Income Taxes

12 Months Ended

Mar. 31, 2022

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

17.     Income Taxes

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,
	2022			2021			2020
Statutory federal income tax rate	21.00		%	21.00		%	21.00		%
Expected tax at statutory rate	$	8,109		$	2,116		$	16,203
State income taxes net of federal benefit	759			(450)			1,397
Foreign taxes at rates other than statutory federal rate	779			287			1,102
Permanent items (1)	(270)			178			266
Valuation allowance (2)	300			84			(1,184)
Federal tax credits (3)	(700)			(700)			(1,903)
Other (4)	(191)			(545)			1,603
Actual tax provision expense	$	8,786		$	970		$	17,484

(1) For fiscal 2022, permanent items include a net GILTI inclusion of $265,000 and Subpart F income of $580,000. For fiscal 2020, permanent items include a net GILTI inclusion of $525,000 and a FDII deduction of $1,029,000

(2) For fiscal 2022 the valuation allowance represents normal current year activity driven by certain foreign jurisdictions and for fiscal 2020, represents the reversal of a valuation allowance on certain foreign tax credits offset by increases in valuation allowances required in certain foreign jurisdictions.

(3) For Fiscal 2022 Federal tax credits include research and development credits of $700,000. For fiscal 2021, Federal tax credits include research and development credits of $700,000. For fiscal 2020, Federal tax credits include research and development credits of $800,000 and minimum tax credits of $1,103,000.

(4) For Fiscal 2022 Other primarily relates to the FY21 NOL generated and related carryback benefit of $908,000. For fiscal 2021, Other primarily relates to adjustments for previously estimated tax expenses.

The provision for income tax expense (benefit) consisted of the following:

	Year Ended March 31,
	2022		2021		2020
Current income tax expense (benefit):
United States Federal	$	(2,482)	$	810	$	(2,491)
State taxes	571		618		626
Foreign	12,666		8,246		11,984
Deferred income tax expense (benefit):
United States	1,139		(5,996)		7,827
Foreign	(3,108)		(2,708)		(462)
	$	8,786	$	970	$	17,484

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,
	2022		2021
Deferred tax assets:
Federal net operating loss carryforwards	$	17,567	$	16,038
State and foreign net operating loss carryforwards	10,075		7,404
Employee benefit plans	16,625		24,692
Insurance reserves	3,609		3,488
Accrued vacation and incentive costs	3,682		3,061
Federal tax credit carryforwards	12,427		13,238
ASC 842 Lease Liability	10,872		8,623
Equity compensation	3,927		2,782
Other	8,394		7,308
Valuation allowance	(16,147)		(15,103)
Deferred tax assets after valuation allowance	71,031		71,531
Deferred tax liabilities:
Property, plant, and equipment	(4,917)		(1,889)
ASC 842 Right-of-Use Asset	(10,130)		(8,446)
Intangible assets	(95,316)		(58,716)
Total deferred tax liabilities	(110,363)		(69,051)
Net deferred tax assets (liabilities)	$	(39,332)	$	2,480

The net deferred tax liability increased in fiscal 2022 primarily as a result of the acquisition of Dorner in Q1 of FY22.

The gross amount of the Company’s deferred tax assets were $87,178,000 and $86,634,000 at March 31, 2022 and 2021, respectively.

The valuation allowance includes $4,322,000 and $2,896,000 primarily related to foreign net operating losses at March 31, 2022 and 2021, respectively. The remaining valuation allowance primarily relates to foreign tax credits which the Company believes it will not utilize of $11,825,000 and $11,900,000 for the years ended March 31, 2022 and 2021, respectively. The Company’s foreign subsidiaries have net operating loss carryforwards of $4,299,000 that expire in periods ranging from five years to indefinite.

Federal net operating losses of $13,752,000 arose from the acquisition of Dorner and have no expiration date. Federal net operating losses of $69,900,000 arose from the acquisition of Magnetek and have expiration dates ranging from 2023 through 2035 and are subject to certain limitations under U.S. tax law. The state net operating losses of $112,184,000 have expiration dates ranging from 2023 through 2042.  The federal tax credits have expiration dates ranging from 2028 to 2042.

Deferred income taxes are classified within the consolidated balance sheets based on the following breakdown:

	March 31,
	2022		2021
Net non-current deferred tax assets	$	2,313	$	20,080
Net non-current deferred tax liabilities	(41,645)		(17,600)
Net deferred tax assets (liabilities)	$	(39,332)	$	2,480

Net non-current deferred tax liabilities are included in other non-current liabilities.

Income before income tax expense includes foreign subsidiary income of $42,127,000, $30,894,000, and $37,577,000 for the years ended March 31, 2022, 2021, and 2020, respectively. As of March 31, 2022, the Company had approximately $115,000,000 of undistributed earnings of foreign subsidiaries. These earnings are considered to be permanently invested in operations outside the U.S. Determination of the amount of unrecognized tax liability with respect to such earnings is not practicable.

Changes in the Company’s uncertain income tax positions, excluding the related accrual for interest and penalties, are as follows:

	2022		2021		2020
Beginning balance	$	141	$	132	$	936
Reductions for prior year tax positions	—		—		(802)
Additions for prior year tax positions	281		—		—
Foreign currency translation	(8)		9		(2)
Ending balance	$	414	$	141	$	132

The Company had $62,000, $57,000, and $46,000 accrued for the payment of interest and penalties at March 31, 2022, 2021, and 2020 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.

$414,000 of the unrecognized tax benefits as of March 31, 2022 would impact the effective tax rate if recognized.

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, 2018 and in Germany for tax years prior to March 31, 2012. The Company has a current tax examination in Germany for fiscal years 2012 to 2014.

The Company anticipates that certain unrecognized tax benefits will change due to the settlement of audits in certain foreign jurisdictions prior to March 31, 2023.