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INCOME TAXES | 12 Months Ended
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Oct. 31, 2014
INCOME TAXES [Abstract] |
INCOME TAXES |
7. | INCOME TAXES
In the fiscal years set forth below, the provision (benefit) for income taxes consisted of the following (in thousands):
|  | Year Ended October 31, |
|  | 2014 |  |  | 2013 |  |  | 2012 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
U.S. taxes |  | $ | 3,498 |  |  | $ | 737 |  |  | $ | 5,460 |
Foreign taxes |  |  | 3,594 |  |  |  | 2,606 |  |  |  | 2,612 |
|  |  | 7,092 |  |  |  | 3,343 |  |  |  | 8,072 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
U.S. taxes |  |  | (709 | ) |  |  | 855 |  |  |  | (1,931 | )
Foreign taxes |  |  | (165 | ) |  |  | 54 |  |  |  | 85 |
|  |  | (874 | ) |  |  | 909 |  |  |  | (1,846 | )
|  | $ | 6,218 |  |  | $ | 4,252 |  |  | $ | 6,226 |
A comparison of income tax expense at the U.S. statutory rate of 35% to the Company's effective tax rate is as follows:
|  | Year Ended October 31, |
|  | 2014 |  |  | 2013 |  |  | 2012 |
Income (Loss) before income taxes (in thousands): |  |  |  |  |  |  |  |  |  |  |  |
Domestic |  | $ | 9,190 |  |  | $ | 4,524 |  |  | $ | 12,432 |
Foreign |  |  | 12,171 |  |  |  | 7,918 |  |  |  | 9,432 |
Earnings (Loss) before taxes on income |  | $ | 21,361 |  |  | $ | 12,442 |  |  | $ | 21,864 |
Tax rates: |  |  |  |  |  |  |  |  |  |  |  |
U.S. statutory rate |  |  | 35 | % |  |  | 35 | % |  |  | 35 | %
Effect of tax rate of international jurisdictions different than U.S. statutory rates |  |  | (6 | )% |  |  | (6 | )% |  |  | (6 | )%
Valuation allowance |  |  | 0 | % |  |  | 5 | % |  |  | 1 | %
State taxes |  |  | 0 | % |  |  | 1 | % |  |  | 1 | %
Tax Credits |  |  | (1 | )% |  |  | (3 | )% |  |  | (2 | )%
Other |  |  | 1 | % |  |  | 2 | % |  |  | (1 | )%
Effective tax rate |  |  | 29 | % |  |  | 34 | % |  |  | 28 | %
We have not made any provision for U.S. income taxes on the undistributed earnings of our wholly-owned foreign subsidiaries based upon our determination that such earnings will be indefinitely reinvested. Undistributed earnings of our wholly-owned foreign subsidiaries at October 31, 2014 were approximately $65.4 million. In the event these earnings are later distributed to the U.S., such distributions would likely result in additional U.S. tax that may be offset, at least in part, by associated foreign tax credits. Deferred income taxes are determined based on the difference between the amounts used for financial reporting purposes and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred taxes are adjusted for changes in tax rates and tax laws when changes are enacted. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. As of October 31, 2014, we had deferred tax assets established for accumulated net operating loss carryforwards of $1.1 million, primarily related to state and foreign jurisdictions. We also have deferred tax assets for research and development tax credits. We have established a valuation allowance against some of these carryforwards due to the uncertainty of their full realization. As of October 31, 2014 and 2013, the balance of this valuation allowance was $1.1 million and $1.2 million, respectively. Significant components of our deferred tax assets and liabilities at October 31, 2014 and 2013 were as follows (in thousands):
|  | October 31, |
|  | 2014 |  |  | 2013 |
Deferred Tax Assets: |  |  |  |  |  |  |  |
Net derivative instruments |  | $ | — |  |  | $ | 411 |
Accrued inventory reserves |  |  | 1,015 |  |  |  | 1,002 |
Accrued warranty expenses |  |  | 397 |  |  |  | 154 |
Compensation related expenses |  |  | 1,613 |  |  |  | 1,572 |
Unrealized exchange gain/loss |  |  | 435 |  |  |  | — |
Other accrued expenses |  |  | 167 |  |  |  | 191 |
Net operating loss and credit carryforwards |  |  | 1,417 |  |  |  | 1,468 |
Other |  |  | 118 |  |  |  | 409 |
