Note H - Income Taxes

6 Months Ended

Dec. 30, 2016

Notes to Financial Statements

Income Tax Disclosure [Text Block]

H. Income Taxes

For the

two

quarters ended

December

30,

2016

and

2015,

the Company’s effective income tax rate was

28.8%

and

36.8%,

respectively. As a result of a change in prior year estimates of foreign tax credits and research and development credits, the Company recognized a net expense of

$490

which decreased the rate by

4.8%.

Continued low global earnings and a similar mix of earnings by jurisdiction during fiscal

2017

had minimal impact to the effective rate.

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. Due to recent operating income in a certain foreign jurisdiction with a history of generating operating losses, the Company has evaluated the realizability of the net deferred tax assets related to this jurisdiction. This evaluation concluded that, based primarily upon recent losses in this jurisdiction and failure to achieve targeted levels of improvement, a full valuation allowance continues to be necessary.

The Company has not provided for additional U.S. income taxes on cumulative earnings of certain consolidated foreign subsidiaries that are considered to be reinvested indefinitely. The Company reaffirms its position that these earnings remain permanently invested. Such earnings could become taxable upon the sale or liquidation of these foreign subsidiaries or upon dividend repatriation.

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 Company has approximately

$963

of unrecognized tax benefits, including related interest and penalties, as of

December

30,

2016,

which, if recognized, would favorably impact the effective tax rate. There was no significant change in the total unrecognized tax benefits due to the settlement of audits, the expiration of statutes of limitations or for other items during the quarter ended

December

30,

2016.

It appears possible that the amount of unrecognized tax benefits could change in the next

twelve

months due to on-going audit activity.

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

2011

through

2016

for the major operations in Italy, Canada, Belgium, and Japan.  The tax years open to examination in the U.S. are for years subsequent to fiscal

2012.

The state of Wisconsin income tax audit remains ongoing for the fiscal years

2010

through

2015.

The company has been notified of a future U.S. Federal income tax audit for the fiscal year

2015.

It is reasonably possible that other audit cycles will be completed during fiscal

2017.