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Income Taxes | 12 Months Ended
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Sep. 30, 2011
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The components of the provision (benefit) for income taxes are as follows:
| Year Ended September 30,
| 2011 |  | 2010 |  | 2009
| (dollars in thousands)
Current: |  |  |  |  |
Domestic Federal | $ | 800 |  |  | 200 |  |  | $ | (330 | )
Foreign | 15,910 |  |  | 7,200 |  |  | 640 |
Domestic state | 110 |  |  | 110 |  |  | 10 |
Total current | 16,820 |  |  | 7,510 |  |  | 320 |
Deferred: |  |  |  |  |
Domestic Federal | (100 | ) |  | (1,540 | ) |  | (710 | )
Foreign | (520 | ) |  | 180 |  |  | (110 | )
Domestic state | (10 | ) |  | — |  |  | 80 |
Total deferred | (630 | ) |  | (1,360 | ) |  | (740 | )
Total provision | $ | 16,190 |  |  | $ | 6,150 |  |  | $ | (420 | )
A reconciliation of actual income taxes to income taxes at the expected United States federal corporate income tax rate of thirty-five percent is as follows:
| Year Ended September 30,
| 2011 |  | 2010 |  | 2009
| (dollars in thousands)
Tax provision (benefit) at the statutory federal rate | $ | 13,410 |  |  | $ | 5,340 |  |  | $ | (680 | )
Effect of permanent book-tax differences | 510 |  |  | 240 |  |  | 130 |
State tax provision | 100 |  |  | 20 |  |  | 20 |
Valuation allowance for net deferred tax assets | 470 |  |  | 90 |  |  | 80 |
Uncertain tax items | 1,620 |  |  | 530 |  |  |
Expiration of foreign net operating loss | 170 |  |  | — |  |  | — |
Other items | (90 | ) |  | (70 | ) |  | 30 |
| $ | 16,190 |  |  | $ | 6,150 |  |  | $ | (420 | )
Deferred income taxes reflect the tax effects of temporary differences between the carrying value of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The tax effects of temporary book-tax differences that give rise to significant portions of the deferred tax assets and deferred tax liability are as follows:
| Year Ended September 30,
| 2011 |  | 2010 |  | 2009
| (dollars in thousands)
Deferred tax assets - current: |  |  |  |  |
Capitalized inventory costs | $ | 150 |  |  | $ | 470 |  |  | 310 |
Inventory write-downs | 590 |  |  | 820 |  |  | 870 |
Accrued Warranty | (580 | ) |  | 370 |  |  | 520 |
Deferred profits | 6,820 |  |  | (180 | ) |  | (10 | )
Accruals and reserves not currently deductible | 2,580 |  |  | 650 |  |  | 600 |
Deferred tax assets - current net of valuation allowance | $ | 9,560 |  |  | $ | 2,130 |  |  | $ | 2,290 |
Deferred tax assets (liabilities)- non-current: |  |  |  |  |
Stock option expense | 270 |  |  | 430 |  |  | 310 |
Book vs. tax basis of acquired assets | (760 | ) |  | (670 | ) |  | (830 | )
Foreign and state net operating losses | 850 |  |  | 380 |  |  | 300 |
Book vs. tax depreciation and amortization | 300 |  |  | 350 |  |  | 150 |
Foreign tax credits | — |  |  | 2,540 |  |  | 1,490 |
Other deferred tax assets | 90 |  |  | 20 |  |  | 20 |
Total deferred tax assets - net | 750 |  |  | 3,050 |  |  | 1,440 |
Valuation allowance | (860 | ) |  | (390 | ) |  | (300 | )
Deferred tax assets (liabilities)- non-current, net of valuation allowance | $ | (110 | ) |  | $ | 2,660 |  |  | $ | 1,140 |
Changes in the deferred tax valuation allowance are as follows:
| Year Ended September 30,
| 2011 |  | 2010 |  | 2009
| (dollars in thousands)
Balance at the beginning of the year | $ | 390 |  |  | $ | 300 |  |  | $ | 220 |
Additions (subtractions) to valuation allowance | 470 |  |  | 90 |  |  | 80 |
Balance at the end of the year | $ | 860 |  |  | $ | 390 |  |  | $ | 300 |
