| Income Taxes | Income Taxes Fiscal year ended March 31, 2022 2021 2020 Current income tax expense Current: Federal $ 9,558 $ 12,591 $ 9,185 State 4,022 4,133 2,561 Foreign 15,333 19,031 14,561 Total current income tax expense 28,913 35,755 26,307 Deferred income tax (benefit) expense Federal 1,183 1,495 5,489 State (1,453) 735 741 Foreign 1,385 (11,224) (22,716) Total deferred income tax (benefit) expense 1,115 (8,994) (16,486) Total income tax expense $ 30,028 $ 26,761 $ 9,821 Earnings before income taxes consists of the following: Fiscal year ended March 31, 2022 2021 2020 United States $ 21,871 $ 56,055 $ 36,193 Foreign 152,068 114,080 110,744 Earnings before income taxes $ 173,939 $ 170,135 $ 146,937 Income taxes paid by the Company for the fiscal years ended March 31, 2022, 2021 and 2020 were $50,484, $32,002 and $48,653, respectively. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law in the U.S. to provide certain relief as a result of the COVID-19 pandemic. In addition, governments around the world have enacted or implemented various forms of tax relief measures in response to the economic conditions in the wake of COVID-19. As of March 31, 2022, neither the CARES Act nor changes to income tax laws or regulations in other jurisdictions had a significant impact on the Company’s effective tax rate. The following table sets forth the tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities: March 31, 2022 2021 Deferred tax assets: Accounts receivable $ 481 $ 2,029 Inventories 8,581 8,831 Net operating loss carryforwards 56,010 62,663 Lease liabilities 17,590 15,685 Accrued expenses 33,571 36,775 Other assets 19,941 18,173 Gross deferred tax assets 136,174 144,156 Less valuation allowance (31,017) (31,928) Total deferred tax assets 105,157 112,228 Deferred tax liabilities: Property, plant and equipment 41,105 38,364 Lease Right-of-use assets 17,590 15,685 Intangible assets 60,827 66,743 Other liabilities 3,384 2,636 Total deferred tax liabilities 122,906 123,428 Net deferred tax liabilities $ (17,749) $ (11,200) The Company has approximately $899 in United States federal net operating loss carryforwards, all of which are limited by Section 382 of the Internal Revenue Code, with expirations between 2023 and 2027. The Company has approximately $202,176 of foreign net operating loss carryforwards, of which $155,338 may be carried forward indefinitely and $46,838 expire between fiscal 2023 and fiscal 2041. In addition, the Company also has approximately $28,994 of state net operating loss carryforwards with expirations between fiscal 2023 and fiscal 2042. The following table sets forth the changes in the Company's valuation allowance for fiscal 2022, 2021 and 2020: Balance at Additions Valuation Allowance Reversal Business Combination Adjustments Other (1) Balance at Fiscal year ended March 31, 2020 $ 17,519 $ 7,494 $ (3,145) $ (688) $ (229) $ 20,951 Fiscal year ended March 31, 2021 20,951 8,437 (2,904) 6,384 (940) 31,928 Fiscal year ended March 31, 2022 31,928 4,486 (1,535) — (3,862) 31,017 (1) Includes the impact of currency changes and the expiration of net operating losses for which a full valuation allowance was recorded. As of March 31, 2022 and 2021, the Company had no federal valuation allowance and the valuation allowance associated with the state tax jurisdictions was $686 for both years. As of March 31, 2022 and 2021, the valuation allowance associated with certain foreign tax jurisdictions was $30,331 and $31,242, respectively. Of the net decrease of $(911), $2,951 was recorded as an increase to tax expense primarily related to deferred tax assets generated in the current year that the Company believes are not more likely than not to be realized, offset by $(3,862) primarily related to foreign currency translation adjustments and expiration of foreign net operating losses for which a full valuation allowance was recorded. A reconciliation of income taxes at the statutory rate (21.0% for fiscal 2022, 2021 and 2020) to the income tax provision is as follows: Fiscal year ended March 31, 2022 2021 2020 United States statutory income tax expense $ 36,527 $ 35,729 $ 30,857 Increase (decrease) resulting from: State income taxes, net of federal effect 1,724 4,000 2,764 Nondeductible expenses and other 1,217 5,273 5,953 Net effect of GILTI, FDII, BEAT 5,405 1,985 3,025 Goodwill impairment - See Note 7 — — 10,714 Effect of foreign operations (14,192) (20,035) (17,605) Valuation allowance 2,951 5,533 4,349 Switzerland Tax Reform — (1,883) (26,846) Research and Development Credit (3,604) (3,841) (3,390) Income tax expense $ 30,028 $ 26,761 $ 9,821 The effective income tax rates for