 |  |  | 2015 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 17.2 |  |  | $ | 22.2 |  |  | $ | 53.7 |
State |  |  | 2.4 |  |  |  | 3.5 |  |  |  | 4.7 |
Total Current |  |  | 19.6 |  |  |  | 25.7 |  |  |  | 58.4 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | 2.0 |  |  |  | 15.4 |  |  |  | (2.1 | )
State |  |  | (1.7 | ) |  |  | (3.2 | ) |  |  | 8.7 |
Foreign |  |  | (1.7 | ) |  |  | 3.5 |  |  |  | (2.3 | )
Change in valuation allowance |  |  | 3.1 |  |  |  | 2.2 |  |  |  | (8.0 | )
Total Deferred |  |  | 1.7 |  |  |  | 17.9 |  |  |  | (3.7 | )
Total income tax expense |  | $ | 21.3 |  |  | $ | 43.6 |  |  | $ | 54.7 |
Income (loss) before income taxes consists of the following:
|  | Year ended June 30, |
|  | 2017 |  |  | 2016 |  |  | 2015 |
United States |  | $ | 45.9 |  |  | $ | 169.5 |  |  | $ | 147.0 |
Foreign |  |  | (3.0 | ) |  |  | (0.6 | ) |  |  | (12.1 | )
Total |  | $ | 42.9 |  |  | $ | 168.9 |  |  | $ | 134.9 |
The differences between income taxes at the statutory federal income tax rate and income taxes reported in the consolidated statements of operations were as follows:
|  | Year ended June 30, |
|  | 2017 |  |  | 2016 |  |  | 2015 |
Federal income tax expense at the statutory rate |  |  | 35.0 | % |  |  | 35.0 | % |  |  | 35.0 | %
State income taxes, net of federal benefit |  |  | 1.7 |  |  |  | 2.0 |  |  |  | 1.7 |
Research and development credits, net of the federal tax on state credits |  |  | (7.1 | ) |  |  | (1.3 | ) |  |  | (2.5 | )
Uncertain tax positions, net of federal benefit |  |  | 3.8 |  |  |  | 0.6 |  |  |  | 1.2 |
Uncertain tax benefits statute expired, net of federal benefit |  |  | (0.9 | ) |  |  | (4.4 | ) |  |  | 0.0 |
Incentive stock option and employee stock purchase plan expense |  |  | 1.9 |  |  |  | (0.3 | ) |  |  | 0.2 |
Adjustment to deferred tax liability attributable to acquired intangible assets |  |  | 0.0 |  |  |  | 0.0 |  |  |  | 1.6 |
Foreign rate differential |  |  | (1.2 | ) |  |  | 0.0 |  |  |  | 1.6 |
Change in valuation allowance |  |  | 7.1 |  |  |  | 1.2 |  |  |  | 2.6 |
California basis step-up election, net of related valuation allowance impact |  |  | 0.0 |  |  |  | 0.0 |  |  |  | (1.2 | )
Early adoption of ASU 2016-09 |  |  | 7.2 |  |  |  | (7.5 | ) |  |  | 0.0 |
Acquisition related transaction costs |  |  | 1.8 |  |  |  | 0.0 |  |  |  | 0.0 |
Other, net |  |  | 0.4 |  |  |  | 0.5 |  |  |  | 0.4 |
|  |  | 49.7 | % |  |  | 25.8 | % |  |  | 40.6 | %
The Company’s effective tax rate for the year ended June 30, 2017 was higher than the years ended June 30, 2016 and 2015. This increase was primarily due a valuation allowance relating to capital losses, the early adoption of ASU 2016-09 regarding stock compensation and an increase in the Company’s liability for unrecognized tax expense. The significant components of the Company’s deferred tax assets and liabilities were comprised of the following at June 30, 2017 and 2016:
|  | Year ended June 30, |
|  | 2017 |  |  | 2016 |
Deferred tax assets: |  |  |  |  |  |  |  |
Net operating loss carryforwards |  | $ | 75.5 |  |  | $ | 54.4 |
Property, plant and equipment |  |  | 2.1 |  |  |  | 1.8 |
Accrued vacation |  |  | 3.0 |  |  |  | 2.0 |
Allowance for doubtful accounts |  |  | 9.7 |  |  |  | 2.4 |
Stock compensation expense |  |  | 29.9 |  |  |  | 27.0 |
Research and development credits |  |  | 9.9 |  |  |  | 9.4 |
Uncertain state tax positions |  |  | 1.4 |  |  |  | 1.1 |
Other, net |  |  | 2.3 |  |  |  | 0.7 |
Total gross deferred tax assets |  |  | 133.8 |  |  |  | 98.8 |
Less valuation allowance |  |  | (40.5 | ) |  |  | (35.6 | )
Total deferred tax assets |  |  | 93.3 |  |  |  | 63.2 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Intangible assets |  |  | 177.7 |  |  |  | 81.1 |
Total deferred tax liabilities |  |  | 177.7 |  |  |  | 81.1 |
Net deferred tax liability |  |  | (84.4 | ) |  |  | (17.9 | )
Due to sustained positive operating performance and the availability of expected future taxable income, the Company concluded that it is more likely than not that the benefits of the majority of its deferred income tax assets will be realized. However, for certain deferred tax assets, a valuation allowance has been established. For the years ended June 30, 2017 and 2016, the Company’s valuation allowance increased by $4.9 and decreased by $2.2, respectively. The net increase of the valuation allowance in the year ended June 30, 2017 consisted of an increase of $1.4 related to capital losses, an increase of $1.9 related to the acquisition of Assurex Health, Inc., an increase of $1.2 related to foreign losses and an increase of $0.4 related to Utah Research Activities Credits. The net increase of the valuation allowance in the year ended June 30, 2016 consisted of an increase of $3.8 related to the adoption of ASU 2016-09 with regard to state excess tax benefits, an increase of $1.9 related to additional state research credit carry-forwards, for which the company concluded it was more likely than not that the benefits of the losses and credits will not be realized. In addition, there was an offsetting decrease in the valuation allowance on foreign net operating losses in the amount of $3.5 which related to a corresponding decrease in the foreign net operating losses. The Company acquired Sividon Diagnostics GmbH on May 31, 2016 (see Note 2). As part of the purchase accounting for this acquisition a net deferred tax liability of approximately $13.2 was recorded, consisting primarily