Income Taxes

12 Months Ended

Sep. 30, 2020

Income Tax Disclosure [Abstract]

Income Taxes

(7) Income Taxes

(a) Earnings before income taxes, and the related provision for income taxes for the years ended September 30, 2020, 2019 and 2018 were as follows:

Year Ended September 30,	2020			2019			2018
Domestic	$	9,068		$	23,954		$	27,787
Foreign		50,225			7,603			2,593
Total earnings before income taxes	$	59,293		$	31,557		$	30,380
Provision (credit) for income taxes -
Federal -
Current	$	1,173		$	5,001		$	6,030
Temporary differences
Fixed asset basis differences and depreciation		960			288			410
Intangible asset basis differences and amortization		753			(797	)		(4,052	)
Currently non-deductible expenses and reserves		(1,001	)		241			1,206
Stock-based compensation		(41	)		(109	)		1,379
Net operating loss carryforwards utilized		26			69			61
Tax credit carryforwards utilized		—			—			181
Other, net		47			(169	)		(148	)
Subtotal		1,917			4,524			5,067
State and local		1,170			834			1,066
Foreign		10,020			1,817			398
Total income tax provision	$	13,107		$	7,175		$	6,531

(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,	2020					2019					2018
Computed income taxes at statutory rate	$	12,452		21.0	%	$	6,627		21.0	%	$	7,443		24.5	%
Increase (decrease) in taxes resulting from -
State and local income taxes		773		1.3			577		1.8			982		3.2
U.S. tax law change		—		—			—		—			(2,655	)	(8.7	)
One-time repatriation tax		—		—			—		—			876		2.9
Foreign-Derived Intangible Income tax		(136	)	(0.2	)		(294	)	(0.9	)		—		—
Global Intangible Low Taxed Income tax		4,970		8.4			1,119		3.6			—		—
Foreign tax credit		(4,767	)	(8.0	)		(990	)	(3.1	)		(15	)	—
Foreign tax rate differences		(534	)	(0.9	)		46		0.1			(104	)	(0.3	)
Transaction costs		548		0.9			—		—			—		—
Qualified domestic production incentives		—		—			—		—			(550	)	(1.8	)
Uncertain tax position activity		62		0.1			126		0.4			(62	)	(0.2	)
Valuation allowance		(106	)	(0.2	)		106		0.3			(40	)	(0.1	)
Stock-based compensation		41		0.1			(33	)	(0.1	)		447		1.4
Other, net		(196	)	(0.4	)		(109	)	(0.4	)		209		0.6
	$	13,107		22.1	%	$	7,175		22.7	%	$	6,531		21.5	%

On December 22, 2017, the United States enacted tax reform legislation commonly known as the Tax Cuts and Jobs Act (the “tax reform act”) including the Global Intangible Low Taxed Income tax (“GILTI”), which requires the Company to include in U.S. income certain foreign earnings that do not exceed a 10% return on foreign investment. For the year ended September 30, 2020, the Company’s U.S. GILTI inclusion was $23,666, resulting in a permanent tax expense of $4,970, which is offset by a foreign tax credit benefit of $4,767. During fiscal 2020, the Internal Revenue Service issued Final Treasury Regulations related to the GILTI tax. Such regulations served to reduce the Company’s fiscal 2019 GILTI inclusion, resulting in an additional $220 federal tax benefit related to fiscal 2019. For the year ended September 30, 2019, the Company’s U.S. GILTI inclusion totaled $5,328, resulting in a permanent tax expense and a foreign tax credit benefit of $1,119 and $990, respectively. The Company has elected to take the GILTI into account in the year it occurs.

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

As of September 30,	2020			2019
Deferred tax assets -
Valuation reserves and non-deductible expenses	$	4,848		$	1,253
Stock compensation expense not deductible		1,804			2,158
Net operating loss and tax credit carryforwards		10,164			494
Basis difference in equity-method investee		302			302
Inventory basis differences		382			289
Other		207			125
Subtotal		17,707			4,621
Less valuation allowance		(302	)		(408	)
Deferred tax assets		17,405			4,213
Deferred tax liabilities -
Fixed asset basis differences and depreciation		(4,269	)		(2,205	)
Intangible asset basis differences and amortization		(9,293	)		(4,374	)
Deferred tax liabilities		(13,562	)		(6,579	)
Net deferred tax assets (liabilities)	$	3,843		$	(2,366	)

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 $205 and $9,959, respectively, as of September 30, 2020. At September 30, 2019, such deferred tax assets totaled $231 and $263, respectively. The operating loss carryforwards in foreign jurisdictions, the majority of which relate to Israel, have no expiration date. The operating loss carryforwards in the U.S. expire in 2023 at the federal level, and in 2036 at the state level. The aggregate amount of federal, state and foreign operating loss carryforwards separately totaled $243, $2,432 and $78,332, respectively, at September 30, 2020. The use of the federal and state losses is limited by the change of ownership provisions of the Internal Revenue Code.

The Company has evaluated its assertion as to whether earnings of foreign subsidiaries are indefinitely reinvested. The Company has removed its indefinite reinvestment assertion on the foreign subsidiary earnings and recognized a deferred tax liability of $185 to reflect the corporate and withholding tax impact of a presumed repatriation of foreign earnings.

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 $17,405 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.

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, 2020 and September 30, 2019 related to such positions was $568 and $509, respectively, of which $494 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 2020 and 2019, such penalties and interest totaled approximately $20 and $34, respectively. We had approximately $138 accrued for the payment of interest and penalties at September 30, 2020 compared to $118 accrued at September 30, 2019. 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:

	2020			2019
Unrecognized income tax benefits at beginning of year	$	509		$	388
Additions for tax positions of prior years		—			83
Reductions for tax positions of prior years		—			(38	)
Additions for tax positions of current year		104			138
Tax examination and other settlements		(45	)		(62	)
Unrecognized income tax benefits at end of year	$	568		$	509

We are subject to examination by the tax authorities in the U.S. (both federal and state) and the countries of Australia, Belgium, Canada, China, England, France, Germany, Holland, Israel and Italy. In the U.S., tax years subsequent to fiscal 2016 remain open. In countries outside the U.S., open tax years generally range from fiscal 2015 and forward. However, in Australia and Belgium, 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.

Supplemental Cash Flow Information (Income Taxes Paid)

Cash paid for income taxes totaled $9,816, $7,840 and $6,555 in fiscal 2020, 2019 and 2018, respectively.