Note 11 - Income Taxes

6 Months Ended

Dec. 27, 2015

11. Income Taxes

The provision for income taxes was as follows:

	For the Three Months Ended						For the Six Months Ended
	December 27, 2015			December 28, 2014			December 27, 2015			December 28, 2014
Provision for income taxes	$	2,088		$	3,193		$	6,028		$	7,354
Effective tax rate		25.2	%		25.9	%		30.1	%		31.8	%

The effective tax rate for the periods presented above is lower than the U.S. statutory rate due to (i) a decrease in the valuation allowance reflecting the recognition of lower taxable income versus book income for the Company’s investment in Parkdale America, LLC (for which the Company maintains a full valuation allowance), which was partially offset by an increase in the valuation allowance for net operating losses, including Renewables (for which no tax benefit could be recognized); (ii) a lower overall effective tax rate for the Company’s foreign earnings (reflecting free-trade zone sales in El Salvador and lower statutory tax rates in both Brazil and China) and (iii) the domestic production activities deduction. These items were partially offset by (a) state and local taxes net of the assumed federal benefit and (b) losses in tax jurisdictions for which no tax benefit could be recognized.

The audit of the 2013 tax year by the Internal Revenue Service was closed in December 2015 and did not generate a significant change in uncertain tax positions for the six months ended December 27, 2015. The Company regularly assesses the outcomes of both completed and ongoing examinations to ensure that the Company’s provision for income taxes is sufficient. Certain returns that remain open to examination have utilized carryforward tax attributes generated in prior tax years, including net operating losses, which could potentially be revised upon examination.

During the three months ended December 27, 2015, the Company utilized a foreign tax credit as a deduction by amending its 2011 federal return. Components of the Company’s deferred tax valuation allowance are as follows:

	December 27, 2015			June 28, 2015
Investment in a former domestic unconsolidated affiliate	$	(6,399	)	$	(6,503	)
Equity-method investment in Parkdale America, LLC		(2,666	)		(3,261	)
Foreign tax credits		—			(1,680	)
Book versus tax basis difference in Renewables		(1,210	)		(1,359	)
Net Operating Losses related to Renewables		(3,313	)		(2,803	)
Total deferred tax valuation allowance	$	(13,588	)	$	(15,606	)