Note 14 - Income Taxes

12 Months Ended

Jun. 28, 2015

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

14. Income Taxes          

Components of income before income taxes

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

	For the Fiscal Years Ended
	June 28, 2015		June 29, 2014		June 30, 2013
United States	$	38,341	$	38,816	$	16,900
Foreign		15,471		9,065		12,114
Income before income taxes	$	53,812	$	47,881	$	29,014

Components of provision for income taxes

The components of provision for income taxes consist of the following:

	For the Fiscal Years Ended
	June 28, 2015			June 29, 2014			June 30, 2013
Current:
Federal	$	7,985		$	14,463		$	2,399
State		1,231			1,035			119
Foreign		7,926			4,092			5,210
		17,142			19,590			7,728
Deferred:
Federal		(4,006	)		183			7,086
State		(112	)		900			542
Foreign		322			(512	)		(2,012	)
		(3,796	)		571			5,616
Provision for income taxes	$	13,346		$	20,161		$	13,344

Utilization of Net Operating Loss Carryforwards

State deferred tax expense includes the utilization of net operating loss (“NOL”) carryforwards of $196, $499 and $825 for fiscal years 2015, 2014 and 2013, respectively. Foreign deferred tax expense includes the utilization of NOL carryforwards of $147, $216 and $258 for fiscal years 2015, 2014 and 2013, respectively. Federal deferred tax expense includes the utilization of NOL carryforwards of $7,904 for fiscal year 2013.

Effective income tax rate

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

	For the Fiscal Years Ended
	June 28, 2015			June 29, 2014			June 30, 2013
Federal statutory tax rate		35.0	%		35.0	%		35.0	%
State income taxes, net of federal tax benefit		1.8			2.8			2.1
Foreign income taxed at different rates		(3.2	)		(1.2	)		(0.5	)
Settlement of certain intercompany foreign currency transactions		5.6			—			—
Repatriation of foreign earnings and withholding taxes		(0.3	)		0.4			1.1
Indefinite reinvestment assertion		(14.2	)		0.5			1.0
Change in valuation allowance		(5.6	)		4.0			11.2
Domestic production activities deduction		(1.3	)		(2.3	)		(1.2	)
Change in uncertain tax positions		5.4			(0.5	)		(1.4	)
Renewable energy credits		(1.9	)		—			—
Research and other credits		(0.4	)		(0.3	)		(3.5	)
Nondeductible expenses and other		3.9			3.7			2.2
Effective tax rate		24.8	%		42.1	%		46.0	%

The effective income tax rate for fiscal year 2015 was primarily impacted by, among other things (i) a decrease in the valuation allowance reflecting the recognition of lower taxable income versus book income for the Company’s investment in Parkdale America, LLC (for which the Company maintains a full valuation allowance), which was partially offset by an increase in the valuation allowance for net operating losses, including Renewables, for which no tax benefit could be recognized; (ii) the change in the Company’s indefinite reinvestment assertion, which provides for foreign earnings permanently reinvested at June 28, 2015; (iii) a lower overall effective tax rate for the Company’s foreign earnings (reflecting free-trade zone sales in El Salvador and lower statutory tax rates in both Brazil and China); (iv) net federal and state credits, including renewable energy credits; and (v) the domestic production activities deduction. These items were partially offset by (i) taxes associated with settlement of certain intercompany foreign currency transactions in Brazil; (ii) a change in uncertain tax positions related to certain intercompany foreign currency transactions in Brazil; and (iii) state and local taxes net of the assumed federal benefit.

The Company’s effective tax rate for fiscal years 2014 and 2013 was significantly impacted by, among other things, the increase in the valuation allowance primarily related to equity investments and state and local taxes net of the assumed federal benefit, partially offset by the domestic production activities deduction, research and development credits and other credits.

Deferred income taxes

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

	June 28, 2015			June 29, 2014
Deferred tax assets:
Investments, including unconsolidated affiliates	$	9,675		$	13,682
State tax credits		461			85
Accrued liabilities and valuation reserves		2,620			4,187
Net operating loss carryforwards		2,904			1,635
Intangible assets, net		4,964			5,259
Foreign tax credits		2,588			2,588
Incentive compensation plans		3,515			2,896
Other items		4,673			5,167
Total gross deferred tax assets		31,400			35,499
Valuation allowance		(15,606	)		(18,615	)
Net deferred tax assets		15,794			16,884
Deferred tax liabilities:
Property, plant and equipment		(11,432	)		(6,709	)
Indefinite reinvestment assertion		—			(7,639	)
Other		(530	)		(618	)
Total deferred tax liabilities		(11,962	)		(14,966	)
Net deferred tax asset	$	3,832		$	1,918

