XML 44 R28.htm IDEA: XBRL DOCUMENT v3.25.3
Note 16 - Income Taxes
 12 Months Ended
Sep. 30, 2025
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

16.    Income Taxes

 

The components of the income tax (benefit) expense from continuing operations for the fiscal years are as follows (in thousands):

 

  

Year Ended September 30,

 
  

2025

  

2024

  

2023

 

Current income tax expense (benefit)

            

Federal

 $(45,468) $227  $(45)

State

  1,439   1,602   1,672 

Foreign

  12,265   11,150   8,549 

Total current income tax expense

  (31,764)  12,979   10,176 

Deferred income tax expense (benefit):

            

Federal

  291   (4,773)  (18,737)

State

  59   1,318   (390)

Foreign

  (187)  (4,283)  (3,014)

Total deferred income tax expense (benefit)

  163   (7,738)  (22,141)

Income tax expense (benefit)

 $(31,601) $5,241  $(11,965)

 

The components of income (loss) from continuing operations before income taxes for the fiscal years are as follows (in thousands):

 

  

Year Ended September 30,

 
  

2025

  

2024

  

2023

 

Domestic

 $(33,676) $(39,648) $(53,400)

Foreign

  26,533   20,523   33,395 

Loss from continuing operations before income taxes

 $(7,143) $(19,125) $(20,005)

 

The differences between the income tax (benefit) expense on income (loss) from continuing operations and income taxes computed using the applicable U.S. statutory federal tax rates for the fiscal years ended September 30, 2025, 2024 and 2023 are as follows (in thousands):

 

  

Year Ended September 30,

 
  

2025

  

2024

  

2023

 

Income tax benefit computed at federal statutory rate

 $(1,500) $(3,945) $(4,129)

State income taxes, net of federal benefit

  (593)  (598)  (696)

Foreign income taxed at different rates

  953   (3,521)  1,477 

Worthless stock deduction

  (45,600)  —   — 

Impact of investments in subsidiaries

  (23,348)  (22,583)  (6,059)

Change in deferred tax asset valuation allowance

  36,475   31,793   (7)

Impact of change in uncertain tax positions

  (398)  36   (1,321)

Global intangible low taxed income, net of foreign tax credits

  4,914   3,767   310 

Impact of tax rate changes

  (928)  (46)  (1,391)

Compensation

  1,353   1,413   1,484 

Tax credits

  (1,538)  (1,199)  (1,425)

Other non-deductible expenses and other taxes

  (111)  1,461   1,069 

Research and development expense deduction

  (1,280)  (1,337)  (1,277)

Income tax (benefit) expense

 $(31,601) $5,241  $(11,965)

 

During fiscal year 2025, the Company recorded a $45.6 million tax benefit for a worthless stock deduction on an investment in a foreign subsidiary.  The tax benefit is recorded as a long-term tax receivable on the balance sheet as it is driven by a capital loss that will be carried back to the federal tax return for fiscal year 2022.

 

During the fiscal year 2024, the Company repatriated approximately $455.0 million of cash from its German subsidiary. The Company recorded a net tax benefit in the amount of $3.2 million related to the repatriation. The benefit included $5.2 million related to deductible U.S. foreign exchange losses measured at the foreign exchange rate on the date of repatriation. This benefit was offset by $2.0 million of state income taxes, net of federal benefit. The tax provision impacts in fiscal year 2024 were offset by the reversal of the related deferred tax asset recorded in fiscal year 2023. Additionally, during fiscal year 2024, the Company reversed $2.9 million of the deferred tax asset previously established due to changes in foreign exchange rates up to the repatriation date. The impact was recorded against other comprehensive income.

 

During the fiscal year 2025, the Company repatriated approximately $41.1 million of cash from its China subsidiary and authorized the future repatriation of $21.5 million. The Company recorded a net tax provision in the amount of $6.4 million related to the repatriation. There is no plan to repatriate earnings as of September 30, 2025 with the exception of the $21.5 million noted above.

 

The Company has not provided deferred income taxes on the outside basis differences of any other foreign subsidiary and maintains its general assertion of indefinite reinvestment regarding those subsidiaries and the remaining earnings of its China subsidiary as of September 30, 2025. The remaining foreign earnings total approximately $377.5 million as of  September 30, 2025 and are expected to be reinvested in foreign operations and acquisitions. The Company did not calculate estimated deferred tax liabilities on the remaining earnings because such calculations would not be practicable due to the complexity of its hypothetical calculation. The taxes on these earnings would primarily consist of foreign withholding taxes, taxes on foreign exchange gains and losses resulting from potential future distributions, and U.S. state income taxes. Substantially all of the unremitted earnings of the Company have been federally taxed in the United States based on the international tax regulations.

 

The global minimum tax of fifteen percent under the Organization for Economic Cooperation and Development’s (“OECD”) Pillar Two Global Anti-Base Erosion Rule is currently effective in certain jurisdictions in which we operate. The OECD continues to issue guidance on the framework and various countries continue to enact legislation with respect to their application of the framework. The Company has considered these rules in effect in the countries in which it operates and there is currently no impact to its financial statements.  The rules are being monitored closely in the United States and the Company expects to be below the revenue threshold.

