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Income Taxes | 12 Months Ended
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Mar. 31, 2024
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes United States income before income tax expense was $20,464,000, $26,076,000, and ($3,681,000) for the years ended March 31, 2024, 2023, and 2022, respectively. Income before income tax expense also includes foreign subsidiary income of $41,063,000, $48,399,000, and $42,127,000 for the years ended March 31, 2024, 2023, and 2022, respectively. The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate to income from continuing operations before income tax expense. The sources and tax effects of the differences were as follows:
|  | Year Ended March 31,
|  | 2024 |  | 2023 |  | 2022
Statutory federal income tax rate (1) |  | 21.00 | % |  | 21.00 | % |  | 21.00 | %
Expected tax at statutory rate |  | $ | 12,921 |  |  | $ | 15,640 |  |  | $ | 8,109 |
State income taxes net of federal benefit |  | 652 |  |  | 2,719 |  |  | 759 |
Foreign taxes at rates other than statutory federal rate |  | (247) |  |  | 1,757 |  |  | 1,027 |
Employee benefits |  | 1,347 |  |  | 1,207 |  |  | (202) |
US benefit on foreign derived income |  | (686) |  |  | (477) |  |  | (205) |
US Tax on foreign earnings |  | 757 |  |  | 1,257 |  |  | 845 |
Permanent items (4) |  | 1,092 |  |  | 287 |  |  | (956) |
Valuation allowance (3) |  | (1,109) |  |  | (787) |  |  | 300 |
Federal tax credits |  | (1,384) |  |  | (1,539) |  |  | (700) |
Other (3) |  | 1,437 |  |  | 285 |  |  | (114) |
Tax audit adjustments (2) |  | (819) |  |  | 2,523 |  |  | — |
Unremitted earnings |  | 501 |  |  | 720 |  |  | — |
Return to provision adjustment |  | 440 |  |  | 2,454 |  |  | (77) |
Actual tax provision expense |  | $ | 14,902 |  |  | $ | 26,046 |  |  | $ | 8,786 |
(1) Fiscal year 2023 and 2022 table amounts have been adjusted to be consistent with individual rate reconciling items disclosed for fiscal 2024. (2) For fiscal 2023, the Company settled income tax assessments related to tax periods prior to the Company's acquisition of STAHL. In accordance with the tax indemnification clause of the share purchase agreement, the Company received full reimbursement from STAHL’s prior owner which was recorded as a gain in Other (income) expense, net. For fiscal 2024, the Company collected tax refunds related to a period prior to the Company's acquisition of STAHL. In accordance with the tax indemnification clause of the share purchase agreement, the Company will reimburse STAHL’s prior owner which was recorded as an loss in Other (income) expense, net. (3) For fiscal 2024, the Company wrote off $1,142,000 of tax attributes as a result of legal entity simplification.The tax attributes had an associated valuation allowance of $1,142,000 which was also written off in fiscal 2024. (4) For fiscal 2024, a tax impact of $525,000 from non-deductible transaction costs was incurred as part of the montratec GmbH acquisition. The provision for income tax expense (benefit) consisted of the following:
|  | Year Ended March 31,
|  | 2024 |  | 2023 |  | 2022
Current income tax expense (benefit): |  |  |  |  |  |
United States Federal |  | $ | 15,375 |  |  | $ | 7,772 |  |  | $ | (2,482) |
State taxes |  | 2,715 |  |  | 2,218 |  |  | 571 |
Foreign |  | 12,097 |  |  | 16,356 |  |  | 12,666 |
Deferred income tax expense (benefit): |  |  |  |  |  |
United States |  | (12,451) |  |  | (517) |  |  | 1,139 |
Foreign |  | (2,834) |  |  | 217 |  |  | (3,108) |
|  | $ | 14,902 |  |  | $ | 26,046 |  |  | $ | 8,786 |
The Company applies the liability method of accounting for income taxes as required by ASC Topic 740, “Income Taxes.” The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows:
|  | March 31,
|  | 2024 |  | 2023
Deferred tax assets: |  |  |  |
Federal net operating loss carryforwards |  | $ | 11,779 |  |  | $ | 12,908 |
State and foreign net operating loss carryforwards |  | 8,104 |  |  | 6,656 |
Employee benefit plans |  | 12,518 |  |  | 11,609 |
Insurance reserves |  | 3,301 |  |  | 3,500 |
Accrued vacation and incentive costs |  | 3,905 |  |  | 4,071 |
Federal tax credit carryforwards |  | 12,094 |  |  | 12,065 |
ASC 842 Lease Liability |  | 20,120 |  |  | 16,544 |
Equity compensation |  | 5,248 |  |  | 4,552 |
Capitalized Research and Development Costs |  | 12,029 |  |  | 6,976 |
Interest Carryforwards |  | 5,657 |  |  | 3,271 |
Other |  | 3,527 |  |  | 1,073 |
Valuation allowance |  | (15,156) |  |  | (15,978) |
Deferred tax assets after valuation allowance |  | 83,126 |  |  | 67,247 |
Deferred tax liabilities: |  |  |  |
Property, plant, and equipment |  | (6,542) |  |  | (7,389) |
ASC 842 Right-of-Use Asset |  | (18,509) |  |  | (15,706) |
Intangible assets |  | (96,728) |  |  | (88,116) |
Total deferred tax liabilities |  | (121,779) |  |  | (111,211) |
Net deferred tax assets (liabilities) |  | $ | (38,653) |  |  | $ | (43,964) |
