10.

INCOME TAXES

Our effective tax rate for the first six months of fiscal 2017 was 31% compared to 28% for the same period in fiscal 2016. The increase in the effective income tax rate was primarily due to changes in the geographic mix of income and loss among tax jurisdictions. We recorded income tax expense during the first six months of fiscal 2017 of $2.0 million, compared to $2.9 million for the same period in fiscal 2016, primarily as a result of a decrease in income period-over-period. We have not provided for any U.S. income taxes on the undistributed earnings of our wholly-owned foreign subsidiaries based upon our determination that such earnings will be indefinitely reinvested. In the event these earnings are later distributed to our U.S. operations, such distributions would likely result in additional U.S. tax that may be offset, at least in part, by associated foreign tax credits.

Our unrecognized tax benefits were $1.2 million as of April 30, 2017 and $1.1 million as of October 31, 2016, and in each case included accrued interest.

We recognize accrued interest and penalties related to unrecognized tax benefits as components of income tax expense. As of April 30, 2017, the gross amount of interest accrued, reported in Accrued expenses and other, was approximately $62,000, which did not include the federal tax benefit of interest deductions.

We file U.S. federal and state income tax returns, as well as tax returns in several foreign jurisdictions. The statutes of limitations with respect to unrecognized tax benefits will expire between July 2017 and July 2019. We are under audit by the Internal Revenue Service (IRS) for our federal income tax return for fiscal year 2015.