Income Taxes

12 Months Ended

Jun. 30, 2024

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Income (loss) before income taxes for the Company's domestic and foreign operations was as follows:

	Years Ended June 30,
($ in millions)	2024		2023		2022
Domestic	$	224.1	$	51.2	$	(74.0)
Foreign	(12.5)		21.3		10.9
Income (loss) before income taxes	$	211.6	$	72.5	$	(63.1)

The expense (benefit) for income taxes from continuing operations consisted of the following:

	Years Ended June 30,
($ in millions)	2024		2023		2022
Current:
Federal	$	30.4	$	8.6	$	(14.7)
State	4.2		2.6		0.1
Foreign	3.8		5.3		3.7
Total current	38.4		16.5		(10.9)
Deferred:
Federal	(10.1)		(0.9)		(1.0)
State	(2.7)		(0.5)		(2.7)
Foreign	(0.5)		1.0		0.6
Total deferred	(13.3)		(0.4)		(3.1)
Total income tax expense (benefit)	$	25.1	$	16.1	$	(14.0)

The following is a reconciliation of income taxes computed at the U.S. Federal income tax rate to the Company's effective income tax rates: 

	Years Ended June 30,
(% of pre-tax income (loss))	2024		2023		2022
Statutory federal income tax rate	21.0	%	21.0	%	21.0	%
State income taxes, net of federal tax benefit	2.7		2.8		3.1
Foreign tax rate differential	(0.3)		0.9		(1.0)
Research and development tax credit	(1.6)		(3.5)		4.4
Foreign derived intangible income deduction	(1.8)		—		—
Adjustments of prior years' income taxes	—		8.7		(7.4)
Non-deductible goodwill impairment	1.4		—		—
Tax benefit related to closure of Additive operations	(8.7)		—		—
Non-taxable income	(0.5)		(0.8)		(1.0)
Non-deductible expenses	6.4		(0.1)		(0.7)
Non-deductible compensation	1.6		1.4		(1.1)
Share-based compensation	(3.2)		—		(0.7)
Changes in valuation allowances	(4.7)		(7.4)		6.0
Law changes	—		0.4		—
Interest on prior tax positions	(0.4)		(1.3)		0.2
Other, net	—		0.1		(0.6)
Effective income tax rate	11.9	%	22.2	%	22.2	%

Deferred taxes are recorded for temporary differences between the carrying amounts of assets and liabilities and their tax bases. A valuation allowance is required when it is more likely than not that all or a portion of a deferred tax asset will not be realized. The Company had state net operating loss carryforwards of $178.2 million expiring between fiscal years 2024 and 2044. A significant portion of the state net operating loss carryforwards are subject to an annual limitation that, under current law, is likely to limit future tax benefits to approximately $7.0 million. Realization is dependent on generating sufficient taxable income prior to expiration of the loss carryforwards. Although realization is not assured, management believes it is more likely than not that all of the deferred tax asset will be realized. The amount of the deferred tax asset considered realizable, however, could be revised in the near term if estimates of future taxable income during the carryforward period change.

Valuation allowances decreased by $11.2 million during fiscal year 2024. Liquidation of the Carpenter Additive business in the United Kingdom for tax purposes resulted in the write-off of net deferred tax assets of $7.2 million for which no benefit was recognized. The write-off of the net deferred tax assets reduced the valuation allowance. The expiration of $3.3 million net operating losses, for which no tax benefit was recognized, caused a reduction in the valuation allowance. As a result of increases in estimates of projected future taxable income during the carryforward period, the valuation allowance was reduced by $0.9 million for the expected realization of previously limited net operating loss carryforwards. This was partially offset by a $0.2 million increase in net operating losses incurred in certain jurisdictions for which no tax benefit was recognized.

The significant components of deferred tax assets and liabilities that are recorded in the consolidated balance sheets are summarized in the table below:

	June 30,
($ in millions)	2024		2023
Deferred tax assets:
Pensions	$	33.1	$	39.8
Postretirement provisions	14.4		20.0
Non-equity compensation	9.6		16.0
Net operating loss carryforwards	8.5		22.5
Tax credit carryforwards	2.0		1.2
Operating lease liabilities	8.9		10.0
Other	20.1		22.3
Gross deferred tax assets	96.6		131.8
Valuation allowances	(2.4)		(13.6)
Total deferred tax assets	94.2		118.2
Deferred tax liabilities:
Depreciation	219.6		237.6
Intangible assets	3.2		5.8
Inventories	28.2		27.4
Operating lease right-of-use assets	7.0		8.0
Other	2.8		3.1
Total deferred tax liabilities	260.8		281.9
Deferred tax liabilities, net	$	166.6	$	163.7

The Company does not have unrecognized tax benefits as of June 30, 2024, 2023 and 2022. The Company recognizes interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense.

All years prior to fiscal year 2018 have been settled with the Internal Revenue Service and with most significant state, local and foreign tax jurisdictions.

The Company asserts that substantially all undistributed earnings from foreign subsidiaries are not considered indefinitely reinvested. The potential tax implications from the distribution of these earnings are expected to be limited to withholding taxes in certain jurisdictions and are not expected to materially impact the consolidated financial statements.