F. INCOME TAXES

For financial reporting purposes earnings before income taxes include the following components:


	For the years ended August 31,
$ in thousands	2013		2012		2011
United States	$	99,781	$	57,884	$	53,879
Foreign		7,526		7,224		2,635
	$	107,307	$	65,108	$	56,514

Significant components of the income tax provision are as follows:


	For the years ended August 31,
$ in thousands	2013		2012		2011
Current:
Federal	$	33,498	$	21,694	$	18,705
State		2,303		1,026		1,309
Foreign		4,173		2,979		2,526
Total current		39,974		25,699		22,540
Deferred:
Federal		(1,554)		(3,829)		(1,484)
State		(178)		614		(29)
Foreign		(1,505)		(653)		(1,315)
Total deferred		(3,237)		(3,868)		(2,828)
Total income tax provision	$	36,737	$	21,831	$	19,712

Total income tax provision resulted in effective tax rates differing from that of the statutory United States Federal income tax rates. The reasons for these differences are:


	For the years ended August 31,
$ in thousands	2013			2012			2011
	Amount		%	Amount		%	Amount		%
U.S. statutory rate	$	37,558	35.0	$	22,788	35.0	$	19,780	35.0
State and local taxes, net of federal tax benefit		1,365	1.3		1,337	2.0		889	1.6
Foreign tax rate differences		(103)	(0.1)		(338)	(0.5)		(257)	(0.5)
Domestic production activities deduction		(2,638)	(2.5)		(1,900)	(2.9)		(1,301)	(2.3)
Research and development and fuel tax credits		(289)	(0.3)		(105)	(0.2)		(239)	(0.4)
Other		844	0.8		49	0.1		840	1.5
Effective rate	$	36,737	34.2	$	21,831	33.5	$	19,712	34.9

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets and liabilities are as follows:


	August 31,
$ in thousands	2013		2012
Deferred tax assets:
Deferred rental revenue	$	835	$	382
Employee benefits liability		1,191		1,282
Net operating loss carry forwards		21		284
Defined benefit pension plan		1,396		1,554
Share-based compensation		2,299		2,284
State tax credits		98		48
Inventory		909		633
Warranty		2,449		1,686
Vacation		182		224
Accrued expenses and allowances		8,043		6,610
Total deferred tax assets	$	17,423	$	14,987

Deferred tax liabilities:
Intangible assets		(11,160)		(6,195)
Property, plant and equipment		(8,493)		(8,210)
Inventory		(89)		(115)
Other		(229)		(296)
Total deferred tax liabilities		(19,971)		(14,816)

Net deferred tax (liabilities) assets	$	(2,548)	$	171

In assessing the ability to realize deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that the Company will realize the benefits of these deductible differences. Accordingly, a valuation allowance for deferred tax assets at August 31, 2013 and 2012 has not been established.

The Company does not intend to repatriate earnings of its foreign subsidiaries and accordingly, has not provided a U.S. deferred income tax liability on these undistributed earnings that are indefinitely reinvested. The Company would recognize a deferred income tax liability if the Company were to determine that such earnings are no longer indefinitely reinvested. At August 31, 2013, undistributed earnings of the Company’s foreign subsidiaries amounted to approximately $16.7 million. Determination of the estimated amount of unrecognized deferred tax liability on these undistributed earnings is not practicable.

The Company recognizes tax benefits only for tax positions that are more likely than not to be sustained upon examination by tax authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely to be realized upon settlement. Unrecognized tax benefits are tax benefits claimed in the Company’s tax returns that do not meet these recognition and measurement standards.

A reconciliation of changes in pre-tax unrecognized tax benefits is as follows:


	August 31,
$ in thousands	2013		2012
Unrecognized Tax Benefits at September 1	$	1,309	$	1,565
Increases for positions taken in current year		68		2
Increases for positions taken in prior years		346		61
Decreases for positions taken in prior years		-		(44)
Settlements with taxing authorities		(6)		(42)
Reduction resulting from lapse of applicable statute of limitations		(352)		(173)
Other increases (decreases)		10		(60)
Unrecognized Tax Benefits at August 31	$	1,375	$	1,309

The net amount of unrecognized tax benefits at August 31, 2013 and 2012 that, if recognized, would impact the Company’s effective tax rate was $1.4 million and $1.3 million, respectively. Recognition of these tax benefits would have a favorable impact on the Company’s effective tax rate.

The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense. Total accrued pre-tax liabilities for interest and penalties included in the unrecognized tax benefits liability were $0.5 million and $0.5 million for the years ended August 31, 2013 and 2012, respectively.

The Company files income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions. The Company is no longer subject to examination by tax authorities in most jurisdictions for years prior to 2010.

While it is expected that the amount of unrecognized tax benefits will change in the next twelve months as a result of the expiration of statutes of limitations, the Company does not expect this change to have a significant impact on its results of operations or financial position.