INCOME TAXES

12 Months Ended

Mar. 31, 2024

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

Income Before Income Taxes. Components of income before income taxes recorded in the consolidated statements of comprehensive income were as follows:

	Years Ended March 31,
	2024		2023		2022
Domestic (1)	$	688,981	$	467,231	$	396,368
Foreign	289,960		198,851		168,270
Total	$	978,941	$	666,082	$	564,638

(1) Domestic income before income taxes for the years ended March 31, 2024, 2023, and 2022 is presented net of intercompany dividends (or repatriated cash) of $250,000, $0, and $120,000, respectively.

Income Tax Expense. Components of income tax expense (benefit) recorded in the consolidated statements of comprehensive income were as follows:

	Years Ended March 31,
	2024		2023		2022
Current
Federal	$	146,939	$	115,708	$	95,012
State	32,065		18,418		22,544
Foreign	41,884		24,853		22,929
Total	220,888		158,979		140,485
Deferred
Federal	(3,113)		4,830		(17,316)
State	(2,336)		382		(4,827)
Foreign	3,939		(14,931)		(5,653)
Total	(1,510)		(9,719)		(27,796)
Total	$	219,378	$	149,260	$	112,689

Income Tax Expense Reconciliation. Income tax expense (benefit) differed from that obtained by applying the statutory federal income tax rate to income before income taxes as follows:

	Years Ended March 31,
	2024		2023		2022
Computed expected income taxes	$	205,578	$	139,882	$	118,574
State income taxes, net of federal income tax benefit	32,023		15,881		16,896
Foreign rate differential	(15,976)		(21,420)		(22,188)
Gross unrecognized tax benefits	1,301		20,122		(491)
Intercompany transfers of assets	(1,817)		(13,072)		(219)
US tax on foreign earnings	4,750		7,672		4,325
Other	(6,481)		195		(4,208)
Total	$	219,378	$	149,260	$	112,689

Deferred Taxes. The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities are as follows:

	As of March 31,
	2024		2023
Deferred tax assets
Amortization of intangible assets	$	11,416	$	16,788
Operating lease liabilities	38,890		38,673
Uniform capitalization adjustment to inventory	11,822		13,823
State related taxes and credit carryforwards	1,834		—
Reserves and accruals	65,817		48,949
Net operating loss carry-forwards	5,981		3,477
Deferred revenue	880		7,924
Other	2,284		1,070
Gross deferred tax assets	138,924		130,704
Valuation allowances	(1,259)		(1,224)
Total	137,665		129,480
Deferred tax liabilities
Prepaid expenses	(7,060)		(6,930)
Operating lease assets	(29,667)		(31,250)
Depreciation of property and equipment	(28,354)		(18,708)
Total	(65,081)		(56,888)
Deferred tax assets, net	$	72,584	$	72,592

The deferred tax assets are currently expected to be realized between fiscal years 2025 and 2031. Based on the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that the results of future operations will generate sufficient taxable income to realize the net deferred tax assets. The Company’s deferred tax valuation allowances are primarily the result of foreign losses in jurisdictions with limited future profitability.

US Taxation of Foreign Earnings. The Company is subject to US taxation of its foreign subsidiary earnings, which is considered global intangible low-taxed income (commonly known as GILTI), as well as limitations on the deductions of executive compensation, which are included in income tax expense in the consolidated statements of comprehensive income for the periods presented above.

The Company currently anticipates repatriating current and future unremitted earnings of non-US subsidiaries, to the extent they have been and will be subject to US income tax, as long as such cash is not required to fund ongoing foreign operations. Due to the complexities in the laws of foreign jurisdictions, it is not practicable to estimate the amount of foreign withholding taxes associated with such unremitted earnings. During the year ended March 31, 2024, the Company declared an intercompany dividend of $250,000 from a foreign subsidiary, for which no foreign withholding taxes were required.

As of March 31, 2024, the Company has $267,926 of undistributed earnings from its non-US subsidiaries, of which $263,820 is held as cash and cash equivalents, a portion of which may be subject to additional foreign withholding taxes if it were to be repatriated. As of March 31, 2024, the Company has $15,906 of accumulated earnings from its non-US subsidiaries for which no US federal or state income taxes have been paid.

