15. Income Taxes:

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

	YEAR ENDED SEPTEMBER 30,
	2013			2012		2011
United States	$	103,349		$	50,819	$	43,414
Foreign		(2,256	)		1,043		1,205
	$	101,093		$	51,862	$	44,619

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

	YEAR ENDED SEPTEMBER 30,
	2013			2012		2011
Current:
Federal	$	31,954		$	15,543	$	15,281
Foreign		(19	)		24		66
State		124			369		279
		32,059			15,936		15,626
Deferred:
Federal		43			413		(1,228	)
Foreign		(566	)		395		510
		(523	)		808		(718	)
	$	31,536		$	16,744	$	14,908

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, 2013, 2012 and 2011 as follows (in thousands):

	YEAR ENDED SEPTEMBER 30,
	2013					2012					2011
Provision for U.S. federal income tax at statutory rate	$	35,382			$		18,153			$		15,617
Effect of foreign income taxes		130					(140	)				(244	)
Manufacturers’/producers’ deduction		(3,048	)				(1,868	)				(921	)
Research and experimentation tax credits		(661	)				(99	)				(750	)
State income taxes, net of federal income tax benefit		81					240					181
Nondeductible expenses		253					165					504
Resolution of prior years’ tax matters		(467	)				544					(116	)
Contingency for uncertainty in income taxes		(51	)				(335	)				632
Other items		(83	)				84					5
	$	31,536			$		16,744			$		14,908
		31.2		%			32.3		%			33.4		%

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, 2013
	U. S.			Non U.S.				Total				U. S.				Non U.S.				Total
Deferred income tax assets:
Allowance for doubtful accounts	$	120		$	4		$		124		$		47		$		3		$		50
Inventories		4,762			(71	)			4,691				4,472				(28	)			4,444
Capitalized research and development costs		--			—				--				89				—				89
Property, plant and equipment and other		—			(632	)			(632	)			—				1				1
Net operating loss carryforwards, tax credits and deferrals		—			1,204				1,204				—				393				393
Stock-based compensation		298			—				298				347				—				347
Accrued product warranty		644			22				666				787				12				799
Accrued compensated absences		549			—				549				443				—				443
Comprehensive income		573			—				573				121				—				121
Insurance and other reserves		973			63				1,036				938				27				965
		7,919			590				8,509				7,244				408				7,652
Deferred income tax liabilities:
Allowance for doubtful accounts		—			--				--				—				(122	)			(122	)
Intangible assets		(230	)		—				(230	)			(144	)			—				(144	)
Property, plant and equipment and other		(3,238	)		--				(3,238	)			(3,056	)			(201	)			(3,257	)
Subtotal deferred income tax asset		4,451			590				5,041				4,044				85				4,129
Valuation allowance		—			--				--				—				(87	)			(87	)
Net deferred income tax asset	$	4,451		$	590		$		5,041		$		4,044		$		(2	)	$		4,042

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

	AS OF SEPTEMBER 30,
	2013			2012
Current deferred income tax asset	$	7,056		$	6,689
Noncurrent deferred income tax asset		594			307
Current deferred income tax liability		(12	)		(111	)
Noncurrent deferred income tax liability		(2,597	)		(2,843	)
	$	5,041		$	4,042

The financial reporting basis of investments in foreign subsidiaries exceed their tax basis. 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, 2013 and 2012, the temporary difference related to undistributed earnings for which no deferred taxes have been provided was approximately $12.7 million and $15.2 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.

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 30, 2010 through 2013

 State of Texas—fiscal years ended September 30, 2009 through 2013

 State of New York—fiscal years ended September 30, 2002 through 2013

 Russian Federation—calendar years 2010 through 2013

 Canada—fiscal years ended September 30, 2009 through 2013

 United Kingdom—fiscal years ended September 30, 2006, 2011, 2012 and 2013

 Colombia—calendar years 2012 and 2013

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

Balance at October 1, 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
Change in prior year tax positions		(22	)
Current tax positions		142
Settlements with taxing authorities		(47	)
Lapse of statute of limitations		(114	)
Balance at September 30, 2013	$	314

As of September 30, 2013, the Company had available approximately $4.8 million of net operating loss (“NOL”) carryforwards in Canada to offset future taxable income in that jurisdiction. The Company, using the “more likely than not” criteria, has determined that the NOL carryforwards will be utilized in full before they begin to expire in 2021. Therefore, no valuation allowance against the Company’s deferred tax assets was considered necessary.

The Company believes that it is reasonably possible the unrecognized tax benefits could change within the next twelve 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 it 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.