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Income Taxes | 12 Months Ended
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Sep. 30, 2014
Income Tax Disclosure [Abstract] |
Income Taxes | H. Income Taxes The components of the income tax provision were as follows (in thousands):
| Year Ended September 30, |
| 2014 |  |  | 2013 |  |  | 2012 |
Current: |  |  |  |  |  |  |  |  |  |  |
Federal | $ | 12,184 |  |  | $ | 10,919 |  |  | $ | 17,648 |
State |  | 2,226 |  |  |  | 1,757 |  |  |  | 1,513 |
Foreign |  | (130 | ) |  |  | 1,575 |  |  |  | 331 |
|  | 14,280 |  |  |  | 14,251 |  |  |  | 19,492 |
Deferred: |  |  |  |  |  |  |  |  |  |  |
Federal |  | (1,798 | ) |  |  | (580 | ) |  |  | (1,853 | )
State |  | (311 | ) |  |  | (114 | ) |  |  | 24 |
Foreign |  | (1,103 | ) |  |  | (6,170 | ) |  |  | 393 |
|  | (3,212 | ) |  |  | (6,864 | ) |  |  | (1,436 | )
Total income tax provision | $ | 11,068 |  |  | $ | 7,387 |  |  | $ | 18,056 |
Income before income taxes was as follows (in thousands):
| Year Ended September 30, |
| 2014 |  |  | 2013 |  |  | 2012 |
U.S. | $ | 35,131 |  |  | $ | 43,299 |  |  | $ | 52,450 |
Other than U.S. |  | (4,443 | ) |  |  | 3,827 |  |  |  | (5,651 | )
Income before income taxes | $ | 30,688 |  |  | $ | 47,126 |  |  | $ | 46,799 |
A reconciliation of the statutory U.S. income tax rate and the effective income tax rate, as computed on earnings before income tax provision in each of the three years presented in the Consolidated Statements of Operations, was as follows:
| Year Ended September 30, |
| 2014 |  |  | 2013 |  |  | 2012 |
Statutory rate |  | 35 | % |  |  | 35 | % |  |  | 35 | %
State income taxes, net of federal benefit |  | 3 |  |  |  | 2 |  |  |  | 2 |
International withholding tax |  | — |  |  |  | (1 | ) |  |  | (1 | )
Other permanent tax items |  | 1 |  |  |  | 1 |  |  |  | — |
Foreign rate differential |  | 1 |  |  |  | (1 | ) |  |  | 1 |
Domestic production activities deduction |  | (3 | ) |  |  | (3 | ) |  |  | (3 | )
Foreign valuation allowance and other |  | (1 | ) |  |  | (17 | ) |  |  | 4 |
Effective rate |  | 36 | % |  |  | 16 | % |  |  | 38 | %
Our provision for income taxes reflects an effective tax rate on pre-tax earnings of 36% in Fiscal 2014 compared to 16% and 38% in Fiscal 2013 and 2012, respectively. The effective tax rates for Fiscal 2014 and 2012 are comparable while the effective tax rate in Fiscal 2013 was materially lower, resulting from the release of a valuation allowance that was recorded against Canadian deferred tax assets. We have not recorded deferred income taxes on $19 million of undistributed earnings of our foreign subsidiaries because of management’s intent to indefinitely reinvest such earnings. Upon distribution of these earnings in the form of dividends or otherwise, we may be subject to U.S. income taxes and foreign withholding taxes. It is not practical, however, to estimate the amount of taxes that may be payable on the eventual remittance of these earnings. We are subject to income tax in the U.S., multiple state jurisdictions and certain international jurisdictions, primarily the U.K. and Canada. We do not consider any state in which we do business to be a major tax jurisdiction. We remain open to examination in the other jurisdictions as follows: Canada 2010 – 2013, United Kingdom 2013 and the United States 2009 – 2013. The net deferred income tax asset (liability) was comprised of the following (in thousands):
| September 30, |
| 2014 |  |  | 2013 |
Current deferred income taxes: |  |  |  |  |  |  |
Gross assets | $ | 5,297 |  |  | $ | 5,335 |
Gross liabilities |  | — |  |  |  | (845 | )
Net current deferred income tax asset |  | 5,297 |  |  |  | 4,490 |
Noncurrent deferred income taxes: |  |  |  |  |  |  |
Gross assets |  | 11,532 |  |  |  | 9,016 |
Gross liabilities |  | (110 | ) |  |  | — |
Net noncurrent deferred income tax asset |  | 11,422 |  |  |  | 9,016 |
Net deferred income tax asset | $ | 16,719 |  |  | $ | 13,506 |
The tax effect of temporary differences between U.S. GAAP accounting and federal income tax accounting creating deferred income tax assets and liabilities was as follows (in thousands):
| September 30, |
| 2014 |  |  | 2013 |
Deferred Tax Assets: |  |  |  |  |  |  |
Net operating loss | $ | 6,236 |  |  | $ | 3,892 |
Uniform capitalization and inventory |  | 2,529 |  |  |  | 2,510 |
Deferred compensation |  | 1,611 |  |  |  | 1,297 |
Stock-based compensation |  | 1,529 |  |  |  | 1,291 |
Reserve for accrued employee benefits |  | 1,444 |  |  |  | 1,396 |
