Income Taxes

12 Months Ended

Jun. 30, 2017

Income Tax Disclosure [Abstract]

Income Taxes

(12) Income Taxes

The components of income before the provision for income taxes are as follows:

	2017		2016		2015
Domestic operations	$	9,555	$	43,906	$	48,276
Foreign operations		7,806		9,948		5,589
	$	17,361	$	53,854	$	53,865

The components of the provision for income taxes are as follows:

	2017			2016			2015
Federal:
Current	$	3,713		$	15,129		$	18,393
Deferred		(585	)		(204	)		(1,357	)
State and local:
Current		555			755			1,526
Deferred		(110	)		173			189
Foreign:
Current		2,221			3,222			2,337
Deferred		191			13			(706	)
	$	5,985		$	19,088		$	20,382

Income taxes payable, which is included in accrued expenses, was $64 and $2,119 at June 30, 2017 and 2016, respectively.

The tax effects of temporary differences that give rise to the deferred tax assets and liabilities at June 30, 2017 and 2016 are presented below:

	2017			2016
Deferred tax assets:
Accrued deferred compensation	$	4,229		$	4,122
Accrual for sales deductions not currently deductible		5,796			5,925
Additional inventoried costs for tax purposes		697			389
Allowance for doubtful accounts receivable		106			106
Depreciation and amortization		11,957			7,784
Debt issuance costs		7,611			9,462
Foreign deferred tax assets		983			1,121
Domestic net operating loss carryforwards		81			109
Foreign net operating loss carryforwards		692			685
Total gross deferred tax assets		32,152			29,703
Valuation allowances		(773	)		(794	)
		31,379			28,909
Deferred tax liabilities:
Foreign deferred tax liabilities		(65	)		(27	)
Goodwill		(10,244	)		(7,586	)
Original issue discount – convertible senior notes		(7,260	)		(9,115	)
Other		(1,136	)		(26	)
Total gross deferred tax liabilities		(18,705	)		(16,754	)
Net deferred tax assets	$	12,674		$	12,155

The following table shows the current and non-current deferred tax assets (liabilities) at June 30, 2017 and 2016:

	2017			2016
Current deferred tax assets, net	$	546		$	3,244
Non-current deferred tax assets, net		19,453			18,053
Non-current deferred tax liabilities		(7,325	)		(9,142	)
Net deferred tax assets	$	12,674		$	12,155

The net change in the total valuation allowance for the years ended June 30, 2017 and June 30, 2016 was a decrease of $21 and $16, respectively. A valuation allowance is provided when it is more likely than not that some portion, or all, of the deferred tax assets will not be realized. The Company has established valuation allowances primarily for net operating loss carryforwards in certain foreign countries. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets are not expected to be realized. The assessment of the amount of value assigned to the Company’s deferred tax assets under the applicable accounting rules is judgmental. Management is required to consider all available positive and negative evidence in evaluating the likelihood that the Company will be able to realize the benefit of its deferred tax assets in the future. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which net operating loss carryforwards are utilizable and temporary differences become deductible. The Company has federal and state net operating loss carryforwards of $0 and $81, respectively, which will expire in fiscal year 2018. The Company has foreign net operating loss carryforwards of $692 which do not have any expiry dates. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, taxable income in carryback years if carryback is permitted and tax planning strategies in making this assessment. In order to fully realize the net deferred tax assets recognized at June 30, 2017, the Company will need to generate future taxable income of approximately $34,638.

Based upon the level of historical taxable income and projections for taxable income over the periods which the deferred tax assets are deductible, management believes it is more likely than not the Company will realize the benefits of these deductible differences. There can be no assurance, however, that the Company will generate any earnings or any specific level of continuing earnings in the future. The amount of the deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced.

Deferred taxes have not been provided for undistributed earnings of foreign subsidiaries amounting to approximately $111,569 at June 30, 2017 since substantially all of these earnings are expected to be indefinitely reinvested in foreign operations. A deferred tax liability will be recognized when the Company expects that it will recover these undistributed earnings in a taxable manner, such as through the receipt of dividends or sale of the investments. The Company intends to indefinitely reinvest the remaining undistributed earnings and has no plan for further repatriation. Determination of the amount of unrecognized deferred U.S. income tax liabilities, net of unrecognized foreign tax credits, is not practical to calculate because of the complexity of this hypothetical calculation resulting in various methods available, each with different U.S. tax consequences.

A reconciliation of the statutory federal income tax rate and the effective tax rate for continuing operations for the fiscal years ended June 30, 2017, 2016 and 2015 follows:

	2017			2016			2015
Federal statutory tax rate		35.0	%		35.0	%		35.0	%
State and local taxes, net of federal income tax benefit		1.2			1.7			2.4
Decrease (increase) in valuation allowance		0.1			-			0.4
Foreign tax rate differential		(1.8	)		(0.4	)		(0.9	)
Other		-			(0.9	)		0.9
Effective tax rate		34.5	%		35.4	%		37.8	%

The Company operates in various tax jurisdictions, and although it believes that it has provided for income and other taxes in accordance with the relevant regulations, if the applicable regulations were ultimately interpreted differently by a taxing authority, the Company may be exposed to additional tax liabilities.

There are no material unrecognized tax benefits included in the consolidated balance sheet that would, if recognized, have a material effect on the Company’s effective tax rate. The Company is continuing its practice of recognizing interest and penalties related to income tax matters in income tax expense. The Company did not recognize interest and penalties during the years ended June 30, 2017 and June 30, 2016. The Company files U.S. federal, U.S. state, and foreign tax returns, and is generally no longer subject to tax examinations for fiscal years prior to 2013 (in the case of certain foreign tax returns, fiscal year 2012).