INCOME TAXES

At January 28, 2012 and April 30, 2011, we had valuation allowances against our deferred tax assets of $62,947 and $54,015, respectively. In accordance with ASC No. 740, “Income Taxes,” a valuation allowance is required to be recorded when it is more likely than not that deferred tax assets will not be realized. Future realization depends on the existence of sufficient taxable income within the carry-forward period available under the tax laws. Sources of future taxable income include future reversals of taxable temporary differences, future taxable income exclusive of reversing taxable differences, taxable income in carry-back years and tax planning strategies. These sources of positive evidence of realizability must be weighed against negative evidence, such as cumulative losses in recent years.

In forming a judgment about the future realization of our deferred tax assets, we considered both the positive and negative evidence of realizability and gave significant weight to the negative evidence from our recent cumulative loss in the U.S. We will continue to assess this situation and make appropriate adjustments to the valuation allowance based on our evaluation of the positive and negative evidence existing at the time. We are currently unable to forecast when there will be sufficient positive evidence for us to reverse the valuation allowances that we have recorded.

The valuation allowance is associated with the deferred tax assets for the differences between book and tax that result from net operating losses (NOLs), foreign investment tax credits with unlimited carryovers generated in the current and prior years and temporary differences which become deductible when the related asset is recovered or related liability is settled.

A reconciliation of the consolidated provisions for income taxes to amounts determined by applying the prevailing statutory federal income tax rate to pre-tax earnings is as follows:



	Three Months Ended						Nine Months Ended
	January 28, 2012			January 29, 2011			January 28, 2012			January 29, 2011
Income tax provision at statutory rate	$	696		$	1,504		$	2,114		$	3,241
Effect of:
State income taxes, net of federal benefit	23			55			31			102
Foreign operations with lower statutory rates	(1,847		)	(2,801		)	(7,538		)	(8,500		)
Valuation allowance	2,787			2,305			8,094			8,286
Uncertain tax positions	3			(2,582		)	(17		)	(2,582		)
Other, net	(482		)	20			739			(636		)
Income tax (benefit)/provision	$	1,180		$	(1,499	)	$	3,423		$	(89	)

We recognize interest and penalties accrued related to the unrecognized tax benefits in the provision for income taxes. During the nine months ended January 28, 2012, we recognized an expense of $12 in interest and zero in penalties. We had approximately $335 accrued at January 28, 2012 for the payment of interest and penalties. The total unrecognized tax benefit as of January 28, 2012 was $338.

The following table presents a reconciliation of the beginning and ending amounts of unrecognized tax benefits:



Balance at April 30, 2011	$	375
Increases for positions related to the current year	—
Decreases for positions related to the prior years	—
Settlements	(37		)
Lapsing of statutes of limitations	—
Balance at January 28, 2012	$	338

We believe that it is reasonably possible that the total amount of unrecognized tax benefits will change within the next twelve months. We have certain tax return years subject to statutes of limitation, which will close within twelve months of the end of the quarter. Unless challenged by tax authorities, the closure of those statutes of limitation is expected to result in the recognition of uncertain tax positions of approximately $37.

The Company and all of its domestic subsidiaries file income tax returns in the U.S. federal jurisdiction and various states. Our foreign subsidiaries file income tax returns in certain foreign jurisdictions since they have operations outside the U.S. The Company and its subsidiaries are generally no longer subject to U.S. federal, state and local examinations by tax authorities for all years except fiscal years 2011, 2010 and 2009.