(12) Income Taxes

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

	2013		2012		2011
Domestic operations	$	21,181	$	16,418	$	7,039
Foreign operations		13,369		8,322		9,923
	$	34,550	$	24,740	$	16,962

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

	2013			2012			2011
Federal:
Current	$	9,428		$	6,533		$	5,342
Deferred		(2,011	)		(1,476	)		(561	)
State and local:
Current		1,568			716			634
Deferred		(628	)		(277	)		(162	)
Foreign:
Current		3,875			2,287			2,693
Deferred		(10	)		(24	)		48
	$	12,222		$	7,759		$	7,994

Income taxes payable, which is included in accrued expenses, was $3,956 and $800 at June 30, 2013 and 2012, respectively.

The tax effects of temporary differences that give rise to the deferred tax assets and liabilities at June 30, 2013 and 2012 are presented below:

	2013			2012
Deferred tax assets:
Accrued environmental remediation liabilities not currently deductible	$	102		$	302
Accrued deferred compensation		2,791			2,429
Accrual for acquisition costs not currently deductible		-			337
Accrual for sales deductions not currently deductible		2,989			1,528
Additional inventoried costs for tax purposes		206			255
Allowance for doubtful accounts receivable		139			134
Depreciation and amortization		2,690			1,438
Accrual for payments to former senior management and other personnel related costs		57			159
Contingent consideration		1,949			489
Foreign deferred tax assets		246			-
Domestic net operating loss carryforwards		200			200
Foreign net operating loss carryforwards		758			965
Total gross deferred tax assets		12,127			8,236
Valuation allowances		(958	)		(946	)
		11,169			7,290

Deferred tax liabilities:
Foreign deferred tax liabilities		(6	)		(8	)
Goodwill		(2,306	)		(1,457	)
Other		(107	)		(166	)
Total gross deferred tax liabilities		(2,419	)		(1,631	)

Net deferred tax assets	$	8,750		$	5,659

The following table shows the current and non current deferred tax assets (liabilities) at June 30, 2013 and 2012:

	2013			2012
Current deferred tax assets, net	$	701		$	948
Non-current deferred tax assets, net		8,055			4,719
Current deferred tax liabilities		-			-
Non current deferred tax liabilities		(6	)		(8	)
Net deferred tax assets	$	8,750		$	5,659

The net change in the total valuation allowance for the year ended June 30, 2013 was an increase of $12. The net change in the total valuation allowance for the year ended June 30, 2012 was a decrease of $73. A valuation allowance is provided when it is more likely than not that some portion, or all, of the deferred tax assets will not be realized. The Company has established valuation allowances primarily for net operating loss carryforwards in certain foreign countries. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets are not expected to be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which net operating loss carryforwards are utilizable and temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. In order to fully realize the net deferred tax assets recognized at June 30, 2013, the Company will need to generate future taxable income of approximately $23,200.

Based upon the level of historical taxable income and projections for taxable income over the periods which the deferred tax assets are deductible, management believes it is more likely than not the Company will realize the benefits of these deductible differences. There can be no assurance, however, that the Company will generate any earnings or any specific level of continuing earnings in the future. The amount of the deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced.

Deferred taxes have not been provided for undistributed earnings of foreign subsidiaries amounting to approximately $85,300 at June 30, 2013 since substantially all of these earnings are expected to be permanently reinvested in foreign operations. A deferred tax liability will be recognized when the Company expects that it will recover these undistributed earnings in a taxable manner, such as through the receipt of dividends or sale of the investments. In connection with the Rising acquisition, the Company repatriated approximately $15,000 of cash from certain foreign subsidiaries, resulting in a tax charge of approximately $2,600 recorded during the year ended June 30, 2011. The Company intends to permanently reinvest the remaining undistributed earnings and has no plan for further repatriation. Determination of the amount of unrecognized deferred U.S. income tax liabilities, net of unrecognized foreign tax credits, is not practical to calculate because of the complexity of this hypothetical calculation.

A reconciliation of the statutory federal income tax rate and the effective tax rate for continuing operations for the fiscal years ended June 30, 2013, 2012 and 2011 follows:

	2013			2012			2011
Federal statutory tax rate		35.0	%		35.0	%		35.0	%
State and local taxes, net of federal income tax benefit		3.0			3.0			2.4
Decrease (increase) in valuation allowance		-			0.2			(0.4	)
Foreign tax rate differential		(2.1	)		(3.0	)		(4.4	)
Impact of repatriation of non-US earnings		-			(2.1	)		15.3
Other		(0.5	)		(1.7	)		(0.8	)
Effective tax rate		35.4	%		31.4	%		47.1	%

We operate in various tax jurisdictions, and although we believe that we have provided for income and other taxes in accordance with the relevant regulations, if the applicable regulations were ultimately interpreted differently by a taxing authority, we may be exposed to additional tax liabilities.

There are no material unrecognized tax benefits included in the consolidated balance sheet that would, if recognized, have a material effect on the Company’s effective tax rate. The Company is continuing its practice of recognizing interest and penalties related to income tax matters in income tax expense. The Company did not recognize interest and penalties during the years ended June 30, 2013 and June 30, 2012. The Company files U.S. federal, U.S. state, and foreign tax returns, and is generally no longer subject to tax examinations for fiscal years prior to 2009 (in the case of certain foreign tax returns, fiscal year 2008).