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Income Taxes | 12 Months Ended
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Sep. 30, 2012
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES The components of income before income taxes are as follows (in thousands):
| Fiscal years ended September 30,
| 2012 |  | 2011 |  | 2010
United States | $ | 2,808 |  |  | $ | 10,173 |  |  | $ | 7,080 |
International | 8,089 |  |  | 6,342 |  |  | 3,439 |
Total income before income taxes | $ | 10,897 |  |  | $ | 16,515 |  |  | $ | 10,519 |
The components of the income tax provision are as follows (in thousands):
| Fiscal years ended September 30,
| 2012 |  | 2011 |  | 2010
Current: |  |  |  |  |
Federal | $ | 2,203 |  |  | $ | 3,880 |  |  | $ | 3,072 |
State | 400 |  |  | 342 |  |  | 327 |
Foreign | 3,131 |  |  | 2,479 |  |  | 1,835 |
Deferred: |  |  |  |  |
U.S. | (2,229 | ) |  | (776 | ) |  | (3,052 | )
Foreign | (223 | ) |  | (429 | ) |  | (604 | )
Total income tax provision | $ | 3,282 |  |  | $ | 5,496 |  |  | $ | 1,578 |
10. INCOME TAXES (CONTINUED) The net deferred tax asset consists of the following (in thousands):
| As of September 30,
| 2012 |  | 2011
Current deferred tax asset | $ | 3,389 |  |  | $ | 2,610 |
Non-current deferred tax asset | 5,010 |  |  | 3,771 |
Current deferred tax liability | (16 | ) |  | (137 | )
Non-current deferred tax liability | (630 | ) |  | (813 | )
Net deferred tax asset | $ | 7,753 |  |  | $ | 5,431 |
Uncollectible accounts and other reserves | $ | 1,669 |  |  | $ | 1,454 |
Depreciation and amortization | 164 |  |  | 183 |
Inventories | 1,263 |  |  | 913 |
Compensation costs | 7,034 |  |  | 6,106 |
Tax carryforwards | 714 |  |  | 771 |
Valuation allowance | (534 | ) |  | (354 | )
Identifiable intangible assets | (2,557 | ) |  | (3,642 | )
Net deferred tax asset | $ | 7,753 |  |  | $ | 5,431 |
As of September 30, 2012, we have tax credit carryforwards in a foreign jurisdiction of $0.2 million, the majority of which will expire in 2015. We have generally concluded that it is more likely than not that our deferred tax assets will be realized based on future projected taxable income and the anticipated future reversal of deferred tax liabilities. Our valuation allowance for certain foreign locations at September 30, 2012 and 2011 was $0.5 million and $0.4 million, respectively. The amount of the deferred tax assets actually realized could vary if there are differences in the timing or amount of future reversals of existing deferred tax liabilities or changes in the amounts of future taxable income. If our future taxable income projections are not realized, an additional valuation allowance may be required, and would be reflected as income tax expense at the time that any such change in future taxable income is determined. The reconciliation of the statutory federal income tax rate to our effective income tax rate is as follows:
| Fiscal years ended September 30,
| 2012 |  | 2011 |  | 2010
Statutory income tax rate | 35.0 | % |  | 35.0 | % |  | 35.0 | %
Increase (decrease) resulting from: |  |  |  |  |
State taxes, net of federal benefits | 1.1 | % |  | 0.9 | % |  | 1.1 | %
Utilization of tax credits | (2.2 | )% |  | (1.4 | )% |  | (0.7 | )%
Discrete tax benefits | (14.1 | )% |  | (4.4 | )% |  | (22.4 | )%
Manufacturing deduction | (0.4 | )% |  | (3.1 | )% |  | (2.9 | )%
Tax rate differential on foreign earnings | 4.0 | % |  | 0.4 | % |  | — | %
Adjustment of tax contingency reserves | 4.9 | % |  | 2.6 | % |  | 2.8 | %
Non-deductible stock-based compensation | 1.0 | % |  | 0.6 | % |  | 0.9 | %
Other, net | 0.8 | % |  | 2.7 | % |  | 1.2 | %
Effective income tax rate | 30.1 | % |  | 33.3 | % |  | 15.0 | %
10. INCOME TAXES (CONTINUED) During fiscal 2012, we recorded a discrete tax benefit of $1.5 million, related to additional research and development tax credits identified for fiscal years ended September 30, 2009, 2010 and 2011, reversal of tax reserves for closure of various jurisdictions' tax matters and tax rate reductions in foreign jurisdictions. These discrete tax benefits reduced our effective tax rate by 14.1 percentage points for the twelve month period ended September 30, 2012 to 30.1%. During fiscal 2012, the income tax provision before discrete tax benefits was higher than the statutory rate primarily due to an increase in certain reserves for unrecognized tax benefits, an adjustment for foreign income taxed at the U.S. rate, and a reduction in domestic tax benefits compared to a year ago. During fiscal 2011, we recorded a discrete tax benefit of $0.7 million. This benefit primarily resulted from the reversal of tax reserves from various jurisdictions, primarily foreign, related to the expiration of the statutes of limitations. It also resulted from the enactment of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 extending the research and development tax credit that allowed us to record tax credits earned during the last three quarters of fiscal 2010 in the first quarter