INCOME TAXES

12 Months Ended

Jun. 30, 2024

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

The components of income (loss) from continuing operations before income taxes are as follows:

	Fiscal Years
	2024		2023		2022
	(Dollars in thousands)
Income (loss) before income taxes
U.S.	$	91,279	$	(10,204)	$	(41,231)
International	(1,343)		(1,794)		(3,211)
	$	89,936	$	(11,998)	$	(44,442)

The provision (benefit) for income taxes consists of:

	Fiscal Years
	2024		2023		2022
	(Dollars in thousands)
Current:
U.S.	$	427	$	(219)	$	(535)
International	(77)		(428)		(425)
Deferred:
U.S.	531		(270)		3,130
International	(12)		262		(153)
	$	869	$	(655)	$	2,017

The provision (benefit) for income taxes differs from the amount of income tax determined by applying the applicable U.S. statutory rate to income (loss) from continuing operations before income taxes, as a result of the following:

	Fiscal Years
	2024		2023		2022
U.S. statutory rate	21.0	%	21.0	%	21.0	%
State income taxes, net of federal income tax benefit	2.3		(2.7)		1.4
Valuation allowance (1)	(21.9)		(12.9)		(6.6)
Foreign income taxes at other than U.S. rates	(0.2)		(0.2)		3.0
Uncertain tax positions	(0.1)		6.7		(17.9)
Stock-based compensation	0.2		(2.7)		(2.8)
Deferred tax rate remeasurement	—		(3.6)		—
Other, net (2)	(0.3)		(0.1)		(2.6)
Effective tax rate	1.0	%	5.5	%	(4.5)	%

_______________________________________________________________________________

(1)The change in valuation allowance for fiscal year 2024 primarily relates to the utilization of federal and state net operating losses used to offset taxable income generated from the extinguishment of long-term debt.

(2)The (0.3)% of other, net in fiscal year 2024 does not include the rate impact of any items in excess of 5% of computed tax. The (0.1)% of other, net in fiscal year 2023 includes the rate impact of the federal provision to return true-up, tax attribute expirations and miscellaneous items of 1.3%, (1.1)%, and (0.3)%, respectively. The (2.6)% of other, net in fiscal year 2022 includes the rate impact of the federal provision to return true-up and miscellaneous items of (2.0)% and (0.6)%, respectively.

The components of the net deferred tax assets and liabilities are as follows:

	June 30,
	2024		2023
	(Dollars in thousands)
Deferred tax assets:
Payroll and payroll related costs	$	5,422	$	5,041
Net operating loss carryforwards (1)	138,691		154,514
Tax credit carryforwards	37,647		37,515
Capital loss carryforwards	5,879		5,845
Deferred franchise fees	5,301		7,018
Operating lease liabilities	74,409		92,666
Interest expense carryforward	8,200		10,193
Other (2)	6,346		8,633
Subtotal	281,895		321,425
Valuation allowance	(181,759)		(202,185)
Total deferred tax assets	$	100,136	$	119,240
Deferred tax liabilities:
Goodwill and intangibles	$	(35,509)	$	(35,001)
Operating lease assets	(73,809)		(91,921)
Other	(2,220)		(3,254)
Total deferred tax liabilities	(111,538)		(130,176)
Net deferred tax liability	$	(11,402)	$	(10,936)

_______________________________________________________________________________

(1)The decline in fiscal year 2024 is a result of US net operating loss utilization, primarily due to taxable income generated from the extinguishment of long-term debt.

(2)The $6.3 million of Other in fiscal year 2024 includes $3.0 million of deferred tax assets with a corresponding valuation allowance of the same amount related to discontinued operations. The $8.6 million of Other in fiscal year 2023 includes $3.4 million of deferred tax assets with a corresponding valuation allowance of the same amount related to discontinued operations.

At June 30, 2024, the Company has tax-effected federal, state, Canada, and U.K. net operating loss carryforwards of approximately $102.9 million, $27.1 million, $8.5 million and $0.2 million, respectively. The Company's federal loss carryforward consists of $12.3 million that will expire in fiscal year 2038 and $90.6 million that has no expiration. The state loss carryforwards consist of $23.5 million that will expire from fiscal years 2025 to 2044 and $3.6 million that has no expiration. The federal and state loss carryforwards reported in the financial statements are reduced for uncertain tax positions by $17.6 million and $2.6 million, respectively. The Canada loss carryforward will expire from fiscal years 2036 to 2044. The U.K. loss carryforward has no expiration.

The Company's tax credit carryforward of $37.6 million primarily consists of Work Opportunity Tax Credits that will expire from fiscal years 2031 to 2044.

The Company's capital loss carryforward of $5.9 million will expire in fiscal year 2025.

We consider the earnings of certain non-U.S. subsidiaries to be indefinitely invested outside the U.S. Accordingly, we have not recorded deferred taxes related to the U.S. federal and state income taxes and foreign withholding taxes on approximately $2.1 million of undistributed earnings of foreign subsidiaries, which have been reinvested outside the U.S. As a result of the Tax Cuts and Jobs Act of 2017, taxes payable on the remittance of such earnings is expected to be minimal.

The Company files tax returns and pays tax primarily in the U.S., Canada, and the U.K., as well as states, cities, and provinces within these jurisdictions. With limited exceptions, due to net operating loss carryforwards, the Company's federal, state, and foreign tax returns are open to examination for all years since 2014, 2013, and 2016, respectively.

A rollforward of the unrecognized tax benefits is as follows:

	Fiscal Years
	2024		2023
	(Dollars in thousands)
Balance at beginning of period	$	21,393	$	22,173
Additions based on tax positions related to the current year	3		10
Additions (reductions) based on tax positions of prior years	12		(663)
Reductions on tax positions related to the expiration of the statute of limitations	(176)		(127)
Balance at end of period	$	21,232	$	21,393

If the Company were to prevail on all unrecognized tax benefits recorded, a net benefit of approximately $0.7 million would be recorded in the effective tax rate. Interest and penalties associated with unrecognized tax benefits are recorded within income tax expense. The Company recorded interest and penalties of approximately $0.1 million, $0.1 million, and $0.2 million, as reductions to the accrual, net of the respective reversal of previously accrued interest and penalties during fiscal years 2024, 2023, and 2022, respectively. As of June 30, 2024, the Company had accrued interest and penalties related to unrecognized tax benefits of $0.6 million. This amount is not included in the gross unrecognized tax benefits noted above.

It is reasonably possible the amount of the unrecognized tax benefit with respect to certain of our unrecognized tax positions will increase or decrease during the next fiscal year. However, an estimate of the amount or range of the change cannot be made at this time.