Note

11.

Income Taxes

Earnings before income taxes are as follows (in thousands):

	Year Ended March 31,
	2017		2016		2015
Domestic	$	12,913	$	14,427	$	14,896
Foreign		1,383		1,128		451
	$	14,296	$	15,555	$	15,347

The components of our provision for income taxes are as follows (in thousands):

	Year Ended March 31,
	2017			2016			2015
Current tax provision
Federal	$	2,282		$	3,666		$	4,186
State		510			627			1,135
Foreign		849			658			212
		3,641			4,951			5,533
Deferred tax provision:
Federal		(126	)		(189	)		252
State		(32	)		(138	)		51
Foreign		(370	)		(238	)		(72	)
		(528	)		(565	)		231
	$	3,113		$	4,386		$	5,764

The components of net deferred tax assets and liabilities are as follows (in thousands):

	March 31,
	201 7			201 6
Current deferred tax assets:
Accrued employee-related expenses	$	242		$	257
Allowances and reserves		132			217
Stock option deductible differences		898			606
Inventory		691			533
Currency translation adjustment		--			12
Net operating loss		--			110
Other		9			3
		1,972			1,738

Long-term deferred tax liability:
Property, plant and equipment		(1,635	)		(1,599	)
Goodwill and intangible assets		(3,807	)		(4,335	)
Currency translation adjustment		(3	)		--
Other		(81	)		(5	)
		(5,526	)		(5,939	)

Net deferred tax liability	$	(3,554	)	$	(4,201	)

A reconciliation of our income tax provision and the amounts computed by applying statutory rates to income before income taxes is as follows (in thousands):

	Year Ended March 31,
	2017			2016			2015
Federal income taxes at statutory rates	$	4,861		$	5,445		$	5,374
State income taxes, net of federal benefit		302			293			860
Tax benefit of stock option exercises		(1,576	)		(751	)		209
Section 199 manufacturing deduction		(304	)		(440	)		(317	)
Research and development credit		(385	)		(345	)		(248	)
Other		215			184			(114	)
	$	3,113		$	4,386		$	5,764

We or

one

of our subsidiaries files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. Our federal tax returns for all years after

2013,

state tax returns after

2012,

and foreign tax returns after

2013

are subject to future examination by tax authorities for all our tax jurisdictions. Although the outcome of tax audits, if any, is always uncertain, we believe that we have adequately accrued for all amounts of tax, including interest and penalties and any adjustments that

may

result.

During the year ended

March 31, 2017,

the IRS examination of our tax year ended

March 31,

2015

was completed with

change to the reported tax liability.

As of

March 31, 2017,

the gross amount of unrecognized tax benefits was

$331,000.

There would have been

impact on our effective tax rate for the year ended

March 31, 2017

had these benefits been recognized. We recognize interest and penalties related to unrecognized tax benefits in other expense and general and administrative expense, respectively. Accrued interest and penalties related to unrecognized tax benefits were

$17,000,

$3,000

and

as of

March 31, 2017,

2016

and

2015,

respectively. A reconciliation of the changes in the gross balance of unrecognized tax benefit amounts is as follows (in thousands):

	Year Ended March 31,
	2017		2016		2015
Beginning balance	$	221	$	--	$	--
Increases related to current period tax positions		110		221		--
Ending balance	$	331	$	221	$	--

We expect that the amount of unrecognized tax benefits will change in the next

months; however, we do

not

expect the change to have a significant impact on our consolidated statements of income or consolidated balance sheets. At this time, we expect resolution of the uncertain tax position within

months.

As of

March 31, 2017,

undistributed earnings of our Canadian subsidiary amounted to

$3,164,234.

Those earnings are considered to be indefinitely reinvested and, accordingly,

U.S. federal and state income taxes have been provided thereon. Upon distribution of those earnings in the form of dividends or otherwise, we would be subject to both U.S. income taxes (subject to an adjustment for foreign tax credits) and withholding taxes payable to the various foreign countries. Determination of the amount of unrecognized deferred U.S. income tax liability is

not

practicable because of the complexities associated with its hypothetical calculation; however, unrecognized foreign tax credits would be available to reduce a portion of the U.S. tax liability.