Note 14 - Income Taxes

12 Months Ended

Jun. 30, 2013

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

14. Income Taxes

Components of income before tax

The components of Income before income taxes consist of the following:

	For the Fiscal Years Ended
	June 30, 2013		June 24, 2012		June 26, 2011
United States	$	16,900	$	3,010	$	14,737
Foreign		12,114		5,839		17,685
Income before income taxes	$	29,014	$	8,849	$	32,422

Components of provision (benefit) for taxes

The components of the Provision (benefit) for income taxes consist of the following:

	For the Fiscal Years Ended
	June 30, 2013			June 24, 2012			June 26, 2011
Current:
Federal	$	2,399		$	457		$	3
State		119			69			—
Foreign		5,210			4,549			6,844
		7,728			5,075			6,847
Deferred:
Federal		7,086			(2,733	)		—
State		542			(3,285	)		—
Foreign		(2,012	)		(1,036	)		486
		5,616			(7,054	)		486
Provision (benefit) for income taxes	$	13,344		$	(1,979	)	$	7,333

Effective income tax rate

The provision for income taxes computed by applying the federal statutory tax rate as reconciled to the effective tax rate is as follows:

	For the Fiscal Years Ended
	June 30, 2013			June 24, 2012			June 26, 2011
Federal statutory tax rate		35.0	%		35.0	%		35.0	%
State income taxes, net of federal tax benefit		2.1			0.5			1.1
Foreign income taxed at different rates		(0.1	)		(7.3	)		(1.2	)
Repatriation of foreign earnings		1.1			71.6			6.3
Unremitted foreign earnings, net of foreign tax credit		1.0			54.2			11.9
North Carolina investment tax credit expiration		0.1			0.3			2.8
Change in valuation allowance		10.3			(180.2	)		(34.8	)
Domestic production activities deduction		(1.2	)		—			—
Research and other credits		(3.5	)		—			—
Nondeductible expenses and other		1.2			3.5			1.5
Effective tax rate		46.0%			(22.4%	)		22.6	%

The Company’s effective tax rate for the year ended June 30, 2013 was significantly impacted by the increase in the valuation allowance primarily related to equity investments, partially offset by the research and other credits and the domestic production activities deduction.    

Deferred income taxes

The significant components of the Company’s deferred tax assets and liabilities consist of the following:

	June 30, 2013			June 24, 2012
Deferred tax assets:
Investments in unconsolidated affiliates	$	12,318		$	9,109
State tax credits		314			343
Accrued liabilities and valuation reserves		4,189			4,523
Net operating loss carryforwards		1,980			10,135
Intangible assets		6,220			6,961
Foreign tax credits		2,588			2,588
Incentive compensation plans		3,070			2,574
Other items		3,577			3,112
Total gross deferred tax assets		34,256			39,345
Valuation allowance		(16,690	)		(13,911	)
Net deferred tax assets		17,566			25,434
Deferred tax liabilities:
Property, plant and equipment		(6,770	)		(9,218	)
Unremitted foreign earnings		(7,390	)		(7,109	)
Other		(795	)		(804	)
Total deferred tax liabilities		(14,955	)		(17,131	)
Net deferred tax asset	$	2,611		$	8,303

Deferred income taxes - valuation allowance

In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. The Company considers the scheduled reversal of taxable temporary differences, taxable income in carryback years, projected future taxable income and tax planning strategies in making this assessment. Since the Company operates in multiple jurisdictions, the assessment is made on a jurisdiction-by-jurisdiction basis, taking into account the effects of local tax law.

The balances and activity for the Company’s deferred tax valuation allowance are as follows:

	For the Fiscal Years Ended
	June 30, 2013			June 24, 2012			June 26, 2011
Balance at beginning of the year	$	(13,911	)	$	(30,164	)	$	(39,988	)
Charged to costs and expenses		(3,243	)		15,847			8,815
Charged to other accounts		464			239			—
Deductions		—			167			1,009
Balance at end of year	$	(16,690	)	$	(13,911	)	$	(30,164	)

Based on the assessment at June 30, 2013, the Company has recorded a valuation allowance of $16,690, of which $14,091 related to reserves against certain domestic deferred tax assets primarily related to equity investments and foreign tax credits as well as $2,599 related to reserves against certain deferred tax assets of the Company’s foreign subsidiaries primarily related to net operating loss carryforwards and equity investments.

