Income Taxes

12 Months Ended

Sep. 30, 2011

Income Taxes [Abstract]

Income Taxes

(7) Income Taxes

(a) Earnings before income taxes, and the related provision for income taxes for the years ended September 30, 2011, 2010 and 2009 were as follows:

Year Ended September 30,	2011			2010			2009
Domestic	$	37,955		$	38,329		$	46,504
Foreign		2,545			3,071			2,819
Total earnings before income taxes	$	40,500		$	41,400		$	49,323
Provision (credit) for income taxes -
Federal -
Current provision	$	13,336		$	13,626		$	15,094
Temporary differences
Fixed asset basis differences and depreciation		(155	)		58			16
Intangible asset basis differences and amortization		(312	)		(335	)		(363	)
Currently non-deductible expenses and reserves		(627	)		(29	)		(134	)
Stock based compensation		(706	)		(618	)		(373	)
Other, net		35			(75	)		48
Subtotal		11,571			12,627			14,288
State and local		1,213			1,186			1,385
Foreign		885			940			891
Total income tax provision	$	13,669		$	14,753		$	16,564

(b) The following is a reconciliation between the statutory U.S. income tax rate and the effective rate derived by dividing the provision for income taxes by earnings before income taxes:

Year Ended September 30,	2011					2010					2009
Computed income taxes at statutory rate	$	14,175		35.0	%	$	14,490		35.0	%	$	17,263		35.0	%
Increase (decrease) in taxes resulting from -
State and local income taxes		834		2.1			777		1.9			904		1.8
Foreign tax rate differences		58		0.1			(87	)	(0.2	)		(43	)	(0.1	)
Qualified domestic production incentives		(1,025	)	(2.5	)		(786	)	(1.9	)		(870	)	(1.8	)
Bioline Group transaction costs		—		—			434		1.0			—		—
U.S. book-to-return and uncertain tax position activity		(422	)	(1.0	)		8		—			(412	)	(0.8	)
Other, net		49		0.1			(83	)	(0.2	)		(278	)	(0.5	)
	$	13,669		33.8	%	$	14,753		35.6	%	$	16,564		33.6	%

(c) The components of net deferred tax assets (liabilities) were as follows:

As of September 30,	2011			2010
Deferred tax assets -
Valuation reserves and non-deductible expenses	$	1,529		$	1,128
Stock compensation expense not deductible		2,562			2,313
Net operating loss carryforwards		767			740
Inventory basis differences		1,322			630
Other		—			125
Subtotal		6,180			4,936
Less valuation allowance		(439	)		(439	)
Deferred tax assets		5,741			4,497
Deferred tax liabilities -
Fixed asset basis differences and depreciation		(731	)		(721	)
Intangible asset basis differences and amortization		(3,421	)		(4,082	)
Other		(442	)		(579	)
Deferred tax liabilities		(4,594	)		(5,382	)
Net deferred tax assets (liabilities)	$	1,147		$	(885	)

For income tax purposes, we have tax benefits related to operating loss carryforwards in the countries of Australia, Belgium and France. These net operating loss carryforwards have no expiration date. We have recorded deferred tax assets for these carryforwards totaling $767 and $740 at September 30, 2011 and September 30, 2010, respectively, inclusive of valuation allowances for the country of Belgium. This valuation allowance is for pre-acquisition net operating loss carryforwards. If tax benefits are recognized in future years for these pre-acquisition net operating loss carryforwards, such benefits will be allocated to reduce goodwill and acquired intangible assets.

The realization of deferred tax assets in foreign jurisdictions is dependent upon the generation of future taxable income in these countries. We have considered the levels of currently anticipated pre-tax income in foreign jurisdictions in assessing the required level of the deferred tax asset valuation allowance. Taking into consideration historical and current operating results, and other factors, we believe that it is more likely than not that the net deferred tax asset for foreign jurisdictions, after consideration of the valuation allowance, which has been established, will be realized. The amount of the net deferred tax asset considered realizable in foreign jurisdictions, however, could be reduced in future years if estimates of future taxable income during the carryforward period are reduced.

Undistributed earnings reinvested indefinitely in our non-U.S. operations were approximately $17,000 at September 30, 2011. U.S. deferred tax liabilities of approximately $6,000 on such earnings have not been recorded. We believe that such U.S. taxes would be largely offset by foreign tax credits for taxes paid in non-U.S. jurisdictions.

As described in Note 1, we utilize a comprehensive model for the recognition, measurement, presentation and disclosure of uncertain tax positions, assuming full knowledge of all relevant facts by the applicable tax authorities. The total amount of unrecognized tax benefits at September 30, 2011 and September 30, 2010 related to such positions was $542 and $725, respectively, of which the full amounts would favorably affect the effective tax rate if recognized. We recognize interest and penalties related to uncertain tax positions as a component of our income tax provision. During fiscal 2011 and 2010, we (decreased)/increased our tax provision by approximately ($109) and $128, respectively, for such interest and penalties. We had approximately $120 accrued for the payment of interest and penalties at September 30, 2011 compared to $229 accrued at September 30, 2010. The amount of our liability for uncertain tax positions expected to be paid or settled in the next 12 months is uncertain.

A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:

	2011			2010
Unrecognized income tax benefits beginning of year	$	725		$	572
Additions for tax positions related to the current year		—			67
Additions for tax positions of prior years		333			206
Reductions for tax positions of prior years		(269	)		—
Tax examination settlements		(4	)		—
Expirations of statute of limitations		(243	)		(120	)
Unrecognized income tax benefits at end of year	$	542		$	725

We are subject to examination by the tax authorities in the U.S. (both federal and state) and the countries of Australia, Belgium, England, France, Germany, Holland and Italy. In the U.S., open tax years are for fiscal 2010 and forward. The IRS has completed its examination of our federal returns for fiscal 2008 and 2009. In countries outside the U.S., open tax years generally range from fiscal 2006 and forward. However, in Belgium, the utilization of local net operating loss carryforwards extends the statute of limitations for examination well into the foreseeable future. Tax examinations in France were completed for fiscal years 2004-2006 during fiscal 2007.