Income Taxes

12 Months Ended

Sep. 30, 2018

Income Tax Disclosure [Abstract]

Income Taxes

(6) Income Taxes

(a) Earnings before income taxes, and the related provision for income taxes for the years ended September 30, 2018, 2017 and 2016 were as follows:

Year Ended September 30,	2018			2017			2016
Domestic	$	27,787		$	31,885		$	44,795
Foreign		2,593			4,544			5,849
Total earnings before income taxes	$	30,380		$	36,429		$	50,644
Provision (credit) for income taxes -
Federal -
Current	$	6,030		$	11,262		$	16,178
Temporary differences
Fixed asset basis differences and depreciation		410			(181	)		(45	)
Intangible asset basis differences and amortization		(4,052	)		(1,158	)		(744	)
Currently non-deductible expenses and reserves		1,206			884			(694	)
Stock-based compensation		1,379			(635	)		129
Net operating loss carryforwards utilized		61			1,831			—
Tax credit carryforwards utilized		181			67			41
Other, net		(148	)		99			181
Subtotal		5,067			12,169			15,046
State and local		1,066			1,900			2,421
Foreign		398			803			948
Total income tax provision	$	6,531		$	14,872		$	18,415

(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,	2018					2017					2016
Computed income taxes at statutory rate	$	7,443		24.5	%	$	12,750		35.0	%	$	17,719		35.0	%
Increase (decrease) in taxes resulting from -
State and local income taxes		982		3.2			1,093		3.0			1,329		2.6
U.S. tax law change		(2,655	)	(8.7	)		—		—			—		—
One-time repatriation tax		876		2.9			—		—			—		—
Foreign tax rate differences		(104	)	(0.3	)		(281	)	(0.8	)		(337	)	(0.7	)
Qualified domestic production incentives		(550	)	(1.8	)		(1,012	)	(2.8	)		(1,290	)	(2.5	)
Acquisition-related costs		—		—			—		—			215		0.4
Uncertain tax position activity		(62	)	(0.2	)		134		0.4			122		0.2
Goodwill impairment charge		—		—			2,320		6.4			—		—
Valuation allowance		(40	)	(0.1	)		—		—			327		0.7
Stock-based compensation		447		1.4			—		—			—		—
Other, net		194		0.6			(132	)	(0.4	)		330		0.7
	$	6,531		21.5	%	$	14,872		40.8	%	$	18,415		36.4	%

On December 22, 2017, the United States enacted tax reform legislation commonly known as the Tax Cuts and Jobs Act (the “tax reform act”). We have completed the accounting for the tax reform act and the following effects are reflected within the consolidated financial statements for the year ended September 30, 2018: (i) a tax benefit of $2,655, primarily from the re-measurement of deferred tax assets and liabilities; and (ii) $876 of tax expense for the mandatory U.S. repatriation transition tax. The re-measurement of deferred tax assets and liabilities reflects the realization of temporary differences during fiscal 2018 at a transitional blended federal rate of 24.5%, with the remaining temporary differences being re-measured at the 21% federal rate.

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

As of September 30,	2018			2017
Deferred tax assets -
Valuation reserves and non-deductible expenses	$	1,473		$	1,762
Stock compensation expense not deductible		2,033			3,367
Net operating loss and tax credit carryforwards		433			743
Basis difference in equity-method investee		302			302
Inventory basis differences		383			1,269
Other		(530	)		(289	)
Subtotal		4,094			7,154
Less valuation allowance		(302	)		(342	)
Deferred tax assets		3,792			6,812
Deferred tax liabilities -
Fixed asset basis differences and depreciation		(1,913	)		(1,325	)
Intangible asset basis differences and amortization		(5,518	)		(9,784	)
Deferred tax liabilities		(7,431	)		(11,109	)
Net deferred tax liabilities	$	(3,639	)	$	(4,297	)

For income tax purposes, we have recorded deferred tax assets related to operating loss and tax credit carryforwards in both U.S. and foreign jurisdictions totaling $303 and $130, respectively, as of September 30, 2018. At September 30, 2017, such deferred tax assets totaled $546 and $197, respectively. The operating loss carryforwards in foreign jurisdictions have no expiration date. The operating loss carryforwards in the U.S. expire between 2023 and 2036 at the federal level, and between 2028 and 2036 at the state level. The aggregate amount of federal, state and foreign operating loss carryforwards totaled $490, $2,186 and $381, respectively, at September 30, 2018. The use of the federal and state losses is limited by the change of ownership provisions of the Internal Revenue Code.

The realization of deferred tax assets is dependent upon the generation of future taxable income in the applicable jurisdictions. We have considered the levels of currently anticipated pre-tax income in U.S. and foreign jurisdictions in assessing the required level of the deferred tax asset valuation allowance including the characterization of the income as ordinary or capital. 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 of $3,792 will be realized. The amount of the net deferred tax asset considered realizable, however, could be reduced in future years if estimates of future taxable income are reduced.

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, 2018 and September 30, 2017 related to such positions was $262 and $517, respectively, of which $150 would favorably impact the effective tax rate if recognized. We generally recognize interest and penalties related to uncertain tax positions as a component of our income tax provision. During fiscal 2018 and 2017, such penalties and interest totaled approximately $84 and $35, respectively. We had approximately $162 accrued for the payment of interest and penalties at September 30, 2018 compared to $165 accrued at September 30, 2017. 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:

	2018			2017
Unrecognized income tax benefits beginning of year	$	517		$	502
Additions for tax positions of prior years		—			144
Tax examination and other settlements		(161	)		(129	)
Expiration of statute of limitations		(94	)		—
Unrecognized income tax benefits at end of year	$	262		$	517

We are subject to examination by the tax authorities in the U.S. (both federal and state) and the countries of Australia, Belgium, China, England, France, Germany, Holland, Italy and Singapore. In the U.S., open tax years are fiscal 2015, fiscal 2016 and fiscal 2017. In countries outside the U.S., open tax years generally range from fiscal 2013 and forward. However, in Australia, Belgium and Singapore, the utilization of local net operating loss carryforwards extends the statute of limitations for examination well into the foreseeable future. To the extent that adjustments result from the completion of these examinations or the lapsing of statutes of limitation, they will affect tax liabilities in the period known. We believe that the results of any tax authority examinations would not have a significant adverse impact on our financial condition or results of operations.