The Company has net operating losses in some states, China and Hong Kong at September 30, 2011 which expire in varying amounts between 2012 and 2015. We have established a valuation allowance on all deferred tax assets related to foreign and state net operating losses, as based on the weight of available evidence, it is more likely than not that they will not be realized. The Company has foreign tax credits which expire in varying amounts between 2018 and 2020. Proper accounting for income taxes requires that a valuation allowance is recognized if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax asset will not be realized. Each quarter the valuation allowance is re-evaluated. Tax payments of $8.5 million were made and tax refunds of $0.3 million were received during fiscal 2011. We adopted, as of the beginning of fiscal 2008, the standards required for accounting for uncertainty in income taxes. Prior to the adoption of these standards, our policy was to establish reserves that reflected the probable outcome of known tax contingencies. The effects of final resolution, if any, were recognized as changes to the effective income tax rate in the period of resolution. The standards adopted at the beginning of fiscal 2008 require application of a “more likely than not” threshold to the recognition and de-recognition of uncertain tax positions. We currently recognize the amount of tax benefit that has a greater than 50 percent likelihood of being ultimately realized upon settlement. The standards further require that a change in judgment related to the expected ultimate resolution of uncertain tax positions be recognized in earnings in the quarter of such change. The following table sets forth changes in our total gross unrecognized tax benefit liabilities for fiscal 2011. Approximately $2.0 million of this total represents the amount that, if recognized would favorably affect our effective income tax rate in future periods.
| Year Ended September 30,
| 2011 |  | 2010 |  | 2009
| (dollars in thousands)
Balances at beginning of the year | $ | 1,010 |  |  | $ | 480 |  |  | $ | 440 |
Additions related to current year tax positions | 1,210 |  |  | 490 |  |  | 70 |
Additions related to tax positions taken in prior years | 450 |  |  | 70 |  |  | — |
Reductions related to settlements with tax authorities | — |  |  | — |  |  | — |
Reductions due to lapse of statute of limitations | (40 | ) |  | (30 | ) |  | (30 | )
Balance at the end of the year | $ | 2,630 |  |  | $ | 1,010 |  |  | $ | 480 |
We have classified all of our liabilities for uncertain tax positions as income taxes payable long-term. We report accrued interest and penalties related to unrecognized tax benefits in income tax expense. For fiscal 2011, we recognized a net expense for interest and penalties of $0.2 million resulting in a cumulative accrual of $0.4 million for potential interest and penalties as of September 30, 2011. During the current fiscal year, we recorded a benefit of less than $0.1 million, resulting from the reversal of liabilities in taxing jurisdictions where the statute of limitations had expired. We do not expect that the amount of our tax reserves will materially change in the next 12 months other than the continued accrual of interest and penalties. The Company and one or more of its subsidiaries file income tax returns in The Netherlands, Germany, France and other foreign jurisdictions, as well as the U.S. and various states in the U.S. We have not signed any agreements with the Internal Revenue Service, any state or foreign jurisdiction to extend the statute of limitations for any fiscal year. As such, the number of open years is the number of years dictated by statute in each of the respective taxing jurisdictions, but generally is from 3 to 5 years. These open years contain certain matters that could be subject to differing interpretations of applicable tax laws and regulations as they relate to the amount, timing, or inclusion of revenues and expenses, or the sustainability of income tax positions of the Company and its subsidiaries. The Company is currently under IRS examination for fiscal year ending September 30, 2009.

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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 Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 2: 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 3: 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 4: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 5: 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 Reference 6: 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 7: 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 8: 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 + Details
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