Annual report pursuant to Section 13 and 15(d)

Income taxes

v2.4.0.6
Income taxes
12 Months Ended
Jun. 30, 2012
Income taxes

K. Income taxes:

The provisions for income taxes consist of the following (in thousands):

 

     Year Ended June 30,  
     2012     2011      2010  

Earnings before income taxes consist of:

       

Domestic

   $ 130,009      $ 131,080       $ 124,860   

Foreign

     32,186        33,901         31,586   
  

 

 

   

 

 

    

 

 

 
   $ 162,195      $ 164,981       $ 156,446   
  

 

 

   

 

 

    

 

 

 

Taxes on income consist of:

       

Currently payable:

       

Federal

   $ 42,288      $ 36,600       $ 37,098   

State

     3,065        2,302         1,856   

Foreign

     8,891        9,854         9,266   

Net deferred:

       

Federal

     (4,318     3,893         (1,494

State

     (149     19         39   

Foreign

     87        11         (95
  

 

 

   

 

 

    

 

 

 
   $ 49,864      $ 52,679       $ 46,670   
  

 

 

   

 

 

    

 

 

 

The following is a reconciliation of the federal tax calculated at the statutory rate of 35% to the actual income taxes provided (in thousands):

 

     Year Ended June 30,  
     2012     2011     2010  

Computed expected federal income tax expense

   $ 56,768      $ 57,743      $ 54,756   

State income taxes, net of federal benefit

     2,038        1,463        1,247   

Qualified production activity deduction

     (3,917     (3,889     (2,459

Research and development tax credit

     (465     (1,329     (444

Tax-exempt interest

     (565     (858     (1,114

Change in deferred tax valuation allowance

     (3,016     60        44   

Foreign exchange loss on repatriation

     0        0        (4,424

Other

     (979     (511     (936
  

 

 

   

 

 

   

 

 

 
   $ 49,864      $ 52,679      $ 46,670   
  

 

 

   

 

 

   

 

 

 

 

Temporary differences comprising deferred taxes on the Consolidated Balance Sheets are as follows (in thousands):

 

     June 30  
     2012     2011  

Inventory

   $ 6,893      $ 4,269   

Unrealized profit on intercompany sales

     1,686        1,075   

Excess tax basis in equity investments

     4,776        3,643   

Deferred compensation

     2,651        2,198   

Other

     891        596   

Valuation allowance

     0        (3,016
  

 

 

   

 

 

 

Net deferred tax assets

     16,897        8,765   

Net unrealized gain on available-for-sale investments

     (23,791     (369

Goodwill and intangible asset amortization

     (15,123     (15,077

Depreciation

     (847     (485

Other

     (502     (397
  

 

 

   

 

 

 

Deferred tax liabilities

     (40,263     (16,328
  

 

 

   

 

 

 

Net deferred tax liabilities

   $ (23,366   $ (7,563
  

 

 

   

 

 

 

A deferred tax valuation allowance is required when it is more likely than not that all or a portion of deferred tax assets will not be realized. At June 30, 2011, the Company had provided a valuation allowance for potential capital loss carryovers resulting from excess tax basis in certain of its equity investments. The Company has determined that the valuation allowance is no longer necessary as a result of the Company’s unrealized gain on its CCXI investment at June 30, 2012. The Company has the intent and ability to sell a portion of its CCXI investment and realize a long-term capital gain to offset losses on its investments in unconsolidated entities. The Company believes that it is more likely than not that the recorded deferred tax assets will be realized.

During fiscal 2010, the Company’s R&D Europe subsidiary declared and paid a dividend of £50 million ($74.4 million) to the Company. The £50 million R&D Europe earnings had previously been taxed in the U.S. and therefore, no additional U.S. income tax resulted from the repatriation. The Company recorded a foreign currency exchange tax loss on the transaction of approximately $12.8 million and as a result, reported a $4.7 million reduction in income tax expense in fiscal 2010.

Undistributed earnings of the Company’s foreign subsidiaries amounted to approximately $144 million as of June 30, 2012. Deferred taxes have not been provided on such undistributed earnings, as the Company has either paid U.S. taxes on the undistributed earnings or intends to indefinitely reinvest the undistributed earnings in the foreign operations.

A summary of changes in unrecognized tax benefits is as follows (in thousands):

 

     June 30  
     2012     2011  

Beginning balance

   $ 34      $ 96   

Change due to tax positions related to the current year

     (4     (53

Decrease due to lapse of statute of limitations

     (7     (9
  

 

 

   

 

 

 

Ending balance

   $ 23      $ 34   
  

 

 

   

 

 

 

The gross unrecognized tax benefit balance as of June 30, 2012, 2011 and 2010 includes $2,000, $3,000 and $5,000 of unrecognized tax benefits that, if recognized, would affect the effective tax rate. Accrued interest and penalties were not material at June 30, 2012 and 2011.

 

The Company does not believe it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase or decrease in the next twelve months. The Company files income tax returns in the U.S federal tax jurisdiction, the states of Minnesota, Massachusetts, California and Missouri, and several jurisdictions outside the U.S. U.S. tax returns for 2009 and subsequent years remain open to examination by the tax authorities. The Company’s major non-U.S. tax jurisdictions are the United Kingdom, France and Germany, which have tax years open to examination for 2009 and subsequent years, and China, which has calendar year 2012 open to examination.