During fiscal year 2013, the Company’s valuation allowance increased by $2,779. This increase consists of $3,428 related to certain foreign and domestic equity investments partially offset by a decrease of $649 related to certain foreign net operating loss carryforwards and temporary items. The Company’s operations in Colombia have experienced positive operating results in recent years (for both reported book and taxable income amounts) and the Company expects these operating results to continue. The Company would need to generate $1,451 of taxable income before the expiration of the net operating loss and presumptive income deductions in 2018 in order to fully realize these foreign deferred tax assets. During the fourth quarter of fiscal year 2013, the Company concluded that the cumulative profitability in recent years and projected future taxable income provided sufficient positive evidence that the future tax benefits related to $424 of deferred tax assets would more-likely-than-not be realized and the Company recorded a reduction to the valuation allowance. This amount was recorded as a benefit for deferred income tax expense.

Based on the assessment at June 24, 2012, the Company had recorded a valuation allowance of $13,911, of which $11,194 related to reserves against certain domestic deferred tax assets primarily related to equity investments and foreign tax credits as well as $2,717 related to reserves against certain deferred tax assets of the Company’s foreign subsidiaries primarily related to net operating carryforwards and equity investments.

During fiscal year 2012, the Company’s valuation allowance declined $16,253. This decrease consisted of $11,242 primarily due to the utilization of domestic federal and state net operating loss carryforwards during the year, partially offset by $1,245 related to certain foreign equity investments. The valuation allowance also decreased $6,256 during fiscal year 2012 as the Company concluded that its cumulative profitability in recent years and projected future taxable income provided sufficient positive evidence that future tax benefits related to $6,256 of its domestic deferred tax assets would more-likely-than-not be realized and the Company recorded a reduction to the valuation allowance. Of this amount, $6,017 was recorded as a benefit for deferred income taxes as a component of net income and $239 was recorded as a component of Accumulated other comprehensive income.

During fiscal year 2011, the valuation allowance decreased $9,824 primarily as a result of the decrease in temporary differences, the effects of a change in an indefinite reinvestment assertion and the utilization of federal net operating loss carryforwards.

Unrecognized tax benefits

A reconciliation of beginning and ending gross amounts of unrecognized tax benefits is as follows:

	For the Fiscal Years Ended
	June 30, 2013			June 24, 2012			June 26, 2011
Balance at beginning of the year	$	1,154		$	775		$	374
Gross increases related to current period tax positions		250			6			22
Gross increases related to tax positions in prior periods		—			400			379
Gross decreases related to settlements with tax authorities		—			—			—
Gross decreases related to lapse of applicable statute of limitations		(440	)		(27	)		—
Balance at end of year	$	964		$	1,154		$	775

Recognition of $964 of previously unrecognized tax benefits would have a favorable impact on the Company’s effective tax rate. Interest and penalties recognized by the Company within income tax expense (benefit) were ($250), $9 and $552 for the fiscal years ended June 30, 2013, June 24, 2012 and June 26, 2011, respectively. The Company has $311, $561 and $552 accrued for interest and/or penalties related to uncertain tax positions as of June 30, 2013, June 24, 2012 and June 26, 2011, respectively.

Expiration of net operating losses and tax credits

As of June 30, 2013, the Company has $17,687 of state net operating loss carryforwards that may be used to offset future taxable income. In addition, the Company has $2,588 of foreign tax credit carryforwards (of which $1,680 are offset by valuation allowances), $130 of North Carolina research credits and $26 of North Carolina investment tax credit carryforwards. These carryforwards, if unused, will expire as follows:

State net operating loss carryforwards	2014	through	2032
Foreign tax credit carryforwards		2021
North Carolina research credits		2028
North Carolina investment tax credit carryforwards	2014	through	2016

Tax years subject to examination

The Company and its domestic subsidiaries file a consolidated federal income tax return, as well as income tax returns in numerous state and foreign jurisdictions. The tax years subject to examination vary by jurisdiction. The Company regularly assesses the outcomes of both completed and ongoing examinations to ensure that the Company’s provision for income taxes is sufficient. During the third quarter of fiscal year 2013, the Internal Revenue Service completed an audit of the Company’s 2010 tax year, with no changes being made to the tax return reported. The Company remains subject to income tax examinations for U.S. federal income taxes for tax years 2010 through 2012, for foreign income taxes for tax years 2007 through 2012, and for state and local income taxes for tax years 2008 through 2012. The U.S. federal returns and certain state tax returns filed for the 2010 through 2012 tax years have utilized carryforward tax attributes generated in prior tax years, including net operating losses that could potentially be revised upon examination.

Indefinite reinvestment assertion

During fiscal year 2013, the Company increased its indefinite reinvestment assertion by $803. The Company has plans to repatriate $21,114 of future cash flows generated from its operations in Brazil and has a deferred tax liability of $7,390 to reflect the additional income tax that would be due as a result of these plans. As of June 30, 2013, $60,622 of undistributed earnings of the Company’s foreign subsidiaries was deemed to be permanently reinvested, and any applicable U.S. federal income taxes and foreign withholding taxes have not been provided on these earnings. If these earnings had not been permanently reinvested, deferred taxes of approximately $21,218 would have been recognized.