11. Income Taxes

The components of the provision for income taxes of continuing operations are as follows:

	Year ended September 30,
	2014			2013			2012
	(in thousands)
Current tax provision:
U.S. Federal	$	14,328		$	27,611		$	28,124
State		2,613			5,035			5,129
Foreign		1,888			1,757			118

		18,829			34,403			33,371
Deferred tax (benefit) expense:
U.S. Federal		(2,886	)		(6,012	)		(1,454	)
State		(526	)		(1,096	)		(265	)
Foreign		4,240			256			—

		828			(6,852	)		(1,719	)

Total provision	$	19,657		$	27,551		$	31,652

Deferred taxes reflect the net tax effect 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:

	September 30,
	2014			2013
	(in thousands)
Deferred tax assets:
Net operating losses—Foreign	$	6,426		$	4,572
Net operating losses—US		1,674			2,107
Accrued vacation and bonus		2,040			2,342
Inventory capitalization		7,328			4,048
Inventory reserves		105			565
Allowance for doubtful accounts		291			252
Stock compensation expense		10,259			8,036
Amortization of intangibles		9,071			6,666
Pension liability		790			852
Other		273			352

Total deferred tax assets before valuation allowance		38,257			29,792
Less: valuation allowance		(7,216	)		(5,424	)

Net deferred tax assets		31,041			24,368
Deferred tax liabilities:
Amortization of goodwill		16,022			7,339
Depreciation		754			1,235

Total deferred tax liabilities	$	16,776		$	8,574

Net deferred taxes	$	14,265		$	15,794

The net current deferred tax asset of approximately $12,321,000, and $10,558,000 is recorded in prepaid and deferred taxes on the consolidated balance sheet as of September 30, 2014 and 2013, respectively. The net non-current deferred tax asset of approximately $6,160,000 and $5,236,000 is recorded in deferred taxes and other assets on the consolidated balance sheet as of September 30, 2014 and 2013, respectively. The net non-current deferred tax liability of approximately $4,217,000 is recorded in other liabilities on the consolidated balance sheet as of September 30, 2014.

The reconciliation of the U.S. federal statutory rate to the effective rate for continuing operations is as follows:

	Year ended September 30,
	2014			2013			2012
U.S. statutory rate		35.0	%		35.0	%		35.0	%
Permanent items		0.5			0.6			—
State taxes		2.7			3.9			3.9
Net foreign rate differential		(2.5	)		(0.7	)		(0.8	)
Change in valuation allowance		3.6			1.3			1.5

Provision for income taxes		39.3	%		40.1	%		39.6	%

At September 30, 2014 and 2013, the Company had deferred tax assets related to available foreign net operating loss (NOL) carryforwards of approximately $6,426,000 and $4,572,000, respectively. All but approximately $547,000 of our NOLs maintain an indefinite carryforward life. The NOLs with limited carryforward periods will expire beginning in 2017 through 2034. Due to historic losses of those foreign entities, the Company does not believe that it is more likely than not that the related deferred tax assets will be realized and a full valuation allowance has been recorded. In addition, the Company also recorded a deferred tax asset of $1,674,000 related to NOL carryforwards related to its acquisition of Network International, Inc. in 2010. These NOL carryforwards expire in 2023. The Company will adjust these NOL carryforwards and the related valuation allowance as the related tax returns are filed.

The Company has not recorded a provision for deferred U.S. tax expense on the undistributed earnings of foreign subsidiaries since the Company intends to indefinitely reinvest the earnings of these foreign subsidiaries outside the U.S. The amount of such undistributed foreign earnings was approximately $8.0 million as of September 30, 2014. As of September 30, 2014 and 2013, approximately $9.3 million and $10.5 million, respectively, of cash and cash equivalents was held overseas and not available to fund domestic operations without incurring taxes upon repatriation.

The Company applies the authoritative guidance related to uncertainty in income taxes. The Company has concluded that there were no uncertain tax positions identified during its analysis. The Company's policy is to recognize interest and penalties in the period in which they occur in the income tax provision. The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, various state and local jurisdictions and in foreign jurisdictions, primarily Canada and the U.K. Currently, the Company is subject to income tax examinations for fiscal 2011 and 2012. The Company anticipates no material tax liability to arise from this examination. The statute of limitations for years prior to fiscal 2011 is now closed. However, certain tax attribute carryforwards that were generated prior to fiscal 2011 may be adjusted upon examination by tax authorities if they are utilized.