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Income Tax Expense | 12 Months Ended
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Sep. 30, 2011
Income Tax Expense [Abstract] |
Income Tax Expense | 8. Income Tax Expense Total income tax expense (benefit) for the years ended September 30, 2011, 2010 and 2009 was allocated as follows:
(Dollars in thousands) |  | 2011 | 2010 | 2009 |
Income tax expense from |  |  |  |  |
continuing operations | $ | 24,457 | 24,819 | 13,867 |
Discontinued operations |  | — | — | (1,473 | )
Total income tax expense | $ | 24,457 | 24,819 | 12,394 |
The components of income from continuing operations before income taxes consisted of the following for the years ended September 30:
(Dollars in thousands) |  | 2011 | 2010 | 2009
United States | $ | 73,275 | 66,639 | 60,477
Foreign |  | 3,683 | 3,026 | 2,695
Total income before income taxes | $ | 76,958 | 69,665 | 63,172
The principal components of income tax expense (benefit) from continuing operations for the years ended September 30, 2011, 2010 and 2009 consist of:
(Dollars in thousands) |  | 2011 |  | 2010 |  | 2009 |
Federal |  |  |  |  |  |  |
Current | $ | 15,708 |  | 17,585 |  | 10,425 |
Deferred |  | 5,578 |  | 4,199 |  | (1,666 | )
State and local: |  |  |  |  |  |  |
Current |  | 2,218 |  | 2,193 |  | 4,683 |
Deferred |  | 580 |  | 230 |  | (421 | )
Foreign: |  |  |  |  |  |  |
Current |  | 3,104 |  | 1,130 |  | 1,179 |
Deferred |  | (2,731 | ) | (518 | ) | (333 | )
Total | $ | 24,457 |  | 24,819 |  | 13,867 |
The actual income tax expense (benefit) from continuing operations for the years ended September 30, 2011, 2010 and 2009 differs from the expected tax expense for those years (computed by applying the U.S. Federal corporate statutory rate) as follows:
| 2011 |  | 2010 |  | 2009 |
Federal corporate statutory rate | 35.0 | % | 35.0 | % | 35.0 | %
State and local, net of Federal benefits | 3.6 |  | 3.1 |  | 4.4 |
Foreign | (2.2 | ) | (1.5 | ) | (0.2 | )
Research credit | (2.0 | ) | 0.3 |  | (7.5 | )
Domestic production deduction | (2.5 | ) | (1.9 | ) | (1.8 | )
Change in uncertain tax positions | (0.5 | ) | 0.1 |  | (7.9 | )
Other, net | 0.4 |  | 0.5 |  | — |
Effective income tax rate | 31.8 | % | 35.6 | % | 22.0 | %
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at September 30, 2011, and 2010 are presented below.
(Dollars in thousands) |  | 2011 |  | 2010 |
Deferred tax assets: |  |  |  |  |
Inventories, long-term contract accounting, |  |  |
contract cost reserves and other | $ | 6,029 |  | 3,331 |
Pension and other postretirement benefits |  | 11,341 |  | 12,178 |
Net operating loss carryforward — domestic |  | 687 |  | 813 |
Net operating loss carryforward — foreign |  | 3,419 |  | 2,018 |
Capital loss carryforward |  | 240 |  | 254 |
Other compensation-related costs |  |  |  |  |
and other cost accruals |  | 17,316 |  | 14,196 |
State credit carryforward |  | 1,240 |  | 1,545 |
Total deferred tax assets |  | 40,272 |  | 34,335 |
Deferred tax liabilities: |  |  |  |  |
Plant and equipment, depreciation methods, |  |  |  |  |
acquisition asset allocations, and other |  | (104,082 | ) | (96,300 | )
Net deferred tax liabilities before |  |  |  |  |
valuation allowance |  | (63,810 | ) | (61,965 | )
Less valuation allowance |  | (873 | ) | (1,613 | )
Net deferred tax liabilities | $ | (64,683 | ) | (63,578 | )
The Company has a foreign net operating loss carryforward of $11.4 million at September 30, 2011, which reflects tax loss carryovers in Brazil, Germany and the United Kingdom. These losses have no expiration date. The Company also has net state research and other credit carryforwards of $1.2 million of which $0.6 million expires between 2022 and 2026. The remaining $0.6 million does not have an expiration date. At September 30, 2011, the Company has established a valuation allowance of $0.2 million against the capital loss carryforward generated in 2008, as such loss carryforward may not be realized in future periods. In addition, the Company has established a valuation allowance against certain net operating loss (NOL) carryforwards in foreign jurisdictions which may not be realized in future periods. The valuation allowance established against the foreign NOL carryforwards was $0.7 million and $1.4 million at September 30, 2011, and 2010, respectively. The Company classifies its valuation allowance related to deferred taxes on a pro rata basis. The Company's foreign subsidiaries have accumulated unremitted earnings of $32.2 million and cash of $18.6 million at Sep-tember 30, 2011. No deferred taxes have been provided on the accumulated unremitted earnings because these funds are not needed to meet the liquidity requirements of the Company's U.S. operations and it is the Company's intention to reinvest these earnings indefinitely. In the event these foreign entities' earnings were distributed, it is estimated that U.S. taxes, net of available foreign tax credits, of approximately $5.2 million would be due, which would correspondingly reduce the Company's net earnings. No significant portion of the Company's foreign subsidiaries' earnings was taxed at a very low tax rate. As of September 30, 2011, the Company had $3.6 million of unrecognized benefits (see table below), of which $3.5 million, net of Federal benefit, if recognized, would affect the Company's effective tax rate. A reconciliation of the Company's unrecognized tax benefits for the years ended September 30, 2011, and 2010 is presented in the table below:
(Dollars in millions) |  | 2011 |  | 2010 |
Balance as of October 1, | $ | 3.2 |  | 3.3 |
Increases related to prior year tax positions |  | 0.7 |  | 0.2 |
Decreases related to prior year tax positions |  | — |  | (0.2 | )
Increases related to current year tax positions |  | 0.2 |  | 0.1 |
Lapse of statute of limitations |  | (0.5 | ) | (0.2 | )
Balance as of September 30, | $ | 3.6 |  | 3.2 |
The Company anticipates a $1.7 million reduction in the amount of unrecognized tax benefits in the next twelve months as a result of a lapse of the applicable statute of limitations. The Company's policy is to include interest related to unrecognized tax benefits in income tax expense and penalties in operating expense. As of September 30, 2011, 2010 and 2009, the Company had accrued interest related to uncertain tax positions of $0.2 million, $0.1 million and $0.1 million, respectively, net of Federal income tax benefit, on its Consolidated Balance Sheet. No significant penalties have been accrued. The principal jurisdictions for which the Company files income tax returns are U.S. Federal and the various city, state, and international locations where the Company has operations. Due to the timing of the utilization of the Company's net operating loss, the U.S. Federal tax years for the periods ended September 30, 1998, and forward remain subject to income tax examination. Various state tax years for the periods ended September 30, 2007, and forward remain subject to income tax examinations. The Company is subject to income tax in many jurisdictions outside the United States, none of which is individually material to the Company's financial position, statements of cash flows, or results of operations.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 136, 172 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 43, 44, 45, 46, 47, 48, 49 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690 + Details
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