XML 31 R13.htm IDEA: XBRL DOCUMENT v3.23.2
Income Taxes
 12 Months Ended
Jul. 02, 2023
Income Tax Disclosure [Abstract]  
Income Taxes

INCOME TAXES

The provision for income taxes consisted of the following (thousands of dollars):

 

 

 

Years Ended

 

 

 

July 2, 2023

 

 

July 3, 2022

 

Currently payable (recoverable):

 

 

 

 

 

 

Federal

 

$

1,035

 

 

$

(691

)

State

 

 

401

 

 

 

161

 

Foreign

 

 

4,782

 

 

 

2,931

 

 

 

 

6,218

 

 

 

2,401

 

Deferred tax provision

 

 

(4,937

)

 

 

(1,986

)

 

 

$

1,281

 

 

$

415

 

The current Federal provision for income taxes excludes a deduction for $22.0 million in research and development costs that are deductible in future periods and $6.0 million of capital losses on the sale of our interest in VAST LLC, which losses are not currently deductible. The current foreign provision for income taxes includes $2.2 million of China non-resident capital gain tax related to the sale of our interest in VAST LLC. The deferred tax provision includes the $22.0 million in research and development costs that are deductible in future periods.

The items accounting for the difference between income taxes computed at the Federal statutory tax rate and the provision for income taxes were as follows:

 

 

Years Ended

 

 

 

July 2, 2023

 

 

July 3, 2022

 

U.S. statutory rate

 

 

21.0

%

 

 

21.0

%

State taxes, net of Federal tax benefit

 

 

4.7

 

 

 

0.4

 

Foreign subsidiaries

 

 

—

 

 

 

8.4

 

China non-resident capital gain tax

 

 

(28.7

)

 

 

—

 

U.S. tax impact on sale of VAST LLC

 

 

(9.7

)

 

 

—

 

Valuation allowance

 

 

(18.8

)

 

 

—

 

Return to provision adjustment

 

 

2.1

 

 

 

(11.1

)

Global intangible low-taxed income

 

 

(8.0

)

 

 

0.5

 

Research and development tax credit

 

 

19.4

 

 

 

(9.7

)

Solar investment tax credit

 

 

—

 

 

 

(0.8

)

Non-controlling interest

 

 

4.0

 

 

 

(1.8

)

Uncertain tax positions

 

 

(1.7

)

 

 

(1.4

)

Stock based compensation

 

 

0.3

 

 

 

(1.3

)

Other

 

 

(1.3

)

 

 

0.3

 

 

 

 

(16.7

%)

 

 

4.5

%

Impacts of the sale of our one-third interest in VAST LLC on our 2023 effective rate include the China non-resident capital gain tax, the U.S. tax impact on the sale of VAST LLC, and the valuation allowance. As discussed above, the current foreign provision for income taxes includes $2.2 million of China non-resident capital gain tax related to the sale of our interest in VAST LLC. The U.S. tax impact of the sale of VAST LLC is the result of the tax gain recognized. The valuation allowance, as discussed further below, is generated by our current assessment of the future realization of the capital losses realized on the VAST LLC sale. The change in the research and development tax credit on the effective rate between periods is due to an estimated increase in the available credit in 2023 as compared to 2022 on a book pre-tax loss in the current year as compared to book pre-tax income in the prior year.

The return to provision adjustment related to adjustments we made to our fiscal 2021 estimated foreign tax credits and estimated tax impacts associated with our investment in VAST LLC. These true-up adjustments resulted from the filing of our US income tax returns during fiscal 2022 and were attributable to actual results included in the non-US income tax returns, which are filed on a calendar year basis, and which differ from estimates included in our fiscal 2021 tax provision. This adjustment was not material to our previously issued financial statements.

