Annual report pursuant to Section 13 and 15(d)

INCOME TAXES

v3.21.2
INCOME TAXES
 12 Months Ended
Sep. 30, 2021
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES:
The income tax provision (benefit) consisted of the following:
  2021 2020 2019
Current:
Federal $ (3,741) $ (12,354) $ 3,308 
State 3,579  (1,030) 2,232 
Foreign 2,379  11,306  2,049 
  2,217  (2,078) 7,589 
Deferred:
Federal 5,829  4,710  (5,472)
State 169  2,880  (2,782)
Foreign (1,840) (24,197) 1,471 
4,158  (16,607) (6,783)
Total $ 6,375  $ (18,685) $ 806 
The reconciliation of the federal statutory tax rate to the consolidated effective tax rate was as follows:
  2021 2020 2019
Federal statutory tax rate 21.0  % 21.0  % 21.0  %
Effect of state income taxes, net of federal deduction 37.5  % (1.9) % 2.7  %
Foreign statutory taxes compared to federal statutory rate (18.6) % 3.4  % (0.8) %
Share-based compensation 24.5  % (1.4) % (3.1) %
Termination of SERP 28.6  % —  % —  %
Tax credits (26.6) % 1.8  % 4.9  %
Tax basis difference —  % —  % 9.8  %
Sale of SERP-related investments 23.8  % —  % —  %
Goodwill write-down —  % (9.4) % (40.2) %
Tax rate differential on net operating loss carryback (21.4) % 4.2  % —  %
Other 0.2  % (0.1) % 3.6  %
Effective tax rate 69.0  % 17.6  % (2.1) %

The Company's consolidated income taxes for the year ended September 30, 2021 were an expense of $6,375, compared to a benefit of $18,685 for fiscal 2020, and an expense of $806 for fiscal 2019. The difference between the Company's consolidated income taxes for fiscal 2021 compared to fiscal 2020 primarily resulted from fiscal 2021 having consolidated income before income taxes, compared to fiscal 2020 having a consolidated loss, which reflected the goodwill write-down recorded in the second quarter of fiscal 2020, that was partially non-deductible. Additionally, the fiscal 2021 tax rate was negatively impacted by the termination of the Company's SERP, which resulted in certain expenses that are nondeductible for tax purposes. The fiscal 2021 effective tax rate benefited from research and development and foreign tax credits, the reduction of uncertain tax positions due to the expiration of the statute of limitations in certain jurisdictions, and the completion of a state tax audit, and the tax benefit of the NOL carryback. The Company’s fiscal 2020 effective tax rate was negatively affected by the non-deductible portion of the goodwill write-down along with certain other non-deductible expenses. The fiscal 2020 effective tax rate benefited from research and development and foreign tax credits, the reduction of uncertain tax positions due to the completion of a foreign tax audit, and the tax benefit of the NOL carryback. The difference between the Company's effective tax rate for fiscal 2020 versus fiscal 2019 primarily resulted from partially non-deductible goodwill write downs of differing amounts in both periods, as well as a benefit for an expected net operating loss (“NOL”) carryback in fiscal 2020. The fiscal 2019 effective tax rate benefited from research and development and foreign tax credits and the elimination, achieved through tax planning, of a taxable basis difference.

The Company's foreign subsidiaries had income before income taxes for the year ended September 30, 2021 of approximately $6,685, loss before income taxes for the year ended September 30, 2020 of approximately $68,343 and income before income taxes for the year ended September 30, 2019 of approximately $11,042. Deferred income taxes have not been provided on undistributed earnings of foreign subsidiaries since they have either been previously taxed, or are now exempt from tax, under the U.S. Tax Cuts and Jobs Act, and such earnings are considered to be reinvested indefinitely in foreign operations. At September 30, 2021, undistributed earnings of foreign subsidiaries for which deferred income taxes have not been provided approximated $358,342. 
The components of deferred tax assets and liabilities at September 30, 2021 and 2020 are as follows:
  2021 2020
Deferred tax assets:
Pension and postretirement benefits $ 11,832  $ 39,705 
Accruals and reserves not currently deductible 8,753  12,258 
Income tax credit carryforward 5,206  5,308 
Operating and capital loss carryforwards 51,438  34,146 
Stock options 4,944  4,062 
Other 1,320  8,376 
Total deferred tax assets 83,493  103,855 
Valuation allowances (28,619) (22,527)
Net deferred tax assets 54,874  81,328 
Deferred tax liabilities:    
Depreciation (23,224) (27,671)
Unrealized gains and losses (886) 389 
Goodwill and intangible assets (113,476) (123,259)
Other (11,215) (5,941)
Total deferred tax liabilities (148,801) (156,482)
Net deferred tax liability $ (93,927) $ (75,154)

At September 30, 2021, the Company had foreign net operating loss carryforwards of $218,691 and foreign capital loss carryforwards of $21,037. The Company has recorded deferred tax assets of $3,045 for state net operating loss carryforwards, which will be available to offset future income tax liabilities. If not used, state net operating losses will begin to expire in 2022. Certain of the foreign net operating losses begin to expire in 2022 while the majority of the Company's foreign net operating losses have no expiration period. Certain of these carryforwards are subject to limitations on use due to tax rules affecting acquired tax attributes, loss sharing between group members, and business continuation. Therefore, the Company has established tax-effected valuation allowances against these tax benefits in the amount of $28,619 at September 30, 2021. 

Changes in the total amount of gross unrecognized tax benefits (excluding penalties and interest) are as follows:
  2021 2020 2019
Balance, beginning of year $ 10,483  $ 15,526  $ 14,827 
Increases for tax positions of prior years —  500  — 
Decreases for tax positions of prior years (288) (2,727) — 
Increases based on tax positions related to the current year 628  939  1,420 
Decreases due to lapse of statute of limitation (8,016) (3,755) (721)
Balance, end of year $ 2,807  $ 10,483  $ 15,526 

The Company had unrecognized tax benefits of $2,807 at September 30, 2021, which would impact the annual effective tax rate.  It is reasonably possible that the amount of unrecognized tax benefits could decrease by approximately $414 in the next 12 months primarily due to the completion of audits and the expiration of the statute of limitation related to specific tax positions.

The Company classifies interest and penalties on tax uncertainties as a component of the provision for income taxes.  Total penalties and interest accrued were $691 and $2,172 at September 30, 2021 and 2020, respectively.  These accruals may potentially be applicable in the event of an unfavorable outcome of uncertain tax positions.
The Company is currently under examination in several tax jurisdictions and remains subject to examination until the statute of limitation expires for those tax jurisdictions. 

As of September 30, 2021, the tax years that remain subject to examination by major jurisdiction generally are:
United States - Federal 2018 and forward
United States - State 2017 and forward
Canada 2017 and forward
Germany 2019 and forward
United Kingdom 2020 and forward
Australia 2017 and forward
Singapore 2017 and forward