Income Taxes

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



	Year Ended June 30,
	2014			2013			2012
(Loss) income from continuing operations before income taxes:
United States	$	(6,068	)	$	(24,760	)	$	30,820
Foreign	155			477			494
	$	(5,913	)	$	(24,283	)	$	31,314
Tax (benefit) provision:
Federal:
Current	$	3,184		$	(699	)	$	10,188
Deferred	(5,281		)	(9,613		)	(2,353		)
	$	(2,097	)	$	(10,312	)	$	7,835
State:
Current	$	594		$	157		$	1,395
Deferred	(375		)	(710		)	(316		)
	$	219		$	(553	)	$	1,079
Foreign:
Current	$	(12	)	$	364		$	77
Deferred	49			—			—
	$	37		$	364		$	77
	$	(1,841	)	$	(10,501	)	$	8,991

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



	Year Ended June 30,
	2014		2013		2012
Tax (benefit) provision at federal statutory rates	(35.0	)%	(35.0	)%	35.0	%
State income tax, net of federal tax benefit	(3.1	)	(1.8	)	2.6
Research and development credits	(14.7	)	(12.6	)	(4.2	)
Domestic manufacturing deduction	(5.3	)	—		(3.0	)
Deemed repatriation of foreign earnings	0.7		—		—
Foreign tax credits	(13.3	)	—		—
Equity compensation	2.2		1.8		1.0
Officers' compensation	11.1		—		—
Stock compensation shortfalls	24.1		—		—
Change in the fair value of the liability related to the LNX earn-out	—		—		(5.4	)
Acquisition costs	—		0.5		1.3
Valuation allowance	—		2.5		2.2
Other	2.2		1.4		(0.7	)
	(31.1	)%	(43.2	)%	28.8	%

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



	June 30,
	2014			2013
Deferred tax assets:
Inventory valuation and receivable allowances	$	8,830		$	8,805
Accrued compensation	972			944
Equity compensation	4,831			6,185
Federal and state research and development tax credit carryforwards	11,167			10,296
Gain on sale-leaseback	1,232			1,676
Other accruals	1,043			1,087
Other temporary differences	4,012			1,262
	32,087			30,255
Valuation allowance	(10,844		)	(9,032		)
Total deferred tax assets	21,243			21,223
Deferred tax liabilities:
Deferred revenue	—			(1,745		)
Property and equipment	(1,694		)	(3,144		)
Acquired intangible assets	(9,242		)	(11,371		)
Other temporary differences	(624		)	—
Total deferred tax liabilities	(11,560		)	(16,260		)
Net deferred tax assets	$	9,683		$	4,963

As reported:
Current deferred tax assets	$	15,216		$	11,534
Non-current deferred tax assets	378			81
Non-current deferred tax liabilities	(5,911		)	(6,652		)
	$	9,683		$	4,963

At June 30, 2014, 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 is more likely than not that most domestic deferred tax assets would be realizable based on the financial performance in fiscal year 2014, projected future taxable income and the reversal of existing deferred tax liabilities.

The Company continues to record a full valuation allowance on certain state research and development (“R&D”) and investment tax credits, and stock basis differences as of June 30, 2014 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 $9,419, which will expire 2015 through 2028. The Company also had state investment tax credits carryforwards of $312.

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 $520 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,
	2014			2013
Unrecognized tax benefits, beginning of period	$	2,923		$	2,642
Increases for previously recognized positions	102			140
Decreases for previously recognized positions	(166		)	—
Increases for currently recognized positions	283			141
Unrecognized tax benefits, end of period	$	3,142		$	2,923

The $3,142 of unrecognized tax benefits as of June 30, 2014, 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 2014.

The Company expects that there will not be any material changes in its reserves for unrecognized tax benefits within the next 12 months. Subsequent to June 30, 2014, the Company received notification that it will be subject to federal income tax audit for the fiscal year 2012.