Income Taxes

12 Months Ended

Sep. 30, 2012

Income Taxes [Abstract]

Income Taxes

14. Income Taxes:

Components of income before income taxes were as follows (in thousands):

	YEAR ENDED SEPTEMBER 30,
	2012		2011		2010
United States	$	50,819	$	43,414	$	21,404
Foreign		1,043		1,205		(502	)
	$	51,862	$	44,619	$	20,902

The provision (benefit) for income taxes consisted of the following (in thousands):

	YEAR ENDED SEPTEMBER 30,
	2012		2011			2010
Current:
Federal	$	15,543	$	15,281		$	8,131
Foreign		24		66			(109	)
State		369		279			214
		15,936		15,626			8,236
Deferred:
Federal		413		(1,228	)		(1,394	)
Foreign		395		510			(22	)
		808		(718	)		(1,416	)
	$	16,744	$	14,908		$	6,820

Actual income tax expense (benefit) differs from income tax expense computed by applying the statutory federal tax rate of 35.0% for each of the fiscal years ended September 30, 2012, 2011 and 2010 as follows (in thousands):

	YEAR ENDED SEPTEMBER 30,
	2012			2011			2010
Provision for U.S. federal income tax at statutory rate	$	18,153		$	15,617		$	7,313
Effect of foreign income taxes		(140	)		(244	)		(19	)
Manufacturers’/producers’ deduction		(1,868	)		(921	)		(504	)
Research and experimentation tax credits		(99	)		(750	)		(27	)
State income taxes, net of federal income tax benefit		240			181			139
Nondeductible expenses		165			504			197
Resolution of prior years’ tax matters		544			(116	)		(121	)
Contingency for uncertainty in income taxes		(335	)		632			(123	)
Other items		84			5			(35	)
	$	16,744		$	14,908		$	6,820
		32.3	%		33.4	%		32.6	%

Deferred income taxes under the liability method reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s net deferred income tax asset were as follows (in thousands):

	AS OF SEPTEMBER 30, 2012									AS OF SEPTEMBER 30, 2011
	U. S.			Non U.S.			Total			U. S.			Non U.S.			Total
Deferred income tax assets:
Allowance for doubtful accounts	$	47		$	3		$	50		$	97		$	2		$	99
Inventories		4,472			(28	)		4,444			4,335			—			4,335
Capitalized research and development costs		89			—			89			355			—			355
Property, plant and equipment and other		—			1			1			—			71			71
Net operating loss carryforwards, tax credits and deferrals		—			393			393			—			433			433
Stock-based compensation		347			—			347			333			—			333
Accrued product warranty		787			12			799			723			11			734
Accrued compensated absences		443			—			443			408			—			408
Insurance and other reserves		938			27			965			788			31			819
		7,123			408			7,531			7,039			548			7,587
Deferred income tax liabilities:
Allowance for doubtful accounts		—			(122	)		(122	)		—			(120	)		(120	)
Intangible assets		(144	)		—			(144	)		(58	)		—			(58	)
Comprehensive income		121			—			121			(92	)		—			(92	)
Property, plant and equipment and other		(3,056	)		(201	)		(3,257	)		(2,645	)		—			(2,645	)
Subtotal deferred income tax asset		4,044			85			4,129			4,244			428			4,672
Valuation allowance		—			(87	)		(87	)		—			—			—
Net deferred income tax asset	$	4,044		$	(2	)	$	4,042		$	4,244		$	428		$	4,672

The Company has net operating losses of $2.0 million at its Russian subsidiary that can be carried forward six years. Such net operating losses will expire beginning after fiscal year 2015. The Company has a $0.1 million valuation allowance that applies to the net operating losses.

Deferred income taxes are reported as follows in the accompanying consolidated balance sheets (in thousands):

	AS OF SEPTEMBER 30,
	2012			2011
Current deferred income tax asset	$	6,689		$	6,356
Noncurrent deferred income tax asset		307			505
Current deferred income tax liability		(111	)		(82	)
Noncurrent deferred income tax liability		(2,843	)		(2,107	)
	$	4,042		$	4,672

A valuation allowance is provided when it is more likely than not that some portion or all of the deferred tax assets will not be realized. During the year ended September 30, 2012, a valuation allowance of $87,000 was established against certain deferred tax assets of the Company’s subsidiary in the Russian Federation. Management believes that its remaining deductible temporary differences will reverse during periods in which the Company generates net taxable income or during periods in which losses can be carried back to offset prior year taxes. Therefore, management believes that the Company will realize the benefit of these remaining net deferred income tax assets, and no further valuation allowance is necessary.

The financial reporting bases of investments in foreign subsidiaries exceed their tax bases. A deferred tax liability is not recorded for this temporary difference because the investment is essentially permanent. A reversal of the Company’s plans to permanently invest in these foreign operations would cause the excess to become taxable. At September 30, 2012 and 2011, the temporary difference related to undistributed earnings for which no deferred taxes have been provided was approximately $15.2 million and $14.6 million, respectively. The Company will need to reassess and reassert its ability and intent to indefinitely reinvest the remaining foreign earnings in order to continue the application of the exception under FASB guidelines.

From time to time the Company is the subject of audits by various tax authorities that can result in claims and assessments and additional tax payments, penalties and interest. The United States Internal Revenue Service (“IRS”) is in the process of conducting an audit of the Company’s United States Federal income tax return for fiscal year 2009. Management believes that the outcome of such audit will not have a material effect on the Company’s financial position, results of operations or cash flows.

The Company follows the provisions of the FASB guidance for accounting for uncertainty in income taxes. The Company classifies interest and penalties associated with the payment of income taxes in the Other Income (Expense) section of its consolidated statements of operations. Tax return filings which are subject to review by local tax authorities by major jurisdiction are as follows:

• United States—fiscal years ended September 2007,2008, 2009, 2010, 2011 and 2012

• State of Texas—fiscal years ended September 2008, 2009, 2010, 2011 and 2012

• State of New York—fiscal years 2001, 2002, 2003, 2004, 2005, 2006, 2007, 2008, 2009, 2010, 2011 and 2012

• Russian Federation—calendar years 2009, 2010, 2011 and 2012

• Canada—fiscal years ended September 2008, 2009, 2010, 2011 and 2012

• United Kingdom—fiscal years 2008, 2009, 2010, 2011 and 2012

The following table is a reconciliation of the total amounts of unrecognized tax benefits (in thousands):

Balance at October 1, 2009	$	241
Change in prior year tax positions		(73	)
Current tax positions		77
Lapse of statute of limitations		(25	)
Balance at September 30, 2010		220
Change in prior year tax positions		581
Current tax positions		61
Lapse of statute of limitations		(10	)
Balance at September 30, 2011		852
Change in prior year tax positions		(420	)
Current tax positions		63
Settlements with taxing authorities		(145	)
Lapse of statute of limitations		5
Balance at September 30, 2012	$	355

The Company believes that is reasonably possible the unrecognized tax benefits could change within the next 12 months based on the resolution of on-going income tax audits. At this time it is not possible to determine the range of such changes. These unrecognized tax benefits would favorably affect the Company’s effective tax rate in future periods if they are favorably resolved.

Management believes that adequate provisions for income taxes have been reflected in the financial statements and is not aware of any significant exposure items that have not been reflected in the financial statements. Amounts considered probable of settlement within one year have been included in the accrued expenses and other liabilities in the accompanying consolidated balance sheets.