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Income Taxes | 12 Months Ended
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Jun. 30, 2018
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Tax Cuts and Jobs Act The Tax Cuts and Jobs Act (the "Act") was enacted on December 22, 2017. The Act makes broad and complex changes to the U.S. tax code, which have affected our current results and will affect our future results. The following were significant changes in the tax code that became effective for the Company beginning January 1, 2018:
• | reducing the Company's U.S. federal corporate income tax rate from 35% to a blended rate of 28.06% for fiscal 2018 as stipulated by the Internal Revenue Code for companies using a June 30 fiscal year end and to 21% for fiscal years thereafter;
• | generally eliminating U.S. federal income tax on dividends from foreign subsidiaries;
• | requiring current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations;
• | allowing full expensing of certain assets placed in service from September 27, 2017 and before January 1, 2023;
• | restricting further deductibility of executive performance compensation in excess of $1.0 million; and
• | disallowing certain entertainment expenses.
The following are significant changes in the tax code that are effective for the Company beginning July 1, 2018:
• | eliminating the deduction for domestic production activity;
• | limiting the annual deduction for business interest;
• | taxing global intangible low-tax income;
• | allowing a deduction for domestically earned foreign intangible income; and
• | establishing a new base erosion and anti-abuse tax on payments between U.S. taxpayers and foreign related parties.
The SEC staff issued SAB 118 which provides guidance on accounting for the tax effects of the Act. SAB 118 provides a measurement period that should not extend beyond one year from the Act’s enactment date for companies to complete the accounting under ASC 740. As of June 30, 2018, we have not completed our accounting for the tax effect of the Act. In accordance with SAB 118 and as discussed below, we have reflected the income tax effects of the those items where the accounting is complete; have recorded a provisional amount with regards for those items where the accounting is not complete but we have made a reasonable estimate; and have continued to account for items based on our existing accounting under ASC 740 in those areas where we have not been able to make a reasonable estimate. Accounting Complete Deferred Taxes Remeasurement We remeasured our domestic deferred tax assets and liabilities based on the rates at which we expect them to reverse in the future. Section 15 of the Internal Revenue Code stipulates that our fiscal year ending June 30, 2018 will have a blended U.S. federal corporate income tax rate of 28.06%, which is based on the applicable tax rates before and after the Act and the number of days in the tax year. Therefore, domestic deferred taxes reversing prior to July 1, 2018 will be taxed based on the blended rate and reversals occurring thereafter will be taxed at the new 21% tax rate. As of June 30, 2018, we have completed the remeasurement of our domestic deferred tax assets and liabilities which resulted in an income tax benefit of $0.5 million, which is included in Provision (benefit) for federal, state and foreign income taxes in the Consolidated Statements of Income. Accounting not Complete - Provisional Amount Recorded One-time Transition Tax on Unpatriated Earnings of Certain Foreign Subsidiaries The Act includes a one-time transition tax based on our total post-1986 foreign earnings and profits (E&P) which we have previously deferred from U.S. income taxes. We have not completed the calculations surrounding this tax, but based on our preliminary calculations, our foreign subsidiaries have overall negative E&P. Therefore, we do not anticipate incurring tax related to this provision of the Act since any return of assets would be a return of capital, not earnings. Due to the preliminary nature of our calculations, no additional income taxes have been provided for any remaining undistributed foreign earnings not subject to the transition tax and any outside basis difference inherent in these entities as these amounts continue to be indefinitely reinvested in foreign operations. Accounting not Complete - Using Existing Accounting Under ASC 740 Valuation Allowances on Foreign Tax Credit Carryforwards We are currently