Income Taxes

12 Months Ended

Sep. 30, 2012

Income Taxes

Income Taxes

Note 6    Income Taxes

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

	Year Ended September 30,
	2010		2011			2012
Income before income taxes:
U.S.	$	12,615	$	44,244		$	67,968
Foreign		2,977		5,154			9,027
Total	$	15,592	$	49,398		$	76,995
Provision for income taxes:
Current:
U.S. Federal	$	2,722	$	5,952		$	15,836
Foreign		678		2,145			1,712
State		696		825			2,079
Total		4,096		8,922			19,627
Deferred:
U.S. Federal		720		7,411			6,314
Foreign		147		(685	)		585
State		1,754		2,308			601
Valuation allowance		—		314			(314	)
Total		2,621		9,348			7,186
Total provision for income taxes	$	6,717	$	18,270		$	26,813

        The provision for income taxes applicable to results of operations differed from the U.S. federal statutory rate as follows:

	Year Ended September 30,
	2010			2011			2012
Statutory federal tax rate		35	%		35	%		35	%
Tax provision for income taxes at the statutory rate	$	5,457		$	17,289		$	26,949
Foreign tax rate differentials		(216	)		(342	)		(864	)
Provision for state taxes, net of federal taxes		468			1,289			1,578
U.S. tax on distributed and undistributed earnings of foreign subsidiaries		165			—			335
Manufacturer's deduction		(193	)		(910	)		(1,715	)
Tax credits		(476	)		(713	)		—
State tax rate reduction impact on deferred tax asset		1,149			1,228			89
Change in Valuation Allowance		—			314			(314	)
Other, net		363			115			755
Provision for income taxes at effective tax rate	$	6,717		$	18,270		$	26,813

        During fiscal 2012, the Company's effective tax rate was lower due to increased proportion of profitability in foreign jurisdictions and the increased Manufacturer's deduction (due to increased U.S. profitability).

        During both fiscal 2010 and fiscal 2011, the Company's effective tax rate increased due to the revaluation of the Company's deferred tax assets at a lower blended state income tax rate. The impact on the effective tax rate in 2011 was lower due to the Company's higher profitability. Also in fiscal 2011, the effective rate decreased due to additional tax credits.

        Deferred tax assets (liabilities) are comprised of the following:

	September 30,
	2011			2012
Current deferred tax assets (liabilities):
Inventories	$	3,106		$	2,996
Pension and postretirement benefits		3,638			3,726
Accrued expenses and other		585			381
Accrued compensation and benefits		978			1,166
Tax attributes		109			740
TIMET Agreement		925			924
Total net current deferred tax assets	$	9,341		$	9,933
Noncurrent deferred tax assets (liabilities):
Property, plant and equipment, net	$	(22,960	)	$	(25,665	)
Intangible assets		(1,973	)		(1,888	)
Pension and postretirement benefits		72,072			79,653
Accrued compensation and benefits		2,556			2,889
TIMET Agreement		13,099			12,147
Tax attributes		1,337			—
Other accruals		1,296			1,119
		65,427			68,255
Valuation Allowance		(314	)		—
Total net noncurrent deferred tax assets	$	65,113		$	68,255
Net deferred tax assets (liabilities)	$	74,454		$	78,188

        The Company has $740 of other tax attributes which include foreign and state operating loss carryforwards. During fiscal year 2011, the Company recorded a valuation allowance against $314 of foreign losses, which was reversed in 2012. Some tax attributes expire beginning in 2024 and others have no expiration.

        Undistributed earnings of certain of our foreign subsidiaries amounted to approximately $43,054 at September 30, 2012. The Company considers those earnings reinvested indefinitely and, accordingly, no provision for U.S. income taxes has been provided. Determination of the amount of unrecognized deferred U.S. income tax liability is not practicable because of the complexities associated with its hypothetical calculation.

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

	October 1, 2009 To September 30, 2010		October 1, 2010 To September 30, 2011		October 1, 2011 To September 30, 2012
Balance at beginning of period	$	264	$	264	$	264
Gross Increases—current period tax positions		—		—		—
Gross Decreases—current period tax positions		—		—		—
Gross Increases—tax positions in prior periods		—		—		—
Gross Decreases—tax positions in prior periods		—		—		—
Gross Decreases—settlements with taxing authorities		—		—		—
Gross Decreases—lapse of statute of limitations		—		—		—
Balance at end of period	$	264	$	264	$	264

        The total amount of unrecognized tax benefits that would, if recognized, affect the effective income tax rate is $234 as of September 30, 2012. Additionally, as consistent with prior periods, the Company recognized accrued interest expense and penalties related to the unrecognized tax benefits as additional income tax expense. The total amount of accrued interest and penalties was approximately $75 and $0 respectively, as of September 30, 2012.

        As of September 30, 2012, the Company is open to examination in the U.S. federal income tax jurisdiction for the 2007 through 2012 tax years and in various foreign jurisdictions from 2009 through 2012. The Company is also open to examination in various states in the U.S., none of which were individually material.

        Of the unrecognized tax benefits noted above, the Company anticipates the entire amount to be recognized in the next 12 months due to the expiration of the statute of limitation.