of intangible assets for which the book basis exceeds the tax basis. The Company Acquired Assurex Health, Inc. on August 31, 2016 (see Note 2). As part of the purchase accounting for the acquisition, a net deferred tax liability of approximately $64.5 was recorded, consisting primarily of intangible assets for which the book basis exceeds the tax basis. During the fiscal year ended June 30, 2016 the Company elected to early adopt ASU 2015-17, Balance Sheet Classification of Deferred Taxes, and ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, both provisions were adopted prospectively. Prior to the adoption of ASU 2016-09, excess tax benefits from stock based compensation were credited directly to additional paid-in-capital. With the early adoption of ASU 2016-09, all excess tax benefits and tax deficiencies are recognized as income tax expense or benefit in the income statement. The Company realized a tax deficiency of $3.1 in the year ended June 30, 2017 and an excess tax benefit of $12.7 in the year ended June 30, 2016. At June 30, 2017, the Company had the following net operating loss and research credit carryforwards, with their respective expiration periods. Certain carryforwards are subject to the limitations of Section 382 and 383 of the Internal Revenue Code as indicated.
|  |  |  |  |  | Subject to |  | Expires |  |  |  |  |
Carryforwards |  | Amount |  |  | sections 382, 383 |  | beginning in year |  |  | Through |
Federal net operating loss |  | $ | 160.9 |  |  | Yes |  |  | 2027 |  |  |  | 2033 |
Utah net operating loss |  |  | 209.5 |  |  | No |  |  | 2016 |  |  |  | 2024 |
Oklahoma net operating loss |  |  | 14.1 |  |  | Yes |  |  | 2023 |  |  |  | 2033 |
Foreign net operating losses (various jurisdictions) |  |  | 26.0 |  |  | No |  | Various |  |  | Various |
Federal research credit |  |  | 3.2 |  |  | Yes |  |  | 2025 |  |  |  | 2032 |
Utah research credit |  |  | 10.1 |  |  | No |  |  | 2021 |  |  |  | 2031 |
All of the Utah net operating loss carryforwards are ‘excess tax benefits’ as defined by ASC guidance and, if realized in future years, will be recognized as a credit to tax benefit, pursuant to the guidance of ASU 2016-09. The Company’s deferred tax asset for the Utah net operating loss ‘excess tax benefits’ is approximately $6.8 and is offset by a full valuation allowance at June 30, 2017. Consistent with the indefinite reversal criteria of ASC 740-30-25-17, the Company intends to invest undistributed earnings of its foreign subsidiaries indefinitely. Due to the cumulative losses that have been incurred to date in its foreign operations, the amount of unrecorded deferred liability resulting from the indefinite reversal criteria at June 30, 2017 is $0. In July 2006, the FASB issued ASC Topic 740 Subtopic 10 Section 05, which clarifies the accounting for uncertainty in tax positions. Accounting guidance requires that the impact of a tax position be recognized in the financial statements if that position is more likely than not of being sustained on audit, based on the technical merits of the position. The Company adopted the guidance on July 1, 2007 and recorded $0 cumulative effect. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
|  | Year ended June 30, |
|  | 2017 |  |  | 2016 |  |  | 2015 |
Unrecognized tax benefits at the beginning of year |  | $ | 24.2 |  |  | $ | 26.3 |  |  | $ | 24.2 |
Gross increases - current year tax positions |  |  | 0.7 |  |  |  | 0.6 |  |  |  | 1.1 |
Gross increases - prior year tax positions |  |  | 0.7 |  |  |  | 5.4 |  |  |  | 1.0 |
Gross increases - acquisitions |  |  | — |  |  |  | — |  |  |  | — |
Gross decreases - prior year tax positions |  |  | (0.4 | ) |  |  | (8.1 | ) |  |  | — |
Unrecognized tax benefits at end of year |  | $ | 25.2 |  |  | $ | 24.2 |  |  | $ | 26.3 |
Interest and penalties in year-end balance |  | $ | (0.9 | ) |  | $ | 0.5 |  |  | $ | 0.6 |
Interest and penalties related to uncertain tax positions are included as a component of income tax expense all other interest and penalties are included as a component of other income (expense). The Company files U.S., foreign and state income tax returns in jurisdictions with various statutes of limitations. The years ended June 30, 2013 through June 30, 2017 remain subject to examination at June 30, 2017. The Company’s income tax returns for the following jurisdictions are currently under examination: California State income tax returns for the years ended June 30, 2013 through 2014; New Jersey State income tax returns for the years ended June 30, 2007 through 2013; and U.S. income tax returns for the years ended June 30, 2014 through 2015. The Company recently was subject to an examination of its payroll reporting by the Internal Revenue Service. The payroll audit concluded during the year ended June 30, 2017 and resulted in a penalty of $0.9, which is included in the Company’s results for that year. Annual tax provisions include amounts considered necessary to pay assessments that may result from examination of prior year tax returns; however, the amount ultimately paid upon resolution of issues may differ materially from the amount accrued. The Company’s foreign income tax returns and all other state tax returns are not currently under examination.

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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/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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