assessing and have not completed our analysis of how various aspects of the Act such as deemed repatriation of foreign income, global intangible low taxes income ("GILTI") inclusions, and new categories of foreign tax credits affect our ability to utilize our existing foreign tax credit carryforwards before they expire. Currently we have stated our foreign tax credits at the amount at which we are more likely than not to realize the tax benefit before consideration of the tax law changes under the Act. Our completed analysis may result in an increased valuation allowance against our current foreign tax credit carryforwards. Indefinite Reinvestment Assertion Currently we do not provide for outside basis differences under the indefinite reinvestment assertion of ASC 740-30. Our complete analysis of the Act may require us to provide for additional taxes to basis differences or withholding taxes on remitted foreign earnings. GILTI The Act creates a new requirement that certain income earned by controlled foreign corporations must be included currently in the gross income of the U.S. shareholder. Because of the complexity of the new GILTI rules, we are continuing to evaluate this provision of the Act and the application of ASC 740. Under US GAAP, we are allowed to make an accounting policy choice of either: 1) treating taxes due on future U.S. inclusions in taxable income related to GILTI as a current-period expense when incurred or 2) factoring such amounts into the measurement of our deferred taxes. Our selection of an accounting policy will depend, in part, on analyzing our global income and the expected GILTI inclusions that, in turn, depend on our estimated future results of global operations. As such, we are not yet able to reasonably estimate the effect of the potential GILTI tax on our financial statements and have not made a policy decision regarding whether to recorded deferred tax on GILTI. Sources of pretax income (loss)
|  | Fiscal Years Ended
|  | June 30, 2018 |  | June 30, 2017 |  | June 30, 2016
|  | (In thousands)
Domestic |  | $ | (2,656 | ) |  | $ | 19,763 |  |  | $ | 33,986 |
Foreign |  | (9,492 | ) |  | (17,317 | ) |  | 5,667 |
Total |  | $ | (12,148 | ) |  | $ | 2,446 |  |  | $ | 39,653 |
Components of the provision for income tax expense (benefit)
|  | Fiscal Years Ended
|  | June 30, 2018 |  | June 30, 2017 |  | June 30, 2016
|  | (In thousands)
Current: |  |  |  |  |  |
Federal |  | $ | (121 | ) |  | $ | 6,522 |  |  | $ | 9,930 |
State |  | 135 |  |  | (185 | ) |  | 2,570 |
Foreign |  | 504 |  |  | (1,509 | ) |  | (262 | )
|  | 518 |  |  | 4,828 |  |  | 12,238 |
Deferred: |  |  |  |  |  |
Federal |  | 1,093 |  |  | 618 |  |  | 887 |
State |  | (590 | ) |  | 101 |  |  | 67 |
Foreign |  | (1,689 | ) |  | (3,239 | ) |  | 924 |
|  | (1,186 | ) |  | (2,520 | ) |  | 1,878 |
|  | $ | (668 | ) |  | $ | 2,308 |  |  | $ | 14,116 |
Reconciliation between the expected income tax provision applying the domestic federal statutory tax rate and the reported income tax provision
|  | Fiscal Years Ended
|  | June 30, 2018 |  | June 30, 2017 |  | June 30, 2016
|  | (In thousands)
Expected provision (benefit) for federal income taxes at the statutory rate |  | $ | (3,408 | ) |  | $ | 857 |  |  | $ | 13,879 |
State income taxes, net of federal benefit |  | 247 |  |  | 808 |  |  | 1,827 |
Impairment of non-deductible goodwill(1) |  | 2,342 |  |  | — |  |  | — |
Charges without tax benefit |  | 1,100 |  |  | 1,741 |  |  | 2,187 |
Change in valuation allowance |  | 1,173 |  |  | 1,295 |  |  | 311 |
Excess tax expense (benefit) on stock-based compensation(2) |  | 511 |  |  | (496 | ) |  | — |
Remeasurement of deferred taxes(3) |  | (455 | ) |  | — |  |  | — |
IRC S199 deduction |  | — |  |  | (749 | ) |  | (999 | )
Research and development and other tax credits |  | (1,665 | ) |  | (1,626 | ) |  | (1,928 | )
Foreign tax differential |  | (10 | ) |  | 1,496 |  |  | (815 | )
Noncontrolling interest |  | — |  |  | (112 | ) |  | 1,164 |
Change in uncertain tax positions |  | (7 | ) |  | (22 | ) |  | (569 | )
Adjustment to tax accounts |  | (435 | ) |  | (924 | ) |  | (786 | )
Other |  | (61 | ) |  | 40 |  |  | (155 | )
Provision (benefit) for federal, state and foreign income taxes |  | $ | (668 | ) |  | $ | 2,308 |  |  | $ | 14,116 |
(1) | Relates to a $17.3 million impairment of goodwill, which included $8.3 million of non-deductible goodwill. See Note 4 - Goodwill and Other Intangible Assets for more information about the impairment.
