v3.26.1
Note 12. Income Taxes
 12 Months Ended
Jun. 30, 2026
Income Tax Disclosure [Abstract]  
Income Tax Disclosure Income Taxes
On July 4, 2025, the One Big Beautiful Bill Act (“2025 U.S. tax reform”) was enacted into law. The 2025 U.S. tax reform contains several key tax laws, including extensions and modifications of the Tax Cuts and Jobs Act. In accordance with ASC 740, Income Taxes, the Company is required to recognize the effect of the tax law changes in the period of enactment, such as remeasuring the estimated U.S. deferred tax assets and liabilities, as well as potential impacts to previously existing valuation allowances. The legislation has multiple effective dates, with certain provisions effective in fiscal year 2026 and others implemented through fiscal year 2028. Due to the 2025 U.S. tax reform, the Company recorded a $0.2 million tax benefit for the year as a decrease in valuation allowance on part of our deferred tax assets.
Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
The components of the deferred tax assets and liabilities as of June 30, 2026 and 2025, were as follows:
(Amounts in Thousands)20262025
Deferred Tax Assets:
Receivables$751 $336 
Inventory2,218 2,252 
Employee benefits341 322 
Deferred compensation8,445 7,224 
Capitalized research and development7,916 10,180 
Tax credit carryforwards9,928 9,650 
Capital Loss
3,587 5,259 
Net operating loss carryforward3,916 4,676 
Net foreign currency losses131 90 
Business interest carryforward5,059 6,919 
Operating Leases3,868 — 
Miscellaneous6,280 4,672 
Valuation Allowance(16,016)(16,418)
Total asset$36,424 $35,162 
Deferred Tax Liabilities:
Property and equipment4,082 8,101 
Right-of-use Asset2,433 — 
Goodwill
594 535 
Miscellaneous3,760 1,336 
Total liability$10,869 $9,972 
Net Deferred Income Taxes$25,555 $25,190 
Since fiscal year 2023, we have capitalized research and development expenses that are required to be capitalized as an amortizable asset under Section 174 of the Internal Revenue Code and amortized over a period of five years. This requirement was based on the implementation of Tax Reform effective in tax years beginning as of January 1, 2022, While this requirement was eliminated with the 2025 U.S. tax reform, the Company elected to capitalize research and development expenses in fiscal year 2026. As of June 30, 2026 and 2025, we have a net deferred tax asset from capitalized research and development expenses of $7.9 million and $10.2 million, respectively.
Income tax benefits associated with the net operating loss carryforwards expire from fiscal year 2030 to 2045. Income tax benefits associated with tax credit carryforwards primarily expire from fiscal year 2027 to 2046. A valuation allowance was provided as of June 30, 2026 and 2025 for deferred tax assets related to certain state credits of $7.4 million and $7.2 million, respectively. As of June 30, 2026 and 2025, we have full valuation allowances of $5.0 million and $6.9 million, respectively on the business interest carryforward deferred tax asset, following a determination that it is not more likely than not that it will be realized. As of June 30, 2026 and 2025, the Company has a deferred tax asset from the capital loss on the sale of GES for $3.6
million and $5.3 million, on which a valuation allowance of $3.6 million and $2.3 million has been provided. The capital loss deferred tax asset declined in fiscal year 2026 as a portion was utilized with the sale of the Tampa facility. The reserve increased in fiscal year 2026 as the utilization of the capital loss deferred tax asset was less than estimated at June 30, 2025, as the final sale price of the Tampa facility was less than estimated. See Note 3 - Sale of GES for further information regarding the sale of GES and Note 4 - Restructuring Activities for further information regarding the sale of the Tampa facility. Except as reserved for in the valuation allowance, we believe our deferred income taxes are more likely than not to be realized in the future.
The components of income before taxes on income are as follows:
Year Ended June 30
(Amounts in Thousands)202620252024
United States$2,551 $(9,681)$(35,055)
Foreign50,670 35,910 60,254 
Total income before taxes on income$53,221 $26,229 $25,199 
The Company currently operates in international jurisdictions which expose the Company to taxation in various regions. The Company continually evaluates its global cash needs. Most of our accumulated unremitted foreign earnings have been invested in active non-U.S. business operations. The aggregate unremitted earnings of the Company’s foreign subsidiaries were approximately $472 million as of June 30, 2026. If such funds were repatriated or we determined that all or a portion of such foreign earnings are no longer permanently reinvested, we may be subject to applicable non-U.S. income and withholding taxes. Determination of the amount of any potential future unrecognized deferred tax liability on such unremitted earnings is not practicable and is recorded in the period when any foreign earnings are determined to be no longer permanently reinvested.
