Note 10 - Income Taxes

3 Months Ended

Sep. 29, 2024

Notes to Financial Statements

Income Tax Disclosure [Text Block]

Note 10 – Income Taxes

The Company computed the interim tax provision using an estimated annual effective rate, adjusted for discrete items. This estimate is used in providing for income taxes on a year-to-date basis and may change in subsequent interim periods. The Company’s effective tax rate for the three months ended September 29, 2024 was 29.6%, compared to 24.8% in the same period of the prior year. The Company’s effective tax rate for the three months ended September 29, 2024 and October 1, 2023 differed from the U.S. federal statutory rate of 21.0% primarily due to state income taxes and non-deductible executive compensation including tax deficiencies (shortfalls) from stock-based compensation, partially offset by tax credits. 

The Company evaluates the realizability of its deferred tax assets on a quarterly basis and establishes valuation allowances when it is more likely than not that all or a portion of a deferred tax asset may not be realized.  In completing this evaluation, the Company considers available positive and negative evidence. Such evidence includes historical operating results, the existence of cumulative earnings and losses in the most recent fiscal years, taxable income in prior carryback year(s) if permitted under the tax law, the time period over which our temporary differences will reverse, the implementation of feasible and prudent tax planning strategies, and expectations for future pre-tax operating income. Estimating future taxable income is inherently uncertain and requires judgment. Deferred tax assets are reduced by a valuation allowance if, based on the weight of this evidence, it is more likely than not that all or a portion of the recorded deferred tax assets will not be realized in future periods.  As of September 29, 2024, and June 30, 2024, the Company had valuation allowances of approximately $4.9 million, primarily related to certain state and foreign net operating losses. 

The Company files income tax returns in the U.S. federal jurisdiction, various state jurisdictions, and various foreign countries. The Company’s Fiscal years 2023, 2022 and 2021 remain subject to U.S. federal examination. Due to nonconformity with the U.S. federal statute of limitations for assessment, certain states remain open from Fiscal 2020. The Company's foreign income tax filings from fiscal 2017 are open for examination by its respective foreign tax authorities, mainly Canada and Brazil.

The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. At September 29, 2024, the Company has an unrecognized tax benefit, including accrued interest and penalties, of approximately $3.3 million (included in "Other liabilities" on our consolidated balance sheet), all of which if fully recognized would impact our effective tax rate. The Company believes that $0.4 million of unrecognized tax positions will be resolved over the next twelve months.