 

On July 4, 2025, the “One Big Beautiful Bill Act” was signed into U.S. tax law, extending many international provisions of the 2017 Tax Cuts and Jobs Act and providing additional favorable incentives.  The Company will continue to monitor the financial impact of these changes. In the near term, the Company does not expect these changes to have an impact on the effective tax rate or cash flows. Many of the key incentives are not initially being elected by the Company.

 

The significant components of the net deferred tax assets and liabilities as of September 30, 2025 and 2024 are as follows (in thousands):

 

  

September 30,

 
  

2025

  

2024

 

Accruals and reserves not currently deductible

 $9,137  $10,291 

Federal, state and foreign tax credits

  2,326   1,151 

Other assets

  2,894   1,213 

Equity compensation

  3,776   2,359 

Loss carryforwards

  86,724   44,356 

Lease liabilities

  14,789   16,283 

Capitalized research and development

  7,035   6,253 

Deferred revenue

  2,954   3,573 

Net unrealized loss on hedging and investments

  8,241   527 

Deferred tax assets

  137,876   86,006 

Depreciation and intangible amortization

  (37,019)  (43,756)

Right-of-use assets

  (13,626)  (15,217)

Other liabilities

  (904)  (605)

Outside basis differences in subsidiaries

  (2,149)  — 

Deferred tax liabilities

  (53,698)  (59,578)

Valuation allowance

  (102,021)  (44,222)

Net deferred tax liability

 $(17,843) $(17,794)

 

The deferred tax assets on the balance sheets for September 30, 2025 and 2024 also include $0.3 million and $0.6 million deferred tax charges related to the company’s intercompany profit elimination, respectively.

 

ASC Topic 740, Income Taxes, requires that all available evidence, both positive and negative, be considered in determining, based on the weight of that evidence, whether a valuation allowance is needed. The weight given to the potential effect of negative and positive evidence should be commensurate with the extent to which it can be objectively verified. The more negative evidence that exists, (a) the more positive evidence is necessary and (b) the more difficult it is to support a conclusion that a valuation allowance is not needed for some portion or the entire deferred tax asset. 

 

The Company evaluates the realizability of its deferred tax assets and assesses the need for a valuation allowance on a quarterly basis. The Company operates in numerous countries under many legal forms and, as a result, is subject to the jurisdiction of numerous domestic and foreign tax authorities. The Company evaluates the profitability of its operations in each jurisdiction on a historic cumulative basis and on a forward-looking basis, while carefully considering carry-forward periods of tax attributes and ongoing tax planning strategies in assessing the need for the valuation allowance.

 

The Company maintains valuation allowances of $27.9 million against deferred tax assets in the United States as of September 30, 2025. The Company also maintains valuation allowances against net deferred tax assets in certain foreign jurisdictions totaling $74.1 million as of September 30, 2025. 

 

As of September 30, 2025, the Company has tax-effected federal, state and foreign loss carry-forwards of approximately $4.4 million, $7.4 million and $74.9 million, respectively. The federal net operating losses carry forward indefinitely with the deductions limited to eighty percent of taxable income in any given year. The state net operating loss carry-forwards will begin to expire in 2033. Many of the foreign net operating loss carry-forwards have no limit in number of years, but some have deductions capped at a certain percent of taxable income.

 

The Company has performed studies to determine if there are any annual limitations on the federal net operating losses under Section 382 of the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code. As a result of these studies, the Company has determined that ownership changes occurred primarily in connection with acquired subsidiaries.  The benefits of the net operating losses that will expire before utilization have not been recorded as deferred tax assets in the Consolidated Balance Sheets.  Subsequent ownership changes may further affect the limitation in future years.

 

The Company maintains liabilities for unrecognized tax benefits. These liabilities involve judgment and estimation, and they are monitored based on the best information available. A reconciliation of the beginning and ending amount of the consolidated liability for unrecognized income tax benefits during the fiscal years ended September 30, 2025, 2024 and 2023 is as follows (in thousands):

 

  

Year Ended September 30,

 
  

2025

  

2024

  

2023

 
             

Balance at beginning of period

 $298  $1,679  $2,006 

Additions from current year positions

  2,500   —   — 

Reductions from lapses in statutes of limitation

  (298)  (1,381)  (327)

Balance at end of period

 $2,500  $298  $1,679 

 

The Company is subject to U.S. federal, state, local and foreign income taxes in various jurisdictions. The amount of income taxes paid is subject to the Company’s interpretation of applicable tax laws in the jurisdictions in which it files.

 

In the normal course of business, the Company is subject to income tax audits in various global jurisdictions in which it operates. The years subject to examination vary for the United States and international jurisdictions, with the earliest tax year being 2019. Based on the outcome of these examinations or the expiration of statutes of limitations for specific jurisdictions, it is reasonably possible that the related unrecognized tax benefits could change from those recorded in the Consolidated Balance Sheets. In fiscal year 2025, the Company recognized tax benefits of $0.3 million due to statute of limitations expirations.