Income Taxes (Tables)

12 Months Ended

Jul. 31, 2018

Income before provision for income taxes

Income (loss) before (benefit from) provision for income taxes consists of the following:



	Fiscal Years Ended July 31,
	2018		2017	2016
U.S.	$	22,243,000	23,732,000	(7,666,000	)
Foreign	2,383,000		1,749,000	(526,000	)
	$	24,626,000	25,481,000	(8,192,000	)

Provision for income taxes

The (benefit from) provision for income taxes included in the accompanying Consolidated Statements of Operations consists of the following:



	Fiscal Years Ended July 31,
	2018			2017		2016
Federal – current	$	367,000		(441,000	)	2,297,000
Federal – deferred	(7,499,000		)	8,399,000		(2,930,000	)

State and local – current	440,000			608,000		408,000
State and local – deferred	1,115,000			659,000		(310,000	)

Foreign – current	429,000			413,000		81,000
Foreign – deferred	5,000			16,000		—
(Benefit from) provision for income taxes	$	(5,143,000	)	9,654,000		(454,000	)

Provision for income taxes differed from amounts computed by applying the U.S. Federal income tax rate

The (benefit from) provision for income taxes differed from the amounts computed by applying the U.S. Federal income tax rate as a result of the following:



	Fiscal Years Ended July 31,
	2018					2017				2016
	Amount			Rate		Amount		Rate		Amount		Rate
Computed "expected" tax expense (benefit)	$	6,615,000		27.0	%	8,919,000		35.0	%	(2,867,000	)	35.0	%
Increase (reduction) in income taxes resulting from:
State and local income taxes, net of federal benefit	1,193,000			4.8		1,257,000		4.9		23,000		(0.3	)
Stock-based compensation	(1,112,000		)	(4.5	)	78,000		0.3		68,000		(0.8	)
Research and experimentation credits	(678,000		)	(2.8	)	(919,000	)	(3.6	)	(1,106,000	)	13.5
Acquisition-related tax contingencies	—			—		—		—		1,962,000		(24.0	)
Nondeductible transaction costs	—			—		—		—		1,279,000		(15.6	)
Tax Reform remeasurement of deferred taxes	(11,317,000		)	(46.0	)	—		—		—		—
Foreign income taxes	(221,000		)	(0.9	)	(151,000	)	(0.6	)	289,000		(3.5	)
Other	377,000			1.4		470,000		1.9		(102,000	)	1.2
(Benefit from) provision for income taxes	$	(5,143,000	)	(21.0	)%	9,654,000		37.9	%	(454,000	)	5.5	%

Tax effects of temporary differences

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at July 31, 2018 and 2017 are presented below:



	2018			2017
Deferred tax assets:
Inventory and warranty reserves	$	5,089,000		7,854,000
Compensation and commissions	3,511,000			3,807,000
Federal, state and foreign research and experimentation credits	18,816,000			16,286,000
Federal alternative minimum tax credit	3,243,000			2,652,000
Stock-based compensation	5,092,000			7,767,000
Acquisition-related contingent liabilities	2,477,000			4,687,000
Federal and state net operating losses	7,349,000			19,880,000
Other	4,672,000			8,764,000
Less valuation allowance	(11,854,000		)	(8,633,000	)
Total deferred tax assets	38,395,000			63,064,000
Deferred tax liabilities:
Plant and equipment	(1,155,000		)	(1,309,000	)
Intangibles	(48,167,000		)	(79,061,000	)
Total deferred tax liabilities	(49,322,000		)	(80,370,000	)
Net deferred tax liabilities	$	(10,927,000	)	(17,306,000	)

Summary of unrecognized tax benefits

The following table summarizes the activity related to our unrecognized tax benefits for fiscal years 2018, 2017 and 2016 (excluding interest):



	2018			2017		2016
Balance at beginning of period	$	8,586,000		9,108,000		2,728,000
Increase related to current period	645,000			587,000		2,487,000
Increase related to prior periods	49,000			86,000		4,490,000
Expiration of statute of limitations	(81,000		)	(404,000	)	(580,000	)
Decrease related to prior periods	(62,000		)	(791,000	)	(17,000	)
Balance at end of period	$	9,137,000		8,586,000		9,108,000