(2) | This represents the amount recognized for excess tax benefits upon the vesting or exercise of nonvested deferred share awards and stock options, respectively, for which the Company expects to receive an income tax deduction. The Company adopted ASU 2016-09 in fiscal 2017, which required that excess tax benefits and tax deficiencies be recognized as part of the provision for income taxes.
(3) | This represents the remeasurement of deferred taxes in connection with Tax Cuts and Jobs Act - see Deferred Taxes Remeasurement paragraph above.
Significant components of the Company’s deferred tax assets and liabilities
|  | June 30, 2018 |  | June 30, 2017
|  | (In thousands)
Deferred tax assets: |  |  |  |
Warranty reserve |  | $ | 206 |  |  | $ | 312 |
Bad debt reserve |  | 1,629 |  |  | 3,869 |
Paid-time-off accrual |  | 575 |  |  | 821 |
Insurance reserve |  | 1,608 |  |  | 2,284 |
Legal reserve |  | 27 |  |  | 82 |
Net operating loss benefit and credit carryforwards |  | 10,169 |  |  | 9,332 |
Valuation allowance |  | (1,638 | ) |  | (1,719 | )
Accrued compensation and pension |  | 758 |  |  | 1,346 |
Stock compensation expense on nonvested deferred shares |  | 2,733 |  |  | 3,731 |
Accrued losses |  | 171 |  |  | 340 |
Foreign currency translation and other |  | 1,066 |  |  | 1,080 |
Total deferred tax assets |  | 17,304 |  |  | 21,478 |
Deferred tax liabilities: |  |  |  |
Tax over book depreciation |  | 8,137 |  |  | 11,446 |
Tax over book amortization |  | 702 |  |  | 3,325 |
Branch future liability |  | 3,018 |  |  | 2,538 |
Receivable holdbacks and other |  | 1,028 |  |  | 912 |
Total deferred tax liabilities |  | 12,885 |  |  | 18,221 |
Net deferred tax asset |  | $ | 4,419 |  |  | $ | 3,257 |
As reported in the Consolidated Balance Sheets
|  | June 30, 2018 |  | June 30, 2017
|  | (In thousands)
Deferred income tax assets |  | 4,848 |  |  | 3,385 |
Deferred income tax liabilities |  | (429 | ) |  | (128 | )
Net deferred tax asset |  | $ | 4,419 |  |  | $ | 3,257 |
Operating loss and tax credit carryforwards The Company has state net operating loss carryforwards, state tax credit carryforwards, federal foreign tax credit carryforwards, foreign net operating loss carryforwards and foreign tax credit carryforwards. The valuation allowance at June 30, 2018 and June 30, 2017 reduces the recognized tax benefit of these carryforwards to an amount that is more likely than not to be realized. These carryforwards will generally expire as shown below:
Operating Loss Carryforwards | Expiration Period | Amount (in thousands)
State net operating losses | June 2023 to June 2038 | $ | 22,230 |
Foreign net operating losses | December 2029; June 2032 to June 2037 | $ | 20,733 |
Tax Credit Carryforwards | Expiration Period | Amount (in thousands)
State tax credits | June 2018 to June 2033 | $ | 679 |
Federal foreign tax credits | June 2019 to June 2025 | $ | 1,244 |
Foreign tax credits | June 2035 to June 2037 | $ | 668 |
Other The Company files tax returns in multiple domestic and foreign taxing jurisdictions. With a few exceptions, the Company is no longer subject to examination by taxing authorities through fiscal 2013. At June 30, 2018, the Company updated its evaluation of its open tax years in all known jurisdictions. We have recorded a $0.5 million liability as of June 30, 2018 for unrecognized tax positions and the payment of related interest and penalties. We treat the related interest and penalties as income tax expense. Due to the uncertainties related to these tax matters, we are unable to make a reasonably reliable estimate as to when cash settlement with a taxing authority will occur.

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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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