Note 6	We account for our income taxes under the liability method. Under the liability method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities as measured by the enacted tax rates that will be in effect when these differences reverse. Deferred tax expense is the result of changes in deferred tax assets and liabilities.

	Additionally, we recognize a liability for income taxes and associated penalties and interest for tax positions taken or expected to be taken in a tax return which are more likely than not to be overturned by taxing authorities (“uncertain tax positions”). We have not recognized a tax benefit in our financial statements for these uncertain tax positions.

The total amount of gross unrecognized tax benefits is

$384,000

and

$374,000

March 31, 2018

and

September 30, 2017,

respectively, all of which would impact our effective tax rate over time, if recognized. We recognize interest and penalties related to uncertain tax positions as a part of the provision for income taxes. As of

March 31, 2018,

and

September 30, 2017,

respectively, the Company has

$249,000

and

$239,000

of accrued interest and penalties.

In addition to our federal tax return and tax returns for Mexico and Canada, we file tax returns in all states that have a corporate income tax with virtually all open for examination for

three

four

years.

Net earnings for the

six

months ended

March 31, 2018

benefited from a

$20.9

million, or

$1.11

per diluted share, gain on the remeasurement of deferred tax liabilities and a

$3.9

million, or

$0.21

per diluted share, reduction in income taxes related primarily to the lower corporate tax rate enacted under the Tax Cuts and Jobs Act in

December 2017.

Net earnings for the

six

months were impacted by a

$1.2

million, or

$.06

per diluted share, provision for the

one

time repatriation tax required under the new tax law. For the

three

months ended

March 31, 2018,

net earnings benefited by a

$1.9

million, or

$.10

per diluted share, reduction in income taxes primarily related to the lower corporate tax rate. Excluding the deferred tax gain and the

one

-time repatriation tax, our effective tax rate decreased to

28.7%

from

35.4%

in the prior year quarter and to

28.6%

from

34.8%

from the previous year

six

months reflecting the reduction in the federal statutory rate to

21%

from

35%

January 1, 2018.

The gain on the remeasurement of deferred tax liabilities and the

one

-time repatriation tax are preliminary estimates.

December 22, 2017,

the SEC issued guidance under Staff Accounting Bulletin

No.

118,

Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB

118”

) directing taxpayers to consider the impact of the U.S. legislation as “provisional” when it does

not

have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete its accounting for the change in tax law. In accordance with SAB

118,

the estimated income tax net benefit

$1.9

million for the

three

months and

$23.6

million for the

six

months represents our best estimate based on interpretation of the U.S. legislation as we are still accumulating data to finalize the underlying calculations, or in certain cases, the U.S. Treasury is expected to issue further guidance on the application of certain provisions of the U.S. legislation. In accordance with SAB

118,

the additional estimated income tax net benefit of

$1.9

million for the

three

months and

$23.6

million for the

six

months are considered provisional and will be finalized before

December 22, 2018.