INCOME TAXES

12 Months Ended

Jun. 30, 2023

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

The components of loss from continuing operations before income taxes are as follows:

	Fiscal Years
	2023		2022		2021
	(Dollars in thousands)
Loss before income taxes
U.S.	$	(10,204)	$	(41,231)	$	(143,104)
International	(1,794)		(3,211)		34,470
	$	(11,998)	$	(44,442)	$	(108,634)

The (benefit) provision for income taxes consists of:

	Fiscal Years
	2023		2022		2021
	(Dollars in thousands)
Current:
U.S.	$	(219)	$	(535)	$	(620)
International	(428)		(425)		(1,421)
Deferred:
U.S.	(270)		3,130		(3,701)
International	262		(153)		314
	$	(655)	$	2,017	$	(5,428)

The (benefit) provision for income taxes differs from the amount of income tax determined by applying the applicable U.S. statutory rate to loss from continuing operations before income taxes, as a result of the following:

	Fiscal Years
	2023		2022		2021
U.S. statutory rate	21.0	%	21.0	%	21.0	%
State income taxes, net of federal income tax benefit	(2.7)		1.4		7.9
Valuation allowance (1)	(12.9)		(6.6)		(61.5)
Foreign income taxes at other than U.S. rates	(0.2)		3.0		9.4
Uncertain tax positions	6.7		(17.9)		0.2
Stock-based compensation	(2.7)		(2.8)		(0.7)
Loss on investment in Luxembourg	—		—		29.3
Deferred tax rate remeasurement	(3.6)		—		—
Other, net (2)	(0.1)		(2.6)		(0.6)
Effective tax rate	5.5	%	(4.5)	%	5.0	%

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(1)See Note 1 to the Consolidated Financial Statements.

(2)The (0.1)% of other, net in fiscal year 2023 includes the rate impact of the federal provision to return true-up, tax attribute expirations and miscellaneous items of 1.3%, (1.1)% and (0.3)%, respectively. The (2.6)% of other, net in fiscal year 2022 includes the rate impact of the federal provision to return true-up and miscellaneous items of (2.0)% and (0.6)%, respectively. The (0.6)% of other, net in fiscal year 2021 does not include the rate impact of any items in excess of 5% of computed tax.

The components of the net deferred tax assets and liabilities are as follows:

	June 30,
	2023		2022
	(Dollars in thousands)
Deferred tax assets:
Payroll and payroll related costs	$	5,041	$	5,267
Net operating loss carryforwards	154,514		153,190
Tax credit carryforwards	37,515		37,664
Capital loss carryforwards	5,845		5,338
Deferred franchise fees	7,018		8,694
Operating lease liabilities	92,666		124,905
Other (1)	18,826		17,542
Subtotal	321,425		352,600
Valuation allowance	(202,185)		(201,731)
Total deferred tax assets	$	119,240	$	150,869
Deferred tax liabilities:
Goodwill and intangibles	$	(35,001)	$	(33,466)
Operating lease assets	(91,921)		(123,333)
Other	(3,254)		(5,049)
Total deferred tax liabilities	(130,176)		(161,848)
Net deferred tax liability	$	(10,936)	$	(10,979)

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(1)The $18.8 million of Other in fiscal year 2023 includes $3.4 million of deferred tax assets with a corresponding valuation allowance of the same amount related to discontinued operations. The $17.5 million of Other in fiscal year 2022 includes $5.3 million of deferred tax assets with a corresponding valuation allowance of the same amount related to discontinued operations.

At June 30, 2023, the Company has tax-effected federal, state, Canada, and U.K. net operating loss carryforwards of approximately $118.1, $27.9, $8.3 and $0.2 million, respectively. The Company's federal loss carryforward consists of $27.3 million that will expire from fiscal years 2034 to 2038 and $90.8 million that has no expiration. The state loss carryforwards consist of $24.4 million that will expire from fiscal years 2024 to 2043 and $3.5 million that has no expiration. The Canada loss carryforward will expire from fiscal years 2036 to 2043. The U.K. loss carryforward has no expiration.

The Company's tax credit carryforward of $37.5 million primarily consists of Work Opportunity Tax Credits that will expire from fiscal years 2031 to 2043.

The Company's capital loss carryforward of $5.8 million will expire in fiscal year 2025.

We consider the earnings of certain non-U.S. subsidiaries to be indefinitely invested outside the U.S. Accordingly, we have not recorded deferred taxes related to the U.S. federal and state income taxes and foreign withholding taxes on approximately $6.6 million of undistributed earnings of foreign subsidiaries, which have been reinvested outside the U.S. As a result of the Tax Cuts and Jobs Act of 2017, taxes payable on the remittance of such earnings is expected to be minimal.

The Company files tax returns and pays tax primarily in the U.S., Canada, and the U.K., as well as states, cities, and provinces within these jurisdictions. With limited exceptions, due to net operating loss carryforwards, the Company's federal, state and foreign tax returns are open to examination for all years since 2014, 2012 and 2016, respectively.

A rollforward of the unrecognized tax benefits is as follows:

	Fiscal Years
	2023		2022
	(Dollars in thousands)
Balance at beginning of period	$	22,173	$	13,858
Additions based on tax positions related to the current year	10		8,636
(Reductions) additions based on tax positions of prior years	(663)		81
Reductions on tax positions related to the expiration of the statute of limitations	(127)		(402)
Balance at end of period	$	21,393	$	22,173

If the Company were to prevail on all unrecognized tax benefits recorded, a net benefit of approximately $0.9 million would be recorded in the effective tax rate. Interest and penalties associated with unrecognized tax benefits are recorded within income tax expense. The Company recorded interest and penalties of approximately $0.1, $0.2 and $0.2 million as reductions to the accrual, net of the respective reversal of previously accrued interest and penalties during fiscal years 2023, 2022 and 2021, respectively. As of June 30, 2023, the Company had accrued interest and penalties related to unrecognized tax benefits of $0.6 million. This amount is not included in the gross unrecognized tax benefits noted above.

It is reasonably possible the amount of the unrecognized tax benefit with respect to certain of our unrecognized tax positions will increase or decrease during the next fiscal year. However, an estimate of the amount or range of the change cannot be made at this time.

On August 16, 2022, the Inflation Reduction Act (the IRA) was signed into law. The IRA contains a number of tax related provisions, including a 15% minimum corporate income tax on certain large corporations, as well as an excise tax on stock repurchases. The Company has evaluated the IRA and does not expect it to have a material impact on the Company's Consolidated Financial Statements.