v3.26.1
Note I - Income Taxes
 9 Months Ended
Mar. 27, 2026
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

I.

Income Taxes

 

Accounting policies for interim reporting require the Company to adjust its effective tax rate each quarter to be consistent with the estimated Annual Effective Tax Rate (AETR). Under 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 each quarter. To calculate its AETR, an entity must estimate its ordinary income or loss and the related tax expense or benefit for its full fiscal year. In situations in which an entity is in a loss position and recognizes a full valuation allowance, the guidance in ASC 740-270-30-36a applies. 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. 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. In addition, all other available positive and negative evidence is taken into consideration, including impacts of tax reform.

 

The Company has evaluated the realizability of deferred tax assets and concluded that the U.S. and state valuation allowance is no longer required and was released December 26, 2025. The Company is expected to be in a cumulative three year income position at the end of the year, and expects to be profitable in future periods. This release relates to both projections of future income and a significant tax planning action for the current year which constitutes a significant unusual or infrequently occurring tax only item, the tax effects of which have been excluded from the estimated AETR as per ASC 740-270. The Company recognized $22.8 million of the related $23.9 million domestic valuation allowance release tax benefit as a discrete item during the second quarter of the current fiscal year.

 

The Company continues to maintain a valuation allowance in an immaterial foreign jurisdiction, due to continued losses and uncertain future earnings. Permanent differences continue to fluctuate and are significant compared to projected ordinary income. Therefore, per ASC guidance, the immaterial foreign jurisdiction was removed from the annualized effective rate calculation. Because of the foreign valuation allowance, the entity may only recognize tax expense / benefit recorded for ASC 740-10 adjustments.

 

  

For the Quarter-Ended

  

For the Three Quarters Ended

 
  

March 27, 2026

  

March 28, 2025

  

March 27, 2026

  

March 28, 2025

 

Foreign earnings (loss), before income taxes of $1,734, $1,140, $3,756, and $3,546, respectively

 $7,049  $5,054  $13,960  $14,154 

Domestic earnings (loss), before income taxes of $105, $1, ($22,714) and ($226), respectively

  (1,654)  (5,334)  (7,296)  (13,928)

Income (loss) before income taxes and noncontrolling interest

 $5,395  $(280) $6,664  $226 
                 

Income tax benefit (expense)

 $(1,839) $(1,142) $18,958  $(3,320)

Effective income tax rate

  34.1%  -407.9%  -284.5%  1469.0%