XML 31 R16.htm IDEA: XBRL DOCUMENT
v3.5.0.2

Income Taxes | 12 Months Ended
--- | ---
Sep. 30, 2016
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, |
| 2016 |  |  | 2015 |  |  | 2014 |
Current: |  |  |  |  |  |  |  |  |  |  |
Federal | $ | (1,395 | ) |  | $ | 2,638 |  |  | $ | 12,184 |
State |  | 449 |  |  |  | 699 |  |  |  | 2,226 |
Foreign |  | 899 |  |  |  | (306 | ) |  |  | (130 | )
|  | (47 | ) |  |  | 3,031 |  |  |  | 14,280 |
Deferred: |  |  |  |  |  |  |  |  |  |  |
Federal |  | 1,923 |  |  |  | 3,296 |  |  |  | (1,798 | )
State |  | 47 |  |  |  | 420 |  |  |  | (311 | )
Foreign |  | 360 |  |  |  | 6,805 |  |  |  | (1,103 | )
|  | 2,330 |  |  |  | 10,521 |  |  |  | (3,212 | )
Total income tax provision | $ | 2,283 |  |  | $ | 13,552 |  |  | $ | 11,068 |
Income before income taxes was as follows (in thousands):
| Year Ended September 30, |
| 2016 |  |  | 2015 |  |  | 2014 |
U.S. | $ | 5,087 |  |  | $ | 33,549 |  |  | $ | 35,131 |
Other than U.S. |  | 12,706 |  |  |  | (10,558 | ) |  |  | (4,443 | )
Income before income taxes | $ | 17,793 |  |  | $ | 22,991 |  |  | $ | 30,688 |
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, |
| 2016 |  |  | 2015 |  |  | 2014 |
Statutory rate |  | 35 | % |  |  | 35 | % |  |  | 35 | %
State income taxes, net of federal benefit |  | 2 |  |  |  | 3 |  |  |  | 3 |
Research and development credit |  | (8 | ) |  |  | (21 | ) |  |  | — |
Foreign rate differential |  | (8 | ) |  |  | 4 |  |  |  | 1 |
Domestic production activities deduction |  | — |  |  |  | (3 | ) |  |  | (3 | )
Foreign valuation allowance |  | (11 | ) |  |  | 43 |  |  |  | — |
Other |  | 3 |  |  |  | (2 | ) |  |  | — |
Effective rate |  | 13 | % |  |  | 59 | % |  |  | 36 | %
Our provision for income taxes reflects an effective tax rate on pre-tax earnings of 13% in Fiscal 2016 compared to 59% and 36% in Fiscal 2015 and 2014, respectively. The effective tax rate for Fiscal 2016 was favorably impacted by the statutory tax rates in the United Kingdom (U.K.) and Canada and the relative amounts of income earned in those jurisdictions, as well as the utilization of net operating loss carryforwards in Canada that have been fully reserved with a valuation allowance. Additionally, the effective tax rate for Fiscal 2016 was favorably impacted by a $0.8 million discrete item recorded in the first quarter of Fiscal 2016 related to the retroactive reinstatement of the Research and Development Tax Credit (R&D Tax Credit) for the previously expired period from January 1, 2015 to September 30, 2015. On December 18, 2015, the “Protecting Americans from Tax Hikes Act of 2015” was enacted which retroactively reinstated and made permanent the R&D Tax Credit. The effective tax rate for Fiscal 2015 was adversely impacted by the establishment of a valuation allowance against our Canadian deferred tax assets during the second quarter of Fiscal 2015. This was partially offset by the release of a $4.1 million FIN 48 reserve related to the R&D Tax Credit upon closing an IRS audit. We also recorded a $0.6 million discrete item in Fiscal 2015 that was also related to the retroactive reinstatement of the R&D Tax Credit referred to above. The effective tax rate for Fiscal 2014 approximated the combined U.S. federal and state statutory rate. We have not recorded deferred income taxes on $21.5 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 2011 – 2015, United Kingdom 2014 – 2015 and the United States 2013 and 2015. The net deferred income tax asset was comprised of the following (in thousands):
| September 30, |
| 2016 |  |  | 2015 |
Current deferred income taxes: |  |  |  |  |  |  |
Gross assets | $ | 4,384 |  |  | $ | 3,910 |
Gross liabilities |  | (378 | ) |  |  | — |
Net current deferred income tax asset |  | 4,006 |  |  |  | 3,910 |
Noncurrent deferred income taxes: |  |  |  |  |  |  |
Gross assets |  | 16,170 |  |  |  | 5,005 |
Gross liabilities |  | (16,308 | ) |  |  | (2,717 | )
Net noncurrent deferred income tax asset (liability) |  | (138 | ) |  |  | 2,288 |
Net deferred income tax asset | $ | 3,868 |  |  | $ | 6,198 |
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, |
| 2016 |  |  | 2015 |
Deferred Tax Assets: |  |  |  |  |  |  |
Net operating loss | $ | 10,453 |  |  | $ | 9,877 |
Uniform capitalization and inventory |  | 1,596 |  |  |  | 1,895 |
Deferred compensation |  | 1,853 |  |  |  | 1,848 |
Stock-based compensation |  | 760 |  |  |  | 993 |
Reserve for accrued employee benefits |  | 1,679 |  |  |  | 1,482 |