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 28, 2015			June 29, 2014			June 30, 2013
Balance at beginning of the year	$	(18,615	)	$	(16,690	)	$	(13,911	)
Charged to provision for income taxes		3,009			(1,925	)		(3,243	)
Charged to other accounts		—			—			464
Balance at end of year	$	(15,606	)	$	(18,615	)	$	(16,690	)

Components of the Company’s deferred tax valuation allowance are as follows:

	For the Fiscal Years Ended
	June 28, 2015			June 29, 2014			June 30, 2013
Investment in a former domestic unconsolidated affiliate	$	(6,503	)	$	(6,493	)	$	(6,649	)
Equity-method investment in Parkdale America, LLC		(3,261	)		(7,286	)		(5,762	)
Foreign tax credits		(1,680	)		(1,680	)		(1,680	)
Book versus tax basis difference in Renewables		(1,359	)		(2,035	)		(1,846	)
NOLs related to Renewables		(2,803	)		(1,121	)		(753	)
Total deferred tax valuation allowance	$	(15,606	)	$	(18,615	)	$	(16,690	)

During fiscal year 2015, the Company’s valuation allowance decreased by $3,009. This decrease consists of $4,025 related to the Company’s investment in Parkdale America, LLC (“PAL”) due to the timing of PAL’s taxable income versus book income and the impact of two bargain purchase gains, as described in more detail in “Note 23. Investments in Unconsolidated Affiliates and Variable Interest Entities”. The decrease was partially offset by a net $1,006 increase related to the Company’s investment in Renewables and its related NOLs as a result of continued losses for Renewables and the disposal of certain biomass foundation and feedstock, as described in more detail in “Note 21. Other Operating Expense, Net”.

During fiscal year 2014, the Company’s valuation allowance increased by $1,925. This increase relates to (i) the timing of taxable income versus book income for PAL and (ii) NOLs for Renewables which were deemed unrealizable.

During fiscal year 2013, the Company’s valuation allowance increased by $2,779. This increase relates to the timing of taxable income versus book income for PAL, partially offset by a decrease of $649 related to NOL carryforwards for the Company’s Colombian subsidiary. Deferred tax expense was reduced by $424.

Unrecognized tax benefits

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

	For the Fiscal Years Ended
	June 28, 2015			June 29, 2014			June 30, 2013
Balance at beginning of the year	$	983		$	964		$	1,154
Gross increases related to current period tax positions		3,469			78			250
Gross increases related to tax positions in prior periods		18			68			—
Gross decreases related to settlements with tax authorities		(178	)		(2	)		—
Gross decreases related to lapse of applicable statute of limitations		(263	)		(125	)		(440	)
Balance at end of year	$	4,029		$	983		$	964

Unrecognized tax benefits would generate a favorable impact of $3,927 on the Company’s effective tax rate when recognized. The Company expects uncertain tax positions to decrease by $308 within the next twelve months due to statute expirations on certain positions. The reversal of interest and penalties recognized by the Company within the provision for income taxes were $(95), $(193) and $(250) for fiscal years 2015, 2014 and 2013, respectively. The Company has $23, $118 and $311 accrued for interest and/or penalties related to uncertain tax positions as of June 28, 2015, June 29, 2014 and June 30, 2013, respectively.

Expiration of net operating loss carryforwards and foreign tax credits

As of June 28, 2015, the Company has $3,972 of state net operating loss carryforwards, for which no valuation allowance is established, 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 a valuation allowance. These carryforwards, if unused, will expire as follows:

State net operating loss carryforwards	2016 through 2033
Foreign tax credit carryforwards	2021

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 multiple 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.

The Company remains subject to income tax examinations for U.S. federal income taxes for tax years 2011 through 2014, for foreign income taxes for tax years 2008 through 2014, and for state and local income taxes for tax years 2009 through 2014. The U.S. federal returns and certain state tax returns filed for the 2011 through 2014 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 the fourth quarter of fiscal year 2015, the Company completed a reorganization of certain foreign subsidiaries that changed the historical ownership structure. As of June 28, 2015, $57,531 of earnings and profits of the Company’s foreign subsidiaries are deemed to be permanently reinvested, including all cash and cash equivalents on-hand at the Company’s foreign operations. In accordance with ASC 740-30-25-17, the Company has no current or deferred tax liabilities recorded (which considers any applicable U.S. federal income taxes and foreign withholding taxes) based on this indefinite reinvestment assertion.

Nevertheless, in future periods, the Company will continue to assess the existing circumstances, including any changes in tax laws, and reevaluate the necessity for any deferred tax liability. Computation of the potential tax liabilities associated with indefinitely reinvested earnings is not practicable.