Income Taxes

We account for uncertainties in tax positions under the provisions of ASC 740-10, Accounting for Uncertainty in Income Taxes, an Interpretation of SFAS No. 109. ASC 740-10 creates a single model to address uncertainty in tax positions and clarifies the accounting for income taxes by prescribing the minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. ASC 740-10 also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition. The following table provides a reconciliation of changes in unrecognized tax benefits for fiscal 2012 and 2011:



	Amount
Balance as of May 1, 2010:	$	538
Gross increases related to prior period tax positions	132
Gross decreases related to prior period tax positions	(104		)
Gross increases related to current period tax positions	81
Lapse of statute of limitations	(120		)
Balance as of April 30, 2011:	$	527
Gross increases related to prior period tax positions	14
Gross decreases related to prior period tax positions	(178		)
Gross increases related to current period tax positions	86
Lapse of statute of limitations	—
Balance as of April 28, 2012:	$	449

As a result of the preliminary results of an IRS audit which is subject to change, we expect our unrecognized tax benefits to reduce in fiscal 2013.

We recorded $11, $(20) and $58 in net interest and penalties during the years ended April 28, 2012, April 30, 2011 and May 1, 2010, respectively. We had accrued $(12) and $4 in net interest or penalties as of April 28, 2012 and April 30, 2011, respectively. We are subject to U.S. Federal income tax as well as the income taxes of multiple state jurisdictions. As a result of the completion of exams by the Internal Revenue Service on prior years and the expiration of statutes of limitations, fiscal years 2009, 2010, and 2011 are the only years remaining open under statutes of limitations. Certain subsidiaries are also subject to income tax in several foreign jurisdictions which have open tax years varying by jurisdiction beginning in fiscal 2004.

During the third quarter of fiscal 2011, the President signed into law a reinstatement of the research and development tax credit, retroactively to January 1, 2010. This reinstatement was effective only through December 31, 2011. As a result, we recognized approximately $686 in benefits, of which approximately $211 related to fiscal 2010.

Income tax expense (benefit) consisted of the following:



	Year Ended
	April 28, 2012			April 30, 2011		May 1, 2010
Current:
Federal	$	2,266		$	4,879	$	(1,375	)
State	577			1,227		145
Foreign	313			939		(43		)
Deferred taxes	(68		)	852		120
	$	3,088		$	7,897	$	(1,153	)

A reconciliation of the provision for income taxes and the amount computed by applying the federal statutory rate to income (loss) before income taxes is as follows:



	Year Ended
	April 28, 2012			April 30, 2011			May 1, 2010
Computed income tax expense (benefit) at federal statutory rate	$	4,052		$	7,732		$	(2,849	)
State taxes, net of federal benefit	497			1,107			263
Research and development tax credit	(1,004		)	(981		)	(689		)
Meals and entertainment	375			299			272
Stock compensation	842			959			1,134
Dividends paid to retirement plan	(522		)	—			—
Goodwill impairment	—			—			305
Domestic production activities deduction	(270		)	(607		)	—
Change in foreign deferred rates	(249		)	—			—
Reversal of valuation allowance	(364		)	—			—
Other, net	(269		)	(612		)	411
	$	3,088		$	7,897		$	(1,153	)

At April 28, 2012, we had foreign net operating loss carry-forwards totaling $186, which have an unlimited carry-forward period. We operated under a tax holiday in China that expired in fiscal 2012. As noted above, the expiration of this tax holiday caused a $249 decrease in our income tax expense in fiscal 2012.

The pretax income (loss) attributable to domestic and foreign operations was as follows:



	Year Ended
	April 28, 2012		April 30, 2011		May 1, 2010
Domestic	$	10,052	$	17,892	$	(6,423	)
Foreign	1,525		4,249		(1,719		)
Income (loss) before income taxes	$	11,577	$	22,141	$	(8,142	)

The components of the net deferred tax asset were as follows:



	April 28, 2012			April 30, 2011			May 1, 2010
Deferred taxes assets:
Warranty reserves	$	8,425		$	8,730		$	9,271
Vacation accrual	1,821			1,680			1,570
Net losses on equity investments	2,971			2,959			3,095
Deferred maintenance revenue	1,738			1,620			754
Reserves for excess and obsolete inventory	1,021			665			1,297
Equity compensation	653			557			486
Allowance for doubtful accounts	473			409			401
Inventory capitalization	907			414			478
Accrued compensation and benefits	742			900			753
Intangible assets	81			147			125
Net operating loss carry forwards	15			—			59
Other	334			214			174
	19,181			18,295			18,463
Deferred tax liabilities:
Property and equipment	(8,817		)	(7,866		)	(7,368		)
Prepaid expenses	(669		)	(470		)	(543		)
Other	(219		)	(551		)	(292		)
	(9,705		)	(8,887		)	(8,203		)
	$	9,476		$	9,408		$	10,260

At April 28, 2012 and April 30, 2011, we had recorded valuation allowances of $0 and $364, respectively, against foreign net operating losses. We believe that our deferred tax assets will be fully realized based upon our estimates of the future taxable income.

The following presents the classification of the net deferred tax asset on the accompanying consolidated balance sheets:



	April 28, 2012			April 30, 2011			May 1, 2010
Current assets	$	10,941		$	9,640		$	12,578
Current liabilities	(42		)	(406		)	(210		)
Non-current assets	30			180			62
Non-current liabilities	(1,453		)	(6		)	(2,170		)
	$	9,476		$	9,408		$	10,260