 

The components of deferred tax (liabilities) assets were as follows (thousands of dollars):

 

 

July 2, 2023

 

 

July 3, 2022

 

Unrecognized pension and postretirement benefit
   plan liabilities

 

$

368

 

 

$

579

 

Accrued warranty

 

 

2,255

 

 

 

423

 

Payroll-related accruals

 

 

4,094

 

 

 

3,085

 

Research and development costs

 

 

5,541

 

 

 

—

 

Capital loss carryforward related to sale of interest in VAST LLC

 

 

1,403

 

 

 

—

 

Stock-based compensation

 

 

414

 

 

 

360

 

Inventory reserve

 

 

1,633

 

 

 

1,010

 

Environmental reserve

 

 

327

 

 

 

327

 

Repair and maintenance supply parts reserve

 

 

222

 

 

 

222

 

Allowance for doubtful accounts

 

 

118

 

 

 

118

 

Lease Liability

 

 

1,049

 

 

 

710

 

Right of Use Assets

 

 

(1,049

)

 

 

(710

)

Credit carry-forwards

 

 

1,628

 

 

 

2,986

 

Postretirement obligations

 

 

64

 

 

 

8

 

Accumulated depreciation

 

 

(4,387

)

 

 

(3,886

)

Accrued pension obligations

 

 

415

 

 

 

504

 

Joint ventures

 

 

47

 

 

 

899

 

Other

 

 

1,078

 

 

 

604

 

 

 

 

15,220

 

 

 

7,239

 

Valuation allowance

 

 

(1,601

)

 

 

(158

)

Net deferred tax assets

 

$

13,619

 

 

$

7,081

 

 

Deferred income tax balances reflect the effects of temporary differences between the carrying amounts of assets and liabilities and their tax basis and are stated at enacted tax rates expected to be in effect when taxes are actually paid or recovered.

Federal credit carry-forwards at July 2, 2023 resulted in future benefits of approximately $1.4 million and expire between 2031 and 2041. We currently anticipate having sufficient Federal taxable income to utilize these credit carry-forwards. State credit carry-forwards at July 2, 2023 resulted in future benefits of approximately $196,000 and expire at varying times between 2025 and 2031. A valuation allowance of $1.4 million has been recorded as of July 2, 2023, due to our assessment of the future realization of the capital loss carryforward. We do not currently anticipate having capital gains in future taxable years to offset the capital loss carryforward. A valuation allowance of $172,000 has been recorded as of July 2, 2023, due to our assessment of the future realization of certain state credit carry-forward benefits. We do not currently anticipate having sufficient state taxable income to offset these credit carry-forwards. Foreign income before the provision for income taxes was $3.1 million in 2023 and $8.6 million in 2022.

The total liability for unrecognized tax benefits was $1.6 million as of July 2, 2023 and $1.5 million as of July 3, 2022 and was included in Other Long-term Liabilities in the accompanying Consolidated Balance Sheets. This liability includes approximately $1.4 million and $1.3 million of unrecognized tax benefits at July 2, 2023 and July 3, 2022, respectively, and approximately $162,000 of accrued interest at July 2, 2023 and $137,000 at July 3, 2022. This liability does not include an amount for accrued penalties. The amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was approximately $1.1 million at July 2, 2023 and $1.0 million at July 3, 2022. We recognize interest and penalties related to unrecognized tax benefits in the provision for income taxes.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows for the years ended July 2, 2023 and July 3, 2022 (thousands of dollars):

 

 

Years Ended

 

 

 

July 2, 2023

 

 

July 3, 2022

 

Unrecognized tax benefits, beginning of year

 

$

1,314

 

 

$

1,458

 

Gross increases – tax positions in prior years

 

 

50

 

 

 

13

 

Gross decreases – tax positions in prior years

 

 

—

 

 

 

(19

)

Gross increases – current period tax positions

 

 

385

 

 

 

241

 

Tax years closed

 

 

(354

)

 

 

(379

)

Unrecognized tax benefits, end of year

 

$

1,395

 

 

$

1,314

 

 

We or one of our subsidiaries files income tax returns in the United States (Federal), Wisconsin (state), Michigan (state) and various other states, Mexico and other foreign jurisdictions. Tax years open to examination by tax authorities under the statute of limitations include fiscal 2020 through 2023 for Federal, fiscal 2019 through 2023 for most states and calendar 2018 through 2022 for foreign jurisdictions.