Income Taxes

Earnings (loss) before income taxes from continuing operations consist of the following:



	2012			2011			2010
United States	$	11,997		$	(34,903	)	$	(77,334	)
Non-U.S. operations	(8,259		)	2,670			3,444
	$	3,738		$	(32,233	)	$	(73,890	)

The provision for (benefit from) income taxes for 2012, 2011 and 2010 from continuing operations consists of the following:



	2012			2011			2010
Current:
Federal	$	(1,756	)	$	(5,700	)	$	(3,041	)
State and local	374			(917		)	(159		)
Foreign	1,025			2,100			1,090
Total current (benefit)	(357		)	(4,517		)	(2,110		)
Deferred:
Federal	2,369			(4,451		)	(20,081		)
State and local	25			769			(1,754		)
Foreign	(986		)	(651		)	(302		)
Total deferred provision (benefit)	1,408			(4,333		)	(22,137		)
Total tax provision (benefit)	$	1,051		$	(8,850	)	$	(24,247	)

The provision for (benefit from) income taxes on earnings of the Company from continuing operations differs from the amounts computed by applying the US federal tax rate of 35% as follows:



	2012			2011			2010
Federal income tax (benefit) at statutory rate	$	1,308		$	(11,281	)	$	(25,861	)
State income taxes, net of applicable federal income tax benefit	146			(1,084		)	(2,051		)
Impairment of non-deductible goodwill	—			2,899			9,679
Net changes in uncertain tax positions	370			232			172
Net change due to change in rates	(72		)	758			207
Impact of change in state deferred tax asset	—			1,470			—
Research and development tax credit	(117		)	(1,086		)	—
Impact of legal entity reorganization	—			(619		)	—
Return to provision adjustments	(1,328		)	(410		)	(1,953		)
Manufacturer's deduction	(124		)	—			—
Valuation allowance	223			—			—
Non-US rate differential	484			—			—
Deemed liquidation of subsidiary	—			—			(2,770		)
Partial reversal of APB 23 assertion	—			—			(1,631		)
Other, net	161			271			(39		)
Total tax provision	$	1,051		$	(8,850	)	$	(24,247	)

The impact from the impairment of goodwill in 2011 and 2010 represents the portion of goodwill impairments that was not deductible for tax purposes. The 2010 Tax Relief Act further extended the research and development credit through December 31, 2011, which occurred in the Company's first quarter of 2011, and the Company reflected two years of research and development tax credits in 2011 (for 2010 and 2011 tax years). The research and development tax credit expired December 31, 2011. Included in the 2012 income tax provision is a benefit related to this credit for the two months ended December 31, 2011. In 2011 the Company reorganized its legal entities, which resulted in a one-time $619 deferred tax benefit. Additionally, in 2011, a change in state tax law resulted in a one-time write-off of a $1,470 deferred tax asset.

In the first quarter of 2010, the Company initiated a tax restructuring of its Donchery, France entity, and in the second quarter of 2010, the Company's Canadian entity used $18,500 to recapitalize the Company's French operations. These transactions resulted in income tax benefits to the Company of $2,770 and $1,631 in the first and second quarter of 2010, respectively. As of October 31, 2009, a deferred tax liability of $1,631 was provided for US income and foreign withholding taxes associated with the $4,200 of accumulated earnings of the Company's foreign subsidiaries that the Company did not consider to be indefinitely reinvested outside of the United States. As a part of the Company's Canadian investment in France, this deferred tax liability was reversed in 2010. The Company does not provide for US income and foreign withholding taxes on the remaining accumulated earnings of its foreign subsidiaries of $66,883 that are not subject to the US income tax as it is the Company's intention to reinvest these earnings indefinitely. It is not practicable to estimate the income tax liability that might be incurred if such earnings were remitted to the US.

At November 3, 2012 and October 29, 2011 the Company's principal components of deferred tax assets and liabilities consisted of the following:



	2012			2011
Deferred tax assets
Net operating loss and other carryforwards	$	12,422		$	11,512
Employee benefits and compensation	6,381			3,758
Workers’ compensation	1,183			1,312
Inventory capitalization of reserves	2,235			2,363
Reserve for product returns	962			988
Deferred compensation benefit plans	1,223			1,066
Bad debt reserves	775			835
Installment note	—			665
Goodwill and other intangible assets	2,007			5,577
Other	3,206			3,747
Total deferred tax assets	30,394			31,823
Valuation allowance	(11,915		)	(6,663		)
Net deferred tax assets	18,479			25,160
Deferred tax liabilities
Property, plant and equipment	39,856			43,785
Inventory capitalization of reserves	482			889
Basis adjustment	4,682			4,709
Other	122			616
Total deferred tax liabilities	45,142			49,999
Net deferred income tax liability	$	26,663		$	24,839

As of November 3, 2012, the Company had a net operating loss carryforward of $18,044 ($6,015 tax effected) in France that has an indefinite carryforward, other foreign operating and capital loss carryforwards of $15,723 ($4,622 tax effected) that will expire at various dates between 2022 and 2032 and domestic federal and state net operating loss carryforwards and credits of $4,780 ($1,785 tax effected) that expire on various dates through 2031. The Company has provided a $11,915 valuation allowance primarily with regard to the tax benefits of certain net operating loss and tax credit carryforwards.

The following table shows the activity related to gross unrecognized tax benefits excluding interest and penalties during fiscal years ended November 3, 2012 and October 29, 2011:



	2012			2011
Unrecognized tax benefits, beginning of the year	$	450		$	503
Additions based on current year tax positions	27			56
Additions for prior year tax positions	377			118
Reductions for prior year tax positions	(223		)	—
Settlements with tax authorities	(11		)	(92		)
Lapses in statutes of limitations	(15		)	(135		)
Unrecognized tax benefits, end of year	$	605		$	450

As of November 3, 2012 there are $508 of net unrecognized tax benefits that if recognized would affect the Company's effective tax rate. The primary difference between gross unrecognized tax benefits and net unrecognized tax benefits is the US federal tax benefit from state tax deductions.

The Company accrues interest related to unrecognized tax benefits, net of tax and penalties as components of its income tax provision. As of November 3, 2012, the Company had accrued $378 for the payment of interest and penalties relating to unrecognized tax benefits.

The Company is currently the subject of several income tax audits in multiple jurisdictions. The Company expects that within the next twelve (12) months it will reach closure on certain of these audits or the statute of limitations will lapse. Management does not expect the unrecognized tax positions to change significantly over the next twelve months.

The Company files US federal, US state, and foreign income tax returns. The statutes of limitations for US federal income tax returns are open for fiscal year 2009 and forward. For state and foreign returns, the Company is generally no longer subject to tax examinations for years prior to 2007.