Annual report pursuant to Section 13 and 15(d)

INCOME TAXES

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INCOME TAXES
 12 Months Ended
Sep. 30, 2012
INCOME TAXES [Abstract]  
INCOME TAXES
12.
INCOME TAXES:

The provision for income taxes consisted of the following:

   
2012
    
2011
    
2010
  
Current:
                  
Federal
   $ 14,060     $ 15,306     $ 20,898  
State
     2,483       3,004       3,191  
Foreign
     6,437       10,689       9,325  
      22,980       28,999       33,414  
Deferred
     5,737       9,557       5,225  
Total
   $ 28,717     $ 38,556     $ 38,639  
                         

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

   
2012
    
2011
    
2010
  
Federal statutory tax rate
     35.0 %     35.0 %     35.0 %
Effect of state income taxes, net of federal deduction
     2.1       2.5       2.6  
Foreign taxes less than federal statutory rate
     (0.6 )     (1.3 )     (0.7 )
Other
     (2.3 )     (1.8 )     (1.9 )
Effective tax rate
     34.2 %     34.4 %     35.0 %
 
The Company's foreign subsidiaries had income before income taxes for the years ended September 30, 2012, 2011 and 2010 of approximately $24,654, $36,870 and $36,040, respectively. At September 30, 2012, undistributed earnings of foreign subsidiaries for which deferred U.S. income taxes have not been provided approximated $189,067.

The components of deferred tax assets and liabilities at September 30, 2012 and 2011 are as follows:

   
2012
    
2011
  
Deferred tax assets:
            
Postretirement benefits
   $ 11,244     $ 10,743  
Environmental reserve
     2,217       2,430  
Pension costs
     30,145       25,524  
Deferred compensation
     281       1,037  
Stock options
     9,653       9,447  
Other
     24,370       22,790  
      77,910       71,971  
Deferred tax liabilities:
                
Depreciation
     (4,220 )     (3,503 )
Goodwill
     (57,767 )     (48,494 )
Other
     (206 )     (1,441 )
      (62,193 )     (53,438 )
                 
Net deferred tax asset
   $ 15,717     $ 18,533  

Changes in the total amount of gross unrecognized tax benefits (excluding penalties and interest) are as follows:

   
2012
    
2011
    
2010
  
Balance, beginning of year
   $ 2,928     $ 3,422     $ 3,575  
Increases for tax positions of prior years
     742       -       437  
Decreases for tax positions of prior years
     (74 )     (96 )     (506 )
Increases based on tax positions related to the current year
     137       202       355  
Decreases due to settlements with taxing authorities
     (602 )     (38 )     (57 )
Decreases due to lapse of statute of limitation
     (423 )     (562 )     (382 )
Balance, end of year
   $ 2,708     $ 2,928     $ 3,422  



The Company had unrecognized tax benefits of $2,708 and $2,928 at September 30, 2012 and 2011, 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 $36 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. For fiscal 2012, the Company included a net increase of $29 in interest and penalties as a component of the provision for income taxes. Total penalties and interest accrued were $1,871 and $1,842 at September 30, 2012 and 2011, 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, 2012, the tax years that remain subject to examination by major jurisdiction generally are:

United States - Federal
2010 and forward
United States - State
2009 and forward
Canada
2008 and forward
Europe
2004 and forward
United Kingdom
2009 and forward
Australia
2008 and forward
Asia
2005 and forward