Warranty accrual |  | 1,388 |  |  |  | 915 |
Goodwill |  | 345 |  |  |  | 398 |
Postretirement benefits liability |  | 503 |  |  |  | — |
Allowance for doubtful accounts |  | 220 |  |  |  | 166 |
Accrued legal |  | 294 |  |  |  | 60 |
Credit carryforwards |  | 1,292 |  |  |  | 1,329 |
Other |  | 171 |  |  |  | 8 |
Deferred tax assets |  | 20,554 |  |  |  | 18,971 |
Deferred Tax Liabilities: |  |  |  |  |  |  |
Depreciation and amortization |  | (8,247 | ) |  |  | (2,705 | )
Other |  | — |  |  |  | (12 | )
Deferred tax liabilities |  | (8,247 | ) |  |  | (2,717 | )
Less: valuation allowance |  | (8,439 | ) |  |  | (10,056 | )
Net deferred tax asset | $ | 3,868 |  |  | $ | 6,198 |
At September 30, 2016, we had $39 million of gross foreign net operating loss carryforwards, the majority of which are subject to a 20-year carryforward period and will begin to expire in 2031. During Fiscal 2015, we established a valuation allowance in the amount of $9.3 million against Canadian net deferred tax assets. In assessing the realizability of net deferred tax assets, we consider whether it is more-likely-than-not that some portion or all of the net deferred tax assets may not be realized. The ultimate realization of net deferred tax assets is dependent on the generation of future taxable income during the periods in which those temporary differences become deductible. Due to the historical Canadian losses, and the losses that we projected at the time of determination, we were required under the more-likely-than-not accounting standard to record a valuation allowance against the Canadian net deferred tax assets because we anticipated that we may not be able to realize the benefits of the net operating loss carryforwards and other deductible differences. A rollforward of the valuation allowance for the past three years is summarized below:
Balance at September 30, 2013 | $ | 135 |  |
Charged to cost and expenses |  | 80 |  |
Charged to other accounts |  | 688 |  |
Balance at September 30, 2014 | $ | 903 |  |
Charged to cost and expenses |  | 10,048 |  |
Charged to other accounts |  | (895 | ) |
Balance at September 30, 2015 | $ | 10,056 |  |
Charged to cost and expenses |  | (1,934 | ) |
Charged to other accounts |  | 317 |  |
Balance at September 30, 2016 | $ | 8,439 |  |
A reconciliation of the beginning and ending amount of the unrecognized tax benefits follows (in thousands):
| Year Ended September 30, |
| 2016 |  |  | 2015 |  |  | 2014 |
Balance at beginning of period | $ | 784 |  |  | $ | 4,026 |  |  | $ | 3,845 |
Increases related to tax positions taken during the current period |  | 293 |  |  |  | 954 |  |  |  | 225 |
Increases related to tax positions taken during a prior period |  | ― |  |  |  | 2 |  |  |  | 14 |
Decreases related to expiration of statute of limitations |  | (31 | ) |  |  | (49 | ) |  |  | (58 | )
Decreases related to settlement with taxing authorities |  | ― |  |  |  | (4,149 | ) |  |  | — |
Balance at end of period | $ | 1,046 |  |  | $ | 784 |  |  | $ | 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, 2016 was not material. During Fiscal 2013, prior year U.S. federal income tax returns were amended to reflect increased R&D Credits and unrecognized tax benefits related to these refund claims were recorded. These amended returns, along with the refund claims, were subject to an Internal Revenue Service audit which was closed during the second quarter of Fiscal 2015 resulting in a $4.1 million tax benefit. Due to the expiration of certain federal statutes of limitations, management believes that, within the next 12 months, it is reasonably possible that the unrecognized tax benefits will decrease by approximately 32%. 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 uncertain, we believe it is probable that our unrecognized tax benefits could decrease by approximately 33% in the next 12 months due to an audit resolution.

X
- References No definition available. + Details
Name: | us-gaap_IncomeTaxDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- 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 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 2: 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=65882285&loc=d3e32559-109319 Reference 3: 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=65882285&loc=d3e32718-109319 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=65882285&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=65882285&loc=d3e32537-109319 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration