N. INCOME TAXES

United States and foreign earnings before income taxes and minority interest were as follows:

	2016			2015		2014
United States	$	(29,293	)	$	5,614	$	1,107
Foreign		3,998			10,286		6,989
	$	(25,295	)	$	15,900	$	8,096

The provision (benefit) for income taxes is comprised of the following:

	2016			2015			2014
Currently payable:
Federal	$	(1,683	)	$	1,607		$	651
State		136			518			104
Foreign		1,468			2,832			2,837
		(79	)		4,957			3,592
Deferred:
Federal		(10,978	)		408			1,309
State		(787	)		5			(95	)
Foreign		(438	)		(855	)		(580	)
		(12,203	)		(442	)		634
	$	(12,282	)	$	4,515		$	4,226

The components of the net deferred tax asset as of June 30 are summarized in the table below.

	2016			2015
Deferred tax assets:
Retirement plans and employee benefits	$	19,106		$	15,157
Foreign tax credit carryforwards		8,887			-
Federal tax credits		191			-
State net operating loss and other state credit carryforwards		768			369
Inventory		1,775			1,789
Reserves		1,544			2,587
Foreign NOL carryforwards		3,176			3,539
Accruals		522			584
Other assets		678			568
		36,647			24,593
Deferred tax liabilities:
Property, plant and equipment		6,329			7,221
Intangibles		2,011			4,778
Other liabilities		140			451
		8,480			12,450

Valuation Allowance		(3,123	)		(3,577	)
Total net deferred tax assets	$	25,044		$	8,566

As of June 30, 2016, due to the early adoption of Accounting Standards Update 2015-17, all deferred tax assets and liabilities have been classified as noncurrent. The Company elected to adopt this guidance prospectively and not revise prior periods. As of June 30, 2015, $4,863 of deferred tax assets is presented as a current asset in the Consolidated Balance Sheet, and $82 of deferred tax liabilities is included in accrued liabilities.

The Company maintains valuation allowances when it is more likely than not that all or a portion of a deferred tax asset will not be realized. Changes in valuation allowances from period to period are included in the tax provision in the period of change. In determining whether a valuation allowance is required, the Company takes into account such factors as prior earnings history, expected future earnings, carry-back and carry-forward periods, and tax strategies that could potentially enhance the likelihood of realization of a deferred tax asset. During fiscal 2016, the Company reported operating income in certain foreign jurisdictions where the loss carryforward period is unlimited. The Company has evaluated the likelihood of whether the net deferred tax assets related to these jurisdictions would be realized and concluded that based primarily upon the uncertainty to achieve levels of sustained improvement and uncertain exchange rates in these jurisdictions; (a) it is more likely than not that $3,123 of deferred tax assets would not be realized; and that (b) a full valuation allowance on the balance of deferred tax assets relating to these jurisdictions continues to be necessary. The Company recorded a net decrease in valuation allowance of $454 in fiscal 2016 due to lower cumulative operating losses in these jurisdictions. Management believes that it is more likely than not that the results of future operations will generate sufficient taxable income and foreign source income to realize the remaining deferred tax assets.

Following is a reconciliation of the applicable U.S. federal income taxes to the actual income taxes reflected in the statements of operations:

	2016			2015			2014

U.S. federal income tax at 35%	$	(8,601	)	$	5,491		$	2,754
Increases (reductions) in tax resulting from:
Foreign tax items		(2,525	)		362			(291	)
State taxes		(374	)		32			228
Valuation allowance		(1,288	)		(1,121	)		1,551
Change in prior year estimate		473			157			139
Research and development tax credits		(348	)		(337	)		(267	)
Section 199 deduction		-			(96	)		(109	)
Unrecognized tax benefits		(21	)		5			183
Goodwill impairment		420			-			-
Other, net		(18	)		22			38
	$	(12,282	)	$	4,515		$	4,226

The Company has not provided additional U.S. income taxes on cumulative earnings of consolidated foreign subsidiaries that are considered to be reinvested indefinitely. The Company reaffirms its position that these earnings remain permanently invested, and has no plans to repatriate funds to the U.S. for the foreseeable future. These earnings relate to ongoing operations and were approximately $3,039 at June 30, 2016. Such earnings could become taxable upon the sale or liquidation of these foreign subsidiaries or upon dividend repatriation. It is not practicable to estimate the amount of unrecognized withholding taxes and deferred tax liability on such earnings. The Company’s intent is for such earnings to be reinvested by the subsidiaries or to be repatriated only when it would be tax effective through the utilization of foreign tax credits.

Annually, we file income tax returns in various taxing jurisdictions inside and outside the United States. In general, the tax years that remain subject to examination are 2012 through 2016 for our major operations in Italy, Belgium and Japan. The tax years open to examination in the U.S. are for years subsequent to fiscal 2013.

The Company has approximately $790 of unrecognized tax benefits as of June 30, 2016, which, if recognized would impact the effective tax rate. During the fiscal year the amount of unrecognized tax benefits decreased primarily due to expiration of statutes. During the next twelve months, the Company does not anticipate any significant changes in unrecognized tax benefits. The Company’s policy is to accrue interest and penalties related to unrecognized tax benefits in income tax expense.

Below is a reconciliation of beginning and ending amount of unrecognized tax benefits:

	June 30, 2016			June 30, 2015
Unrecognized tax benefits, beginning of year	$	810		$	1,603
Additions based on tax positions related to the prior year		12			-
Additions based on tax positions related to the current year		172			184
Reductions based on tax positions related to the prior year		(4	)		(3	)
Subtractions due to statutes closing		(179	)		(60	)
Settlements with Taxing Authorities		(21	)		(914	)
Unrecognized tax benefits, end of year	$	790		$	810

Substantially all of the Company’s unrecognized tax benefits as of June 30, 3016, if recognized, would affect the effective tax rate. As of June 30, 2016 and 2015, the amounts accrued for interest and penalties totaled $61 and $62, respectively, and are not included in the reconciliation above.