XML 38 R23.htm IDEA: XBRL DOCUMENT
v3.19.2

Note P - Income Taxes | 12 Months Ended
--- | ---
Jun. 30, 2019
Notes to Financial Statements |
Income Tax Disclosure [Text Block] | P . INCOME TAXES United States and foreign income before income taxes and minority interest were as follows:
|  | 2019 |  |  | 2018 |
United States |  | $ | 7,059 |  |  | $ | 8,679 |
Foreign |  |  | 7,448 |  |  |  | 5,741 |
|  | $ | 14,507 |  |  | $ | 14,420 |
The provision (benefit) for income taxes is comprised of the following:
|  | 2019 |  |  | 2018 |
Currently payable: |  |  |  |  |  |  |  |
Federal |  | $ | 248 |  |  | $ | 234 |
State |  |  | 261 |  |  |  | 135 |
Foreign |  |  | (3,644 | ) |  |  | 1,400 |
|  |  | (3,135 | ) |  |  | 1,769 |
Deferred: |  |  |  |  |  |  |  |
Federal |  |  | 920 |  |  |  | 5,529 |
State |  |  | (7 | ) |  |  | 167 |
Foreign |  |  | 5,933 |  |  |  | (2,692 | )
|  |  | 6,846 |  |  |  | 3,004 |
|  | $ | 3,711 |  |  | $ | 4,773 |
The components of the net deferred tax asset as of June 30 are summarized in the table below.
|  | 2019 |  |  | 2018 |
Deferred tax assets: |  |  |  |  |  |  |  |
Retirement plans and employee benefits |  | $ | 7,732 |  |  | $ | 6,910 |
Foreign tax credit carryforwards |  |  | 6,296 |  |  |  | 6,866 |
Federal tax credits |  |  | 1,057 |  |  |  | 774 |
State net operating loss and other state credit carryforwards |  |  | 1,269 |  |  |  | 1,190 |
Inventory |  |  | 757 |  |  |  | 1,259 |
Reserves |  |  | 765 |  |  |  | 1,099 |
Foreign NOL carryforwards |  |  | 775 |  |  |  | 2,940 |
Accruals |  |  | 339 |  |  |  | 324 |
Right of use assets - leases |  |  | 3,691 |  |  |  | - |
Other assets |  |  | 656 |  |  |  | 403 |
|  |  | 23,337 |  |  |  | 21,765 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Property, plant and equipment |  |  | 3,432 |  |  |  | 3,473 |
Intangibles |  |  | 5,345 |  |  |  | 1,209 |
Long term lease obligations |  |  | 3,617 |  |  |  | - |
Other liabilities |  |  | 194 |  |  |  | 230 |
|  |  | 12,588 |  |  |  | 4,912 |
Valuation allowance |  |  | - |  |  |  | - |
Total net deferred tax assets |  | $ | 10,749 |  |  | $ | 16,853 |
The Company maintains valuation allowances when it is more likely than not that all or a portion of a deferred tax asset will not be realized. Changes in valuation allowances from period to period are included in the tax provision in the period of change. In determining whether a valuation allowance is required, the Company takes into account such factors as prior earnings history, expected future earnings, carry-back and carry-forward periods, and tax strategies that could potentially enhance the likelihood of realization of a deferred tax asset. The Company has evaluated the likelihood of whether the net deferred tax assets would be realized and concluded that it is more likely than not that all of deferred tax assets would be realized. Management believes that it is more likely than not that the results of future operations will generate sufficient taxable income and foreign source income to realize all the deferred tax assets. Following is a reconciliation of the applicable U.S. federal income taxes to the actual income taxes reflected in the statements of operations:
|  | 2019 |  |  | 2018 |
U.S. federal income tax at 21% (27.56% in 2018) |  | $ | 3,046 |  |  | $ | 3,974 |
Increases (reductions) in tax resulting from: |  |  |  |  |  |  |  |
Foreign tax items |  |  | 281 |  |  |  | 675 |
State taxes |  |  | 209 |  |  |  | 272 |
Valuation allowance |  |  | - |  |  |  | (3,803 | )
Change in prior year estimate |  |  | (50 | ) |  |  | (89 | )
Research and development tax credits |  |  | (306 | ) |  |  | (162 | )
Section 199 deduction |  |  | - |  |  |  | (114 | )
Unrecognized tax benefits |  |  | 158 |  |  |  | (42 | )
Stock compensation |  |  | (153 | ) |  |  | (114 | )
Rate changes |  |  | 15 |  |  |  | 3,786 |
Deferred tax basis adjustments |  |  | (111 | ) |  |  | 431 |
Executive compensation |  |  | 291 |  |  |  | - |
GILTI inclusion |  |  | 284 |  |  |  | - |
FDII deduction |  |  | (74 | ) |  |  | - |
Other, net |  |  | 121 |  |  |  | (41 | )
|  | $ | 3,711 |  |  | $ | 4,773 |
On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act makes broad and complex changes to the Internal Revenue Code. The Tax Act is generally applicable for tax years beginning after December 31, 2017, which is the Company’s fiscal year 2018. However, several provisions of the Tax Act have differing effective dates, meaning these provisions did not impact the Company’s financial statements until fiscal year 2019. The provisions impacting the Company’s fiscal year 2019 financial statements include the global intangible low taxed income (“GILTI”) and foreign-derived intangible income (“FDII”) deduction and limitations on the deductibility of executive compensation. The Securities and Exchange Commission issued Staff Accounting Bulletin 118 to address uncertainty regarding the application of ASC 740 to the income tax effects of the Tax Act, signed into law on December 22, 2017. The bulletin provides a measurement period ( not to exceed one year from the Tax Act enactment date) for companies to complete the accounting under ASC 740. To the extent that a company’s accounting for certain income tax effects is incomplete, but is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act. The Tax Act results in comprehensive changes to tax reporting rules. The Company has thoroughly reviewed all provisions of the Tax Act to determine their applicability to both fiscal year 2019 and future years. The Company has prepared a complete analysis of all applicable provisions of the Tax Act and has appropriately reflected