Income Taxes:

Components of income before income taxes consists of the following (in thousands):



	2016		2015		2014
U.S.	$	22,203	$	38,615	$	30,291
Foreign	13,153		18,343		6,843
Total	$	35,356	$	56,958	$	37,134

The provision for income taxes consists of the following (in thousands):



	2016			2015			2014
Current
Federal	$	2,649		$	(659	)	$	9,725
State	670			859			733
Foreign	3,282			3,423			3,725
	6,601			3,623			14,183
Deferred
Federal	$	2,702		$	6,928		$	(3,831	)
State	193			495			(328		)
Foreign	(701		)	225			(1,237		)
	2,194			7,648			(5,396		)
Total	$	8,795		$	11,271		$	8,787

A reconciliation of the U.S. statutory tax rates to the effective tax rates on income follows:



	2016		2015		2014
U.S. Statutory Rate	35.0	%	35.0	%	35.0	%
State Taxes, Net of Federal Tax Benefit	3.4	%	2.4	%	1.6	%
Impact of Foreign Operations and Tax Rates	(7.8	)%	(1.2	)%	0.7	%
Changes to Unrecognized Tax Benefits	2.8	%	4.3	%	1.2	%
U.S. Manufacturers Deduction	(3.7	)%	(2.5	)%	(4.8	)%
Change in Accounting Method (1)	—	%	—	%	(7.8	)%
Research & Development Credit (2)	(10.6	)%	(18.1	)%	(1.0	)%
Goodwill Impairment	7.6	%	—	%	—	%
Other, Net	(1.8	)%	(0.1	)%	(1.2	)%
Effective Tax Rate	24.9	%	19.8	%	23.7	%

(1) "Change in Accounting Method" in fiscal 2014 relates to a taxpayer election filed pursuant to the outcome of a U.S. court case that provided the Company authority to record a tax benefit of $2.9 million for the permanent exclusion of qualified export activity from prior years’ taxable income.

(2) "Research & Development Credit” in fiscal 2016 includes current year and prior year federal research & development credit due to the reenactment of the credit during fiscal 2016. In fiscal 2015, this item primarily relates to federal research & development tax credits associated with the completion of a research & development tax credit analysis of prior fiscal years.

The components of deferred income taxes were as follows (in thousands):



Current Asset (Liability):	2016			2015
Difference Between Book and Tax Related to:
Inventory	$	13,360		$	12,159
Payroll Related Accruals	4,808			4,980
Warranty Reserves	9,747			11,065
Workers Compensation Accruals	2,812			2,421
Other Accrued Liabilities	10,117			11,432
Miscellaneous	3,892			3,814
Deferred Income Tax Asset (Liability)	$	44,736		$	45,871
Long-Term Asset (Liability):
Difference Between Book and Tax Related to:
Pension Cost	$	90,016		$	53,237
Accumulated Depreciation	(41,319		)	(43,484		)
Intangibles	(56,755		)	(58,180		)
Accrued Employee Benefits	39,083			43,428
Postretirement Health Care Obligation	14,107			15,838
Warranty	6,770			6,910
Valuation Allowance	(19,371		)	(17,198		)
Net Operating Loss/State Credit Carryforwards	24,942			22,694
Miscellaneous	(4,011		)	(1,016		)
Deferred Income Tax Asset (Liability)	$	53,462		$	22,229

Total deferred tax assets were $200.3 million and $170.8 million as of July 3, 2016 and June 28, 2015, respectively. Total deferred tax liabilities were $102.1 million and $102.7 million as of July 3, 2016 and June 28, 2015, respectively. During fiscal 2016, the total valuation allowance increased by $2.2 million.

Deferred tax assets were generated during the current year as a result of foreign income tax loss carryforwards in the amount of $0.9 million. At July 3, 2016, there are $5.6 million of foreign income tax loss carryforwards, consisting of $3.6 million that have no expiration date, and $2.0 million that will expire within the next 5 to 10 years. A deferred tax asset of $19.3 million exists at July 3, 2016 related to state income tax losses and state tax credit carryforwards. If not utilized against future taxable income, this amount will expire from 2017 through 2027. Realization of the deferred tax assets are contingent upon generating sufficient taxable income prior to expiration of these carryforwards. At July 3, 2016, a valuation allowance of $3.5 million is recorded for the foreign losses which the Company believes are unlikely to be realized in the future. In addition, a valuation allowance of $15.9 million is recorded related to state tax credits that are unlikely to be realized.

The Company does not record deferred income taxes applicable to undistributed earnings of foreign subsidiaries for which the Company intends to reinvest such earnings indefinitely outside of the U.S. The undistributed earnings amounted to approximately $77.4 million at July 3, 2016. If the Company were to distribute these earnings, foreign tax credits may become available under current law to reduce the resulting U.S. income tax. Determination of the amount of unrecognized deferred tax liability related to these earnings is not practicable.

The change to the gross unrecognized tax benefits of the Company during the fiscal year ended July 3, 2016 and June 28, 2015 is reconciled as follows:

Unrecognized Tax Benefits (in thousands):



	2016			2015			2014
Beginning Balance	$	10,551		$	7,657		6,949
Changes based on tax positions related to prior year	(208		)	4,573			380
Additions based on tax positions related to current year	579			691			378
Settlements with taxing authorities	—			(2,120		)	—
Lapse of statute of limitations	—			(250		)	(50		)
Ending Balance	$	10,922		$	10,551		$	7,657

As of July 3, 2016, gross unrecognized tax benefits that, if recognized, would impact the effective tax rate were $9.3 million. There is a reasonable possibility that approximately $4.1 million of the liability for uncertain tax positions may be settled within the next twelve months due to the resolution of audits or expiration of statutes of limitations.

The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense. The total expense recognized for fiscal years 2016, 2015 and 2014 was $0.2 million, $0.1 million, and $0.1 million, respectively.

As of July 3, 2016 and June 28, 2015, the Company had $1.4 million and $1.2 million, respectively, accrued for the payment of interest and penalties.

At July 3, 2016 and June 28, 2015, the liability for uncertain tax positions, inclusive of interest and penalties, was $12.3 million and $11.8 million, respectively, which is recorded as an other long-term liability within the Consolidated Balance Sheets.

Income tax returns are filed in the U.S., state, and foreign jurisdictions and related audits occur on a regular basis. In the U.S., the Company is currently under audit for the fiscal years 2010 through 2013, and is no longer subject to U.S. federal income tax examinations before fiscal 2010. The Company is also currently under audit by various state and foreign jurisdictions. The Company is no longer subject to tax examinations before fiscal 2006 in its major foreign jurisdictions.