v3.25.2
Income Taxes
 12 Months Ended
Jun. 30, 2025
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The components of earnings (loss) before income taxes by jurisdiction were as follows ($000):
Year Ended June 30,202520242023
U.S. loss$(445,586)$(540,048)$(450,370)
Non-U.S. income539,767 392,401 94,812 
Earnings (loss) before income taxes$94,181 $(147,647)$(355,558)
The components of the income tax expense (benefit) were as follows ($000):
Year Ended June 30,202520242023
Current:
Federal$3,010 $10,119 $5 
State1,733 181 3,867 
Foreign154,815 103,640 106,850 
Total Current159,558 113,940 110,722 
Deferred:
Federal(50,454)(68,955)(106,044)
State(7,217)(186)(7,151)
Foreign(37,763)(33,682)(93,627)
Total Deferred(95,434)(102,823)(206,822)
Total Income Tax Expense (Benefit)$64,124 $11,117 $(96,100)
Principal items comprising deferred tax assets and liabilities were as follows ($000):
June 30,20252024
Deferred income tax assets
Inventory capitalization$74,886 $62,242 
Non-deductible accruals18,222 16,770 
Accrued employee benefits36,331 38,460 
Net-operating loss and credit carryforwards256,794 268,735 
Share-based compensation expense15,852 15,947 
Other9,564 1,346 
Research and development capitalization168,998 128,291 
Deferred revenue15,376 14,839 
Right of use asset37,785 47,712 
Valuation allowances(163,678)(154,830)
Total deferred income tax assets470,130 439,512 
Deferred income tax liabilities
Tax over book accumulated depreciation(14,038)(29,065)
Intangible assets(863,484)(905,435)
Interest rate swap— (4,104)
Interest rate cap(4,000)(11,465)
Tax on unremitted earnings(63,383)(61,719)
Outside basis differences(142,781)(122,423)
Lease liability(31,239)(46,198)
Other(9,515)(2,511)
Total deferred income tax liabilities(1,128,440)(1,182,920)
Net deferred income taxes$(658,310)$(743,408)
The reconciliation of income tax expense at the statutory U.S. federal rate to the reported income tax expense (benefit) is as follows ($000):
Year Ended June 30,2025%2024%2023%
Taxes at statutory rate$19,778 21 $(31,006)21 $(74,667)21 
Increase (decrease) in taxes resulting from:
State income taxes-net of federal benefit(4,265)(5)(22)— (2,548)1 
Taxes on non U.S. earnings3,632 4 16,601 (11)191 — 
Valuation allowance20,295 22 43,866 (30)3,836 (1)
U.S. Branch Income(1,216)(1)3,226 (2)2,037 (1)
Noncontrolling interest4,284 4 1,002 (1)— — 
Research and manufacturing incentive deductions and credits(26,396)(28)(41,387)28 (29,416)8 
Stock compensation2,153 2 13,294 (9)18,661 (5)
GILTI and FDII13,631 15 (629)— (7,195)2 
Uncertain Tax Positions6,814 7 3,301 (2)(3,450)1 
Notional Interest(10,174)(11)(2,521)2 (7,896)2 
Assets held-for-sale36,895 39 — — — — 
Other(1,307)(1)5,392 (4)4,347 (1)
 $64,124 68 $11,117 (8)$(96,100)27 
On July 4, 2025, the U.S. government enacted The One Big Beautiful Bill Act of 2025 which includes, among other provisions, changes to the U.S. corporate income tax system including the allowance of immediate expensing of qualifying research and development expenses and permanent extensions of certain provisions within the Tax Cuts and Jobs Act. Certain provisions are effective for the Company beginning fiscal 2026. The Company is evaluating the future impact of these tax law changes on its financial statements.
The Company is partially permanently reinvested and will repatriate earnings for all non-U.S. subsidiaries with cash in excess of working capital needs. Such distributions could potentially be subject to U.S. state tax in certain states and foreign withholding taxes. Foreign currency gains (losses) related to the translation of previously taxed earnings from functional currency to U.S. dollars could also be subject to U.S. tax when distributed. The Company has estimated the associated withholding tax to be $63 million.
Additionally, the Company made a final accounting policy election to treat taxes due from future inclusions in U.S. taxable income related to global intangible low tax income (“GILTI”) as a current period expense when incurred.
During the fiscal years ended June 30, 2025, 2024, and 2023, cash paid by the Company for income taxes was $167 million, $97 million, and $90 million, respectively.
