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

11. INCOME TAXES

The components of income (loss) before income taxes and equity in earnings of equity-method investees for the years ended June 30, 2011, 2010 and 2009 were as follows:

 

     2011     2010     2009  

Domestic

    $ 95,048      $ 66,006      $ 25,673   

Foreign

      (610 )      (6,653 )      (49,494 ) 
  

 

 

    

 

 

    

 

 

  

Total

    $ 94,438      $ 59,353      $ (23,821 ) 
  

 

 

    

 

 

    

 

 

  

 

The provision for income taxes for the years ended June 30, 2011, 2010 and 2009 is presented below.

 

     2011      2010      2009  

Current:

         

Federal

    $ 24,878       $ 20,357       $ 7,245   

State and local

      4,833         2,361         1,591   

Foreign

      2,437         2,231         (1,022 ) 
  

 

 

     

 

 

     

 

 

  
     32,148         24,949         7,814   
  

 

 

     

 

 

     

 

 

  

Deferred:

         

Federal

      4,201         515         558   

State and local

      501         205         (11 ) 

Foreign

      458         3,326         (2,724 ) 
  

 

 

     

 

 

     

 

 

  
     5,160         4,046         (2,177 ) 
  

 

 

     

 

 

     

 

 

  

Total

    $ 37,308       $ 28,995       $ 5,637   
  

 

 

     

 

 

     

 

 

  

The current tax benefit realized upon the exercise of stock options and the vesting of restricted stock and restricted share units amounted to $6,183 in 2011, $1,487 in 2010 and $1,653 in 2009.

Income taxes paid during the years ended June 30, 2011, 2010 and 2009 amounted to $34,297, $12,335 and $13,903, respectively.

Reconciliations of expected income taxes at the U.S. federal statutory rate of 35% to the Company's provision for income taxes for the years ended June 30 were as follows:

 

     2011     %     2010     %     2009     %  

Expected U.S. federal income tax at statutory rate

    $ 33,053        35.0 %    $ 20,773        35.0 %    $ (8,337 )      35.0 % 

State income taxes, net of federal benefit

      3,467        3.7        2,356        4.0        1,574        (6.6 ) 

Non-deductible goodwill impairment

      —            —          —          14,247        (59.8 ) 

Domestic manufacturing deduction

      (2,191 )      (2.3 )      (770 )      (1.3 )      (333 )      1.4   

Non-deductible compensation

      1,278        1.3        1,194        2.0        335        (1.4 ) 

Foreign income at different rates

      —          —          1,531        2.6        (937 )      3.9   

Effect of settled tax matters

      —          —          (1,205 )      (2.0 )      —          —     

Valuation allowances established for UK losses

      3,689        3.9        6,354        10.7        —          —     

Other

      (1,988 )      (2.1 )      (1,238 )      (2.1 )      (912 )      3.8   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Provision for income taxes

    $ 37,308        39.5 %    $ 28,995        48.9 %    $ 5,637        (23.7 )% 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

We have deferred tax benefits related to carryforward losses and deferred tax assets in the United Kingdom of $7,868, against which full valuation allowances have been recorded. These valuation allowances were initially recorded in the third quarter of fiscal 2010 as a result of the Company's evaluation of its United Kingdom tax position in accordance with ASC 740, "Accounting for Income Taxes." The Company's United Kingdom subsidiary had recorded historical losses and had been affected by restructuring and other charges in recent years. These losses represented sufficient evidence for management to determine that a full valuation allowance for the deferred tax assets was appropriate under ASC 740. We continue to recognize no tax benefit for losses incurred in the United Kingdom. Under current U.K. tax law, our carryforward losses have no expiration. If the Company is able to realize any of these deferred tax assets in the future, the provision for income taxes will be reduced by a release of the corresponding valuation allowance. Until an appropriate level of profitability is attained, we expect to continue to maintain a valuation allowance on our net deferred tax assets related to future U.K. tax benefits.

