6Income Taxes

For the three and nine months ended July 3, 2015 and June 27, 2014, the Company’s earnings before income taxes, income tax expense and effective income tax rate were as follows:



	Three Months Ended				Nine Months Ended
	July 3		June 27		July 3		June 27
(thousands, except tax rate data)	2015		2014		2015		2014
Profit before income taxes	$	16,101	$	10,105	$	15,997	$	18,399
Income tax expense		6,104		5,407		6,548		8,490
Effective income tax rate		37.9%		53.5%		40.9%		46.1%

The Company’s interim reporting for income taxes is based upon adjusting its effective tax rate each quarter to be consistent with the estimated annual effective tax rates in the tax jurisdictions in which the Company operates. Using this effective tax rate methodology, the Company applies an estimated annual income tax rate to its year to date ordinary earnings to derive its income tax provision for each quarter.

The favorable change in the Company’s effective tax rate for the three and nine months ended July 3, 2015 versus the prior year periods was primarily due to the goodwill impairment with no tax benefit in the prior year period. Variances in income for entities with a valuation allowance had an unfavorable, but minor impact to the rate.

Variances in income or loss for entities that have a valuation allowance, primarily in non-U.S. tax jurisdictions, will drive fluctuations in the effective tax rate. The impact of the Company’s operations in these foreign locations is removed from the overall effective tax rate methodology used by the Company and recorded directly based on year to date results for the year for which no tax expense or benefit can be recognized. The tax jurisdictions that have a valuation allowance for the periods ended July 3, 2015 and June 27, 2014 were as follows:



July 3		June 27
2015		2014
	Japan		Japan
	France		France
	Indonesia		Indonesia
	Italy		Italy
	Netherlands		Netherlands
	New Zealand		New Zealand
	Spain		Spain
			United Kingdom

The Company regularly assesses the adequacy of its provisions for income tax contingencies in accordance with the applicable authoritative guidance on accounting for income taxes. As a result, the Company may adjust the reserves for unrecognized tax benefits due to the impact of changes in its assumptions or as a result of new facts and developments, such as changes to interpretations of relevant tax law, assessments from taxing authorities, settlements with taxing authorities and lapses of statutes of limitation. The Company’s 2015 fiscal year tax expense is anticipated to include approximately $500 related to uncertain income tax positions.

In accordance with its accounting policy, the Company recognizes accrued interest and penalties related to unrecognized benefits as a component of income tax expense. The Company is projecting accrued interest of $150 related to uncertain income tax positions for the fiscal year ending October 2, 2015.

The Company files income tax returns, including returns for its subsidiaries, with federal, state, local and foreign taxing jurisdictions. The Company is currently undergoing income tax examinations in Italy and Germany. As of the date of this report, the following tax years remain subject to examination by the respective tax jurisdictions:


Jurisdiction	Fiscal Years
United States	2012-2014
Canada	2010-2014
France	2010-2014
Germany	2009-2014
Italy	2009-2014
Japan	2012-2014
Switzerland	2004-2014