Income Taxes

The components of income (loss) before income taxes and income tax expense (benefit) were as follows:



	Year Ended June 30,
	2013			2012			2011
(Loss) income before income taxes:
United States	$	(23,639	)	$	31,277		$	26,007
Foreign	477			494			495
	$	(23,162	)	$	31,771		$	26,502
Tax (benefit) provision:
Federal:
Current	$	(427	)	$	10,591		$	4,974
Deferred	(9,376		)	(2,582		)	1,992
	$	(9,803	)	$	8,009		$	6,966
State:
Current	$	192		$	1,401		$	855
Deferred	(707		)	(335		)	48
	$	(515	)	$	1,066		$	903
Foreign:
Current	$	364		$	77		$	161
Deferred	—			—			30
	$	364		$	77		$	191
	$	(9,954	)	$	9,152		$	8,060

The following is the reconciliation between the statutory federal income tax rate and the Company’s effective income tax (benefit) rate:



	Year Ended June 30,
	2013		2012		2011
Tax (benefit) provision at federal statutory rates	(35.0	)%	35.0	%	35.0	%
State income tax, net of federal tax benefit	(1.8	)	2.6		2.2
Research and development credits	(13.2	)	(4.2	)	(6.9	)
Domestic manufacturing deduction	—		(3.0	)	(2.6	)
Equity compensation	1.8		1.0		1.6
Change in the fair value of the liability related to the LNX earn-out	—		(5.4	)	—
Acquisition costs	0.5		1.3		0.6
Valuation allowance	2.6		2.2		1.7
Other	2.0		(0.7	)	(1.3	)
	(43.1	)%	28.8	%	30.3	%

The components of the Company’s net deferred tax assets (liabilities) were as follows:



	June 30,
	2013			2012
Deferred tax assets:
Inventory valuation and receivable allowances	$	8,805		$	4,788
Accrued compensation	1,197			1,367
Equity compensation	6,290			6,036
Federal and state research and development tax credit carryforwards	9,746			8,569
Gain on sale-leaseback	1,676			2,116
Other accruals	1,087			919
Other temporary differences	3,038			1,333
	31,839			25,128
Valuation allowance	(9,032		)	(8,682		)
Total deferred tax assets	22,807			16,446
Deferred tax liabilities:
Deferred revenue	(1,745		)	(3,488		)
Property and equipment	(3,122		)	(3,995		)
Acquired intangible assets	(12,342		)	(8,507		)
Other temporary differences	(1,647		)	—
Total deferred tax liabilities	(18,856		)	(15,990		)
Net deferred tax assets	$	3,951		$	456

At June 30, 2013, the Company evaluated the need for a valuation allowance on deferred tax assets. In assessing whether the deferred tax assets are realizable, management considered whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. The Company continues to conclude that it was more likely than not that most domestic deferred tax assets would be realizable based on the financial performance in fiscal year 2013, projected future taxable income and the reversal of existing deferred tax liabilities.

The Company continues to record a full valuation allowance on Massachusetts research and development (“R&D”) and investment tax credits as of June 30, 2013 as management continues to believe that it is not more likely than not that these deferred tax assets would be realized. Any future reversals of the valuation allowance will impact income tax expense.

The Company had state research and development credit carryforwards of $8,719, which will expire 2018 through 2027. The Company also had state investment tax credits carryforwards of $312 that will expire in 2015. As of June 30, 2013, the Company also had approximately $399 in foreign operating loss carryforwards. Net operating losses of $933 will expire in 2015.

Upon consideration of changing business conditions and cash position in its foreign subsidiaries, management has determined that it would no longer need to indefinitely reinvest the earnings of certain foreign subsidiaries. Therefore, the Company has accrued deferred taxes in association with the $1,300 in undistributed earnings and profits.

The Company files income tax returns in all jurisdictions in which it operates. The Company has established reserves to provide for additional income taxes that may be due in future years as these previously filed tax returns are audited. These reserves have been established based upon management’s assessment as to the potential exposures. All tax reserves are analyzed quarterly and adjustments are made as events occur and warrant modification.

The changes in the Company’s reserves for unrecognized income tax benefits are summarized as follows:



	Year Ended June 30,
	2013		2012
Unrecognized tax benefits, beginning of period	$	2,642	$	1,831
Increases for previously recognized positions	140		716
Settlements of previously recognized positions	—		—
Decreases for previously recognized positions	—		(84		)
Increases for currently recognized positions	141		179
Unrecognized tax benefits, end of period	$	2,923	$	2,642

The $2,923 of unrecognized tax benefits as of June 30, 2013, if released, would reduce income tax expense.

The Company’s major tax jurisdiction is the U.S. and the open tax years are fiscal 2010 through 2012.

The Company expects that there will not be any material changes in its reserves for unrecognized tax benefits within the next 12 months. Currently there are no significant tax audits underway.