Recent Tax Law Changes. The Organization for Economic Co-operation and Development (OECD), supported by 140 of their member countries, have agreed to implement a minimum 15% tax rate on certain multinational enterprises and have released model guidance. This global minimum tax, known as the Pillar Two framework, will become effective across various countries starting in calendar year 2024, as each country works to enact legislation influenced by the OECD Pillar Two rules. The Company continues to evaluate the impact of additional guidance released by the OECD, along with the pending and adopted legislation in each of the countries in which we operate, on future periods.

Unrecognized Tax Benefits. When tax returns are filed, some positions taken are subject to uncertainty about the merits of the position taken or the amount that would be ultimately sustained upon examination. The benefit of a tax position is recorded in the consolidated financial statements during the period in which the Company believes it is more likely than not that the position will be sustained upon examination by taxing authorities. The recognition threshold is measured as the largest amount of tax benefit that is more than 50% likely to be realized upon settlement. The portion of the benefit that exceeds the amount measured, as described above, is recorded as a liability for unrecognized tax benefits, along with any associated interest and penalties, in the consolidated balance sheets.

A reconciliation of the beginning and ending amounts of total gross unrecognized tax benefits are as follows:

	Years Ended March 31,
	2024		2023		2022
Beginning balance	$	44,901	$	24,779	$	25,270
Gross increase related to current year tax positions	4,318		6,865		2,520
Gross increase related to prior year tax positions	4,629		16,243		2,750
Gross decrease related to prior year tax positions	(4,698)		(456)		(243)
Settlements	(582)		—		(795)
Lapse of statute of limitations	(2,948)		(2,530)		(4,723)
Ending balance	$	45,620	$	44,901	$	24,779

Total gross unrecognized tax benefits recorded in the consolidated balance sheets are as follows:

	As of March 31,
	2024		2023
Long-term asset
Deferred tax assets, net	$	—	$	3,145
Current liability
Income tax payable	3,998		1,829
Long-term liability
Income tax liability	41,622		39,927
Total	$	45,620	$	44,901

Net unrecognized tax benefits are defined as gross unrecognized tax benefits, less federal benefit for state income taxes, related to uncertain tax positions taken in the Company’s income tax return that would impact the Company’s effective tax rate, if recognized. Management believes it is reasonably possible that the amount of net unrecognized tax benefits, as well as associated interest and penalties, may decrease during the next 12 months by $9,088, which includes amounts relating to expirations of statute of limitations and settlements of various tax matters. Of this amount, $8,046 would result in an income tax benefit for the Company and $1,042 would result in a decrease to interest expense in the consolidated statements of comprehensive income.

As of March 31, 2024, and 2023, the Company has accrued $6,314 and $5,828 for the payment of interest and penalties, respectively, in income tax liability in the consolidated balance sheets. During the years ended March 31, 2024, 2023, and 2022, the Company recorded $486, $1,106, and $(60), respectively, of interest and penalties as an increase or (decrease) to interest expense in the consolidated statements of comprehensive income.

The Company has on-going income tax examinations in various state and foreign tax jurisdictions and regularly assesses tax positions taken in years open to examination. The Company files income tax returns in the US federal jurisdiction and various state, local, and foreign jurisdictions. With few exceptions, the Company is no longer subject to US federal, state, local, or foreign income tax examinations by tax authorities before fiscal year 2020.

Although the Company believes its tax estimates are reasonable and prepares its tax filings in accordance with all applicable tax laws, the final determination with respect to any tax audits, and any related litigation, could be materially different from the Company’s estimates or from its historical income tax provisions and accruals. The results of an audit or litigation could have a material impact on results of operations or cash flows in the periods for which that determination is made. In addition, future period earnings may be adversely impacted by litigation costs, settlements, penalties, or interest assessments. However, management does not currently expect these audits and inquiries to have a material impact on the Company’s consolidated financial statements.