The provision for income taxes is composed of the following items:
Year Ended June 30
(Amounts in Thousands)202620252024
Current Taxes:
Federal$(73)$(2,034)$2,024 
Foreign24,196 12,097 12,372 
State429 (1,688)587 
Total payable$24,552 $8,375 $14,983 
Deferred Taxes:
Federal$3,933 $(3,344)$(12,280)
Foreign(2,960)(1,701)91 
State138 (1,261)(3,094)
Valuation allowance(402)7,176 4,988 
Total deferred$709 $870 $(10,295)
Total provision for income taxes$25,261 $9,245 $4,688 
The amount of income taxes paid (net of refunds) were:
Year Ended June 30
(Amounts in Thousands)2026
U.S. Federal$3,162 
State286 
Foreign
   Mexico$4,226 
   Poland875 
   Thailand758 
   China4,913 
   Other$(2)
Total$14,218 
The Company adopted ASU 2023-09 prospectively for the year ended June 30, 2026, and a reconciliation of the income tax provision to the amount computed applying the U.S. federal statutory tax rate of 21% to income (loss) before income taxes was as follows:
Year Ended June 30
2026
Amount%
Tax Computed at U.S. Statutory Tax Rate$11,176 21.0%
State and Local Income Taxes, Net of Federal Income Tax (1)
575 1.1
Foreign Tax Effect
China
Statutory rate difference between China and United States874 1.6
Other(433)(0.8)
Mexico
Impact of foreign exchange rate699 1.3
Non-Deductible Employee Benefits815 1.5
Inflation Adjustment766 1.4
Fixed Assets basis difference(623)(1.2)
Other670 1.3
Poland(2)
(727)(1.3)
Thailand(2)
(949)(1.8)
Romania
Minimum Tax809 1.5
Other15 —
Netherlands
Withholding Taxes(3)
8,958 16.8
Other18 —
Effects of Cross Border Tax Laws
Global Intangible low-taxed income (4)
2,982 5.6
Other96 0.2
Tax Credits
Research and Development tax credits(206)(0.4)
Other165 0.3
Change in Valuation Allowance(5)
Valuation Allowance - Capital Loss1,089 2.1
Valuation Allowance - Capitalized Interest Expense(1,668)(3.1)
Non Taxable or Nondeductible Items
Executive Compensation930 1.8
Other(474)(0.9)
Changes in unrecognized tax benefits— —
Other Adjustments(296)(0.5)
Total$25,261 47.5%
(1)For the year ended June 30, 2026, state taxes in California, Florida, Michigan, and Indiana comprised the majority (greater than 50%) of the tax effect in this category.
(2)All rate reconciling items for Poland and Thailand are separately below posting threshold.
(3)During fiscal year 2026, the Company recorded dividend withholding tax expense in Netherlands of $8.9 million. This includes $4.4 million and $4.5 million of dividend withholding taxes and related interest from Poland and China, respectively. The dividend withholding taxes from Poland relate to a 2018 dividend, and reflect a 19% dividend withholding tax rate. The expense was recorded in fiscal year 2026 following an unfavorable court decision. The Company may pursue other means of recovery. The dividend withholding taxes from China include $1.3 million on dividends paid in fiscal year 2026 and $3.2 million on dividends paid from fiscal years 2021 through 2025. The withholding tax expense reflects a 10% dividend on the fiscal year 2026 dividend as well as the fiscal year 2021 through 2025 dividends, applied retroactively, following a rate settlement reached in 2026.
(4)The effect of Global Intangible low-taxed income is presented net of foreign tax credit for the year ended June 30, 2026.
(5)In 2026, we released $1.9 million of valuation allowance on capitalized interest expense and recorded an additional $1.5 million valuation allowance on capitalized loss carryforward & state income tax credits.
A reconciliation of the income tax provision, prior to the adoption of ASU 2023-09, to the amount computed applying the U.S. federal statutory tax rate of 21% to income (loss) before income taxes was as follows:
Year Ended June 30
20252024
(Amounts in Thousands)Amount%Amount%
Tax computed at U.S. federal statutory rate$5,508 21.0%$5,292 21.0%
State income taxes, net of federal income tax benefit(2,810)(10.7)(2,433)(9.7)
Foreign tax rate differential2,267 8.6 592 2.3 
Impact of foreign exchange rates on foreign income taxes637 2.4 (995)(3.9)
Valuation allowance7,176 27.4 4,988 19.8 
Asset impairment/Disposal
(4,732)(18.0)(2,882)(11.4)
Research credit(1,479)(5.6)(1,150)(4.6)
Global intangible low tax income2,913 11.1 1,339 5.3 
Non-deductible compensation244 0.9 385 1.5 
Other - net(479)(1.9)(448)(1.7)
Total provision for income taxes$9,245 35.2%$4,688 18.6%
The Asset impairment/Disposal line in the table above includes, in fiscal year 2024, the tax effects of recording deferred tax assets resulting from the impairment recorded following the held for sale classification of GES. In fiscal year 2025, the line reflects the $5.3 million tax benefit on the capital loss from the GES sale as well as the tax impact of other adjustments to GES deferred tax assets following the disposal. See Note 3 - Sale of GES for further information regarding the sale.
Changes in the unrecognized tax benefit, excluding accrued interest and penalties, during fiscal years 2026, 2025, and 2024 were as follows:
(Amounts in Thousands)202620252024
Beginning balance - July 1$166 $216 $408 
Tax positions related to prior fiscal years:
Additions17 5 10 
  Reductions— — — 
Tax positions related to current fiscal year:
Additions— — — 
Reductions— — — 
Settlements— — — 
Lapses in statute of limitations— (55)(202)
Ending balance - June 30$183 $166 $216 
Portion that, if recognized, would reduce tax expense and effective tax rate$145 $131 $182 
We do not expect the change in the amount of unrecognized tax benefits in the next 12 months to have a significant impact on our results of operations or financial position. We recognize interest and penalties related to unrecognized tax benefits in Provision for Income Taxes on the Consolidated Statements of Income.
Interest and penalties accrued for unrecognized tax benefits were $0.6 million at each of June 30, 2026, 2025, and 2024 . Expenses related to interest and penalties in fiscal years 2026, 2025, and 2024 were not material.
The Company or its wholly-owned subsidiaries file U.S. federal income tax returns and income tax returns in various state, local, and foreign jurisdictions. We are no longer subject to any significant U.S. federal tax examinations by tax authorities for years before fiscal year 2023. We are subject to income tax examinations by various, state, local, and foreign jurisdiction tax authorities for years after June 30, 2020.