v3.26.1
Income Taxes
 12 Months Ended
Jun. 28, 2026
Income Tax Disclosure [Abstract]  
Income Taxes

NOTE 6. INCOME TAXES

The income tax provisions were calculated based upon the following components of income before income tax and non-controlling interest (in thousands):

 

 

Years Ended

 

 

 

June 28, 2026

 

 

June 29, 2025

 

 

June 30, 2024

 

Income before income tax and non-controlling interest:

 

 

 

 

 

 

 

 

 

Domestic

 

$

22,265

 

 

$

18,570

 

 

$

11,766

 

Foreign

 

 

10,697

 

 

 

6,066

 

 

 

8,437

 

 

 

$

32,962

 

 

$

24,636

 

 

$

20,203

 

Income tax expense is summarized as following (in thousands):

 

 

Years Ended

 

 

 

June 28, 2026

 

 

June 29, 2025

 

 

June 30, 2024

 

Current:

 

 

 

 

 

 

 

 

 

Federal

 

$

1,085

 

 

$

4,726

 

 

$

4,466

 

State

 

 

238

 

 

 

336

 

 

 

619

 

Foreign

 

 

6,453

 

 

 

2,545

 

 

 

3,401

 

 

 

 

7,776

 

 

 

7,607

 

 

 

8,486

 

Deferred:

 

 

 

 

 

 

 

 

 

Federal

 

 

3,079

 

 

 

(1,103

)

 

 

(3,988

)

State

 

 

331

 

 

 

(138

)

 

 

(538

)

Foreign

 

 

153

 

 

 

(649

)

 

 

(185

)

 

 

 

3,563

 

 

 

(1,890

)

 

 

(4,711

)

 

 

$

11,339

 

 

$

5,717

 

 

$

3,775

 

 

The table below provides the required disclosures for fiscal 2026 related to the Company's effective tax rate. See Note 2 Summary of Significant Accounting Policies — Recently Issued Accounting Standards for additional details on the adoption of ASU 2023-09, Income Taxes. Income tax provision differs from the amount that would be provided by applying the statutory U.S. corporate income tax rate for the years ended June 28, 2026, due to the following items (in thousands):

 

 

Year Ended

 

 

 

June 28, 2026

 

 

Percent of Pre-tax Income

 

Income taxes at U.S. federal statutory rate

 

$

6,922

 

 

 

21.0

%

State taxes, net of federal benefit1

 

 

520

 

 

 

1.6

 

Foreign tax effects

 

 

 

 

 

 

Mexico

 

 

 

 

 

 

Statutory rate differential

 

 

963

 

 

 

2.9

 

Withholding taxes

 

 

454

 

 

 

1.4

 

Other

 

 

(141

)

 

 

(0.4

)

Effect of cross-border tax laws

 

 

 

 

 

 

Mexico advanced pricing agreement

 

 

(836

)

 

 

(2.5

)

U.S. taxes on foreign branch

 

 

687

 

 

 

2.1

 

Other

 

 

(229

)

 

 

(0.7

)

Tax credits

 

 

 

 

 

 

Research and development credits

 

 

(975

)

 

 

(3.0

)

Non-taxable or non-deductible items

 

 

 

 

 

 

Non-controlling interest

 

 

(385

)

 

 

(1.2

)

Share-based payment awards

 

 

(453

)

 

 

(1.4

)

Officer compensation limitation

 

 

546

 

 

 

1.7

 

Other

 

 

175

 

 

 

0.5

 

Changes in unrecognized tax benefits

 

 

2,993

 

 

 

9.1

 

Changes in valuation allowance

 

 

1,027

 

 

 

3.1

 

Other

 

 

71

 

 

 

0.2

 

Income tax expense

 

$

11,339

 

 

 

34.4

%

1 State taxes in Michigan made up the majority (greater than 50%) of the tax effect in this category.

The reconciliation of taxes at the Federal statutory rate to our provision for income taxes for the years ended June 29, 2025 and June 30, 2024 in accordance with the guidance prior to the adoption of ASU 2023-09 was as follows:

 

 

Years Ended

 

 

 

June 29, 2025

 

 

June 30, 2024

 

Federal statutory rate

 

 

21.0

%

 

 

21.0

%

State taxes, net of federal tax benefit

 

 

1.0

 

 

 

2.7

 

Foreign subsidiaries

 

 

(1.7

)

 

 

5.4

 

China non-resident capital gain tax

 

 

—

 

 

 

(1.6

)

Valuation allowance

 

 

4.9

 

 

 

