H.	Income Taxes

The third fiscal quarter tax expense on near break-even, pre-tax results primarily relates to a provision to return adjustment related to foreign tax credits of approximately $0.7 million during the third quarter of fiscal 2013 following final settlement of the IRS audit. During the third quarter of fiscal 2013, the Company completed and filed its 2012 Federal income tax return which reflected all adjustments from the recently finalized federal income tax audit. As a result of this filing, the Company recorded a provision to return adjustment which reversed the carryforward benefit previously booked for foreign tax credits utilized under the audit period.

The effective tax rate for the first nine months of fiscal 2013 is 46.6%, which is higher than the prior year's 34.4%. The fiscal 2013 rate reflects the provision to return adjustment related to foreign tax credits noted above, along with impact of the valuation allowance on a continued reduced earnings base. Other offsetting items impacting the year to date tax expense include a favorable benefit from the reinstated research and development tax credit, a reduced domestic manufacturing deduction (i.e. Section 199) benefit and an additional reserve for uncertain tax positions for additional state income taxes.

Accounting policies for interim reporting require the Company to adjust its effective tax rate each quarter to be consistent with the estimated annual effective tax rate. Under this effective tax rate methodology, the Company applies an estimated annual income tax rate to its year-to-date ordinary earnings to derive its income tax provision each quarter. The impact of the Company's operations in certain foreign locations is removed from the overall effective tax rate methodology and recorded directly based upon year-to-date results as these operations anticipate net operating losses for the year for which no tax benefit can be recognized.

The Company has approximately $1,800,000 of unrecognized tax benefits, including related interest and penalties, as of March 29, 2013, which if recognized, would favorably impact the effective tax rate. Based on an internal review by the Company during the third quarter it was determined that additional state income tax reserves may be needed, resulting in an increase to the state reserve of $199,000 for tax and interest.

Annually, the Company files income tax returns in various taxing jurisdictions inside and outside the United States. In general, the tax years that remain subject to examination are 2008 through 2012 for the major operations in the Italy, Belgium and Japan. The tax years open to federal examination in the U.S. are for the years subsequent to fiscal 2011. The state of Wisconsin income tax audit remains ongoing for fiscal years 2001 through 2009. In the upcoming quarter the Company will commence an income tax audit by the state of Florida covering the period fiscal 2009 through fiscal 2011. During this quarter the Company was notified and began an audit in Italy. It is reasonably possible that at least one of these audit cycles will be completed during fiscal 2013.