Income Taxes

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 examinations by the Internal Revenue Service on prior years and the expiration of statutes of limitations, fiscal years 2010, 2011 and 2012 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 2005.

On January 2, 2013, the President signed into law The American Taxpayer Relief Act of 2012. Under prior law, a taxpayer was entitled to a research tax credit for qualifying amounts paid or incurred on or before December 31, 2011. The 2012 Taxpayer Relief Act extends the research credit for two years to December 31, 2013. The extension of the research credit is retroactive and includes amounts paid or incurred after December 31, 2011. As a result of the retroactive extension, we recognized approximately $1,804 in tax benefits for the credit during fiscal year 2013.

Income tax expense (benefit) consisted of the following:



	Year Ended
	April 27, 2013			April 28, 2012			April 30, 2011
Current:
Federal	$	9,517		$	2,266		$	4,879
State	2,219			577			1,227
Foreign	754			313			939
Deferred taxes	(4,340		)	(68		)	852
	$	8,150		$	3,088		$	7,897

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



	Year Ended
	April 27, 2013			April 28, 2012			April 30, 2011
Computed income tax expense at federal statutory rate	$	10,825		$	4,052		$	7,732
State taxes, net of federal benefit	684			497			1,107
Research and development tax credit	(1,804		)	(1,004		)	(981		)
Meals and entertainment	308			375			299
Stock compensation	466			842			959
Dividends paid to retirement plan	(616		)	(522		)	—
Domestic production activities deduction	(976		)	(270		)	(607		)
Change in foreign deferred rates	—			(249		)	—
Reversal of valuation allowance	—			(364		)	—
Other, net	(737		)	(269		)	(612		)
	$	8,150		$	3,088		$	7,897

We operated under a tax holiday in China which 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 attributable to domestic and foreign operations was as follows:



	Year Ended
	April 27, 2013		April 28, 2012		April 30, 2011
Domestic	$	27,667	$	10,052	$	17,892
Foreign	3,262		1,525		4,249
Income before income taxes	$	30,929	$	11,577	$	22,141

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



	April 27, 2013			April 28, 2012
Deferred taxes assets:
Warranty reserves	$	9,847		$	8,425
Vacation accrual	1,788			1,821
Net losses on equity investments	3,066			2,971
Deferred maintenance revenue	2,439			1,738
Reserves for excess and obsolete inventory	1,246			1,021
Equity compensation	1,049			653
Allowance for doubtful accounts	599			473
Inventory capitalization	600			907
Accrued compensation and benefits	1,077			742
Intangible assets	37			81
Net operating loss carry forwards	—			15
Other	440			334
	22,188			19,181
Deferred tax liabilities:
Property and equipment	(7,542		)	(8,817		)
Prepaid expenses	(662		)	(669		)
Other	(168		)	(219		)
	(8,372		)	(9,705		)
	$	13,816		$	9,476

We review deferred tax assets, including net operating losses, and to the extent we believe the asset may not be realized, we recognize a valuation allowance. At April 27, 2013 and April 28, 2012, we had recorded no valuation allowances as we believe our deferred tax assets will be fully realized based upon our estimates of the future taxable income. If our estimates of future taxable income are not met in future periods, a valuation allowance for some of these deferred tax assets may be required.

We have not recorded U.S. deferred income taxes on certain of our non-U.S. subsidiaries’ undistributed earnings, as such amounts are intended to be reinvested outside the United States indefinitely. However, should we change our business and tax strategies in the future and decide to repatriate a portion of these earnings to one of our U.S. subsidiaries, including cash maintained by these non-U.S. subsidiaries, additional U.S. tax liabilities would be incurred. It is not practical at this time to estimate the amount of additional U.S. tax liabilities we would incur.

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



	April 27, 2013		April 28, 2012
Current assets	$	12,755	$	10,941
Current liabilities	—		(42		)
Non-current assets	1,061		30
Non-current liabilities	—		(1,453		)
	$	13,816	$	9,476

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 2013, 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
Gross increases related to prior period tax positions	—
Gross decreases related to prior period tax positions	(11		)
Gross increases related to current period tax positions	129
Lapse of statute of limitations	(188		)
Balance as of April 27, 2013:	$	379

We recognized an expense (benefit) of $10, $(1) and $(16) in net interest and penalties during the years ended April 27, 2013, April 28, 2012 and April 30, 2011, respectively. Interest and penalties recognized are recorded in income taxes in our consolidated statements of operations. We had accrued $11 and $24 in net interest or penalties as of April 27, 2013 and April 28, 2012, respectively.