Our foreign subsidiaries in various tax jurisdictions operate under tax holiday arrangements. The impact of the tax holidays on our effective rate is a reduction in the rate of 11.6%, 5.6% and 2.3% for the fiscal years ended June 30, 2025, 2024 and 2023, respectively, and the impact of the tax holidays on diluted earnings per share is $0.06, $0.05, and $0.05 for the fiscal years ended June 30, 2025, 2024, and 2023, respectively. The tax holiday related to Coherent Malaysia Sdn. Bhd will end during the fiscal year ended June 30, 2026 for certain business lines, the tax holiday related to certain II-VI Laser Enterprise Philippines, Inc.’s business lines will end during the fiscal year ended June 30, 2026, the tax holiday related to Silicon Carbide Vietnam Limited Liability Company will end during the fiscal year ended June 30, 2026, the tax holiday related to certain Coherent Vietnam (Dong Nai) Company Limited business lines will end during the fiscal year ended June 30, 2026, and the tax holiday related to certain Coherent Singapore PTE Ltd business lines will end during the fiscal year ended June 30, 2027.
The Company has the following gross operating loss carryforwards and tax credit carryforwards as of June 30, 2025 ($000):
TypeAmountExpiration Date
Tax credit carryforwards:
Federal research and development credits$121,286 June 2032-June 2045
Foreign tax credits12,964 June 2030-June 2035
State tax credits15,976 June 2026-June 2040
State tax credits (indefinite)79,179 Indefinite
Operating loss carryforwards:
Loss carryforwards - federal$31,278 June 2026-June 2036
Loss carryforwards - federal (indefinite)1,754 Indefinite
Loss carryforwards - state330,313 June 2026-June 2045
Loss carryforwards - state (indefinite)42,674 Indefinite
Loss carryforwards - foreign85,218 June 2026-June 2033
Loss carryforwards - foreign (indefinite)48,711 Indefinite
The Company has recorded a valuation allowance against the majority of the foreign and state loss and credit carryforwards, certain U.S. credit carryforwards and the majority of state credit carryforwards. The Company’s U.S. federal loss carryforwards, federal research and development credit carryforwards, foreign tax credits, and certain state tax credits resulting from the Company’s acquisitions are subject to various annual limitations under Section 382 of the U.S. Internal Revenue Code.
Changes in the liability for unrecognized tax benefits for the fiscal years ended June 30, 2025, 2024 and 2023 were as follows ($000):
Year Ended June 30,202520242023
Beginning balance$116,697 $115,180 $37,411 
Increases in current year tax positions9,660 5,168 110 
Acquired business— — 86,077 
Settlements— (2,970)— 
Expiration of statute of limitations(2,349)(681)(8,418)
Ending balance$124,008 $116,697 $115,180 
The Company classifies all estimated and actual interest and penalties as income tax expense. During fiscal years 2025, 2024 and 2023, there was $2.0 million, $2.3 million and $0.3 million of interest and penalties within income tax expense, respectively. The Company had $9 million, $7 million and $6 million of interest and penalties accrued at June 30, 2025, 2024 and 2023, respectively. The Company has classified the uncertain tax positions as non-current income tax liabilities, as the amounts are not expected to be paid within one year. The majority of the liability can be offset by credit carryforwards and would not impact cash taxes. Including tax positions for which the Company determined that the tax position would not meet the more likely than not recognition threshold upon examination by the tax authorities based upon the technical merits of the position, the total estimated unrecognized tax benefit that, if recognized, would affect our effective tax rate, was approximately $20 million, $19 million and $92 million at June 30, 2025, 2024 and 2023, respectively. For the years ended June 30, 2025 and June 30, 2024, due to the U.S. valuation allowance, a large portion of our unrecognized tax benefit will no longer impact the tax rate if recognized. The Company expects a decrease of $67 million of unrecognized tax benefits during the next 12 months due to the expiration of statutes of limitation.
Fiscal years 2018 and 2022 to 2025 remain open to examination by the Internal Revenue Service, fiscal years 2021 to 2025 remain open to examination by certain state jurisdictions, and fiscal years 2012 to 2025 remain open to examination by certain foreign taxing jurisdictions. The Company is currently under examination for certain subsidiary companies in Vietnam for the years ended June 30, 2017 through September 30, 2021; Malaysia for the years ended June 30, 2021 through June 30, 2023; Singapore for the year ended June 30, 2023; United Kingdom for the year ended June 30, 2023; and Germany for the years ended June 30, 2012 through June 30, 2021. The Company believes its income tax reserves for these tax matters are adequate