8. Income Taxes:

The components of income before income taxes for the fiscal years ended October 1, 2011, October 2, 2010, and October 3, 2009 were as follows:

	2011		2010		2009
	(expressed in thousands)
Income before income taxes:
Domestic	$	35,243	$	10,659	$	15,965
Foreign		38,062		16,553		7,938
Total	$	73,305	$	27,212	$	23,903

The provision for income taxes for the fiscal years ended October 1, 2011, October 2, 2010, and October 3, 2009 was as follows:

	2011		2010		2009
	(expressed in thousands)
Current provision (benefit):
Federal	$	5,855	$	357	$	(601	)
State		553		65		5
Foreign		10,627		6,046		7,435
Deferred		5,328		2,168		(330	)
Total provision	$	22,363	$	8,636	$	6,509

A reconciliation from the federal statutory income tax rate to the Company's effective income tax rate for the fiscal years ended October 1, 2011, October 2, 2010, and October 3, 2009 is as follows:

	2011			2010			2009

United States federal statutory income tax rate		35	%		35	%		35	%
Foreign provision (less than) greater than U.S. tax rate		(2	)		(1	)		1
Settlement of audits, favorable resolution of accrued tax matters		-			(2	)		-
State income taxes, net of federal benefit		1			1			1
Research and development tax credits		(3	)		(1	)		(13	)
Domestic production activities deduction		(1	)		-			(1	)
Foreign tax credits		-			(3	)		-
Valuation allowances against deferred tax assets		-			-			1
Nondeductible stock option expense and other permanent items		1			3			3
Effective income tax rate		31	%		32	%		27	%

A summary of the deferred tax assets and liabilities for the fiscal years ended October 1, 2011 and October 2, 2010 is as follows:

	2011			2010
	(expressed in thousands)
Deferred Tax Asset:
Accrued compensation and benefits	$	7,584		$	8,509
Inventory reserves		3,299			3,246
Intangible and other assets		4,851			4,473
Allowance for doubtful accounts		216			175
Net operating loss carryovers		758			2,080
Unrealized derivative instrument losses		495			634
Research and foreign tax credit carryovers		621			2,050
Total deferred tax asset before valuation allowance		17,824			21,167
Less valuation allowance		(643	)		(986	)
Total Deferred Tax Asset	$	17,181		$	20,181


Deferred Tax Liability:
Property and equipment	$	12,221	$	10,026
Foreign deferred revenue and other		2,766		2,757
Total Deferred Tax Liability	$	14,987	$	12,783
Net Deferred Tax Asset	$	2,194	$	7,398

As of October 1, 2011, the Company's French and one of its German subsidiaries had net operating loss carryovers of $0.3 million and $1.9 million, respectively. These net operating loss carryovers will not expire under local tax law. The Company determined that the benefit of the German subsidiary's net operating loss carryover of $1.9 million is not likely to be realized. Accordingly, as of October 1, 2011, the Company had a full valuation allowance against the German subsidiary's deferred tax asset in the amount of $0.6 million.

During fiscal year 2011, the Company repatriated $14.9 million of current earnings from its German and Japanese subsidiaries. The Company recorded $0.5 million tax expense during fiscal year 2011 related to these repatriations. Also during fiscal year 2011, U.S. research and development tax credit legislation was extended with an effective date retroactive to January 1, 2010. This legislation allowed the Company to recognize $2.8 million of tax benefits in fiscal year 2011, partly due to tax credits available on applicable research and development spending by the Company during the last three fiscal quarters of fiscal year 2010 and partly due to a full year of credit for fiscal year 2011.

During fiscal year 2010, the Company repatriated $51.0 million of historic earnings from its German, Japanese, Korean and Canadian subsidiaries, a portion of which constituted previously taxed income. The Company recorded a $0.3 million tax benefit during fiscal year 2010 related to these dividends. Also during fiscal year 2010, the Company was only allowed to recognize research and development credits on applicable spending during the first fiscal quarter, as the provision in the U.S. tax law allowing for these credits expired on December 31, 2009.

During fiscal year 2009, U.S. research and development tax credit legislation was extended with an effective date retroactive to January 1, 2008. This legislation allowed the Company to recognize $3.0 million of tax benefits in fiscal year 2009, partly due to tax credits available on applicable research and development spending by the Company during the last three fiscal quarters of fiscal year 2008 and partly due to a full year of credit for fiscal year 2009.

In accordance with ASC 740-30, the Company has not recognized a deferred tax liability for the undistributed earnings of certain of its foreign operations because those subsidiaries have invested or will invest the undistributed earnings indefinitely. At October 1, 2011, undistributed earnings were approximately $70 million. It is impractical for the Company to determine the amount of unrecognized deferred tax liabilities on these indefinitely reinvested earnings. Deferred taxes are recorded for earnings of foreign operations when the Company determines that such earnings are no longer indefinitely reinvested.

A summary of changes in the Company's liability for unrecognized tax benefits for the fiscal years ended October 1, 2011, October 2, 2010, and October 3, 2009 is as follows:

	2011			2010
	(expressed in thousands)
Beginning balance	$	4,181		$	3,591
Increase due to tax positions related to the current year		1,408			1,274
Decrease due to tax positions related to prior years		(240	)		-
Decrease due to lapse of statute of limitations		(232	)		(657	)
Exchange rate change		(11	)		(27	)
Ending balance	$	5,106		$	4,181

Included in the balance of unrecognized tax benefits at October 1, 2011 are potential benefits of $1.5 million that, if recognized, would affect the effective tax rate.

At October 1, 2011 and October 2, 2010, the Company had accrued interest related to uncertain income tax positions of approximately $0.4 million and $0.5 million, respectively. At October 1, 2011, October 2, 2010, and October 3, 2009, no accrual for penalties related to uncertain tax positions existed. Interest and penalties related to uncertain tax positions are included in Interest Expense and General and Administrative Expense, respectively, on the Consolidated Statements of Income.

The Company is subject to U.S. federal income tax as well as income tax of numerous state and foreign jurisdictions. The Company is no longer subject to U.S. federal tax examinations for fiscal years before 2008 and with limited exceptions, state and foreign income tax examinations for fiscal years before 2006. The Company's U.S. tax return is currently under audit by the IRS for fiscal years 2009 and 2010. The Company's French tax returns have been examined by the tax authorities through fiscal year 2006 and are currently under audit for fiscal years 2007 through 2010. The Company's German tax returns have been examined by the tax authorities through fiscal year 2008. The Company's Japanese tax returns have been examined by the tax authorities through fiscal year 2010. The Company's Chinese tax returns for calendar years 2008 through 2010 have not been examined by the tax authorities. As of October 1, 2011, the Company does not expect significant changes in the amount of unrecognized tax benefits during the next twelve months.

At October 1, 2011 and October 2, 2010, certain of the Company's foreign subsidiaries were expected to receive income tax refunds within the next fiscal year. As a result, at October 1, 2011 and October 2, 2010, the Company recognized a current income tax receivable of $0.1 million and $7.7 million, respectively, which is included in Prepaid Expenses and Other Current Assets on the Consolidated Balance Sheets.