their impact in the financial statements as per current guidance. The accounting for those provisions of the Tax Act, which the Company is currently subject to, is disclosed below Reduction in the Federal Corporate Income Tax Rate: The Tax Act reduces the corporate tax rate from 35% to 21% for tax years beginning after December 31, 2017. A blended rate is calculated for non-calendar year filers resulting in a 27.56% federal tax rate for fiscal year 2018. The change in tax rate required a revaluation of the end of year deferred assets and liabilities of the Company. This resulted in additional tax expense of $3,786. Deemed Repatriation Transition Tax : The deemed repatriation transition tax is a tax on previously untaxed accumulated and current earnings and profits of certain foreign subsidiaries. To determine the amount of the transition tax, the Company calculated the amount of post- 1986 earnings and profits for all foreign subsidiaries as well as the amount of non-U.S. income taxes paid on such earnings. The Company calculated the amount of the transition tax and determined it to be zero based on overall net historical negative earnings and profits. Executive Compensation Limitations: The Tax Act substantially modifies the limitation on corporate deductibility of executive compensation under Section 162 (m) of the Code. Section 162 (m) limits the deduction for compensation paid by a publicly held corporation to certain of its executive employees to $1,000 per year. The Tax Act has amended the definition of “covered employee” to correspond to the general SEC reporting requirements for named executive officers. These are the corporation’s principal executive officer, principal financial officer, and the next three highest-paid executive officers. Most significantly, the Tax Act has eliminated the exemptions for commissions and performance-based compensation. Global Intangible Low Taxed Income ( “ GILTI ” ): The Tax Act changed the foreign source income calculations and related foreign tax credit amounts. The GILTI requires 10% domestic shareholders (U.S. Shareholders) of controlled foreign corporations (“CFC’s”) to include in gross income annually the U.S. Shareholders’ pro rata share of GILTI for the year. Foreign Derived Intangible Income ( “ FDII ” ): The Tax Act provides companies with this new permanent deduction. An incentive for C corporations to generate revenue from serving foreign markets, the provision applies a preferential tax rate to eligible income. The new tax law assumes a fixed rate of return on a corporation’s tangible assets. Any remaining income is deemed to be generated by intangible assets. The Company has not provided additional U.S. income taxes on cumulative earnings of consolidated foreign subsidiaries that are considered to be reinvested indefinitely. The Company reaffirms its position that these earnings remain permanently invested, and has no plans to repatriate funds to the U.S. for the foreseeable future. These earnings relate to ongoing operations and were approximately $6,208 at June 30, 2019. Such earnings could become taxable upon the sale or liquidation of these foreign subsidiaries or upon dividend repatriation. It is not practicable to estimate the amount of unrecognized withholding taxes and deferred tax liability on such earnings. The Company’s intent is for such earnings to be reinvested by the subsidiaries or to be repatriated only when it would be tax effective through the utilization of foreign tax credits. Annually, the Company files income tax returns in various taxing jurisdictions inside and outside the United States. In general, the tax years that remain subject to examination are 2015 through 2019 for the Company’s major operations in Italy, Belgium and Japan. The tax years open to examination in the U.S. are for years subsequent to fiscal 2015. The Company has approximately $938 of unrecognized tax benefits as of June 30, 2019, which, if recognized would impact the effective tax rate. During the fiscal year the amount of unrecognized tax benefits decreased primarily due to reserves which were released upon the conclusion of the fiscal year 2015 IRS income tax audit. During the next twelve months, the Company anticipates closure of the Wisconsin income tax audit for the periods from fiscal year 2010 through fiscal year 2013. This could result in a significant change to the unrecognized tax benefits. The Company’s policy is to accrue interest and penalties related to unrecognized tax benefits in income tax expense. Below is a reconciliation of beginning and ending amount of unrecognized tax benefits:
|  | June 30, 2019 |  |  | June 30, 2018 |
Unrecognized tax benefits, beginning of year |  | $ | 816 |  |  | $ | 827 |
Additions based on tax positions related to the prior year |  |  | 31 |  |  |  | - |
Additions based on tax positions related to the current year |  |  | 91 |  |  |  | 303 |
Reductions based on tax positions related to the prior year |  |  | - |  |  |  | (9 | )
Subtractions due to statutes closing |  |  | - |  |  |  | (105 | )
Settlements with taxing authorities |  |  | - |  |  |  | (200 | )
Unrecognized tax benefits, end of year |  | $ | 938 |  |  | $ | 816 |
Substantially all of the Company’s unrecognized tax benefits as of June 30, 3019, if recognized, would affect the effective tax rate. As of June 30, 2019 and 2018, the amounts accrued for interest and penalties totaled $148 and 93, respectively, and are not included in the reconciliation above.

X
- References No definition available. + Details
Name: | us-gaap_DisclosureTextBlockAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration