

NOTE 10	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,
	2016 (As Restated)		2015		2014
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	(2.8	)	(0.3	)	1.5
Tax credit for research activities	(24.2	)	(3.9	)	(1.2	)
Tax benefit on qualified production activities	(13.7	)	(3.6	)	(2.9	)
Tax benefit on insurance premiums	(10.3	)	(1.0	)	—
Change in uncertain tax positions	1.8		—		—
Foreign tax rate difference	(2.9	)	0.4		0.1
Other, net	(1.7	)	0.3		0.1
	(18.8	)%	26.9	%	32.6	%

The decrease in the fiscal 2016 effective rate is primarily due to the combination of a significantly lower book income year-over-year, a $560 tax benefit for qualified production activities, and a $989 tax benefit from the R&D tax credit extension passed by Congress in fiscal 2016. The qualified production deduction is based on estimated taxable income. Tax deductible goodwill and long-lived asset impairments of $14,756 in fiscal 2016 resulted in a deferred tax benefit for financial reporting purposes and a higher estimated taxable income due to the longer period of tax amortization.

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 fiscal 2015 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 (benefit) provision were as follows:



	For the years ended January 31,
	2016 (As Restated)			2015			2014
Income taxes:
Currently payable	$	5,272		$	12,663		$	20,098
Deferred (benefit) expense	(6,039		)	(958		)	623
	$	(767	)	$	11,705		$	20,721

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,
	2016 (As Restated)			2015			2014
Current deferred tax assets:
Accounts receivable	$	355		$	194		$	111
Inventories	602			873			583
Accrued vacation	836			940			1,032
Insurance obligations	350			271			276
Accrued benefit liabilities	99			261			291
Warranty obligations	670			1,225			898
Other accrued liabilities	198			194			181
	3,110			3,958			3,372

Non-current deferred tax assets (liabilities):
Postretirement benefits	2,797			4,243			2,799
Depreciation and amortization	(9,886		)	(16,099		)	(11,522		)
Uncertain tax positions	896			1,002			2,219
Share-based compensation	3,613			4,410			3,196
Other	(667		)	(647		)	(218		)
	(3,247		)	(7,091		)	(3,526		)
Net deferred tax (liability)	$	(137	)	$	(3,133	)	$	(154	)

Pre-tax book income (loss) for the U.S. companies and the foreign subsidiaries was $3,279 and $802, respectively. As of January 31, 2016, undistributed earnings of $1,975 of the Canadian and European subsidiaries and 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 $319 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,
	2016 (As Restated)			2015			2014
Gross unrecognized tax benefits at beginning of year	$	2,307		$	4,660		$	4,213
Increases in tax positions related to the current year	395			909			795
Decreases as a result of lapses in applicable statutes of limitation	(375		)	(393		)	(348		)
Tax settlement with tax authorities	—			(2,869		)	—
Gross unrecognized tax benefits at end of year	$	2,327		$	2,307		$	4,660

Fiscal year 2016 changes to uncertain tax positions related to prior years resulted from lapses of applicable statutes of limitation and fiscal year 2015 included 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 $1,655, $1,617, and $3,029 as of January 31, 2016, 2015, and 2014, 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, 2016, 2015, and 2014, accrued interest and penalties were $672, $952, and $1,897, 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, 2016, federal tax returns filed in the U.S., Canada and Switzerland for fiscal years ended January 31, 2010 through January 31, 2015 remain subject to examination by federal tax authorities. In state and local jurisdictions, tax returns for fiscal years ended January 31, 2008 through January 31, 2015 remain subject to examination by state and local tax authorities.