INCOME TAXES

12 Months Ended

Jun. 30, 2013

INCOME TAXES [Abstract]

INCOME TAXES

N.  INCOME TAXES

United States and foreign earnings before income taxes and minority interest were as follows (in thousands):

	2013		2012		2011
United States	$	3,935	$	43,335	$	27,914
Foreign		5,302		1,421		4,115
	$	9,237	$	44,756	$	32,029

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

	2013			2012			2011
Currently payable:
Federal	$	1,745		$	7,310		$	8,837
State		(234	)		188			373
Foreign		2,788			2,831			3,333
		4,299			10,329			12,543
Deferred:
Federal		1,122			7,653			(315	)
State		439			662			(97	)
Foreign		(874	)		(829	)		1,766
		687			7,486			1,354
	$	4,986		$	17,815		$	13,897

The components of the net deferred tax asset as of June 30 are summarized in the table below (in thousands).

	2013			2012
Deferred tax assets:
Retirement plans and employee benefits	$	20,675		$	25,316
State net operating loss and other state credit carryforwards		91			14
Inventory		1,421			1,283
Reserves		2,388			2,016
Research & development capitalization		-			63
Foreign NOL carryforwards		4,311			4,359
Accruals		822			543
Other assets		98			96
		29,806			33,690
Deferred tax liabilities:
Property, plant and equipment		10,295			8,780
Intangibles		5,595			5,869
Other liabilities		439			490
		16,329			15,139
Valuation Allowance		(3,724	)		(3,811	)
Total net deferred tax assets	$	9,753		$	14,740

Note: $216,000 of this net deferred tax position is included in Accrued Liabilities.

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 2013, the Company continued to incur operating losses in certain foreign jurisdictions where the loss carryforward period is unlimited.  The Company has evaluated the realizability of the net deferred tax assets related to these jurisdictions and concluded that based primarily upon continuing losses in these jurisdictions and failure to achieve targeted levels of improvement, a full valuation allowance continues to be necessary.  Therefore, the Company recorded a net reduction in valuation allowance of $87,000.  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 the remaining 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 (in thousands):

	2013			2012			2011
U.S. federal income tax at 35%	$	3,104		$	15,595		$	11,163
Increases (reductions) in tax resulting from:
Foreign tax items		88			169			1,119
State taxes		296			797			129
Valuation allowance		1,216			1,060			2,491
Change in prior year estimate		(526	)		(215	)		(157	)
Research & development tax credits		309			96			(387	)
Section 199 deduction		(84	)		(908	)		(735	)
Goodwill impairment		-			1,292			-
Other, net		583			( 71	)		274
	$	4,986		$	17,815		$	13,897

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 no plans to repatriate funds to the U.S. for the foreseeable future.  These earnings relate to ongoing operations and were approximately $17.8 million at June 30, 2013.  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, we file income tax returns in various taxing jurisdictions inside and outside the United States.  In general, the tax years that remain subject to examination are 2009 through 2013 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 2011.

The Company has approximately $1.556 million of unrecognized tax benefits as of June 30, 2013, which, if recognized would impact the effective tax rate.  During the fiscal year the amount of unrecognized tax benefits increased primarily due to the tax positions taken during the fiscal year partially offset by the settlement of an IRS examination.  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 (in thousands):

	June 30, 2013			June 30, 2012
Unrecognized tax benefits, beginning of year	$	1,163		$	1,431
Additions based on tax positions related to the prior year		351			-
Additions based on tax positions related to the current year		361			132
Reductions based on tax positions related to the prior year		-			-
Subtractions due to statutes closing		(40	)		(50	)
Settlements with taxing authorities		(279	)		(350	)
Unrecognized tax benefits, end of year	$	1,556		$	1,163

Substantially all of the Company's unrecognized tax benefits as of June 30, 2013, if recognized, would affect the effective tax rate.  As of June 30, 2013 and 2012, the amounts accrued for interest and penalties totaled $296,000 and $41,000, respectively, and are not included in the reconciliation above.