N. INCOME TAXES

United States and foreign income (loss) before income taxes and minority interest were as follows:

	2018		2017			2016
United States	$	8,679	$	(13,048	)	$	(29,293	)
Foreign		5,741		3,519			3,998
	$	14,420	$	(9,529	)	$	(25,295	)

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

	2018			2017			2016
Currently payable:
Federal	$	234		$	(191	)	$	(1,683	)
State		135			251			136
Foreign		1,400			771			1,468
		1,769			831			(79	)
Deferred:
Federal		5,529			(3,906	)		(10,978	)
State		167			(706	)		(787	)
Foreign		(2,692	)		367			(438	)
		3,004			(4,245	)		(12,203	)
	$	4,773		$	(3,414	)	$	(12,282	)

The components of the net deferred tax asset as of

June 30

are summarized in the table below.

	2018		2017
Deferred tax assets:
Retirement plans and employee benefits	$	6,910	$	13,755
Foreign tax credit carryforwards		6,866		7,620
Federal tax credits		774		1,131
State net operating loss and other state credit carryforwards		1,190		1,213
Federal net operating loss		-		2,299
Inventory		1,259		1,992
Reserves		1,099		833
Foreign NOL carryforwards		2,940		3,606
Accruals		324		460
Other assets		403		665
		21,765		33,574
Deferred tax liabilities:
Property, plant and equipment		3,473		5,488
Intangibles		1,209		971
Other liabilities		230		125
		4,912		6,584
Valuation Allowance		-		(3,803	)
Total net deferred tax assets	$	16,853	$	23,187

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

2018,

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 on recent operational changes implemented, (a) it is more likely than

not

that all of deferred tax assets would be realized; and that (b) a full valuation allowance on the balance of deferred tax assets relating to these jurisdictions is

longer necessary. The company recorded a net decrease in the valuation allowance of (

$3,803

) in fiscal

2018

due to higher income and continued utilization of 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 all the 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:

	2018			2017			2016

U.S. federal income tax at 27.56% (34% in prior years)	$	3,974		$	(3,240	)	$	(8,601	)
Increases (reductions) in tax resulting from:
Foreign tax items		675			(179	)		(2,525	)
State taxes		272			(499	)		(374	)
Valuation allowance		(3,803	)		(47	)		(1,288	)
Change in prior year estimate		(89	)		899			473
Research and development tax credits		(162	)		(230	)		(348	)
Section 199 deduction		(114	)		-			-
Unrecognized tax benefits		(42	)		65			(21	)
Stock Compensation		(114	)		-			-
Goodwill impairment		-			-			420
Rate changes		3,786			-			-
Deferred tax basis adjustments		431			-			-
Other, net		(41	)		(183	)		(18	)
	$	4,773		$	(3,414	)	$	(12,282	)

December 22, 2017,

the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act makes broad and complex changes to the Internal Revenue Code. The Tax Act is generally applicable for tax years beginning after

December 31, 2017,

which is the Company’s fiscal year

2019.

However, several provisions of the Tax Act have differing effective dates, meaning these provisions have an impact upon the Company’s financial statements for fiscal year

2018.

The provisions impacting the Company’s fiscal year

2018

financial statements include the reduction of the U.S. federal corporate tax rate from

35%

21%,

the imposition of a

one

-time transition tax on the deemed repatriation of earnings from certain foreign subsidiaries, changes to the deductibility of certain meals and entertainment expenses and employee fringe benefits, and the extension of accelerated depreciation on qualified property acquired and placed in service after

September 27, 2017.

The Securities and Exchange Commission issued Staff Accounting Bulletin

118

to address uncertainty regarding the application of ASC

740

to the income tax effects of the Tax Act, signed into law on

December 22, 2017.

The bulletin provides a measurement period (

not

to exceed

one

year from the Tax Act enactment date) for companies to complete the accounting under ASC

740.

To the extent that a company’s accounting for certain income tax effects is incomplete, but is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate in the financial statements, it should continue to apply ASC

740

on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.

The Tax Act results in comprehensive changes to tax reporting rules. The Company has thoroughly reviewed all provisions of the Tax Act to determine their applicability to both fiscal

2018

and future years. The Company has completed its analysis of all applicable provisions of the Tax Act and has appropriately reflected their impact in the financial statements as per current guidance. The accounting for those provisions of the Tax Act which the Company is currently subject to is disclosed below:

Reduction in the Federal Corporate Income Tax Rate:

The Tax Act reduces the corporate tax rate from

35%

21%

for tax years beginning after

December 31, 2017.

A blended rate is calculated for non-calendar year filers resulting in a

27.56%

federal tax rate for fiscal year

2018.

The change in tax rate required a revaluation of the end of year deferred assets and liabilities of the Company. This resulted in additional tax expense of

$3,786.

Deemed Repatriation Transition Tax

: The deemed repatriation transition tax is a tax on previously untaxed accumulated and current earnings and profits of certain foreign subsidiaries. To determine the amount of the transition tax, the Company calculated the amount of post-

1986

earnings and profits for all foreign subsidiaries as well as the amount of non-U.S. income taxes paid on such earnings. The Company calculated the amount of the transition tax and determined it to be

zero

based on overall net historical negative earnings and profits.

Deductible Meals & Entertainment Expenses:

The Tax Act significantly revised the rules related to the deductibility of Meals & Entertainment expenses as well as certain employee fringe benefits. Entertainment expenses incurred after

December 31, 2017

are

100%

disallowed, with

one

small exception. There will also be much greater scrutiny placed on expenses for Meals to ensure they were incurred for a valid business purpose. The Company has completed a thorough analysis of every expense account in which Meals & Entertainment costs

may

have been recorded and has treated them accordingly based on the new rules under the Tax Act. As anticipated at the end of fiscal year

2018,

the financial statement impact of this provision of the Tax Act is immaterial.

Bonus Depreciation:

The Tax Act allows

100%

bonus depreciation for qualified assets placed in service after

September 27, 2017.

The Company has identified the assets which qualify for this provision and has incorporated the additional depreciation expense into the tax provision for fiscal year

2018.

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

plans to repatriate funds to the U.S. for the foreseeable future. These earnings relate to ongoing operations and were approximately

$4,077

June 30, 2018.

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, 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

2014

through

2018

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

2015.

The Company has approximately

$816

of unrecognized tax benefits as of

June 30, 2018,

which, if recognized would impact the effective tax rate. During the fiscal year the amount of unrecognized tax benefits decreased primarily due to reserves which were released upon the conclusion of the fiscal year

2015

IRS income tax audit. During the next

twelve

months, the Company anticipates closure of the Wisconsin income tax audit for the periods fiscal year

2010

through fiscal year

2013.

This could result in a significant change to the 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, 2018			June 30, 2017
Unrecognized tax benefits, beginning of year	$	827		$	790
Additions based on tax positions related to the prior year		-			-
Additions based on tax positions related to the current year		303			55
Reductions based on tax positions related to the prior year		(9	)		(13	)
Subtractions due to statutes closing		(105	)		(5	)
Settlements with Taxing Authorities		(200	)		-
Unrecognized tax benefits, end of year	$	816		$	827

Substantially all of the Company’s unrecognized tax benefits as of

June 30,

3018,

if recognized, would affect the effective tax rate. As of

June 30, 2018

and

2017,

the amounts accrued for interest and penalties totaled

$93

and

$94,

respectively, and are

not

included in the reconciliation above.