The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate to income from continuing operations before income tax expense. The sources and tax effects of the difference were as follows:

		Year Ended March 31,
		2012	2011	2010
Expected tax at 35%		$ 11,485	$ 1,773	$ (4,511)
State income taxes net of federal expense (benefit)		253	(936)	(238)
Foreign taxes less than statutory provision		(1,012)	(683)	(1,081)
Permanent items		(211)	(119)	229
Valuation allowance		(4,315)	42,983	-
Research & development credits		-	(812)	-
Other		696	(795)	256
Actual tax provision (benefit)		$ 6,896	$ 41,411	$ (5,345)



		Year Ended March 31,
		2012	2011	2010
Current income tax expense (benefit):
	United States Federal	$ 487	$ (4,229)	$ -
	State taxes	269	49	913
	Foreign	7,050	4,818	2,417
Deferred income tax expense (benefit):
	United States	130	40,621	(7,745)
	Foreign	(1,040)	152	(930)
		$ 6,896	$ 41,411	$ (5,345)

The Company applies the liability method of accounting for income taxes as required by ASC Topic 740, “Income Taxes.” The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows:

		March 31,
		2012	2011
Deferred tax assets:
	Federal net operating loss carryforwards	$ 5,107	$ 10,709
	State and foreign net operating loss carryforwards	4,217	5,189
	Employee benefit plans	23,262	10,795
	Insurance reserves	8,722	9,048
	Accrued vacation and incentive costs	3,389	3,408
	Federal tax credit carryforwards	7,568	6,584
	Equity compensation	1,797	1,680
	Other	4,164	2,012
	Valuation allowance	(53,325)	(45,836)
Gross deferred tax assets		4,901	3,589
Deferred tax liabilities:
	Inventory reserves
	Property, plant, and equipment	(2,283)	(1,822)
	Intangible assets	(4,272)	(4,916)
	Gross deferred tax liabilities	(6,555)	(6,738)
	Net deferred tax liabilities	$ (1,654)	$ (3,149)

During 2011, the Company recorded a non-cash charge of $42,983,000 (or $2.26 per diluted share) included within its provision for income taxes. This charge relates to the Company's determination that a full valuation allowance against its deferred tax assets generated in the U.S and three of the Company's subsidiaries is necessary. Accounting rules require a reduction of the carrying amounts of deferred tax assets by a valuation allowance if, based on the available and objectively verifiable evidence, it is more likely than not that such assets will not be realized. The existence of cumulative losses for a certain threshold period is a significant form of negative evidence used in the assessment. If a cumulative loss threshold is met, the accounting rules indicate that forecasts of future profitability are generally not sufficient positive evidence to overcome the presumption that a valuation allowance is necessary.

The valuation allowance includes $1,358,000 and $1,240,000 related to foreign net operating losses at March 31, 2012 and 2011, respectively. The increase in foreign valuation allowance is primarily due to net operating losses in two of the Company's subsidiaries. The Company's valuation allowance related to foreign subsidiaries' net operating losses have lives that range from five years to indefinite.

The federal net operating losses have expiration dates ranging from 2030 to 2031. The state net operating losses have expiration dates ranging from 2015 through 2030. The federal tax credits have expiration dates starting in 2013.

Deferred income taxes are classified within the consolidated balance sheets based on the following breakdown:

	March 31,
	2012	2011
Net current deferred tax asset	$ 44	$ 336
Net non-current deferred tax asset	2,824	1,217
Net non-current deferred tax liability	(4,522)	(4,702)
Net deferred tax liability	$ (1,654)	$ (3,149)

The net current deferred tax assets are included in prepaid expenses. Net non-current deferred tax liabilities are included in other non-current liabilities.

Income from continuing operations before income tax expense includes foreign subsidiary income of $18,590,000, $12,403,000, and $8,769,000 for the years ended March 31, 2012, 2011, and 2010, respectively. Income from discontinued operations reported in the statements of operations is net of tax expense of $0, $243,000, and $326,000 for the years ended March 31, 2012, 2011, and 2010, respectively. As of March 31, 2012, the Company had unrecognized deferred tax liabilities related to approximately $94,000,000 of cumulative undistributed earnings of foreign subsidiaries. These earnings are considered to be permanently invested in operations outside the United States. Determination of the amount of unrecognized deferred U.S. income tax liability with respect to such earnings is not practicable.

There were shares of common stock issued through restricted stock units, the exercise of non-qualified stock options, or through the disqualifying disposition of incentive stock options in the years ended March 31, 2012 and 2011. The tax benefits to the Company from these transactions, recorded in additional paid-in capital rather than recognized as a reduction of income tax expense, were $0 and $68,000 in 2012 and 2011, respectively. This tax shortfall has also been recognized in the consolidated balance sheet as an increase in deferred tax assets.

Changes in the Company's uncertain income tax positions, excluding the related accrual for interest and penalties, are as follows:

	2012	2011	2010
Beginning balance	$ 2,647	$ 3,577	$ 3,546
Additions for prior year tax positions	-	27	20
Additions for current year tax positions	30	93	260
Reductions for prior year tax positions	(45)	(928)	(33)
Settlements	(112)	-	-
Foreign currency translation	(44)	32	(90)
Lapses in statute limitations	(48)	(154)	(126)
Ending balance	$ 2,428	$ 2,647	$ 3,577

The Company had $176,000 and $96,000 accrued for the payment of interest and penalties at March 31, 2012 and 2011, respectively. The Company recognizes interest expense or penalties related to uncertain tax positions as a part of income tax expense in its consolidated statements of operations.

Substantially all of the unrecognized tax benefits as of March 31, 2012 would impact the effective tax rate if recognized.

The Company and its subsidiaries file income tax returns in the U.S., various state, local, and foreign jurisdictions. The Internal Revenue Service has completed an examination of the Company's U.S. income tax returns for 2009 and 2010 resulting in no adjustments. Current examinations include various state audits.

The Company's major jurisdictions are the United States and Germany. With few exceptions, the Company is no longer subject to tax examinations by tax authorities in the United States for tax years prior to March 31, 2011 and in Germany for tax years prior to December 31, 2006.

The Company does not anticipate that total unrecognized tax benefits will change significantly due to the settlement of audits or the expiration of statutes of limitations prior to March 31, 2013.