INCOME TAXES |
9 Months Ended |
|---|---|
Dec. 31, 2025 | |
| Income Tax Disclosure [Abstract] | |
| INCOME TAXES | INCOME TAXES For the three months ended December 31, 2025, we earned $7.9 million from operations before taxes and recognized net income tax benefits of $2.7 million, resulting in an effective tax rate of (34.2)%. For the nine months ended December 31, 2025, we earned $117.7 million from operations before taxes and provided for income taxes of $25.2 million, resulting in an effective tax rate of 21.4%. The provision for income taxes differed from the statutory rate for the three and nine months ended December 31, 2025 primarily due to state income tax (net of federal benefit), executive compensation limitations, provision for global intangible low-taxed income ("GILTI"), and non-deductible transaction costs; offset by release of uncertain tax position ("UTP") due to lapse of statute, excess tax deductions related to equity compensation, and foreign tax credits. In connection with the T.A. Industries, Inc. (“TRUaire”) acquisition that closed in December 2020, the Company recognized a UTP of $17.3 million related to pre-acquisition tax periods. In addition, in accordance with the tax indemnification provided by the seller to the Company for up to $12.5 million related to UTPs taken in pre-acquisition years, we recognized a tax indemnification asset of $12.5 million, $5 million of which was released in the three months ended March 31, 2021. During the three months ended December 31, 2023, the remaining $7.5 million tax indemnification asset expired and was recognized as non-cash other expense on the statement of income, which is not deductible for income tax purposes. During the three months ended December 31, 2025 and 2024, $5.0 million and $2.7 million of the UTP accrual (including penalties and interests accrued post-acquisition), respectively, were released due to the expiration of the tax statutes and were recorded as income tax benefits. As of December 31, 2025, the UTP accrual related to TRUaire's pre-acquisition tax periods was $8.5 million, including penalties and interests accrued post-acquisition, and is expected to be released in the future as the statutes on the open tax years expire. In connection with the Falcon Stainless, Inc. (“Falcon”) acquisition that closed in October 2022, the Company recognized a UTP of $3.0 million related to pre-acquisition tax periods. In addition, in accordance with the tax indemnification provided by the seller to the Company for up to $4.5 million related to UTPs taken in pre-acquisition years, we recognized an initial tax indemnification asset of $3.0 million, which will either be settled or expire upon the closure of the tax statutes for the pre-acquisition periods. During the three months ended December 31, 2025, 2024 and 2023, as a result of the statute expiration, $1.4 million, $0.9 million and $1.0 million UTP, respectively, were released and the corresponding $1.4 million, $0.9 million and $1.0 million tax indemnification assets expired concurrently and were recognized as non-cash other expense on the statement of income, which is not deductible for income tax purposes. As of December 31, 2025, the UTP reserves, including penalties and interests accrued post-acquisition, and offsetting indemnification asset related to Falcon's pre-acquisition period were $0.5 million. The Falcon UTP reserves and offsetting indemnification asset will either be settled or expire upon the closure of the tax statutes for the pre-acquisition period. For the three months ended December 31, 2024, we earned $31.3 million from operations before taxes and provided for income taxes of $4.3 million, resulting in an effective tax rate of 13.8%. For the nine months ended December 31, 2024, we earned $133.6 million from operations before taxes and provided for income taxes of $31.2 million, resulting in an effective tax rate of 23.3%. The provision for income taxes differed from the statutory rate for the three and nine months ended December 31, 2024 primarily due to state income tax (net of federal benefit), executive compensation limitations, and provision for GILTI; offset by release of UTPs due to lapse of statute, excess tax deductions related to equity compensation, foreign currency rate impact on the cumulative unrepatriated foreign earnings, foreign tax credits and foreign-derived intangible income (“FDII”). The Company expects $6.4 million of reserves for UTPs to either be settled or expire within the next 12 months as the statutes of limitations expire. We are under examination by the state of Michigan for the fiscal years ended March 31, 2021 through 2024. We have not been notified of any material adjustments. The Organization for Economic Cooperation and Development introduced a framework under pillar two ("Pillar Two"), which includes a global minimum tax rate of 15% applied on a county-by-country basis for companies with global revenues and profits above certain thresholds. Certain jurisdictions in which we do business have enacted laws implementing Pillar Two. We are monitoring these developments and do not believe these rules will have a material impact on our financial condition and/or consolidated results. On July 4, 2025, the "One Big Beautiful Bill Act" (the "Act") was enacted into law. The Act includes changes to the U.S. tax laws that are applicable to the Company, including the reinstatement of 100% bonus depreciation and 100% expensing of research and development costs, a change in the calculation of deductible interest expense, and changes to the U.S. tax treatment of GILTI and FDII. We evaluated the Act, including estimating the impact of certain provisions of the Act that may impact the estimated annual effective tax rate for the current year, and estimated it to have an immaterial impact on our income tax expenses. We expect the Act will change the timing of our cash tax payments in the current fiscal year and future periods. We will continue to evaluate the impact of the Act as additional guidance becomes available. |