Note I - Income Taxes

9 Months Ended

Mar. 31, 2023

Notes to Financial Statements

Income Tax Disclosure [Text Block]

I. Income Taxes

To determine our quarterly provision for income taxes, we use an estimated annual effective tax rate, which is based on expected annual income, statutory tax rates and tax planning opportunities available in the various jurisdictions to which we are subject. Certain significant or unusual items are separately recognized in the quarter in which they occur and can be a source of variability in the effective tax rate from quarter to quarter. We recognize interest and penalties related to uncertain tax positions, if any, as an income tax expense.

Our effective tax rate for the three months ended March 31, 2023 was 14.6% and our effective tax rate for the three months ended March 31, 2022 was 21.4%. Our effective tax rate for the nine months ended March 31, 2023 was 40.6% and our effective tax rate for the nine months ended March 31, 2022 was 22.2%. Our effective tax rates for the three and nine months ended March 31, 2023 differ from the fiscal 2023 U.S. federal statutory rate of 21% primarily due to due to foreign income tax rate differential, the recognition of a prior year bad debt reserve as a tax loss in the current year, the timing of other forecasted permanent tax items, and discrete tax items related to employee stock vesting and return-to-provision adjustments. Our effective tax rates for the three and nine months ended March 31, 2022 differ from the fiscal 2022 U.S. federal statutory rate of 21% primarily due to foreign income tax rate differential and other tax credits.

We record valuation allowances to reduce our deferred tax assets to an amount we believe is more likely than not to be realized. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. During the three and nine months ended March 31, 2023, there was no change to our valuation allowance for our deferred tax assets.