Income Taxes

6 Months Ended

Sep. 30, 2024

Income Taxes

Income Taxes

Note 9: Income Taxes

The Company’s effective tax rate for the three months ended September 30, 2024 and 2023 was 30.1 percent and 21.4 percent, respectively.  The Company’s effective tax rate for the six months ended September 30, 2024 and 2023 was 29.2 percent and 23.0 percent, respectively. The effective tax rates for fiscal 2025 are higher than the prior year, primarily due to changes in the mix and amount of foreign and U.S. earnings. In addition, the effective tax rates for the prior-year periods were favorably impacted by the release of a $1.8 million unrecognized tax benefit during the second quarter of fiscal 2024, due to a lapse in statute of limitations.

The Company records valuation allowances against its net deferred tax assets to the extent it determines it is more likely than not that such assets will not be realized in the future.  Each quarter, the Company evaluates the probability that its deferred tax assets will be realized and determines whether valuation allowances or adjustments thereto are needed.  This determination involves judgement and the use of significant estimates and assumptions, including expectations of future taxable income and tax planning strategies.  In addition, the Company considers the duration of statutory carryforward periods and historical financial results.

At September 30, 2024, valuation allowances against deferred tax assets in the U.S. and in certain foreign jurisdictions totaled $46.3 million and $23.8 million, respectively.  The Company will maintain the valuation allowances in each applicable tax jurisdiction until it determines it is more likely than not the deferred tax assets will be realized, thereby eliminating the need for a valuation allowance.  Future events or circumstances, such as lower taxable income or unfavorable changes in the financial outlook of the Company’s operations in the U.S. and certain foreign jurisdictions, could necessitate the establishment of further valuation allowances.

Accounting policies for interim reporting require the Company to adjust its effective tax rate each quarter to be consistent with its estimated annual effective tax rate.  Under this methodology, the Company applies its estimated annual income tax rate to its year-to-date ordinary earnings to derive its income tax provision each quarter.  The Company records the tax impacts of certain significant, unusual or infrequently occurring items in the period in which they occur.  In addition, the Company excludes the impact of operations anticipated to generate net operating losses for the full fiscal year from the overall effective tax rate calculation and instead records them discretely based upon year-to-date results. The Company does not anticipate a significant change in unrecognized tax benefits during the remainder of fiscal 2025.