Income Taxes

Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Income tax benefits associated with net operating losses of, in thousands, $5,698 expire from fiscal year 2013 to 2034. Income tax benefits associated with tax credit carryforwards of, in thousands, $2,734, expire from fiscal year 2016 to 2026. As of June 30, 2012, the Company was in a cumulative three-year domestic income position, after adjustment for permanent items. In evaluating whether a valuation allowance was warranted for the U.S. federal net deferred tax asset as of June 30, 2012, management weighed both positive and negative evidence and determined that it was more likely than not that all of the deferred tax asset would be realized, and accordingly, a valuation allowance for the U.S. federal net deferred tax asset was not required. A valuation reserve was provided as of June 30, 2012 for deferred tax assets relating to certain foreign and state net operating losses of, in thousands, $1,761, and, in thousands, $150 related to other deferred tax assets that the Company currently believes are more likely than not to remain unrealized in the future. During fiscal year ended June 30, 2012, the valuation reserve was reduced primarily due to the expiration of a state tax credit.

The components of the deferred tax assets and liabilities as of June 30, 2012 and 2011, were as follows:



(Amounts in Thousands)	2012			2011
Deferred Tax Assets:
Receivables	$	1,492		$	1,420
Inventory	2,009			2,409
Employee benefits	640			608
Deferred compensation	12,885			12,092
Other current liabilities	1,313			1,583
Warranty reserve	767			698
Credit carryforwards	2,734			6,272
Restructuring	107			3,173
Goodwill	3,510			4,011
Net operating loss carryforward	5,698			5,749
Miscellaneous	4,322			2,698
Valuation Allowance	(1,911		)	(6,698		)
Total asset	$	33,566		$	34,015
Deferred Tax Liabilities:
Property & equipment	$	10,075		$	6,986
Capitalized software	62			115
Net foreign currency gains	—			1,677
Miscellaneous	494			597
Total liability	$	10,631		$	9,375
Net Deferred Income Taxes	$	22,935		$	24,640

The components of income (loss) before taxes on income are as follows:



	Year Ended June 30
(Amounts in Thousands)	2012		2011			2010
United States	$	7,831	$	(2,966	)	$	(8,434	)
Foreign	9,871		7,403			14,402
Total income before income taxes on income	$	17,702	$	4,437		$	5,968

Foreign unremitted earnings of entities not included in the United States tax return have been included in the consolidated financial statements without giving effect to the United States taxes that may be payable on distribution to the United States because it is not anticipated such earnings will be remitted to the United States. The aggregate unremitted earnings of the Company's foreign subsidiaries for which a deferred income tax liability has not been recorded was approximately $80.3 million as of June 30, 2012. Determination of the amount of unrecognized deferred tax liability on unremitted earnings is not practicable.

The provision (benefit) for income taxes is composed of the following items:



	Year Ended June 30
(Amounts in Thousands)	2012			2011			2010
Currently Payable (Refundable):
Federal	$	954		$	(2,527	)	$	(6,768	)
Foreign	1,849			(130		)	3,474
State	877			150			(305		)
Total current	3,680			(2,507		)	(3,599		)
Deferred Taxes:
Federal	1,784			1,090			1,407
Foreign	970			1,509			(1,553		)
State	(366		)	(577		)	(1,090		)
Total deferred	2,388			2,022			(1,236		)
Total provision (benefit) for income taxes	$	6,068		$	(485	)	$	(4,835	)

A reconciliation of the statutory U.S. income tax rate to the Company's effective income tax rate follows:



	Year Ended June 30
	2012					2011					2010
(Amounts in Thousands)	Amount			%		Amount			%		Amount			%
Tax computed at U.S. federal statutory rate	$	6,196		35.0	%	$	1,553		35.0	%	$	2,089		35.0	%
State income taxes, net of federal income tax benefit	332			1.9		(277		)	(6.3	)	(907		)	(15.2	)
Foreign tax effect	(639		)	(3.6	)	(1,213		)	(27.3	)	(3,120		)	(52.3	)
Tax-exempt interest income	—			—		—			—		(169		)	(2.8	)
Research credit	(247		)	(1.4	)	(751		)	(16.9	)	(674		)	(11.3	)
Foreign subsidiary land and building gain	—			—		—			—		(2,236		)	(37.5	)
Other - net	426			2.4		203			4.6		182			3.1
Total provision (benefit) for income taxes	$	6,068		34.3	%	$	(485	)	(10.9	)%	$	(4,835	)	(81.0	)%

Net cash payments (refunds) for income taxes were, in thousands, $1,504, $(2,851), and $8,866 in fiscal years 2012, 2011, and 2010, respectively.

Changes in the unrecognized tax benefit, excluding accrued interest and penalties, during fiscal years 2012, 2011, and 2010 were as follows:



(Amounts in Thousands)	2012			2011			2010
Beginning balance - July 1	$	2,499		$	2,466		$	2,165
Tax positions related to prior fiscal years:
Additions	250			312			532
Reductions	(84		)	(77		)	(130		)
Tax positions related to current fiscal year:
Additions	—			96			74
Reductions	—			(42		)	—
Settlements	—			(74		)	(36		)
Lapses in statute of limitations	(41		)	(182		)	(139		)
Ending balance - June 30	$	2,624		$	2,499		$	2,466
Portion that, if recognized, would reduce tax expense and effective tax rate	$	2,190		$	2,125		$	2,097

The Company recognizes interest and penalties related to unrecognized tax benefits in the Provision (Benefit) for Income Taxes line of the Consolidated Statements of Income. Amounts accrued for interest and penalties were as follows:



	As of June 30
(Amounts in Thousands)	2012		2011		2010
Accrued Interest and Penalties:
Interest	$	256	$	230	$	311
Penalties	85		86		117

Accrued interest and penalties are not included in the tabular roll forward of unrecognized tax benefits above. Interest and penalties income/(expense) recognized for fiscal years 2012, 2011, and 2010 were, in thousands, $(2), $107, and $72, respectively.

The Company, or one of its wholly-owned subsidiaries, files U.S. federal income tax returns and income tax returns in various state, local, and foreign jurisdictions. The Company is no longer subject to any significant U.S. federal tax examinations by tax authorities for years before fiscal year 2008. The Company is subject to various state and local income tax examinations by tax authorities for years after June 30, 2002 and various foreign jurisdictions for years after June 30, 2004. The Company does not expect the change in the amount of unrecognized tax benefits in the next 12 months to have a significant impact on the results of operations or the financial position of the Company.