of fiscal 2011. This benefit reduced our effective tax rate by 4.4 percentage points for the twelve month period ended September 30, 2011 to 33.3%. During fiscal 2010, we reversed $2.3 million in income tax reserves associated primarily with the closing of prior tax years through statute expiration and the conclusion of a federal tax audit. While the statutes of limitations have not expired, U.S. federal income tax returns for the periods ended September 30, 2007 and September 30, 2008 have been audited by and settled with the Internal Revenue Service. The aforementioned income tax benefits resulting from the reversal of income tax reserves and other discrete tax benefits reduced the effective tax rate by 22.4 percentage points in fiscal 2010. A reconciliation of the beginning and ending amount of unrecognized tax benefits is (in thousands):
| Fiscal years ended September 30,
| 2012 |  | 2011 |  | 2010
Unrecognized tax benefits at beginning of fiscal year | $ | 2,061 |  |  | $ | 2,265 |  |  | $ | 4,146 |
Increases related to: |  |  |  |  |
Prior year income tax positions | 631 |  |  | 32 |  |  | 36 |
Current year income tax positions | 441 |  |  | 392 |  |  | 195 |
Decreases related to: |  |  |  |  |
Prior year income tax positions | (94 | ) |  | — |  |  | — |
Settlements | — |  |  | — |  |  | (1,740 | )
Expiration of statute of limitations | (319 | ) |  | (628 | ) |  | (372 | )
Unrecognized tax benefits at end of fiscal year | $ | 2,720 |  |  | $ | 2,061 |  |  | $ | 2,265 |
The total amount of unrecognized tax benefits that, if recognized, would affect our effective tax rate is $2.7 million. We expect that it is reasonably possible that the total amounts of unrecognized tax benefits will decrease approximately between $0.3 million to $0.4 million over the next 12 months due to the expiration of statue of limitations. We recognize interest and penalties related to income tax matters in income tax expense. During the fiscal years ended September 30, 2012, 2011 and 2010, there were insignificant amounts of interest and penalties related to income tax matters in income tax expense. We had accrued interest and penalties related to unrecognized tax benefits as of both September 30, 2012 and September 30, 2011, of $0.6 million. Our long-term income taxes payable on our condensed consolidated balance sheets includes these accrued interest and penalties in addition to the unrecognized tax benefits in the table above. We operate in multiple tax jurisdictions both in the U.S. and outside of the U.S. Accordingly, we must determine the appropriate allocation of income to each of these jurisdictions. This determination requires us to make several estimates and assumptions. Tax audits associated with the allocation of this income, and other complex issues, may require an extended period of time to resolve and may result in adjustments to our income tax balances in those years that are material to our consolidated balance sheet and results of operations. We are no longer subject to income tax examination for tax years prior to fiscal 2009 in the case of U.S. federal tax authorities and prior to fiscal 2008 for non-U.S. income tax authorities. For state taxing authorities, consisting primarily of Minnesota and California, we are no longer subject to income tax examination for tax years generally before fiscal 2008. 10. INCOME TAXES (CONTINUED) At September 30, 2012, we had approximately $22.0 million of accumulated undistributed foreign earnings, for which we have not accrued additional U.S. tax. Our policy is to reinvest earnings of our foreign subsidiaries indefinitely to fund current operations and provide for future international expansion opportunities, and only repatriate earnings to the extent that U.S. taxes have already been recorded. Although we have no current need to do so, if we change our unremitted assertion to repatriate additional undistributed foreign earnings for cash requirements in the United States, we would have to accrue applicable taxes. The amount of any taxes and the application of any tax credits would be determined based on the income tax laws at the time of such repatriation. Under current tax laws, we estimate the unrecognized deferred tax liability to be in the range of $2.5 million to $3.5 million and could have a material impact on our current consolidated balance sheet, results of operations and cash flows.

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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 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 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=6881521&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 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 5: 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 6: 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 7: 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 8: 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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