

NOTE 9	INCOME TAXES

The reconciliation of income tax computed at the federal statutory rate to the Company's effective income tax rate was as follows:



	For the years ended January 31,
	2015		2014		2013
Tax at U.S. federal statutory rate	35.0	%	35.0	%	35.0	%
State and local income taxes, net of U.S. federal tax benefit	(0.3	)	1.5		1.6
Tax credit for research activities	(3.9	)	(1.2	)	(0.9	)
Tax benefit on qualified production activities	(3.6	)	(2.9	)	(3.2	)
Other, net	(0.3	)	0.2		(0.2	)
	26.9	%	32.6	%	32.3	%

The effective tax rate for fiscal 2015 was impacted favorably by recognition of a $776 research and development tax credit based upon a tax study undertaken for fiscal years 2011 through 2014. The Company also recorded a $963 discrete tax benefit in fourth quarter after reaching a favorable tax settlement with a state tax authority on a previously recorded uncertain tax position.

Significant components of the Company's income tax provision were as follows:



	For the years ended January 31,
	2015			2014		2013
Income taxes:
Currently payable	$	12,663		$	20,098	$	26,894
Deferred (benefit) expense	(958		)	623		(1,803		)
	$	11,705		$	20,721	$	25,091

Deferred Tax Assets

Deferred income taxes 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 deferred tax assets and liabilities were as follows:



	As of January 31,
	2015			2014			2013
Current deferred tax assets:
Accounts receivable	$	194		$	111		$	70
Inventories	873			583			507
Accrued vacation	940			1,032			1,118
Insurance obligations	271			276			302
Accrued benefit liabilities	261			291			274
Warranty obligations	1,225			898			661
Other accrued liabilities	194			181			175
	3,958			3,372			3,107

Non-current deferred tax assets (liabilities):
Postretirement benefits	4,243			2,799			2,826
Depreciation and amortization	(16,099		)	(11,522		)	(9,114		)
Uncertain tax positions	1,002			2,219			1,969
Share-based compensation	2,897			2,309			1,613
Other	866			669			253
	(7,091		)	(3,526		)	(2,453		)
Net deferred tax (liability) asset	$	(3,133	)	$	(154	)	$	654

Pre-tax book income (loss) for the U.S. companies and the Canadian subsidiary was $42,282 and $(38), respectively. As of January 31, 2015, undistributed earnings of $1,490 of the Canadian subsidiary were considered to have been reinvested indefinitely and, accordingly, the Company has not provided United States income taxes on such earnings. This estimated tax liability would be approximately $231 net of foreign tax credits.

Uncertain Tax Positions

A summary of the activity related to the gross unrecognized tax benefits (excluding interest and penalties) is as follows:



	For the years ended January 31,
	2015			2014			2013
Gross unrecognized tax benefits at beginning of year	$	4,660		$	4,213		$	3,567
Increases in tax positions related to the current year	909			795			993
Decreases as a result of lapses in applicable statutes of limitation	(393		)	(348		)	(347		)
Tax settlement with tax authorities	(2,869		)	—			—
Gross unrecognized tax benefits at end of year	$	2,307		$	4,660		$	4,213

Fiscal year 2015 changes to uncertain tax positions related to prior years resulted from both lapses of applicable statutes of limitation and a favorable settlement reached with a state tax authority. The total unrecognized tax benefits that, if recognized, would affect the Company's effective tax rate were $1,617, $3,029, and $2,738 as of January 31, 2015, 2014, and 2013, respectively. The Company does not expect any significant change in the amount of unrecognized tax benefits in the next fiscal year.

The Company recognizes interest and penalties accrued related to unrecognized tax benefits in income tax expense. At January 31, 2015, 2014, and 2013, accrued interest and penalties were $952, $1,897, and $1,605, respectively.

The Company files tax returns, including returns for its subsidiaries, with various federal, state, and local jurisdictions. Uncertain tax positions are related to tax years that remain subject to examination. As of January 31, 2015, federal tax returns filed in the U.S., Canada and Switzerland for fiscal years ended January 31, 2010 through January 31, 2014 remain subject to examination by federal tax authorities. In state and local jurisdictions, tax returns for fiscal years ended January 31, 2007 through January 31, 2014 remain subject to examination by state and local tax authorities.