10.

Income Taxes

The components of income from continuing operations before income taxes are as follows (in thousands):

	2017		2016		2015
U.S. Operations	$	16,257	$	23,996	$	33,161
Non-U.S. Operations		45,675		44,529		42,956
Total	$	61,932	$	68,525	$	76,117

The Company utilizes the asset and liability method of accounting for income taxes. Deferred income taxes are determined based on the estimated future tax effects of differences between the financial and tax bases of assets and liabilities given the provisions of the enacted tax laws. The components of the provision for income taxes on continuing operations (in thousands) were as shown below:

	2017			2016			2015
Current:
Federal	$	2,229		$	11,014		$	9,195
State		230			523			556
Non-U.S.		13,017			11,514			11,372
Total Current		15,476			23,051			21,123
Deferred:
Federal	$	2,141		$	(5,214	)	$	556
State		(290	)		(1,060	)		(495	)
Non-U.S.		(1,972	)		(482	)		(310	)
Total Deferred		(121	)		(6,756	)		(249	)
Total	$	15,355		$	16,295		$	20,874

A reconciliation from the U.S. Federal income tax rate on continuing operations to the total tax provision is as follows (in thousands):

	2017			2016			2015
Provision at statutory tax rate		35.0	%		35.0	%		35.0	%
State taxes		(0.1%	)		(0.5%	)		0.1	%
Impact of foreign operations		(8.0%	)		(6.7%	)		(5.0%	)
Federal tax credits		(1.3%	)		(1.8%	)		(1.2%	)
Life insurance proceeds		0.0	%		0.0	%		0.0	%
Contributions, net		0.0	%		(1.3%	)		0.0	%
Other		(0.8%	)		(0.9%	)		(1.5%	)
Effective income tax provision		24.8	%		23.8	%		27.4	%

Changes in the effective tax rates from period to period

may

be significant as they depend on many factors including, but

not

limited to, size of the Company’s income or loss and any

one

-time activities occurring during the period.

The Company's income tax provision from continuing operations for the fiscal year ended

June 30, 2017

was impacted by the following items: (i) a benefit of

$0.6

million related to the R&D tax credit and

(ii) a benefit of

$5.3

million due to the mix of income earned in jurisdictions with beneficial tax rates.

The Company's income tax provision from continuing operations for the fiscal year ended

June 30, 2016

was impacted by the following items: (i) a net benefit of

$0.9

million related to a bargain-sale of idle property to a charitable organization, and

(ii) a benefit of

$0.7

million related to the R&D tax credit, and (iii)

a benefit of

$4.9

million due to the mix of income earned in jurisdictions with beneficial tax rates.

The Company's income tax provision from continuing operations for the fiscal year ended

June 30, 2015

was impacted by the following items: (i) a benefit of

$0.5

million related to the R&D tax credit that expired during the fiscal year on

December 31

, and (ii)

a benefit of

$4.0

million due to the mix of income earned in jurisdictions with beneficial tax rates.

Significant components of the Company’s deferred income taxes are as follows (in thousands):

	2017			2016
Deferred tax liabilities:
Depreciation and amortization	$	(55,041	)	$	(27,437	)
Total deferred tax liability	$	(55,041	)	$	(27,437	)

Deferred tax assets:
Accrued compensation	$	4,127		$	3,707
Accrued expenses and reserves		6,886			6,154
Pension		26,309			29,730
Inventory		2,677			2,548
Other		939			1,432
Net operating loss and credit carry forwards		6,773			5,948
Total deferred tax asset	$	47,711		$	49,519

Less: Valuation allowance		(1,530	)		(649	)
Net deferred tax asset (liability)	$	(8,860	)	$	21,433

The Company estimates the degree to which deferred tax assets, including net operating loss and credit carry forwards will result in a benefit based on expected profitability by tax jurisdiction and provides a valuation allowance for tax assets and loss carry forwards that it believes will more likely than

not

go unrealized. The valuation allowance at

June 30, 2017

applies to state and foreign loss carry forwards, which management has concluded that it is more likely than

not

that these tax benefits will

not

be realized. The increase (decrease) in the valuation allowance from the prior year was less than

$0.9

million.

As of

June 30, 2017,

the Company had gross state net operating loss ("NOL") and credit carry forwards of approximately

$56.6

million and

$2.5

million, respectively, which

may

be available to offset future state income tax liabilities and expire at various dates from

2017

through

2036.

In addition, the Company had foreign NOL carry forwards of approximately

$2.4

million,

$1.9

million of which carry forward indefinitely and

$0.5

million that carry forward for

years.

March 2016,

the FASB issued ASU

2016

09,

Improvements to Employee Share-Based Payment Accounting. The new standard simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. Under this guidance, a company recognizes all excess tax benefits and tax deficiencies as income tax expense or benefit in the income statement. This change eliminates the notion of the additional paid-in capital pool and reduces the complexity in accounting for excess tax benefits and tax deficiencies. The Company has decided to adopt this ASU prior to the effective date as prescribed within the ASU. The primary impact of our adoption was the recognition of excess tax benefits related to equity compensation in our provision for income taxes rather than paid-in capital, which is a change required to be applied on a prospective basis in accordance with the new guidance. Accordingly, we recorded discrete income tax benefits in the consolidated statements of income of

$0.6

million during the fiscal year ended

June 30, 2017,

for excess tax benefits related to equity compensation.

A provision has

not

been made for U.S. or additional non-U.S. taxes on

$229.3

million of undistributed earnings of international subsidiaries that could be subject to taxation if remitted to the U.S. It is

not

practicable to estimate the amount of tax that might be payable on the remaining undistributed earnings. Our intention is to reinvest these earnings permanently or to repatriate the earnings only when it is tax effective to do so. Accordingly, we believe that U.S. tax on any earnings that might be repatriated would be substantially offset by U.S. foreign tax credits.

The total provision for income taxes included in the consolidated financial statements was as follows (in thousands):

	2017			2016			2015
Continuing operations	$	15,355		$	16,295		$	20,874
Discontinued operations		(27	)		(55	)		(259	)
Total Provision	$	15,328		$	16,240		$	20,615

The changes in the amount of gross unrecognized tax benefits during

2016,

2015

and

2014

were as follows (in thousands):

	2017		2016			2015
Beginning Balance	$	2,978	$	1,054		$	1,033
Additions based on tax positions related to the current year		12		2,125			17
Additions for tax positions of prior years		1		-			4
Reductions for tax positions of prior years		-		(201	)		-
Ending Balance	$	2,991	$	2,978		$	1,054

If the unrecognized tax benefits in the table above were recognized in a future period,

$2.5

million of the unrecognized tax benefit would impact the Company’s effective tax rate.

Within the next

twelve

months, the statute of limitations will close in various U.S., state and non-U.S. jurisdictions. As a result, it is reasonably expected that net unrecognized tax benefits from these various jurisdictions would be recognized within the next

twelve

months. The recognition of these tax benefits is

not

expected to have a material impact to the Company's financial statements. The Company does

not

reasonably expect any other significant changes in the next

twelve

months. The following tax years, in the major tax jurisdictions noted, are open for assessment or refund:

Country	Years Ending June 30,
United States		2014	to	2017
Canada		2013	to	2017
Germany		2012	to	2017
Ireland		2017	to	2017
Portugal		2014	to	2017
United Kingdom		2013	to	2017

The Company’s policy is to include interest expense and penalties related to unrecognized tax benefits within the provision for income taxes on the consolidated statements of operations. At both

June 30, 2017

and

June 30, 2016,

the company had less than

$0.1

million for accrued interest expense on unrecognized tax benefits.