J .	Income Taxes

December 22, 2017,

the Tax Cuts and Jobs Act (the “Tax Act”) was signed into law in the United States. The Tax Act, among other provisions, introduced changes in the U.S corporate tax rate, business related exclusions, deductions, and credits, and has tax consequences for companies that operate internationally. Most of the changes introduced in the Tax Act were effective beginning on

January 1, 2018;

however, as the Company has a fiscal year end of

June 30,

the effective dates for the Company are various and different.

For the

two

quarters ended

December 28, 2018

and

December 29, 2017,

the Company’s effective income tax rate was

25.1%

and

204.0%

respectively. In the prior year, increased and sustained profitability in a foreign jurisdiction resulted in the release of a

$3,803

valuation allowance, which decreased the effective tax rate by

611.5%.

In the prior year, the impact of the Tax Act was reflected resulting in an increase to tax expense of

$4,526,

which increased the effective tax rate by

727.9%.

Foreign tax reform also reflected in the prior year increased tax expense and by

$431

and resulted in an increase in the effective tax rate of

69.3%.

Within the calculation of the Company’s annual effective tax rate, the Company has used assumptions and estimates that

may

change as a result of future guidance, interpretation, and rule-making from the Internal Revenue Service, the SEC, and the FASB and/or various other taxing jurisdictions. Further, the Company anticipates that the state jurisdictions will continue to determine and announce their conformity to the Tax Act, which could have an impact on the annual effective tax rate.

The permanent reduction to the U.S. federal corporate income tax rate from

35%

21%

was effective

January 1, 2018.

The effective tax rate in the current quarter of fiscal

2019

reflects the reduction in the statutory federal income tax rate to

21%.

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.

new material information nor material interpretational changes have developed, the Company’s previous calculation reflected in fiscal

2018

has

not

changed. With the enactment of the transition tax, any future dividends repatriated would benefit from the

100%

Dividends Received Deduction. The company reaffirms its positon that the earnings of certain foreign subsidiaries remain permanently reinvested. An analysis was also completed to verify the future utilization of tax attributes and it was determined that full utilization would be realized and

valuation allowance was required. The Company has completed a provisional analysis of the global intangible low taxed income (“GILTI”) provisions and anticipates

impact to the financial statements due to the offset of the inclusion with the associated foreign tax credits. A provisional foreign-derived intangible income (“FDII”) calculation was completed and the benefit has been reflected in the quarterly provision. The Company has provisionally elected to treat GILTI as a period expense; however, the Company has

not

made a final accounting policy decision with respect to this item. A provisional analysis of the new base erosion anit-abuse tax (“BEAT”) rules has been completed and the Company does

not

meet the minimum thresholds at this time and is therefore

not

subject to this tax. These estimates

may

be impacted by actual future data, additional guidance or other unforeseen circumstances.

Under ASC Topic

740,

Income Taxes, a company is generally required to recognize the effect of changes in tax laws in its financial statements in the period in which the legislation is enacted. U.S. income tax laws are deemed to be effective on the date the president signs tax legislation. The president signed the Tax Act on

December 22, 2017.

As such, the Company is required to recognize the related impacts to the financial statements in the quarter ended

December 29, 2017.

In acknowledgment of the substantial changes incorporated in the Tax Act, in conjunction with the timing of the enactment being just weeks before the majority of the provisions became effective, the SEC staff issued Staff Accounting Bulletin ("SAB")

118

to provide certain guidance in determining the accounting for income tax effects of the legislation in the accounting period of enactment as well as provide a measurement period (similar to that used when accounting for business combinations) within which to finalize and reflect such final effects associated with the Tax Act. Further, SAB

118

summarizes a

three

-step approach to be applied each reporting period within the overall measurement period: (

) amounts should be reflected in the period including the date of enactment for those items which are deemed to be complete (i.e. all information is available and appropriately analyzed to determine the applicable financial statement impact), (

) to the extent the effects of certain changes due to the Tax Act for which the accounting is

not

deemed complete but for which a reasonable estimate can be determined, such provisional amount(s) should be reflected in the period so determined and adjusted in subsequent periods as such effects are finalized and (

) to the extent a reasonable estimate cannot be determined for a specific effect of the tax law change associated with the Tax Act,

provisional amount should be recorded but rather, continue to apply ASC

740

based upon the tax law in effect prior to the enactment of the Tax Act. Such measurement period is deemed to end when all necessary information has been obtained, prepared and analyzed such that a final accounting determination can be concluded, but in

event should the period extend beyond

one

year. If a company does

not

have the necessary information available, prepared or analyzed for certain income tax effects of the Tax Act, SAB

118

allows a company to report provisional numbers and adjust those amounts during the measurement period

not

to extend beyond

one

year. For the

two

quarters ended

December 28, 2018,

the Company has recorded all known and estimable impacts of the Tax Act that are effective for fiscal year

2019.

Future adjustments to the provisional numbers will be recorded as discrete adjustments to income tax expense in the period in which those adjustments become estimable and/or are finalized.

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. In addition, all other available positive and negative evidence is taken into consideration, including all new impacts of tax reform. The company has evaluated the realizability of the net deferred tax assets related to its operations and based on this evaluation management has concluded that

valuation allowances are required.

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

$1,092

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

December 28, 2018,

which, if recognized, would favorably impact the effective tax rate. There was

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

two

quarters ended

December 28, 2018.

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

2018

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

2015.

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

2010

through

2013.

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

2019.