Note 18: Income Taxes

Income from continuing operations before income taxes consists of the following (for the fiscal years ended):

(Amounts in thousands)	4/30/2016		4/25/2015		4/26/2014
United States	$	115,750	$	96,605	$	82,705
Foreign		9,293		9,023		8,854

Total	$	125,043	$	105,628	$	91,559

Income tax expense (benefit) applicable to continuing operations consists of the following components (for the fiscal years ended):

(Amounts in thousands)	4/30/2016		4/25/2015		4/26/2014
Federal:
—current	$	32,403	$	28,887	$	24,695
—deferred		3,559		406		1,495
State:
—current		4,750		4,573		5,345
—deferred		859		637		(2,082	)
Foreign:
—current		2,345		2,281		1,375
—deferred		164		170		555

Total income tax expense	$	44,080	$	36,954	$	31,383

Our effective tax rate differs from the U.S. federal income tax rate for the following reasons:

	Year Ended
(% of income from continuing operations before income taxes)	Year Ended
	4/30/2016			4/25/2015			4/26/2014
Statutory tax rate		35.0	%		35.0	%		35.0	%
Increase (reduction) in income taxes resulting from:
State income taxes, net of federal benefit		3.4			3.5			3.1
U.S. manufacturing benefit		(2.5	)		(2.1	)		(1.0	)
Change in valuation allowance		(0.3	)		(0.4	)		(1.2	)
Miscellaneous items		(0.3	)		(1.0	)		(1.6	)

Effective tax rate		35.3	%		35.0	%		34.3	%

For our foreign operating units, we permanently reinvest the earnings and consequently do not record a deferred tax liability relative to the undistributed earnings. We have reinvested approximately $24.7 million of the earnings. The potential deferred tax attributable to these earnings would be approximately $3.2 million.

The primary components of our deferred tax assets and (liabilities) were as follows:

	As of
(Amounts in thousands)	4/30/2016			4/25/2015
Assets
Deferred and other compensation	$	25,032		$	22,085
Allowance for doubtful accounts		1,560			2,255
State income tax—net operating losses, credits and other		5,571			6,032
Pension		1,542			2,828
Warranty		7,817			6,466
Rent		4,184			5,174
Workers' compensation		3,870			4,173
Employee benefits		3,212			3,096
Other		—			1,262
Valuation allowance		(3,625	)		(4,322	)

Total deferred tax assets		49,163			49,049
Liabilities
Property, plant and equipment		(7,089	)		(2,722	)
Other		(391	)		—

Net deferred tax assets	$	41,683		$	46,327

The deferred tax assets associated with loss carry forwards and the related expiration dates are as follows:

(Amounts in thousands)	Amount		Expiration
Various U.S. state net operating losses (excluding federal tax effect)	$	8,909		Fiscal 2017 - 2035
Foreign net operating losses		100		Indefinite
Foreign capital losses		19		Indefinite

We evaluate our deferred taxes to determine if a valuation allowance is required. Accounting standards require that we assess whether a valuation allowance should be established based on the consideration of all available evidence using a "more likely than not" standard with significant weight being given to evidence that can be objectively verified.

The evaluation of the amount of net deferred tax assets expected to be realized necessarily involves forecasting the amount of taxable income that will be generated in future years. We have forecasted future results using estimates management believes to be reasonable. We based these estimates on objective evidence such as expected trends resulting from certain leading economic indicators. Based upon our net deferred tax asset position at April 30, 2016, we estimate that about $106 million of future taxable income would need to be generated to fully recover our net deferred tax assets. The realization of deferred income tax assets is dependent on future events. Actual results inevitably will vary from management's forecasts. Such variances could result in adjustments to the valuation allowance on deferred tax assets in future periods, and such adjustments could be material to the financial statements.

During fiscal 2016, we recorded a $0.7 million decrease in our valuation allowance for deferred tax assets that are now considered more likely than not to be realized. This determination was primarily the result of our assessment of our cumulative pre-tax income in certain jurisdictions. A summary of the valuation allowance by jurisdiction is as follows:

Jurisdiction (Amounts in thousands)	4/25/2015 Valuation Allowance		Change			4/30/2016 Valuation Allowance
U.S. state	$	4,303	$	(697	)	$	3,606
Foreign		19		—			19

Total	$	4,322	$	(697	)	$	3,625

The remaining valuation allowance of $3.6 million primarily related to certain U.S. state and foreign deferred tax assets. The U.S. state deferred taxes are primarily related to state net operating losses.

As of April 30, 2016, we had a gross unrecognized tax benefit of $1.8 million related to uncertain tax positions in various jurisdictions. A reconciliation of the beginning and ending balance of these unrecognized tax benefits is as follows:

(Amounts in thousands)	4/30/2016			4/25/2015			4/26/2014
Balance at the beginning of the period	$	2,226		$	2,972		$	3,248
Additions:
Positions taken during the current year		87			94			88
Reductions:
Positions taken during the prior year		(321	)		(702	)		(99	)
Decreases related to settlements with taxing authorities		—			(25	)		(98	)
Reductions resulting from the lapse of the statute of limitations		(171	)		(113	)		(167	)

Balance at the end of the period	$	1,821		$	2,226		$	2,972

We recognize interest and penalties associated with uncertain tax positions in income tax expense. We had approximately $0.2 million and $0.3 million accrued for interest and penalties as of April 30, 2016, and April 25, 2015, respectively.

If recognized, $0.4 million of the total $1.8 million of unrecognized tax benefits would decrease our effective tax rate. We expect unrecognized tax benefits to decrease by approximately $1.3 million within the next 12 months as a result of state tax net operating loss carryovers expiring. This expected decrease in unrecognized tax benefits will not impact our effective tax rate. The remaining balance will be settled or released as tax audits are effectively settled, statutes of limitation expire or other new information becomes available.

Our U.S. federal income tax returns for fiscal years 2013 and subsequent are still subject to audit. Our fiscal year 2012 U.S. federal income tax return audit was completed in fiscal 2016 with no changes to reported tax. In addition, we conduct business in various states. The major states in which we conduct business are subject to audit for fiscal years 2013 and subsequent. Our businesses in Canada and Thailand are subject to audit for fiscal years 2007 and subsequent, and in Mexico, calendar years 2011 and subsequent.

Cash paid for taxes (net of refunds received) during the fiscal years ended April 30, 2016, April 25, 2015, and April 26, 2014, were $34.5 million, $34.4 million, and $25.0 million, respectively.