NOTE

INCOME TAXES

The Company accounts for income taxes under the asset and liability method, which recognizes deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the tax bases of assets and liabilities and their financial statement reported amounts, and for net operating losses and tax credit carryforwards. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The Company records a valuation allowance against deferred tax assets when it is more likely than

not

that such asset will

not

be realized. The Company continues to monitor the likelihood that it will be able to recover its deferred tax assets. If recovery is

not

likely, the Company must increase its provision for income taxes by recording a valuation allowance against the deferred tax assets.

The Company accounts for uncertain tax positions in accordance with the authoritative guidance on income taxes under which the Company

may

only recognize or continue to recognize tax positions that meet a "more likely than

not"

threshold. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as a component of the provision for income taxes.

As of

December 31, 2017,

the Company's total unrecognized tax benefits were approximately

$0.2

million, which would affect the effective tax rate if recognized. The Company will recognize interest and penalties, when they occur, related to uncertain tax provisions as a component of tax expense. There is

interest or penalties to be recognized for the

six

month periods ended

December 31, 2017

2016.

The Company is required to make its best estimate of the annual effective tax rate for the full fiscal year and use that rate to provide for income taxes on a current year-to-date basis. The Company recorded a tax provision of

$1.1

million and

$1.7

million from its operations for the

six

months ended

December 31, 2017

and

December 31, 2016,

respectively. The effective tax rate for the

three

and

six

months ended

December 31, 2017

and

2016

differed from the statutory rate primarily due to the net charge related to the Tax Cuts and Jobs Act ("TCJA") and the mix of non-deductible items.

December 22, 2017,

the TCJA was enacted into law, which significantly changes existing U.S. tax law and includes numerous provisions that affect the Company, such as imposing a

one

-time transition tax on deemed repatriation of deferred foreign income, reducing the U.S. federal statutory tax rate, and adopting a territorial tax system. The TCJA requires a

one

-time transition tax on deferred foreign income

not

previously subject to U.S. income tax at a rate of

15.5%

for foreign cash and certain other net current assets, and

on the remaining income. The TCJA also reduces the U.S. federal statutory tax rate from

35%

21%

effective

January 1, 2018.

For fiscal year

2018,

the blended U.S. federal statutory tax rate is

28%.

This is the result of using the tax rate of

35%

for the

first

and

second

quarter of fiscal year

2018

and the reduced tax rate of

21%

for the

third

and

fourth

quarter of fiscal year

2018.

The TCJA includes a provision to tax global intangible low-taxed income (“GILTI”) of foreign subsidiaries and a base erosion anti-abuse tax (“BEAT”) measure that taxes certain payments between a U.S. corporation and its subsidiaries. The GILTI and BEAT provisions of the TCJA will be effective beginning

July 1, 2018.

The TCJA is effective in the

second

quarter of fiscal year

2018.

During the

second

quarter of fiscal year

2018,

the Company recorded a charge of

$0.05

million related to the TCJA, due to the impact of the

one

-time transition tax on the deemed repatriation of deferred foreign income of

$1.0

million.

To calculate the transition tax, the Company estimated the deferred foreign income for fiscal year

2017

and the

first

and

second

quarter of fiscal year

2018

because these tax returns are

not

complete or due. The fiscal year

2017

and fiscal year

2018

taxable income will be known once the respective tax returns are complete and filed.

In addition, the Company recorded a

$0.5

million expense during the quarter ended December

31,

2017

from the impact of changes in the tax rate, primarily on deferred tax assets and liabilities, which was included in provision for income taxes on the consolidated income statements and deferred income taxes on the consolidated balance sheet. The remeasurement of the deferred taxes reflects the reduced rate that will apply when these deferred taxes are settled or realized in future periods.

The Company is subject to income taxes in the U.S. federal, various states, Canada and New Zealand tax jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. The Company

’s tax years

2013

through

2017

will remain open for examination by the federal and state authorities which is

three

and

four

years, respectively. The Company’s tax years from acquisition through

2017

remain open for examination by Canada and New Zealand authorities which is

four

years. As of

December 31, 2017,

there were

active taxing authority examinations.