Depreciation and amortization |  | 1,217 |  |  |  | 944 |
Warranty accrual |  | 643 |  |  |  | 1,042 |
Goodwill |  | 474 |  |  |  | 1,198 |
Postretirement benefits liability |  | 252 |  |  |  | 396 |
Allowance for doubtful accounts |  | 495 |  |  |  | 163 |
Workers’ compensation |  | 128 |  |  |  | 185 |
Accrued legal |  | 65 |  |  |  | 57 |
Credit carryforwards and other |  | 1,109 |  |  |  | 845 |
Gross deferred tax asset |  | 17,732 |  |  |  | 15,216 |
Less: valuation allowance |  | (903 | ) |  |  | (865 | )
Deferred tax asset |  | 16,829 |  |  |  | 14,351 |
Deferred Tax Liabilities: |  |  |  |  |  |  |
Uncompleted contracts |  | — |  |  |  | (845 | )
Other |  | (110 | ) |  |  | — |
Deferred tax liabilities |  | (110 | ) |  |  | (845 | )
Net deferred tax asset | $ | 16,719 |  |  | $ | 13,506 |
At September 30, 2014, we had $24 million of gross foreign operating loss carryforwards which are subject to a 20-year carryforward period, the first of which will expire in 2031. At September 30, 2013, we released a valuation allowance that was recorded against Canadian deferred tax assets, resulting in a $7 million tax benefit. Although our Canadian operations reported a loss for Fiscal 2014, we believe these deferred tax assets are more likely than not to be utilized by future taxable income. With the exception of the deferred tax assets related to certain foreign withholding taxes as well as the net operating losses of our Dutch entities, we believe that our other deferred tax assets are more likely than not realizable through future reversals of existing taxable temporary differences and our estimate of future taxable income. The recognition of deferred tax assets requires estimates related to future income and other assumptions regarding timing and future profitability. Estimates may change as new events occur, additional information becomes available or operating environments change. A reconciliation of the beginning and ending amount of the unrecognized tax liabilities follows (in thousands):
Balance as of September 30, 2013 | $ | 3,845 |
Increases related to tax positions taken during the current period |  | 225 |
Increases related to tax positions taken during a prior period |  | 14 |
Decreases related to expirations of statute of limitations |  | (58 | )
Balance as of September 30, 2014 | $ | 4,026 |
Our continuing policy is to recognize interest and penalties related to income tax matters as tax expense. The amount of interest and penalty expense recorded for the year ended September 30, 2014 was not material. During Fiscal 2013, prior year U.S. federal income tax returns were amended to reflect increased research and development credits, and unrecognized tax benefits related to these refund claims were recorded. Fiscal 2012 and 2011 tax returns, along with the refund claims, are currently under review by the Internal Revenue Service Joint Committee on Taxation (JCT). It is reasonably possible that the amount of unrecognized tax benefits related to our research and development credits will change during the next twelve months. In addition, management believes that it is reasonably possible that within the next 12 months other unrecognized tax benefits will decrease by approximately 1% due to the expiration of certain federal statutes of limitations. Management believes that an adequate provision has been made for any adjustments that may result from tax examinations. However, the outcome of tax audits cannot be predicted with certainty. If any issues addressed in our tax audits are resolved in a manner not consistent with management’s expectations, we could be required to adjust our provision for income tax in the period such resolution occurs. Although timing of the resolution and/or closure of audits is highly uncertain, with the exception of the JCT review, we do not believe it is reasonably possible that our unrecognized tax benefits could materially change in the next 12 months.

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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 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 2: 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=26873400&loc=d3e23780-122690 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 4: 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 5: 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 6: 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 + Details
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