Income Tax Expense

12 Months Ended

Sep. 30, 2023

Income Tax Expense

Income Tax Expense

5.      Income Tax Expense

The components of income before income taxes for 2023, 2022 and 2021 consisted of the following:

(Dollars in thousands)	2023		2022	2021
United States	$	98,983	90,674	70,214
Foreign		19,964	15,761	10,457
Total income before income taxes	$	118,947	106,435	80,671

The principal components of income tax expense (benefit) for 2023, 2022 and 2021 consist of:

(Dollars in thousands)	2023		2022	2021
Federal:
Current	$	24,192	7,248	14,807
Deferred		(5,816)	9,752	(1,598)
State and local:
Current		3,563	1,635	2,257
Deferred		(1,038)	1,774	(786)
Foreign:
Current		5,694	4,645	2,922
Deferred		(193)	(939)	(427)
Total	$	26,402	24,115	17,175

The actual income tax expense for 2023, 2022 and 2021 differs from the expected tax expense for those years (computed by applying the U.S. Federal corporate statutory rate) as follows:

	2023		2022		2021
Federal corporate statutory rate	21.0	%	21.0	%	21.0	%
State and local, net of Federal benefits	2.1		2.9		1.9
Impact of foreign operations	0.3		(0.3)		(0.4)
Federal research credit	(1.1)		(0.3)		(0.9)
Executive compensation	0.9		0.5		0.9
Valuation allowance	0.3		(0.3)		—
U.S. tax on GILTI	1.2		1.8		1.0
GILTI foreign tax credits	(0.9)		(1.5)		(0.6)
FDII deduction	(1.6)		(0.9)		(1.7)
Other, net	—		(0.2)		0.1
Effective income tax rate	22.2	%	22.7	%	21.3	%

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at September 30, 2023 and 2022 are presented below:

(Dollars in thousands)	2023		2022
Deferred tax assets:
Inventories	$	5,457	4,990
Pension and other postretirement benefits		658	664
Capitalized research and development expenditures		4,114	—
Lease liabilities		9,822	7,073
Net operating and capital loss carryforwards — domestic		553	575
Net operating loss carryforward — foreign		3,714	3,396
Other compensation-related costs and other cost accruals		8,691	9,093
State credit carryforward		2,249	1,676
Foreign credit carryforward		—	203
Total deferred tax assets		35,258	27,670
Deferred tax liabilities:
ROU assets		(9,822)	(7,073)
Goodwill		(13,313)	(11,691)
Acquisition intangible assets		(61,187)	(62,051)
Depreciation, software amortization		(21,772)	(24,503)
Net deferred tax liabilities before valuation allowance		(70,836)	(77,648)
Less valuation allowance		(1,772)	(1,208)
Net deferred tax liabilities	$	(72,608)	(78,856)

We had a foreign net operating loss (NOL) carryforward of $13.2 million at September 30, 2023, which reflects tax loss carryforwards in Germany, South Africa, Canada, Japan, India and the United Kingdom. Approximately $11.1 million of the tax loss carryforwards have no expiration date while the remaining $2.1 million will expire between 2030 and 2042.We had deferred tax assets related to state NOL carryforwards of $0.6 million at September 30, 2023 which expire between 2025 and 2043. We also had state research and other credit carryforwards of $2.2 million of which $0.8 million expires between 2036 and 2038. The remaining $1.4 million does not have an expiration date.

The valuation allowance for deferred tax assets as of September 30, 2023 and 2022 was $1.8 million and $1.2 million, respectively. The net change in the total valuation allowance for each of the years ended September 30, 2023 and 2022 was an increase of $0.6 million and a decrease of $0.8 million, respectively. In addition, we maintained a valuation allowance against state NOL carryforwards that are not expected to be realized in future periods of $0.5 million at September 30 of both 2023 and 2022. Lastly, we recorded a valuation allowance against foreign deferred tax assets of $0.6 million in the year ended September 30, 2023, which resulted in a valuation allowance against foreign deferred assets which may not be realized in future periods of $1.3 million and $0.7 million at September 30, 2023 and 2022, respectively.

As of September 30, 2023, the Company does not have any material unrecognized tax benefits.