 

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Components of our deferred tax assets (liabilities) as of June 30 were as follows:

 

     2011     2010  

Current deferred tax assets:

     

Basis difference on inventory

    $ 4,628      $ 5,206   

Reserves not currently deductible

      8,853        5,187   

Other

      512        345   
  

 

 

    

 

 

  

Current deferred tax assets

      13,993        10,738   
  

 

 

    

 

 

  

Noncurrent deferred tax liabilities:

     

Difference in amortization

      (41,746 )      (31,441 ) 

Basis difference on property and equipment

      (10,997 )      (7,695 ) 

Other comprehensive income

      (7,678 )      (7,775 ) 

Noncurrent deferred tax assets:

     

Net operating loss and tax credit carryforwards

      14,301        15,214   

Stock based compensation

      2,705        3,234   

Other

      927        27   

Valuation allowances

      (10,427 )      (9,847 ) 
  

 

 

    

 

 

  

Noncurrent deferred tax liabilities, net

      (52,915 )      (38,283 ) 
  

 

 

    

 

 

  
   $ (38,922 )    $ (27,545 ) 
  

 

 

    

 

 

  

We have U.S. foreign tax credit carryforwards of $1,552 at June 30, 2011 with various expiration dates through 2020. We have U.S. federal tax net operating losses available for carryforward at June 30, 2011 of $10,901 that were generated by certain subsidiaries prior to their acquisition and have expiration dates through 2028. The use of pre-acquisition operating losses is subject to limitations imposed by the Internal Revenue Code. We do not anticipate that these limitations will affect utilization of the carryforwards prior to their expiration. In addition to the net operating losses in the United Kingdom described above, we also have deferred tax benefits for foreign net operating losses of $2,291 which are available to reduce future income tax liabilities in Belgium and the Netherlands. The Company believes it is more likely than not that these net operating losses will not be realized and a valuation allowance has been established against these deferred tax assets.

The changes in valuation allowances against deferred income tax assets were:

 

     2011     2010  

Balance at beginning of year

    $ 9,847      $ 7,701   

Additions charged to income tax expense

      1,148        3,166   

Reductions credited to income tax expense

      (1,255 )      (755 ) 

Currency translation adjustments

      686        (265 ) 
  

 

 

    

 

 

  

Balance at end of year

    $ 10,426      $ 9,847   
  

 

 

    

 

 

  

As of June 30, 2011, the Company had approximately $31,864 of undistributed earnings of foreign subsidiaries for which taxes have not been provided as the Company has invested or expects to invest these undistributed earnings indefinitely. If in the future these earnings are repatriated to the U.S., or if the Company determines such earnings will be remitted in the foreseeable future, additional tax provisions would be required. Due to complexities in the tax laws and the assumptions that would have to be made, it is not practicable to estimate the amounts of income taxes that might be payable if some or all of such earnings were to be remitted.

Unrecognized tax benefits, including interest and penalties, activity for the years ended June 30, 2011, 2010 and 2009 is summarized below:

 

     2011     2010     2009  

Balance at beginning of year

    $ 2,248      $ 2,489      $ 2,268   

Additions based on tax positions related to prior years

      224        304        430   

Reductions for tax positions of prior years

      —          (545 )      (209 ) 

Reductions due to lapse of statute of limitations

      (1,000 )      —          —     
  

 

 

    

 

 

    

 

 

  

Balance at end of year

    $ 1,472      $ 2,248      $ 2,489   
  

 

 

    

 

 

    

 

 

  

At June 30, 2011, $1,185 represents that amount that would impact the effective tax rate in future periods if recognized.

The Company records interest and penalties on tax uncertainties as a component of the provision for income taxes. The Company recognized $224 and $113 of interest and penalties related to the above unrecognized benefits within income tax expense for the years ended June 30, 2011 and 2010. The Company had accrued $287 and $282 for interest and penalties at the end of fiscal 2011 and 2010, respectively. In the fourth quarter of fiscal 2011 the Company reduced its reserves by $1,000 as a result of an expiration of the statute of limitations. The Internal Revenue Service completed the examination of our income tax returns for fiscal years 2005 and 2006 in the fourth quarter of fiscal 2010, which resulted in the receipt of a small refund. As a result, the Company reduced its reserves for uncertain tax positions by $400.

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, various U.S. state jurisdictions and several foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2008. Given the uncertainty regarding when tax authorities will complete their examinations and the possible outcomes of their examinations, a current estimate of the range of reasonably possible significant increases or decreases of income tax that may occur within the next twelve months cannot be made.