Note 11 - Income Taxes

12 Months Ended

Jun. 30, 2013

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

11. INCOME TAXES

Components of earnings (loss) before income taxes are as follows (in thousands):

	2013			2012			2011
Domestic operations	$	(2,633	)	$	(14,614	)	$	(413	)
Foreign operations		3,429			14,725			13,652
	$	796		$	111		$	13,239

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

	2013			2012			2011
Current:
Federal	$	124		$	(392	)	$	12
Foreign		1,243			4,239			6,818
State		(48	)		455			164
Deferred:
Federal		(1,472	)		(5,195	)		(177	)
Foreign		503			656			(331	)
State		608			(540	)		(92	)
	$	958		$	(777	)	$	6,394

Reconciliations of expected tax expense at the U.S. statutory rate to actual tax expense (benefit) are as follows (in thousands):

	2013			2012			2011
Expected tax expense	$	271		$	38		$	4,501
State taxes, net of federal effect		26			(170	)		(32	)
Foreign taxes, net of federal credits		353			(751	)		(227	)
Change in valuation allowance		(127	)		(201	)		908
Tax reserve adjustments		141			(286	)		246
Return to provision adjustments		(764	)		-			-
Losses not benefited		370			206			771
Dividend from subsidiary (net of foreign tax credit)		201			-			-
Tax rate change applied to deferred tax balances		880			-			-
Other permanent items		(393	)		387			227
Actual tax expense (benefit)	$	958		$	(777	)	$	6,394

Significant changes in the tax expense reconciliation in the year ended June 30, 2013 relate to the following items:  Return to provision adjustments primarily in the U.S. for foreign tax credits, research credits and state taxes; the tax impact of a dividend from a foreign subsidiary and a change in the effective state tax rate in the U.S. and a legislated change in the tax rate in the U.K. applied to deferred tax balances. Similar items for the years ended June 30, 2012 and 2011 were not significant and continue to be classified in the preceding table as components of other permanent items.

No valuation allowance has been recorded for the domestic federal NOL.  The Company believes that forecasted future taxable income and certain tax planning opportunities make it likely that such NOLs will be utilized in future periods.

A valuation allowance has been provided on certain state NOLs as a result of their much shorter carryforward periods and the uncertainty of generating adequate taxable income at the entity and state level.   Similarly, a valuation allowance has been provided on certain foreign NOLs due to the uncertainty of generating future taxable income in those jurisdictions. In addition, a valuation allowance has been provided for foreign tax credit carryforwards due to the uncertainty of generating sufficient foreign source income in the future. In fiscal 2013, the allowance increased by $1.6 million primarily related to foreign tax credits. The need for a valuation allowance is reevaluated as facts and assumptions change over time.

Deferred income taxes at June 30, 2013 and 2012 are attributable to the following (in thousands):

	2013			2012
Deferred assets (current):
Inventories	$	2,954		$	4,892
Employee benefits (other than pension)		827			1,336
Book reserves		1,435			1,757
Other		313			298
Total current deferred tax assets		5,529			8,283
Valuation allowance		(551	)		(663	)
Current deferred tax asset	$	4,978		$	7,620
Deferred assets (long-term):
Federal NOL, carried forward	$	6,715		$	5,706
State NOL, various carryforward periods		1,178			874
Foreign NOL, various carryforward periods		1,574			1,283
Foreign tax credit carryforward, expiring 2014 - 2023		4,398			1,028
Pension benefits		10,889			13,599
Retiree medical benefits		4,144			5,563
Intangibles		2,643			3,285
Other		721			401
Total long-term deferred tax assets		32,262			31,739
Valuation allowance		(3,988	)		(1,897	)
Long-term deferred tax asset	$	28,274		$	29,842
Deferred liabilities (long-term):
Depreciation		(2,182	)		(2,530	)
Long-term deferred tax liabilities	$	(2,182	)	$	(2,530	)
Net deferred tax assets	$	31,070		$	34,932

As of June 30, 2013 and 2012, the net long-term deferred tax asset and deferred tax liabilities on the balance sheet are as follows (in thousands):

	2013			2012
Long-term assets	$	28,274		$	29,842
Long-term liabilities		(2,182	)		(2,530	)
	$	26,092		$	27,312

Foreign operations deferred assets relate primarily to book reserves (current) and pension benefits (long term).  Amounts related to foreign operations included in the long-term portion of deferred liabilities relate to depreciation.

The Company is subject to U.S. federal income tax and various state, local and foreign income taxes in numerous jurisdictions. The Company’s domestic and international tax liabilities are subject to the allocation of revenues and expenses in different jurisdictions and the timing of recognizing revenues and expenses. Additionally, the amount of income taxes paid is subject to the Company’s interpretation of applicable tax laws in the jurisdictions in which it files.

Reconciliations of the beginning and ending amount of unrecognized tax benefits are as follows (in thousands):

Balance at June 26, 2010	$	(9,809	)
Decreases for tax positions taken during a prior period		156
Increases for tax positions taken during the current period		(1,189	)
Effect of exchange rate changes		(285	)
Balance at June 30, 2011		(11,127	)
Increases for tax positions taken during a prior period		(32	)
Increases for tax positions taken during the current period		(955	)
Effect of exchange rate changes		473
Decrease relating to settlement		137
Decreases resulting from the expiration of the statute of limitations		914
Balance at June 30, 2012		(10,590	)
Increases for tax positions taken during a prior period		(212	)
Increases for tax positions taken during the current period		(381	)
Effect of exchange rate changes		140
Decrease relating to settlement		32
Balance at June 30, 2013	$	(11,011	)

The long-term tax obligations on the balance sheet as of June 30, 2013 and 2012 relate primarily to transfer pricing adjustments.  The Company has also recorded a non-current tax receivable for $3.8 million at June 30, 2013 and 2012, representing the corollary effect of transfer pricing competent authority adjustments.

During the next 12 months, the Company does not expect there will be a significant change in the total amount of unrecognized tax benefits. The Company recognizes interest and penalties related to income tax matters in income tax expense.

The Company’s U.S. federal tax returns for years prior to fiscal 2010 are no longer subject to U.S. federal examination by the Internal Revenue Service; however, tax losses carried forward from earlier years are still subject to review and adjustment. As of June 30, 2013, the Company has substantially resolved all open income tax audits. In international jurisdictions Argentina, Australia, Brazil, Canada, China, Germany, Japan, Mexico, New Zealand, Singapore and the United Kingdom, the years that may be examined vary by country. The Company’s most significant foreign subsidiary in Brazil is subject to audit for the calendar years 2008 through 2012.   

The federal NOL carryforward of $20 million expires beginning in 2029. The state tax loss carryforwards tax effected benefit of $1.2 million expires at various times over the next 1 to 20 years. The foreign tax credit carryforward of $4.4 million expires in the years 2014 through 2023.

The Company received a cash dividend from a foreign subsidiary for $2.4 million in fiscal 2013. At June 30, 2013, the estimated amount of total unremitted earnings of foreign subsidiaries is $69 million. The Company has no plans to repatriate additional earnings of its foreign subsidiaries and, accordingly, no estimate of the unrecognized deferred taxes related to these earnings has been made.