H.	Income Taxes

For the six months ended December 28, 2012 and December 30, 2011, the Company's effective income tax rate was 38.3% and 35.5% respectively. The fiscal 2013 rate reflects the impact of the valuation allowance on a continued reduced earnings base, increased net foreign earnings and additional reserves for uncertain tax positions ($380,000). Decreased domestic sales were offset by a limited Section 199 deduction. No research and development tax credit was reflected as it was not extended within the quarter. The favorable impact of the recently extended research and development tax credit will be recorded in the third fiscal quarter, as it was signed January 2, 2013.

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 impact of the Company's operations in certain foreign jurisdictions is removed from the overall effective tax rate methodology and recorded directly based upon year-to-date results as these operations anticipate net operating losses for the year for which no tax benefit can be recognized.

The Company has approximately $1,500,000 of unrecognized tax benefits, including related interest and penalties, after the revision discussed in footnote A as of December 28, 2012, which, if recognized, would favorably impact the effective tax rate. The Company finalized an audit settlement in the U.S. for fiscal years 2010 and 2011 which resulted in a decrease in unrecognized tax benefits of $305,000. Additionally, as a result of an on-going state audit, the Company added an additional reserve of $380,000.

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 2008 through 2011 for the major operations in Italy, Belgium, and Japan. The tax years open to examination in the U.S. are for years subsequent to fiscal 2011. The state of Wisconsin income tax audit remains ongoing for the fiscal years 2001 through 2009. During this quarter the Company was notified by the state of Florida of a tax examination covering open periods. It is reasonably possible that at least one of these audit cycles will be completed during fiscal 2013.