the fiscal years ended March 31, 2022, 2021 and 2020 were 17.3%, 15.7% and 6.7%, respectively. The effective income tax rate with respect to any period may be volatile based on the mix of income in the tax jurisdictions in which the Company operates and the amount of its consolidated income before taxes. The rate increase in fiscal 2022 compared to fiscal 2021 is primarily due to Swiss tax reform and changes in the mix of earnings among tax jurisdictions. The rate increase in fiscal 2021 compared to fiscal 2020 is primarily due to Swiss tax reform, partially offset by the Hagen, Germany exit charges and changes in the mix of earnings among tax jurisdictions. On May 19, 2019, a public referendum held in Switzerland approved the Federal Act on Tax Reform and AHV (Old-Age and Survivors Insurance) Financing (TRAF) as adopted by the Swiss Federal Parliament on September 28, 2018. The Swiss tax reform measures were effective January 1, 2020. The Company recorded a net deferred tax asset of $22,500 during fiscal 2020, related to the amortizable goodwill and based on further evaluation with the Swiss tax authority, recorded an additional income tax benefit of $1,883 during fiscal 2021. In fiscal 2022, the foreign effective income tax rate on foreign pre-tax income of $152,068 was 11.0%. In fiscal 2021, the foreign effective income tax rate on foreign pre-tax income of $114,080 was 6.8% and in fiscal 2020, the foreign effective income tax rate on foreign pre-tax income of $110,744 was (7.4)%. The rate increase in fiscal 2022 compared to fiscal 2021 is primarily due to Swiss tax reform and changes in the mix of earnings among tax jurisdictions. The rate increase in fiscal 2021 compared to fiscal 2020 is primarily due to Swiss tax reform, partially offset by the Hagen, Germany exit charges and changes in the mix of earnings among tax jurisdictions. Income from the Company's Swiss subsidiary comprised a substantial portion of its overall foreign mix of income for the fiscal years ended March 31, 2022, 2021 and 2020 and was taxed, excluding the impact from the Swiss tax reform, at approximately 4%, 8% and 3%, respectively. The Company has approximately $1,180,000 and $1,591,000 of undistributed earnings of foreign subsidiaries for fiscal years 2022 and 2021, respectively. During fiscal 2022, the Company remitted $550,000 of undistributed earnings from a foreign subsidiary, with no tax impact. Additionally, the Company recorded $2,000 in additional income taxes related to the indefinite suspension of its business operations in Russia. The Company intends to continue to be indefinitely reinvested on the remaining undistributed foreign earnings and outside basis differences and therefore, no additional income taxes have been provided. Uncertain Tax Positions The following table summarizes activity of the total amounts of unrecognized tax benefits: Fiscal year ended March 31, 2022 2021 2020 Balance at beginning of year $ 6,785 $ 7,795 $ 20,165 Increases related to current year tax positions 21 346 598 Increases related to the Alpha acquisition — — 769 Increases related to prior year tax positions 598 325 — Decreases related to prior tax positions — — (11,463) Decreases related to prior year tax positions settled (784) — — Lapse of statute of limitations (1,850) (1,681) (2,274) Balance at end of year $ 4,770 $ 6,785 $ 7,795 All of the balance of unrecognized tax benefits at March 31, 2022, if recognized, would be included in the Company’s Consolidated Statements of Income and have a favorable impact on both the Company’s net earnings and effective tax rate. The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, and various states and foreign jurisdictions and is routinely subject to income tax examinations. As of March 31, 2022, the most significant tax examinations in process are the United States and Switzerland. The Company regularly assesses the likely outcomes of its tax audits and disputes to determine the appropriateness of its tax reserves. However, any tax authority could take a position on tax treatment that is contrary to the Company’s expectations, which could result in tax liabilities in excess of reserves. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2010. While the net effect on total unrecognized tax benefits cannot be reasonably estimated, approximately $1,050 is expected to reverse in fiscal 2023 due to expiration of various statute of limitations. The Company recognizes tax related interest and penalties in income tax expense in its Consolidated Statements of Income. As of March 31, 2022 and 2021, the Company had an accrual of $440 and $400, respectively, for interest and penalties. |