|  |  | 5,162 |  |  |  | 5,207 |
Less: Valuation allowance on net operating loss and credit carryforwards |  |  | (1,225 | ) |  |  | (1,199 | )
Deferred tax assets |  |  | 3,937 |  |  |  | 4,008 |
Deferred Tax Liabilities: |  |  |  |  |  |  |  |
Net derivative instruments |  |  | (537 | ) |  |  | — |
Property and equipment and capitalized software development costs |  |  | (1,950 | ) |  |  | (1,814 | )
Unrealized exchange gain/loss |  |  | — |  |  |  | (359 | )
Other |  |  | (381 | ) |  |  | (498 | )
Net deferred tax assets |  | $ | 1,069 |  |  | $ | 1,337 |
As of October 31, 2014, we had deferred tax assets relating to net operating losses carryforwards for international and U.S. income tax purposes of $1.1 million, of which $1.0 million will expire within 5 years and $125,000 will expire between 5 and 20 years. We also had deferred tax assets relating to tax credits of $268,000 which will expire between 10 and 20 years. A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding the related accrual for interest or penalties, is as follows (in thousands):
|  | 2014 |  |  | 2013 |  |  | 2012 |
Balance, beginning of year |  | $ | 1,284 |  |  | $ | 118 |  |  | $ | 244 |
Additions based on tax positions related to the current year |  |  | 5 |  |  |  | 1,217 |  |  |  | 5 |
Additions (reductions) related to prior year tax positions |  |  | (4 | ) |  |  | 23 |  |  |  | (131 | )
Reductions due to statute expiration |  |  | — |  |  |  | (74 | ) |  |  | — |
Other |  |  | (89 | ) |  |  | — |  |  |  | — |
Balance, end of year |  | $ | 1,196 |  |  | $ | 1,284 |  |  | $ | 118 |
The entire balance of the unrecognized tax benefits and related interest at October 31, 2014, if recognized, would favorably affect the effective tax rate in future periods. We recognize accrued interest and penalties related to unrecognized tax benefits as components of our income tax provision. As of October 31, 2014, the gross amount of interest accrued, reported in other liabilities, was approximately $10,000, which did not include the federal tax benefit of interest deductions. The statute of limitations with respect to unrecognized tax benefits will expire between July 2015 and July 2018. Due to the uncertain and complex application of tax regulations, it is possible that the ultimate resolution of future audits may result in liabilities that could be different from this estimate. In such case, we would record additional tax expense or tax benefit in the tax provision (benefit) or reclassify amounts on the consolidated balance sheets in the period in which the matter is effectively settled with the taxing authority. We file income tax returns in the U.S. federal jurisdiction and various states, local, and non-U.S. jurisdictions. The Internal Revenue Service (IRS) finalized their audit of our federal income tax returns for fiscal years 2011 and 2012 with minimal adjustments. We have also been notified by the German taxing authority that they have finalized their audit for fiscal years 2009 to 2012 with minimal adjustments. A summary of open tax years by major jurisdiction is presented below:
United States federal | Fiscal 2011 through the current period
Indiana | Fiscal 2008 through the current period
California | Fiscal 2010 through the current period
Germany¹ | Fiscal 2013 through the current period
Taiwan | Fiscal 2011 through the current period
¹ Includes federal as well as state, provincial or similar local jurisdictions, as applicable.

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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 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 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=26873400&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 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 5: 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 6: 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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