INCOME TAXES

12 Months Ended

Sep. 30, 2012

INCOME TAXES [Abstract]

INCOME TAXES

15.  INCOME TAXES

Income before income taxes was as follows:

	Year Ended September 30,
	2012		2011		2010
Domestic	$	55,555	$	54,886	$	39,835
Foreign		7,316		24,026		33,442
Total	$	62,871	$	78,912	$	73,277

Taxes on income consisted of the following:

	Year Ended September 30,
	2012			2011			2010
U.S. federal and state:
Current	$	19,975		$	15,700		$	15,372
Deferred		(308	)		6,194			(2,643	)
Total	$	19,667		$	21,894		$	12,729
Foreign:
Current	$	5,593		$	6,616		$	10,597
Deferred		(3,215	)		(1,260	)		493
Total		2,378			5,356			11,090
Total U.S. and foreign	$	22,045		$	27,250		$	23,819

The provision for income taxes at our effective tax rate differed from the statutory rate as follows:

	Year Ended September 30,
	2012			2011			2010
Federal statutory rate		35.0	%		35.0	%		35.0	%
U.S. benefits from research and experimentation activities		(0.5	)		(2.0	)		(0.6	)
State taxes, net of federal effect		0.2			0.6			0.5
Foreign income at other than U.S. rates		(1.9	)		(2.8	)		(2.7	)
Executive compensation		0.8			1.4			-
Share-based compensation		0.7			3.3			0.3
Adjustment of prior amounts, net of valuation allowance		0.9			-			-
Domestic production deduction		(0.5	)		(0.8	)		(0.1	)
Tax-exempt interest income		(0.0	)		(0.1	)		(0.1	)
Other, net		0.4			(0.1	)		0.2
Provision for income taxes		35.1	%		34.5	%		32.5	%

In fiscal 2012, 2011 and 2010, we elected to permanently reinvest the earnings of certain of our foreign subsidiaries outside the U.S. rather than repatriating the earnings to the U.S.  We have not provided deferred taxes on approximately $31.1 million of undistributed earnings of such subsidiaries.  These earnings could become subject to additional income tax if they are remitted as dividends to the U.S. parent company, loaned to the U.S. parent company, or upon sale of subsidiary stock.  Determination of the amount of unrecognized deferred tax liability related to these earnings is not practicable.

The increase in our effective tax rate in fiscal 2012 was primarily due to the expiration of the research and experimentation tax credit effective December 31, 2011, decreased income in the foreign subsidiaries where we have elected to permanently reinvest earnings, and certain adjustments made to prior year tax estimates.  These increases were partially offset by decreased tax effects on share-based compensation and decreased taxable executive compensation in excess of limits defined in section 162(m) of the Internal Revenue Code.  As discussed in footnote 1 of this 10-K under the heading “Results of Operations”, income tax expense in fiscal 2012 included $973 of non-material adjustments to correct various prior period amounts and income tax expense in fiscal 2011 included $671 of adjustments to executive compensation in fiscal 2008 through 2010 and a $497 reversal of a deferred tax asset for certain share-based compensation expense.

The accounting guidance regarding uncertainty in income taxes prescribes a threshold for the financial statement recognition and measurement of tax positions taken or expected to be taken on a tax return.  Under these standards, we may recognize the tax benefit of an uncertain tax position only if it is more likely than not that the tax position will be sustained by the taxing authorities, based on the technical merits of the position.

The following table presents the changes in the balance of gross unrecognized tax benefits during the last three fiscal years:

Balance September 30, 2009	$	249
Additions for tax positions relating to the current fiscal year		-
Additions for tax positions relating to prior fiscal years		153
Settlements with taxing authorities		(28	)
Lapse of statute of limitations		(201	)
Balance September 30, 2010		173
Additions for tax positions relating to the current fiscal year		123
Additions for tax positions relating to prior fiscal years		307
Settlements with taxing authorities		-
Lapse of statute of limitations		-
Balance September 30, 2011		603
Additions for tax positions relating to the current fiscal year		51
Additions for tax positions relating to prior fiscal years		114
Settlements with taxing authorities		(353	)
Lapse of statute of limitations		(132	)
Balance September 30, 2012	$	283

We recognize interest and penalties related to uncertain tax positions as income tax expense in our financial statements.  Interest and penalties accrued on our Consolidated Balance Sheet were $4 and $19 at September 30, 2012 and 2011, respectively, and interest and penalties charged to expense were not material.

We believe the tax periods open to examination by the U.S. federal government include fiscal years 2009 through 2011.  We believe the tax periods open to examination by U.S. state and local governments include fiscal years 2008 through 2011 and the tax periods open to examination by foreign jurisdictions include fiscal years 2008 through 2011.  We do not anticipate a significant change to the total amount of unrecognized tax benefits within the next 12 months.

Significant components of deferred income taxes were as follows:

	September 30,
	2012			2011
Deferred tax assets:
Employee benefits	$	4,035		$	3,246
Inventory		2,930			2,886
Bad debt reserve		1,708			387
Share-based compensation expense		12,659			12,184
Net operating losses		2,292			768
Other		2,656			1,558
Valuation allowance		(1,378	)		-
Total deferred tax assets	$	24,902		$	21,029
Deferred tax liabilities:
Translation adjustment	$	7,966		$	10,576
Depreciation and amortization		3,776			1,568
Unremitted foreign earnings		1,810			3,647
Other		645			127
Total deferred tax liabilities	$	14,197		$	15,918

As of September 30, 2012, the Company had foreign and state net operating loss carryforwards (NOLs) of $7,772 and $1,528, respectively, which will expire beginning in fiscal year 2017 through fiscal year 2030.  We provided a gross valuation allowance of $1,699 on these NOLs during fiscal 2012.  As of September 30, 2012, the Company also had $1,818 in state tax credit carryforwards, for which we have recorded a $1,047 gross valuation allowance in fiscal 2012.