The valuation allowance includes $989,000 and $2,070,000 primarily related to foreign net operating losses at March 31, 2024 and 2023, respectively. The valuation allowance also includes $2,091,000 and $1,788,000 for separate state net operating losses at March 31, 2024 and 2023, respectively. The remaining valuation allowance primarily relates to foreign tax credits which the Company believes it will not utilize of $12,076,000 and $12,088,000 for the years ended March 31, 2024 and 2023, respectively. The Company’s foreign subsidiaries have tax-effected net operating loss carryforwards of $4,246,000 that expire in periods ranging from five years to indefinite. Federal net operating loss carryforwards from the acquisition of Dorner were fully utilized in fiscal 2023. Federal net operating loss carryforwards of $56,088,000 remain from the acquisition of Magnetek, have expiration dates ranging from 2025 through 2035, and are subject to certain limitations under U.S. tax law. State net operating losses of $69,412,000 either have indefinite carryforward periods or have expiration dates ranging from 2025 through 2042. The federal tax credits have expiration dates ranging from 2028 to 2034. Included in the Other deferred tax asset category above are $1,251,000 of state tax credit carryforwards. These state tax credit carryforwards have expiration dates ranging from 2026 to 2038. Deferred income taxes are classified within the consolidated balance sheets based on the following breakdown:
|  | March 31,
|  | 2024 |  | 2023
Net non-current deferred tax assets |  | $ | 1,797 |  |  | $ | 2,035 |
Net non-current deferred tax liabilities |  | (40,450) |  |  | (45,999) |
Net deferred tax assets (liabilities) |  | $ | (38,653) |  |  | $ | (43,964) |
Net non-current deferred tax liabilities are included in other non-current liabilities. As of March 31, 2024, the Company has determined that certain foreign amounts, which can be distributed tax efficiently, are not permanently reinvested where earned. As of March 31, 2024 a tax liability of approximately $925,000 has been accrued for taxes that would be incurred upon repatriation of the earnings that are not permanently reinvested. $75,848,000 of unremitted earnings of other subsidiaries and outside basis differences other than unremitted earnings are intended to be permanently reinvested. It is not practicable to calculate the amount of unrecognized deferred tax related to these basis differences. Changes in the Company’s uncertain income tax positions, excluding the related accrual for interest and penalties, are as follows:
|  | 2024 |  | 2023 |  | 2022
Beginning balance |  | $ | 411 |  |  | $ | 414 |  |  | $ | 141 |
Additions for prior year tax positions |  | — |  |  | — |  |  | 281 |
Foreign currency translation |  | — |  |  | (3) |  |  | (8) |
Ending balance |  | $ | 411 |  |  | $ | 411 |  |  | $ | 414 |
The Company had $76,000, $68,000, and $62,000 accrued for the payment of interest and penalties at March 31, 2024, 2023, and 2022 respectively. The Company recognizes interest expense or penalties related to uncertain tax positions as a part of income tax expense in its consolidated statements of operations. $411,000 of the unrecognized tax benefits as of March 31, 2024 would impact the effective tax rate if recognized. It is reasonably possible that the amount of unrecognized tax benefits could change in the next 12 months, however an estimate of the change cannot be made. The Company and its subsidiaries file income tax returns in the U.S., various state, local, and foreign jurisdictions. The Company’s major tax jurisdictions are the United States and Germany. With few exceptions, the Company is no longer subject to tax examinations by tax authorities in the United States for tax years prior to March 31, 2021 and in Germany for tax years prior to March 31, 2012. The Company has a current tax examination in Germany underway for fiscal years 2012 to 2014. In addition, the tax authorities have also started an examination for fiscal years 2015 through 2018. The Inflation Reduction Act was enacted in fiscal year 2023 and includes the implementation of a new 15% minimum tax on book income of certain large corporations, an excise tax on stock buybacks, and various tax credits and incentives for energy and clean climate initiatives, among other provisions. The Company has evaluated the Act and its provisions did not have a material impact to the Company's consolidated financial statements for fiscal 2024. On December 15, 2022, the European Union (EU) Member States formally adopted the EU’s Pillar Two Directive, which generally provides for a minimum effective tax rate of 15%, as established by the Organization for Economic Co-operation and Development (OECD) Pillar Two Framework. A significant number of other countries are expected to also implement similar legislation with varying effective dates in the future. The Company will be subject to legislation beginning in the fiscal year 2025. The Company is continuing to evaluate the potential impact on future periods of the Pillar Two Framework, pending legislative adoption by additional individual countries.

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