Annual report pursuant to Section 13 and 15(d)

Note 11 - Income Taxes

v2.4.0.8
Note 11 - Income Taxes
12 Months Ended
Jun. 30, 2013
Income Tax Disclosure [Abstract]  
Income Tax Disclosure [Text Block]

(11)     Income Taxes


Income tax expense (benefit) attributable to income from operations consists of the following for the fiscal years ended June 30 (in thousands):


   

2013

   

2012

   

2011

 

Current:

                       

Federal

  $ 13,305     $ 13,086     $ (4,428 )

State

    1,822       (1,433 )     1,505  

Foreign

    125       57       107  

Total current

    15,252       11,710       (2,816 )

Deferred:

                       

Federal

    1,798       (20,896 )     (1,432 )

State

    669       591       1,369  

Foreign

    (23 )     140       -  

Total deferred

    2,444       (20,165 )     (63 )

Income tax expense (benefit)

  $ 17,696     $ (8,455 )   $ (2,879 )

The following is a reconciliation of expected income tax expense (benefit) (computed by applying the federal statutory income tax rate to income before taxes) to actual income tax expense (benefit) (in thousands):


Expected income tax expense

  $ 17,561       35.0 %   $ 14,434       35.0 %   $ 9,228       35.0 %

State income taxes, net of federal income tax

    1,467       2.9 %     1,038       2.5 %     750       2.8 %

Valuation allowance

    631       1.3 %     (21,237 )     -51.5 %     (12,672 )     -48.1 %

Section 199 Qualified Production Activities deduction

    (1,157 )     -2.3 %     (1,001 )     -2.4 %     (705 )     -2.7 %

Unrecognized tax expense (benefit)

    30       0.1 %     (1,483 )     -3.6 %     490       1.9 %

Other, net

    (836 )     -1.7 %     (206 )     -0.5 %     30       0.1 %

Actual income tax expense (benefit)

  $ 17,696       35.3 %   $ (8,455 )     -20.5 %   $ (2,879 )     -10.9 %

The deferred income tax asset and liability balances at June 30 (in thousands) include:


   

2013

   

2012

 

Deferred tax assets:

               

Accounts receivable

  $ 463     $ 470  

Employee compensation accruals

    5,057       6,321  

Stock based compensation

    2,342       2,617  

Deferred rent credits

    5,071       5,283  

Restructuring charges

    622       526  

Net operating loss carryforwards

    3,592       3,066  

Goodwill

    5,020       6,251  

Other, net

    3,053       3,829  

Total deferred tax assets

    25,220       28,363  

Less: Valuation allowance

    (2,948 )     (2,317 )

Net deferred tax assets

    22,272       26,046  

                 

Deferred tax liabilities:

               

Inventories

    775       2,068  

Property, plant and equipment

    1,121       536  

Intangible assets other than goodwill

    14,264       14,264  

Commissions

    3,590       3,880  

Other, net

    20       22  

Total deferred tax liability

    19,770       20,770  

Net deferred tax asset

  $ 2,502     $ 5,276  

The deferred tax balances are classified in the Consolidated Balance Sheets as follows at June 30 (in thousands):


   

2013

   

2012

 

Current assets

  $ 2,876     $ 2,147  

Non-current assets

    251       3,129  

Current liabilities

    -       -  

Non-current liabilities

    625       -  

Total net deferred tax asset

  $ 2,502     $ 5,276  

Note:        Current deferred tax assets and liabilities and non-current deferred tax assets and liabilities have been presented net in the Consolidated Balance Sheets.


We evaluate our deferred taxes to determine if the “more likely than not” standard of evidence has not been met thereby supporting the need for a valuation allowance.


A valuation allowance must be established for deferred tax assets when it is more likely than not that the assets will not be realized. During fiscal 2012, we released all of United States federal and Canadian valuation allowance against net deferred tax assets established during the fourth quarter of fiscal 2010. We recorded a tax benefit of $21.6 million for the reversal of the valuation allowance against those assets, with a non-cash benefit to earnings in the quarter ended March 31, 2012. We retained a valuation allowance against various foreign, state and local deferred tax assets in our retail segment. At June 30, 2013 this valuation allowance was approximately $2.9 million.


The Company’s deferred income tax assets at June 30, 2013 with respect to the net operating losses expire as follows (in thousands):


   

Deferred

Income

Tax Assets

   

Net Operating

Loss

Carryforwards

 

United States (State), expiring between 2013 and 2032

  $ 2,398     $ 51,808  

Foreign, Expiring between 2029 and 2030

    1,194       3,880  

Deferred U.S. federal income taxes are not provided for unremitted foreign earnings of our foreign subsidiaries because we expect those earnings will be permanently reinvested.


Uncertain Tax Positions


We recognize interest and penalties related to income tax matters as a component of income tax expense. If the $6.8 million of unrecognized tax benefits and related interest and penalties as of June 30, 2013 were recognized, approximately $4.2 million would be recorded as a benefit to income tax expense. A reconciliation of the beginning and ending amount of unrecognized tax benefits including related interest and penalties as of June 30, 2013 and 2012 is as follows (in thousands):


   

2013

   

2012

 

Beginning balance

  $ 7,369     $ 11,027  

Additions for tax positions taken

    1,227       1,074  

Reductions for tax positions of prior years

    (1,351 )     (3,543 )

Settlements

    (402 )     (1,189 )

Ending balance

  $ 6,843     $ 7,369  

It is reasonably possible that various issues relating to approximately $3.2 million of the total gross unrecognized tax benefits as of June 30, 2013 will be resolved within the next twelve months as exams are completed or statutes expire. If recognized, approximately $2.0 million of unrecognized tax benefits would reduce our tax expense in the period realized. However, actual results could differ from those currently anticipated.


The Company conducts business globally and, as a result, the Company or one or more of its subsidiaries files income tax returns in the U.S., various state, and foreign jurisdictions. In the normal course of business, the Company is subject to examination by the taxing authorities in such major jurisdictions as the U.S. Canada, Mexico and Honduras. As of June 30, 2013, the Company and certain subsidiaries are currently under audit from 2006 through 2010 in the U.S. While the amount of uncertain tax benefits with respect to the entities and years under audit may change within the next twelve months, it is not anticipated that any of the changes will be significant.