Note H - Income Taxes

6 Months Ended

Dec. 27, 2024

Notes to Financial Statements

Income Tax Disclosure [Text Block]

H.         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 (AETR). 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. To calculate its AETR, an entity must estimate its ordinary income or loss and the related tax expense or benefit for its full fiscal year. In situations in which an entity is in a loss position and recognizes a full valuation allowance, the guidance in ASC 740-270-25-9 applies. Due to continued historical domestic losses and uncertain future domestic earnings, the Company continues to recognize a full domestic valuation allowance.

Permanent differences continue to fluctuate and are significant compared to projected ordinary income. Therefore, per ASC guidance, the fully valued domestic entity was removed from the annualized effective rate calculation. Because of the full U.S. valuation allowance, the U.S. entity may only recognize tax expense (benefit) recorded for ASC 740-10 adjustments.

	For the Quarter-Ended						For the Two Quarters Ended
	December 27, 2024			December 29, 2023			December 27, 2024			December 29, 2023
Foreign earnings, before income taxes of $1,552, $1,683, $2,406, and $2,199, respectively	$	5,660		$	6,209		$	9,100		$	8,264
Domestic losses, before income taxes of $0, ($21), ($227) and $9, respectively		(3,009	)		(3,612	)		(8,594	)		(6,204	)
Earnings before income taxes and noncontrolling interest	$	2,651		$	2,597		$	506		$	2,060
Income tax expense	$	1,552		$	1,662		$	2,179		$	2,208
Effective income tax rate		58.5	%		64.0	%		430.6	%		107.2	%

Due to the full US valuation allowance currently in place, no tax benefit can be recognized on the domestic losses.

A discrete expense was recorded during the period of $148 related to foreign returns filed compared to income tax provision accrued.