Income Taxes

Significant components of our deferred tax assets and liabilities were as follows:



	April 28, 2012			April 30, 2011
Deferred tax liabilities:
Accelerated tax depreciation	$	2,664		$	2,731
Unremitted earnings	9,539			2,679
Deferred income	1,212			1,417
	13,415			6,827
Deferred tax assets:
Deferred compensation and stock award amortization	4,472			2,845
Inventory valuation differences	1,488			1,200
Property valuation differences	5,282			4,523
Accelerated book amortization	15,112			17,447
Environmental reserves	1,152			1,868
Bad debt reserves	591			494
Vacation accruals	963			926
Restructuring accruals	—			150
Foreign investment tax credit	24,303			26,411
Net operating loss carryovers	24,520			12,404
Foreign tax credits	1,393			—
Other accruals	888			808
	80,164			69,076
Less valuation allowance	57,279			54,015
Total deferred tax assets	22,885			15,061
Net deferred tax assets	$	9,470		$	8,234
Balance sheet classification:
Current asset	$	3,529		$	3,778
Non-current asset	15,072			4,456
Current liability	(9,131		)	—
	$	9,470		$	8,234

In addition to the deferred tax assets listed in the table above, the Company had an unrecorded tax benefit of $345 at April 28, 2012, primarily attributable to the difference between the amount of the financial statement expense and the allowable tax deduction for the Company's common stock issued under the Company's stock compensation plans. Although not recognized for financial reporting purposes, this unrecognized tax benefit is available to reduce future income and is incorporated into our federal and state net operating loss carry forwards, which are discussed below.

At April 28, 2012, we had valuation allowances against our deferred tax assets of $57,279. 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. In fiscal 2010, we utilized all ability to carry-back federal U.S. losses to prior years. Future realization depends on the existence of sufficient taxable income within the carry forward period available under the tax law. 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. 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 remainder of the valuation allowances that we have recorded.

The federal and state NOL carry forwards relate to the current and prior years’ NOLs, which may be used to reduce tax liabilities in future years. If not realized, the federal tax benefits of $20,989 expire over a twenty year period. If not realized, the state tax benefits of $3,532 expire over a twelve to twenty year period.

The foreign tax credit carry-forward relates to the current year, which may be used to reduce tax liabilities in future years. If not realized, the federal tax benefits of $1,393 expire over a ten-year period.

The tax laws of Malta provide for investment tax credits of 30% of certain qualified expenditures. Unused credits of $24.4 million as of April 28, 2012 can be carried forward indefinitely. We have accumulated investment tax credits in excess of amounts more likely than not to be realized based upon projections of taxable income to be generated within a reasonable time period. Valuation allowances of $17.6 million as of April 28, 2012 have been provided for this excess.

In the fourth quarter of fiscal 2012, we recorded $9,012 of deferred U.S. tax, net of associated foreign tax credits, to recognize deferred tax on undistributed foreign earnings of $38,000 that we previously intended to permanently reinvest in foreign operations. We offset this deferred tax expense by reducing our valuation allowance by an equal amount of $9,012.

Components of income/(loss) before income taxes are as follows:



	Fiscal Year Ended
	April 28, 2012			April 30, 2011			May 1, 2010
Domestic source	$	(32,418	)	$	(20,658	)	$	(20,018	)
Foreign source	43,791			35,120			27,835
Income/(loss) before income tax	$	11,373		$	14,462		$	7,817

Income taxes from continuing operations consisted of the following:



	Fiscal Year Ended
	April 28, 2012			April 30, 2011			May 1, 2010
Current
Federal	$	36		$	(2,703	)	$	(11,356	)
Foreign	5,672			4,179			1,339
State	(533		)	(345		)	61
Subtotal	5,175			1,131			(9,956		)

Deferred
Federal and state	119			(3,198		)	4,827
Foreign	(2,058		)	(2,009		)	(835		)
Subtotal	(1,939		)	(5,207		)	3,992
Total income tax/(benefit)	$	3,236		$	(4,076	)	$	(5,964	)

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



	Fiscal Year Ended
	April 28, 2012					April 30, 2011					May 1, 2010
Income tax at statutory rate	$	4,067		35.0	%	$	5,169		35.0	%	$	2,693		35.0	%
Effect of:
State income taxes, net of federal benefit	29			0.3	%	84			0.6	%	637			8.3	%
Foreign operations with lower statutory rates	(10,955		)	(94.3	)%	(10,640		)	(72.1	)%	(4,723		)	(61.4	)%
Foreign losses with no tax benefit	845			7.3	%	289			2.0	%	532			6.9	%
Foreign investment tax credit (FTC)	(791		)	(6.8	)%	(1,276		)	(8.6	)%	(337		)	(4.4	)%
Change in tax contingency reserve	(251		)	(2.2	)%	(2,716		)	(18.4	)%	(3,344		)	(43.5	)%
Research and development credit	—			—	%	—			—	%	(293		)	(3.8	)%
Adjustment of prior years' income taxes	—			—	%	—			—	%	1,714			22.3	%
Change in permanent reinvestment assertion	9,613			82.7	%
Change in valuation allowance	392			3.4	%	5,613			38.0	%	(2,975		)	(38.6	)%
Other, net	287			2.5	%	(599		)	(4.1	)%	132			1.7	%
Income tax provision	$	3,236		27.9	%	$	(4,076	)	(27.6	)%	$	(5,964	)	(77.5	)%

We paid income taxes of $4,028 in fiscal 2012, $5,187 in 2011 and $1,392 in fiscal 2010. In fiscal 2011 and 2010, we received tax refunds of $13,208 and $9,334, respectively in the U.S. No provision has been made for income taxes on undistributed net income of foreign operations, as we expect them to be indefinitely reinvested in our foreign operations. If the undistributed net income of $93,158 were distributed as dividends, we would be subject to foreign tax withholdings and incur additional income tax expense of approximately $32,605, before available foreign tax credits. It is not practical to estimate the amount of foreign tax withholdings or foreign tax credits that may be available. We record investment tax credits using the "flow through" method.

Income tax provision (benefit) allocated to continuing operations and discontinued operations were as follows for the years ended:



	Fiscal Year
	2012		2011			2010
Continuing operations	$	3,236	$	(4,076	)	$	(5,964	)
Discontinued operations	—		3,493			—
Total tax provision	$	3,236	$	(583	)	$	(5,964	)

As of April 28, 2012, our gross unrecognized tax benefits totaled $66. After considering the federal impact on the state issues, $66 of this total would favorably affect the effective tax rate if resolved in our favor.

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	(272		)
Lapsing of statutes of limitations	(37		)
Balance at April 28, 2012	$	66

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 from the end of the fiscal 2012. Unless challenged by tax authorities, the closure of those statutes of limitation is expected to result in the recognition of uncertain tax positions of $36.

The U.S. federal statute of limitations remains open for fiscal year ended May 2, 2009. Generally, the fiscal years ended May 2, 2009 and forward remain open under the state statute of limitations.

The continuing practice of the Company is to recognize interest and penalties related to income tax matters in the provision for income taxes. We had $59 accrued for interest and no accrual for penalties at April 28, 2012. We recorded an interest expense reversal related to unrecognized tax provision of $265 in fiscal 2012 and no expense for penalties.