2.6

 

Return to provision adjustment

 

 

1.1

 

 

 

(6.1

)

Research and development tax credit

 

 

(6.0

)

 

 

(8.1

)

Non-controlling interest

 

 

0.4

 

 

 

2.3

 

Stock-based compensation

 

 

(0.1

)

 

 

0.7

 

Other

 

 

2.6

 

 

 

(0.2

)

Effective income tax rate

 

 

23.2

%

 

 

18.7

%

 

Cash paid for income taxes (net of refunds) for the year ended June 28, 2026 is as follows (in thousands):

 

 

Year Ended

 

 

 

June 28, 2026

 

Federal

 

$

2,071

 

State

 

 

31

 

Foreign:

 

 

 

Mexico

 

 

2,644

 

 

 

$

4,746

 

At June 28, 2026, June 29, 2025 and June 30, 2024, the Company had total unrecognized tax benefits of $4.7 million, $1.9 million and $1.6 million, respectively, included in other noncurrent liabilities in the accompanying consolidated balance sheets. The Company recognizes interest and penalties as a component of income tax expense. At June 28, 2026, June 29, 2025 and June 30, 2024, the liability included accrued interest of $1.4 million, $0.2 million and $0.2 million, respectively. Substantially all these unrecognized tax benefits, if recognized, would impact the effective income tax rate.

The reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding interest, is as follows (in thousands):

 

 

Years Ended

 

 

 

June 28, 2026

 

 

June 29, 2025

 

 

June 30, 2024

 

Unrecognized tax benefits, beginning of year

 

$

1,669

 

 

$

1,417

 

 

$

1,395

 

Increases for tax positions taken in prior years

 

 

1,860

 

 

 

—

 

 

 

41

 

Decreases for tax positions taken in prior years

 

 

(189

)

 

 

(6

)

 

 

(59

)

Increases for tax positions taken in current year

 

 

284

 

 

 

492

 

 

 

427

 

Lapse of statutes

 

 

(305

)

 

 

(234

)

 

 

(387

)

Unrecognized tax benefits, end of year

 

$

3,319

 

 

$

1,669

 

 

$

1,417

 

During fiscal 2026, the Company increased its reserve for unrecognized tax benefits by $1.8 million related to transfer pricing matters associated with its Mexican maquiladora operations. The increase reflects management's assessment of the expected outcome of ongoing discussions with the Mexican tax authorities regarding the application of an Advance Pricing Agreement methodology for certain historical tax years.

The deferred tax assets and deferred tax liabilities and related valuation allowance were comprised of the following (in thousands):

 

 

Years Ended

 

 

 

June 28, 2026

 

 

June 29, 2025

 

Deferred tax assets:

 

 

 

 

 

 

Research and development costs

 

$

6,163

 

 

$

10,396

 

Compensation and employee benefits

 

 

7,456

 

 

 

6,472

 

Other accrued expenses

 

 

4,094

 

 

 

4,871

 

Capital loss and credit carryforwards

 

 

5,656

 

 

 

4,923

 

Lease liabilities

 

 

552

 

 

 

739

 

Other

 

 

1,678

 

 

 

1,296

 

Gross deferred tax assets

 

 

25,599

 

 

 

28,697

 

Valuation allowance

 

 

(4,445

)

 

 

(3,865

)

Net deferred tax assets

 

 

21,154

 

 

 

24,832

 

Deferred tax liabilities:

 

 

 

 

 

 

Property, plant and equipment

 

 

(3,565

)

 

 

(3,167

)

Lease right of use assets

 

 

(484

)

 

 

(662

)

Other

 

 

(1,025

)

 

 

(1,472

)

Gross deferred tax liabilities

 

 

(5,074

)

 

 

(5,301

)

Net deferred tax assets

 

$

16,080

 

 

$

19,531

 

 

The Company has foreign tax credit carryforwards of $2.7 million (expiring between 2031 and 2045), research and development credits of $0.8 million (expiring in 2046), state credits of $0.7 million (expiring between 2062 and 2077) and a capital loss carryforward of $1.7 million (expiring in 2029). The Company has established a full valuation allowance against the foreign tax credit carryforwards and capital loss carryforward based on its assessment of future realization.

Income tax returns are filed in the United States, Wisconsin, Michigan and various other states, as well as Mexico and other foreign jurisdictions. Tax years open to examination by tax authorities under the statute of limitations include fiscal 2023 through 2027 for federal, fiscal 2021 through 2026 for most states and calendar 2017 through 2025 for foreign jurisdictions.