Annual report pursuant to Section 13 and 15(d)

INCOME TAXES

v2.4.0.8
INCOME TAXES
 12 Months Ended
Sep. 30, 2014
INCOME TAXES [Abstract]  
INCOME TAXES
13. INCOME TAXES:

The provision for income taxes consisted of the following:

   
2014
    
2013
    
2012
  
Current:
            
Federal
  
$
7,371
    
$
15,703
    
$
14,060
  
State
    
3,612
      
3,423
      
2,483
  
Foreign
    
10,427
      
4,804
      
6,437
  
     
21,410
      
23,930
      
22,980
  
Deferred
    
2,066
      
2,734
      
5,737
  
Total
  
$
23,476
    
$
26,664
    
$
28,717
  
                         

The reconciliation of the federal statutory tax rate to the consolidated effective tax rate was as follows:

   
2014
    
2013
    
2012
  
Federal statutory tax rate
    
35.0
%
    
35.0
%
    
35.0
%
Effect of state income taxes, net of federal deduction
    
3.8
      
2.7
      
2.1
  
Foreign taxes less than federal statutory rate
    
(2.1
)
    
(3.1
)
    
(0.6
)
Other
    
(2.1
)
    
(1.9
)
    
(2.3
)
Effective tax rate
    
34.6
%
    
32.7
%
    
34.2
%
 
The Company's foreign subsidiaries had income before income taxes for the years ended September 30, 2014, 2013 and 2012 of approximately $23,835, $23,662 and $24,654, respectively.  At September 30, 2014, undistributed earnings of foreign subsidiaries for which deferred U.S. income taxes have not been provided approximated $259,354.  The Company has not determined the deferred tax liability associated with these undistributed earnings, as such determination is not practicable.

The components of deferred tax assets and liabilities at September 30, 2014 and 2013 are as follows:

   
2014
    
2013
  
Deferred tax assets:
        
Pension and postretirement benefits
  
$
34,309
    
$
26,780
  
Accruals and reserves not currently deductible
    
28,090
      
20,939
  
Income tax credit carryforward
    
9,839
      
-
  
Operating and capital loss carryforwards
    
25,419
      
3,733
  
Stock options
    
8,366
      
10,691
  
Other
    
16,175
      
3,791
  
Total deferred tax assets
    
122,198
      
65,934
  
    Valuation allowances
    
(24,540
)
    
(2,234
)
Net deferred tax assets
    
97,658
      
63,700
  
                 
Deferred tax liabilities:
                
Depreciation
    
(7,651
)
    
(3,693
)
Goodwill and intangible assets
    
(183,685
)
    
(67,012
)
Other
    
(18,590
)
    
(1,630
)
     
(209,926
)
    
(72,335
)
                 
Net deferred tax asset
  
$
(112,268
)
  
$
(8,635
)


At September 30, 2014, the Company had U.S. state net operating loss carryforwards of $70,130, foreign net operating loss carryforwards of $66,688, foreign capital loss carryforwards of $25,862, and various U.S. and non-U.S. income tax credit carryforwards of $5,260 and $4,579, respectively, which will be available to offset future income tax liabilities. If not used, state net operating losses will begin to expire in 2017.  Foreign net operating losses have no expiration period. Certain of these carryforwards are subject to limitations on use due to tax rules affecting acquired tax attributes, loss sharing between group members, and business continuation.  Therefore, the Company has established tax-effected valuation allowances against these tax benefits in the amount of $24,540 at September 30, 2014.  U.S. tax attributes acquired in the Schawk transaction totaled $6,346.  At September 30, 2014, the Company had total foreign tax credit carryforwards of $3,120, offset by a valuation allowance of $689. The Company has the ability to claim a deduction for these credits prior to expiration, and the net carrying value of the credits of $2,431 assumes that a deduction will be claimed instead of a tax credit. If unutilized, these U.S. foreign tax credits will begin to expire in 2016.
 
Changes in the total amount of gross unrecognized tax benefits (excluding penalties and interest) are as follows:

   
2014
    
2013
    
2012
  
Balance, beginning of year
  
$
4,516
    
$
4,501
    
$
4,721
  
Increase from acquisition
    
385
      
-
      
-
  
Increases for tax positions of prior years
    
369
      
-
      
742
  
Decreases for tax positions of prior years
    
(863
)
    
(124
)
    
(74
)
Increases based on tax positions related to the current year
    
623
      
708
      
137
  
Decreases due to settlements with taxing authorities
    
(12
)
    
(250
)
    
(602
)
Decreases due to lapse of statute of limitation
    
(707
)
    
(319
)
    
(423
)
Balance, end of year
  
$
4,311
    
$
4,516
    
$
4,501
  
 
The Company had unrecognized tax benefits of $4,311 and $4,516 at September 30, 2014 and 2013, respectively, all of which, if recorded, would impact the annual effective tax rate.  It is reasonably possible that the amount of unrecognized tax benefits could change by approximately $801 in the next 12 months primarily due to expiration of statutes related to specific tax positions.

The Company classifies interest and penalties on tax uncertainties as a component of the provision for income taxes.  Total penalties and interest accrued were $2,135 and $2,401 at September 30, 2014 and 2013, respectively.  These accruals may potentially be applicable in the event of an unfavorable outcome of uncertain tax positions.

The Company is currently under examination in several tax jurisdictions and remains subject to examination until the statute of limitation expires for those tax jurisdictions.  As of September 30, 2014, the tax years that remain subject to examination by major jurisdiction generally are:

United States - Federal
2011 and forward
United States - State
2010 and forward
Canada
2009 and forward
Europe
2008 and forward
United Kingdom
2012 and forward
Australia
2010 and forward
Asia
2008 and forward