5) Income Taxes

(a)	Earnings before income taxes, and the related provision for income taxes for the years ended September 30, 2013, 2012 and 2011 were as follows:


Year Ended September 30,	2013			2012			2011
Domestic	$	53,963		$	44,774		$	37,955
Foreign		3,399			4,942			2,545

Total earnings before income taxes	$	57,362		$	49,716		$	40,500

Provision (credit) for income taxes—
Federal—
Current	$	18,311		$	15,077		$	13,336
Temporary differences
Fixed asset basis differences and depreciation		121			2			(155	)
Intangible asset basis differences and amortization		(339	)		(354	)		(312	)
Currently non-deductible expenses and reserves		(425	)		(397	)		(627	)
Stock-based compensation		(282	)		(599	)		(706	)
Tax credit carryforwards		(717	)		—			—
Other, net		43			74			35

Subtotal		16,712			13,803			11,571
State and local		2,013			1,521			1,213
Foreign		605			1,021			885

Total income tax provision	$	19,330		$	16,345		$	13,669

(b)	The following is a reconciliation between the statutory U.S. income tax rate and the effective rate derived by dividing the provision for income taxes by earnings before income taxes:


Year Ended September 30,	2013					2012					2011
Computed income taxes at statutory rate	$	20,078		35.0	%	$	17,398		35.0	%	$	14,175		35.0	%
Increase (decrease) in taxes resulting from—
State and local income taxes		1,270		2.2			994		2.0			834		2.1
Net benefit on foreign dividend		(84	)	(0.2	)		(373	)	(0.8	)		—		—
Qualified domestic production incentives		(1,621	)	(2.8	)		(1,226	)	(2.5	)		(1,025	)	(2.5	)
Uncertain tax position activity		(80	)	(0.1	)		(71	)	(0.1	)		(397	)	(1.0	)
Other, net		(233	)	(0.4	)		(377	)	(0.7	)		82		0.2

	$	19,330		33.7	%	$	16,345		32.9	%	$	13,669		33.8	%

(c)	The components of net deferred tax assets were as follows:


As of September 30,	2013			2012
Deferred tax assets—
Valuation reserves and non-deductible expenses	$	1,784		$	1,575
Stock compensation expense not deductible		3,381			3,067
Net operating loss carryforwards		734			765
Tax credit carryforwards		717			—
Inventory basis differences		1,626			1,376
Other		33			—

Subtotal		8,275			6,783
Less valuation allowance		(296	)		(450	)

Deferred tax assets		7,979			6,333

Deferred tax liabilities—
Fixed asset basis differences and depreciation		(862	)		(761	)
Intangible asset basis differences and amortization		(1,924	)		(2,508	)
Other		(225	)		(306	)

Deferred tax liabilities		(3,011	)		(3,575	)

Net deferred tax assets	$	4,968		$	2,758

For income tax purposes, we have tax benefits related to operating loss carryforwards in the countries of Australia and Belgium. These net operating loss carryforwards have no expiration date. We have recorded deferred tax assets for these carryforwards totaling $734 and $765 at September 30, 2013 and September 30, 2012, respectively, excluding valuation allowances for Australia in 2013, and Australia and Belgium in 2012.

The realization of deferred tax assets in foreign jurisdictions is dependent upon the generation of future taxable income in these countries. We have considered the levels of currently anticipated pre-tax income in foreign jurisdictions in assessing the required level of the deferred tax asset valuation allowance. Taking into consideration historical and current operating results, and other factors, we believe that it is more likely than not that the net deferred tax asset for foreign jurisdictions, after consideration of the valuation allowance, which has been established, will be realized. The amount of the net deferred tax asset considered realizable in foreign jurisdictions, however, could be reduced in future years if estimates of future taxable income during the carryforward period are reduced.

Undistributed earnings reinvested indefinitely in our non-U.S. operations were approximately $14,000 at September 30, 2013. U.S. deferred tax liabilities of approximately $1,000 on such earnings, after consideration of foreign tax credits, have not been recorded as of September 30, 2013.

As described in Note 1, we utilize a comprehensive model for the recognition, measurement, presentation and disclosure of uncertain tax positions, assuming full knowledge of all relevant facts by the applicable tax authorities. The total amount of unrecognized tax benefits at September 30, 2013 and September 30, 2012 related to such positions was $208 and $471, respectively, of which the full amounts would favorably affect the effective tax rate if recognized. We recognize interest and penalties related to uncertain tax positions as a component of our income tax provision. During fiscal 2013 and fiscal 2012, we decreased our tax provision by approximately $72 and $18, respectively, for such interest and penalties. We had approximately $30 accrued for the payment of interest and penalties at September 30, 2013 compared to $102 accrued at September 30, 2012. The amount of our liability for uncertain tax positions expected to be paid or settled in the next 12 months is uncertain.

A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:


	2013			2012
Unrecognized income tax benefits beginning of year	$	471		$	542
Additions for tax positions of prior years		61			159
Reductions for tax positions of prior years		(103	)		—
Tax examination and other settlements		(183	)		—
Expirations of statute of limitations		(38	)		(230	)

Unrecognized income tax benefits at end of year	$	208		$	471

We are subject to examination by the tax authorities in the U.S. (both federal and state) and the countries of Australia, Belgium, England, France, Germany, Holland and Italy. In the U.S., open tax years are for fiscal 2010 and fiscal 2012, with the IRS having completed its examination of our federal return for fiscal 2011. In countries outside the U.S., open tax years generally range from fiscal 2008 and forward. However, in Belgium, the utilization of local net operating loss carryforwards extends the statute of limitations for examination well into the foreseeable future.