Income Taxes

6 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The effective tax rate used for interim periods is the estimated annual effective consolidated tax rate, based on the current estimate of full year results, except that taxes related to specific events, if any, are recorded in the interim period in which they occur. The annual effective tax rate is based upon a number of significant estimates and judgments, including the estimated annual pre-tax income, or loss, of the Company in each tax jurisdiction in which it operates, and the development of tax planning strategies during the year. In addition, the Company’s tax expense or benefit can be impacted by changes in tax rates or laws, the finalization of tax audits, and other factors that cannot be predicted with certainty. As such, there can be significant volatility in interim tax provisions.

During the three and six months ended December 31, 2021, deferred taxes were determined by the year-to-date tax benefit with current taxes accounting for the remaining tax benefit recorded in the period. Income tax benefit was $5.6 million, or 16.0 percent of pre-tax loss for the three months ended December 31, 2021, as compared with income tax benefit of $10.7 million, or 11.2 percent of pre-tax loss for the three months ended December 31, 2020. Income tax benefit for the six months ended December 31, 2021 was $16.1 million or 26.7 percent of pre-tax loss as compared with $29.7 million or 18.4 percent of pre-tax loss in the six months ended December 31, 2020.

Income tax benefit for the three months ended December 31, 2021 reflects a change in the estimated full year results for the fiscal year. Also included is the unfavorable impact of losses in certain foreign jurisdictions for which no tax benefit can be recognized. Income tax benefit for the three months ended December 31, 2020 included the unfavorable impacts of a non-deductible goodwill impairment charge and losses in certain foreign jurisdictions for which no tax benefit can be recognized. Additionally, the anticipated benefit for the carryback of the fiscal year 2021 net operating loss to fiscal years with higher tax rates was included in this period. Excluding the discrete tax impact of the $52.8 million non-deductible goodwill impairment charge, the tax rate for the three months ended December 31, 2020 would have been 24.8 percent.

Income tax benefit for the six months ended December 31, 2021 includes the unfavorable impact of losses in certain foreign jurisdictions for which no tax benefit can be recognized. Income tax benefit for the six months ended December 31, 2020 included the unfavorable impacts of a non-deductible goodwill impairment charge and losses in certain foreign jurisdictions for which no tax benefit can be recognized as well as discrete tax benefits of $2.0 million associated with the debt extinguishment losses, net and $2.4 million for the impact of restructuring and asset impairment charges. Additionally, the anticipated benefit for the carryback of the fiscal year 2021 net operating loss to fiscal years with higher tax rates was included in this period. Also included is a tax charge of $1.2 million attributable to employee share-based compensation. Excluding the discrete tax impacts of the $52.8 million non-deductible goodwill impairment charge, debt extinguishment losses, net and restructuring and asset impairment charges, the tax rate for the six months ended December 31, 2020 would have been 27.1 percent.

The Coronavirus Aid, Relief and Economic Security Act (the "CARES Act") was enacted on March 27, 2020. The CARES Act established new provisions, including but not limited to, expanded deduction of certain qualified capital expenditures, delayed payment of certain employment taxes, expanded use of net operating losses, reduced limitations on deductions of interest expense and extension of funding for defined benefit plans. The net operating loss provision is expected to provide incremental tax benefits of approximately $7.0 million due to the higher tax rates in the expanded carryback period. The other provisions in the CARES Act are not expected to have a significant impact on our financial position, results of operations or cash flows.