Annual report pursuant to Section 13 and 15(d)

Note 11 - Income Taxes

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Note 11 - Income Taxes
12 Months Ended
Jun. 30, 2015
Notes to Financial Statements  
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):
 
   
2015
   
2014
   
2013
 
Current:
                       
Federal
  $ 15,064     $ 20,693     $ 13,305  
State
    489       1,900       1,822  
Foreign
    55       60       125  
Total current
    15,608       22,653       15,252  
Deferred:
                       
Federal
    2,979       (941 )     1,798  
State
    759       (1,921 )     669  
Foreign
    195       (320 )     (23 )
Total deferred
    3,933       (3,182 )     2,444  
Income Tax Expense (Benefit)
  $ 19,541     $ 19,471     $ 17,696  
 
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):
 
   
2015
   
2014
   
2013
 
                                                 
Expected Income Tax Expense
  $ 19,839       35.0 %   $ 21,841       35.0 %   $ 17,561       35.0 %
State income taxes, net of federal income tax
    1,597       2.8 %     2,209       3.5 %     1,467       2.9 %
Valuation allowance
    409       0.7 %     (1,540 )     -2.5 %     631       1.3 %
Section 199 Qualified Production Activities deduction
    (998 )     -1.8 %     (1,342 )     -2.2 %     (1,157 )     -2.3 %
Unrecognized tax expense (benefit)
    (641 )     -1.1 %     (904 )     -1.4 %     30       0.1 %
Other, net
    (665 )     -1.2 %     (793 )     -1.3 %     (836 )     -1.7 %
Actual income tax expense (benefit)
  $ 19,541       34.5 %   $ 19,471       31.2 %   $ 17,696       35.3 %
 
The deferred income tax asset and liability balances at June 30 (in thousands) include:
 
   
2015
   
2014
 
Deferred tax assets:
               
Accounts receivable
  $ 534     $ 557  
Inventories
    -       223  
Employee compensation accruals
    4,555       5,168  
Stock based compensation
    2,639       2,468  
Deferred rent credits
    5,943       5,695  
Restructuring charges
    387       465  
Net operating loss carryforwards
    4,059       4,004  
Goodwill
    2,748       3,870  
Other, net
    2,320       2,693  
Total deferred tax assets
    23,185       25,143  
Less: Valuation allowance
    (1,816 )     (1,408 )
Net deferred tax assets
    21,369       23,735  
 
 
Deferred tax liabilities:
               
Inventories
    149       -  
Property, plant and equipment
    1,358       622  
Intangible assets other than goodwill
    14,261       14,306  
Commissions
    3,999       3,274  
Other, net
    -       -  
Total deferred tax liability
    19,767       18,202  
Total net deferred tax asset
  $ 1,602     $ 5,533  
 
 
The deferred tax balances are classified in the Consolidated Balance Sheets as follows at June 30 (in thousands):
 
   
2015
   
2014
 
Current assets
  $ 2,301     $ 4,028  
Non-current assets
    3,932       4,440  
Current liabilities
    -       -  
Non-current liabilities
    4,631       2,935  
Total net deferred tax asset
  $ 1,602     $ 5,533  
 
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 less than 50% likely that assets will be realized. At June 30 of 2015, 2014 and 2013, such an allowance was in place against the Belgian foreign tax assets in our retail segment, and at June 30, 2015 this valuation allowance was approximately $1.8 million. At June 30, 2013, a valuation allowance was also in place against certain U.S. retail segment assets. During fiscal 2014, we determined these assets would likely be realized due to a return to profitability that remains through fiscal 2015. Accordingly, during fiscal 2014, we released all of the U.S. retail segment valuation allowance remaining against deferred tax assets, recording a tax benefit of $2 million at that time.
 
The Company’s deferred income tax assets at June 30, 2015 with respect to the net operating losses expire as follows (in thousands):
 
   
Deferred
   
Net Operating
 
   
Income
   
Loss
 
   
Tax Assets
   
Carryforwards
 
United States (State), expiring between 2016 and 2032
  $ 1,641     $ 35,761  
Foreign, Expiring between 2029 and 2033
    2,419       7,579  
 
 
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 $3.1 million of unrecognized tax benefits and related interest and penalties as of June 30, 2015 were recognized, approximately $2.0 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, 2015 and 2014 is as follows (in thousands):
 
   
2015
   
2014
 
Beginning balance
  $ 4,699     $ 6,843  
Additions for tax positions taken
    568       1,642  
Reductions for tax positions taken in prior years
    (1,555 )     (2,853 )
Settlements
    (596 )     (933 )
Ending balance
  $ 3,117     $ 4,699  
 
 
It is reasonably possible that various issues relating to approximately $1.2 million of the total gross unrecognized tax benefits as of June 30, 2015 will be resolved within the next twelve months as exams are completed or statutes expire. If recognized, approximately $0.8 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, Belgium and Honduras. As of June 30, 2015, the Company and certain subsidiaries are currently under audit from 2007 through 2013 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.